An assessment period means a specific time frame during which the tax authorities may issue assessment for tax collection or levy additional tax in accordance with the law with respect to taxable events. After such period, the tax authorities cannot impose additional taxes or penalties.
An assessment period means a specific time frame during which the tax authorities may issue assessment for tax collection or levy additional tax in accordance with the law with respect to taxable events. After such period, the tax authorities cannot impose additional taxes or penalties. However, it is important to note that if an act constitutes criminal tax evasion, the evaded taxes are considered criminal proceeds. As such, under the Criminal Code, such taxes are still subject to confiscation within the statute of limitations for prosecution and confiscation.
■A company’s responsible person can be punished for the company’s tax evasion
According to Article 21 of the Tax Collection Act, assessment period in general is five years. But if the taxpayer fails to file and pay within the statutory period, or if they intentionally evade taxes through fraud or any other unrighteous means, the assessment period shall be seven years. In other words, if a taxpayer engages in the unlawful act of tax evasion, once the assessment period has lapsed, the tax authorities cannot impose penalties of additional taxes. Then, does that mean the evaded taxes can be retained by the taxpayer? The answer is no. Instead, the judicial authorities will handle the matter according to the relevant provisions on confiscation under the Criminal Code.
The offense of tax evasion provided in Article 41 of the Tax Collection Act uses the amount of tax evaded as the element of the offense. According to judicial interpretations, the evaded taxes are considered as an unlawful financial gain, achieved through reduced expenses, leading to a net increase in overall assets, pertaining to criminal proceeds under Article 38-1 of the Criminal Code. To prevent offenders from benefiting from their illegal act and to eliminate incentives for crime, the Criminal Code provides for the confiscation of such proceeds. According to Article 38-1, Paragraph 4 of the Criminal Code, criminal proceeds include any property derived from or obtained directly or indirectly, through the commission of an offence. However, penalties imposed for violation of provisions on tax obligation arising from tax evasion are not included in the scope of confiscation.
As for the actor of tax evasion, according to Article 41 of the Tax Collection Act, only a taxpayer can be held liable for the offense of tax evasion. When a company is involved in tax evasion, even though the taxpayer is the company, but the company, as a legal entity, cannot physically engage in any act. The real perpetrator of tax evasion is a natural person. Therefore, Article 47, Paragraph 1 of the Tax Collection Act extends the subject of the tax evasion offense to the company’s responsible person. In other words, if a company evades taxes, the responsible person of the company is subject to criminal prosecution and penalties for their unlawful act in the company’s tax evasion.
■If criminal acts are involved, the statute of limitations for prosecution and confiscation need to be considered
However, since the benefit from tax evasion ultimately goes to the company, if the perpetrator (the company’s responsible person) is believed to not have retained the criminal proceeds, does this mean the company can keep the illicit gains from the tax evasion? The answer is still no. To thoroughly strip away illegal gains and eliminate incentives for crime, Article 38-1 of the Criminal Code extends confiscation to third parties who are not acting in good faith. In other words, if the court determines that the conditions are met, it can still order the confiscation of criminal proceeds held by the company.
According to Article 41, Paragraph 1 of the Tax Collection Act, the statutory penalty for the offense of tax evasion is imprisonment for up to five years. Under Article 80, Paragraph 1, Subparagraph 2 of the Criminal Code, the statute of limitations for prosecution is 20 years. As for the statute of limitations for confiscation, Article 40-2, Paragraph 2 of the Criminal Code provides that it should be calculated based on the statute of limitations applicable to the related criminal offense. Therefore, the statute of limitations for both the prosecution of tax evasion and the confiscation of tax evasion proceeds is 20 years. This means that the confiscation provisions in the Criminal Code for recovering unpaid taxes are not limited by the assessment period set out in the Tax Collection Act.
If a taxpayer engages in tax evasion and the assessment period has already passed, the tax authority cannot impose additional taxes or penalties upon discovering it. However, it is not time for the taxpayer to be relieved yet. If the act still falls within the criminal statute of limitations for tax evasion and confiscation (20 years), due to the requirement in the Code of Criminal Procedure that public officials must report any suspected crime encountered during the performance of their duties, the matter would then be handled by judicial authorities. A prosecutor can still investigate, prosecute, and bring the case to court for penalties and confiscation of the evaded taxes. In other words, there is still another mountain to climb. Taxpayers should not take any chances.
This article was published in the Expert’s Commentary Column of the Commercial Times: https://www.ctee.com.tw/news/20240703700102-431305
