Embezzlement is not considered a hidden activity for tax purposes
A taxpayer sold hunting rights that he did not own. He was prosecuted and convicted of forgery and breach of trust.
administration informed by the public prosecutor's office of the income received from this "sale," they issued a tax assessment against the taxpayer, determining that the income was subject to taxation under the catch-all category of non-commercial profits (General Tax Code, Art. 92).
The taxpayer then attempted to defend himself by arguing thatadministration classified the income as capital gains from real estate. He contended that the income stemmed from the sale of real estate, which would have reduced the amount of the tax assessment.
The Court nevertheless rejects this argument, holding that since the taxpayer did not own the property sold, the income cannot constitute a capital gain on real estate. This income was received as part of an embezzlement scheme and is therefore taxable as non-business income.
The taxpayer will nevertheless prevail with regard to the application of the surcharges.administration applied the surcharges for unreported business activity, arguing that the taxpayer should have registered his business with the business registration office.
The Court has overturned the application of these surcharges, ruling that taxpayers were not required to register with the registration center for a single transaction. One might also wonder whether a taxpayer is required to register when committing embezzlement...