[Exclusive] Bribe Given to Doctor Processed as Employee Welfare Expenses by Forging Card Receipt

'Rebate Costs Disguised to Evade Taxes,' Prosecutors' Indictment
Use of Others' Credit Cards, Canceled Transactions, Copies, and Forged Receipts
Rebate Costs Recorded as Welfare, Market Development, and Meeting Expenses
JW Pharmaceutical: "We Will Sincerely Clarify Our Position in Court"

JW Pharmaceutical Corporation and CEO Shin, who were indicted for disguising money given to doctors or hospitals to prescribe more drugs as employee welfare expenses to evade taxes, have been found to have reduced corporate taxes by substantiating rebate costs with fake receipts collected by sales representatives.

According to the indictment, from January 2016 to December 31, 2016, CEO Shin processed receipts from others' credit cards, cancellations, copies, and forged card receipts collected by sales representatives as employee welfare expenses at the office. However, the prosecution's investigation revealed that these expenses were not employee welfare costs. Instead, they were monetary compensations such as money or gifts given by the company to induce doctors or hospitals to prescribe their drugs.

The prosecution stated that CEO Shin split these fabricated receipts into 11 categories such as market development expenses, welfare expenses, and meeting expenses. They recorded 4,517,590,000 KRW under these accounts as expenses, evading 901,640,000 KRW in corporate taxes. During 2017 and 2018, the same method was used to process 3,358,640,000 KRW in cash rebates as expenses, evading 660,130,000 KRW in corporate taxes, according to the prosecution's investigation. In this process, double bookkeeping was used, and the evidence was falsified.

The prosecution wrote in the indictment, "Sales representatives of JW Pharmaceutical have used cash for expenses related to sales, including rebates, since before the 2000s, and processed cash expenditures as expenses based on receipts from others' credit cards collected by sales representatives."

It also stated, "CEO Shin, knowing this method of expense processing, encouraged or tolerated it, and as the head of the pharmaceutical business division, processed funds used as rebates in cash as expenses based on receipts from others' credit cards collected through employees."

Accordingly, the Tax Crime Investigation Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Lee Jin-yong) indicted JW Pharmaceutical Corporation and its CEO last month on the 27th for evading approximately 1.56 billion KRW in corporate taxes from 2016 to 2018 by including about 7.8 billion KRW of funds with unclear usage, including rebate expenses, as deductible expenses (recognized as expenses under tax law).

JW Pharmaceutical stated regarding the indictment, "Since we have been indicted, we will sincerely explain our position in court during the trial."