April 11, 2003

2. The costs of lawsuit are assessed against the plaintiffs.

The imposition disposition of each value-added tax listed in the attached Form 1 through 6 by the director of the tax office on the plaintiff 1 through 6, the imposition disposition of each value-added tax listed in the attached Form 7, 8, and 11 by the director of the tax office on the plaintiff 7, 8, and 10, and the imposition disposition of each value-added tax listed in the attached Form 9 and 10 by the director of the tax office on the defendant 7 and 9 shall be revoked.

The following facts are not disputed between the parties:

A. The plaintiffs are banks running financial business, which is value-added tax-free business, and have its headquarters in Belgium since the beginning of the 1990s, and have been affiliated with S.I.F.T (hereinafter “SWIT”), and have been provided with services for transmitting transaction messages through the exclusive telecommunications network operated by SWIFT, such as settlement of funds, financial transactions, and opening of letters of credit, and paid fees to SWIT.

B. The Defendants, as a non-resident or foreign corporation with no domestic place of business, collected the value-added tax on the fees paid by the Plaintiffs in accordance with Article 34(1) of the Value-Added Tax Act and made a disposition imposing each value-added tax on the Plaintiffs as stated in the claims (hereinafter “instant disposition”) on the premise that the Plaintiffs are obligated to pay by proxy.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The Plaintiffs asserted that the instant disposition is unlawful for the following reasons.

(1) A non-resident or foreign corporation is liable to pay value-added tax only in the case of the supply of services in Korea. Since the supply of services to the plaintiffs of SWIFT was made abroad with no taxation authority in Korea, SIFT is not liable to pay value-added tax in Korea, and therefore the plaintiffs are not liable to pay it by proxy

(2) Since the WT has a domestic place of business of the trade name "COMAS", the plaintiffs are not obligated to pay the value-added tax on behalf of them.

B. Relevant statutes

Value-Added Tax Act

Article 7 (Supply of Services)

(1) The supply of services shall be either the supply of services or having others use the goods, facilities or rights, pursuant to all contractual and legal grounds.

(4) Matters necessary for the supply of services under paragraph (1) shall be prescribed by Presidential Decree.

Article 10 (Transaction Place)

(2) The place of supplying services shall be the place as provided in the following subparagraphs:

1. The place where services are provided or goods, facilities or rights are used;

Article 34 (Payment by Proxy)

(1) A person who receives a supply of service from a person falling under any of the following subparagraphs (excluding cases where the supplied service is supplied for a taxable business) shall collect the value-added tax at the time of payment of the price, and pay it to the head of the competent district tax office having jurisdiction over the place of business or domicile, by applying mutatis mutandis the provisions of Articles 18 (2) and

1. A nonresident or a foreign corporation that has no domestic business place under Article 120 of the Income Tax Act or Article 94 of the Corporate Tax Act (hereafter in this Article, referred to as the “domestic business place”); and

(2) In case of paragraph (1), if the person who received the service fails to pay the value-added tax to the head of the competent district tax office having jurisdiction over the business place or domicile under the same paragraph, the head of the competent tax office having jurisdiction over the business place or domicile shall collect the unpaid tax amount in addition to the amount equivalent to 10

Enforcement Decree

Article 18 (Scope of Supply of Services)

Those falling under any of the following subparagraphs shall be deemed the supply of services under Article 7 of the Act:

3. Provision of information on industrial, commercial, or scientific knowledge, experience, or skill.

C. Determination

(1) Whether WT is liable to pay value-added tax

(A) The supply of services to the plaintiffs should be carried out in Korea to bear the obligation of value-added tax payment in Korea. To make this decision, first of all, it should be determined whether SWIFT provided services to the plaintiffs. As such, the following facts are acknowledged in addition to the written evidence No. 12, No. 12, No. 3, and the testimony of the non-party witness.

① WT is established in 1973 and is currently affiliated with approximately 7,00 financial institutions around the world. The main business is to transmit transaction messages, such as notification of remittance request, instruction of fund transfer, notification of confirmation of the purchase and sale of foreign currency funds, establishment of loan and deposit contract, notification of the issuance of credit and change of terms and conditions following trading transactions, and store them for a certain period of time to prevent disputes between parties to trading.

② The SWIFT communications network consists of connection points established in each country (or relay stations, Swiftce Swiftce PP (hereinafter referred to as SAP), regional control stations established in major areas, such as Hong Kong, and secondary control stations established in the United States and the Netherlands, etc., and one central control station installed in the United States and the Netherlands, etc. are linked to submarine cables, etc. The SAP plays the role of concentrating and relaying the messages sent or transmitted to the individual subscribers of each country, and the above control stations play the role of controlling and coordinating the transmission of the message for a certain period.

③ The most big difference is that the transmission of transaction messages using the SWIT telecommunications network is using teleex or other media. The most important thing is that SWIFT develops a standardized format between financial institutions according to the aforementioned various types of transaction messages and then, “MT 000” (MT is the weak in MT) is commonly used by all member financial institutions by attaching an encrypted classification number of “MT 000” (MT is the weak in MT), thereby ensuring the accuracy, swiftness, and safety of the transmission of messages and reducing costs.

④ At the Republic of Korea, SAP is established in the Ministry of Finance and Economy (payment and settlement agency jointly established by domestic banks). The Plaintiffs are linked to the above SAP by means of telecommunications line and Monom among domestic telecommunications companies by putting the software provided with the standardized message format on the device. If the Plaintiffs input the classification number and contents according to the standardized message format connected to the SAP telecommunications network at the place of business where the above device is installed, the message will be transmitted to the other financial institution via the SAP and the control office, and the user fee will be paid to the financial institution transmitting the message according to the amount calculated according to the quantity of the message every quarter.

(B) According to the above facts, it can be seen that the content of the service provided to the plaintiffs by SWT is connected to a domestic exclusive telecommunications network to use the standardized message format by the SWIFT and the plaintiffs transmit the message that they entered according to the above format to a foreign country and store it for a certain period through the telecommunications network. The most important and essential part of the message form is to allow the use of standardized message format and send the message in the form through the exclusive telecommunications network of SWIT connected to SAP.

(C) If so, even if the message transmission and storage are carried out overseas, the Plaintiffs are deemed to have received the most important and essential part of the services in Korea. Therefore, it is reasonable for the WT to assume the liability for value-added tax payment in Korea. Accordingly, the Plaintiffs’ assertion on a different premise is without merit.

(2) Whether a domestic place of business exists

While there is no evidence to acknowledge that the COMAS claimed by the Plaintiff is a domestic business place of SWIFT, in addition to the whole purport of arguments in the statements in Eul evidence Nos. 4 and 5, the Coma, Ltd. located in Gangnam-gu Seoul Metropolitan Government ( Address omitted), is a company that engages in the sale of software and technical support necessary for the use of telecommunications networks of SWIFT and is one of the partnership companies of SWIFT (SWIFT's Internet homepage is introduced as one of the "Busi business partners" rather than the "Officides"). Therefore, the plaintiffs' assertion on its part is without merit.

3. Conclusion

Therefore, the instant disposition based on the premise that the Plaintiffs are liable to pay value-added tax on behalf of the WT is legitimate. Therefore, all of the plaintiffs' claims seeking revocation are dismissed as it is without merit. It is so decided as per Disposition.

Judges Kang Young-ho (Presiding Judge)