Seoul High Court 2006Nu509 (No. 12, 2007)

Except in extenuating circumstances, the supply of goods shall not be excluded from zero-rate tax rate only on the grounds of defects in the process of issuing a purchase certificate.

Unless there are special circumstances, such as that the supplier of the goods was aware of the defect in the issuance of a purchase certificate, the supply of the goods by the purchase certificate may not be immediately excluded from zero tax rate under the Value-Added Tax Act on the sole ground of the defect in the process of such issuance, and such special circumstances must be demonstrated by the defendant.

The contents of the decision shall be the same as attached.

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Article 11(1)1 of the Value-Added Tax Act and Article 24(2)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 17827, Dec. 30, 2002) provide that the zero-rate tax rate shall apply to the supply of exported goods, and that the entrepreneur shall include the above exported goods in a local letter of credit or a purchase confirmation as prescribed by the Ordinance of the Ministry of Finance and Economy and apply the zero

On the other hand, the issue of whether the supplied goods have been actually exported can not affect the application of zero-rate tax rate to the supplier at present, and the fact that there are defects such as either having no basis for export in the process of issuing a purchase certificate or having been issued on the basis of a false export contract or having been issued on the basis of the expiry date or the expiry date, or having been issued after the expiry date of the expiry date, cannot be deemed as null and void a purchase certificate issued by the head of a foreign exchange bank on the sole ground of the defects in the process of issuing a purchase certificate, barring special circumstances, such as where the supplier of the goods knows that there was a defect in issuing a purchase certificate, the supply of goods made on the basis of the above purchase certificate can not be immediately excluded from zero-rate tax rate under the Value-Added Tax Act, and such special circumstances must bear the burden of proving the legality of the tax imposition disposition and the existence of the duty of taxation requirements (see, e.g., Supreme Court Decisions 2005Du13735, Jan. 26, 2006>

2. The lower court determined that the instant transaction is not subject to zero-rate tax, on the ground that the seller’s intent to evade the tax in collusion with the buyer by means of a false purchase confirmation, even if the seller knew of the purchaser’s intention to evade the tax by making use of a purchase confirmation, and consented to the request for application of zero-rate tax, which would undermine the order of collection of value-added tax, and thus, it cannot be deemed that the seller offered facts as indicated in its reasoning after compiling the adopted evidence, but at least it can be sufficiently confirmed that the purchaser did not collect value-added tax with knowledge of the fact that the seller intended to abuse the zero-rate system by using a false

However, we cannot accept the above judgment of the court below for the following reasons.

First, we cannot accept the above judgment of the court below for the following reasons.

First of all, in light of the facts acknowledged by the lower court, there was a defect in issuing the instant purchase certificate if the Plaintiff had exercised due diligence in connection with the instant transaction, and furthermore, there was a fact that the purchaser might have known the fact that the Plaintiff would have abused the zero-rate system using such a purchase certificate. However, it is difficult to deem that the instant transaction ought to be excluded from zero-rate tax rate application solely on the basis of such circumstance.

Furthermore, with respect to whether the Plaintiff, with the knowledge of its intent to evade taxes by using a purchase certificate with serious defects, is valid as long as the Plaintiff, with the knowledge of the intent of the purchaser to evade taxes, and the following circumstances acknowledged by the reasoning of the lower judgment and the record, namely, health expenses, the reasoning of the lower judgment and the following circumstances acknowledged by the records as follows: ① purchase certificate is issued before the supply of goods, so it is often possible to issue without the entry of the purchase (supply) price as it is issued before the supply of the goods; ② the Plaintiff’s new purchase certificate is a purchase certificate issued by a legitimate approved authority even if it is omitted, and ② the Plaintiff’s new purchase certificate issued by the 20 years old Enforcement Rule of the Value-Added Tax Act, with the knowledge of the fact that it is difficult for the Plaintiff to conclude that the new purchase certificate was issued by 10 years prior to the sale of the goods, based on the amendment of the former Enforcement Rule of the Value-Added Tax Act No. 258, Apr. 12, 2002. 208.

Nevertheless, the judgment of the court below which confirmed that the plaintiff had made the transaction in this case with knowledge of the fact that the purchaser would abuse the zero tax rate system by making use of a false purchase certificate without conducting all necessary deliberation as to the above point, was erroneous in the misapprehension of legal principles as to the exception to transaction by a purchase certificate under the Value-Added Tax Act and the failure to exhaust all necessary deliberations, which affected the conclusion of the judgment.

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.