B&L Co., Ltd. (Attorneys Ba-sik et al., Counsel for the plaintiff-appellant)

Head of the District Tax Office

July 5, 2013

1. The Defendant’s imposition of value-added tax of KRW 125,681,520 against the Plaintiff on December 1, 2010 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. On December 3, 2004, the Plaintiff is a domestic corporation that established the head office on the 7th floor of Gangnam-gu Seoul Metropolitan Government ( Address omitted) building with its main business purpose such as corporate management consulting business, corporate financial field consulting business, etc.

B. The LLPL (hereinafter “MLPL”) purchased bonds issued overseas from Korean listed companies from the Hong Kong branch (hereinafter “CS”) through the following process:

On January 29, 2009, the OLPL opened the treatment securities account, RBS Hong Kong Branch account on February 10, 2009, and transferred USD 2,200,000 to the treatment securities on February 12, 2009, and USD 9,000,000 to the RBS Hong Hong Branch. The RBS Hong Kong branch on behalf of the ELPL sent an order for purchase of foreign currency bonds issued by Korean listed companies to the Korea-listed Hong Kong Branch on February 23, 2009. On March 9, 2009, the LBS Hong Kong branch sent the amount to USD 2,20,000 to the European Exchange, whose contract was concluded and payment was made. On the other hand, on February 23, 2009, the LBS Hong Kong branch sent the amount to USD 3,000,000 to the Korea-U.S. Securities Exchange (U.S.) to the Korea-U. Government Securities Contract.

Section CB. CB. 2,676,960 US$ 25,60 on July 9, 2009 to 25, 2009 to 19,746,916 US$ 20 on August 17, 2009 to 30, 200 US$ 65,209 to 36.6 US$ 20.6, 200 on July 13, 2009 to 36.6 US$ 20, 40, 209 to 36.6 US$ 9, 20, 200, 200, 00 US$ 6.6, 30, 200, 205 US$ 20, 307, 200, 130, 200, 130, 207 US$ 20, 307, 25,209.

* CBond: CBond Bonds and Bonds with Warrants

* RBS: RBS Bank Bank Ltd. (hereinafter referred to as "RBS").

* KGI: Gyeonggi-dol.

* KEB: Korea Ex. Bank (Korea Exchange Bank)

Table 2> Details of recovery of bonds denominated in Korean won

NAB CB 27 March 27, 2009; 1,632,931,506 Mez BW Baz B on June 29, 2009; NAW 23,400,000 on March 23, 2009

C. At the time, the Plaintiff provided MLL with the services of mediating, arranging, and recovering the acquisition of the pertinent SS claim (hereinafter “instant services”). On March 19, 2010, the Plaintiff received US$850,000 as the price. The Plaintiff considered this as zero-rate tax application under the Value-Added Tax Act and did not collect the value-added tax on the price of the instant services.

D. The director of the Seoul Regional Tax Office conducted a tax investigation from June 23, 2010 to June 30, 2010, and deemed that the Plaintiff provided the instant service to the ELPL, which is formally located in Singapore but is deemed to have a real management place in Korea, and received the price, but did not report the value-added tax thereon, and notified the Defendant thereof.

E. On August 2, 2010, the Defendant excluded the application of zero-rate tax according to the above notification, and deemed that the time of supply for the instant service was the second period in 2009, and imposed KRW 122,43,470 on the Plaintiff on August 2, 2009.

F. On October 29, 2010, the Plaintiff filed an objection with the director of the Seoul Regional Tax Office. On November 26, 2010, the director of the Seoul Regional Tax Office rendered a decision to revoke the said disposition by deeming that the time of supply for the service of this case is no zero tax rate, but the time of supply for the service of this case is no zero tax rate.

G. On December 1, 2010, the Defendant revoked the initial disposition in accordance with the above decision, and imposed on the Plaintiff the imposition of KRW 125,681,520 (including additional tax) of the value-added tax of KRW 125,681,520 (hereinafter “instant disposition”).

H. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on March 2, 201, but the said claim was dismissed on April 4, 2012.

[Ground of recognition] The whole or part of Gap's evidence, Gap's evidence Nos. 1, 2, 43 through 47, 57, Eul's evidence Nos. 1, 2 and 4 (including evidence with a serial number) and the purport of the whole pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The instant service is subject to zero tax rate as “services provided overseas” under Article 11 subparag. 2 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same) for the following reasons. The instant service is a foreign corporation where the actual management place is located in a foreign country, contrary to the Defendant’s assertion. In addition, as the Plaintiff, which is the core and essential part of the instant service, was provided overseas as “the part mediating and mediating the acquisition of the SS claim to MPL, which is a foreign corporation,” the instant service ought to be deemed as “services provided overseas.”

(2) Even if the place where the instant service was rendered is deemed to be “domestic”, the instant service is subject to zero tax rate as foreign exchange earnings for foreign corporations under Article 11 subparag. 4 of the former Value-Added Tax Act and Article 26(1)1 and 1-2 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 23595, Feb. 2, 2012; hereinafter the same).

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

First, we examine whether the instant service constitutes “services provided abroad” under Article 11 subparag. 2 of the former Value-Added Tax Act.

○ First of all, the Defendant issued the instant disposition with the purport that the instant service was provided in Korea, since the ELPL, which received the instant service, is a domestic corporation with the place of actual management, and thus, the instant disposition was rendered from whether it is a domestic corporation or a foreign corporation.

Article 1 subparag. 1 and 3 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010) provide that “A domestic corporation shall have its headquarters or principal office in a foreign country where the place of actual management is located in the Republic of Korea, even if it has its headquarters or principal office in a foreign country.” The term “actual management place” refers to an important management and commercial decision necessary for the implementation of the whole of the relevant corporation.

Comprehensively taking account of the aforementioned evidence and the purport of evidence evidence evidence Nos. 3 through 42, MPL was established on March 2, 200 under the Singapore Company Act and operated information and communications services mainly within Singapore until the business year 2008. ② The board of directors of MPL was composed of Nonparty 2, Nonparty 3, and Nonparty 4 at the time of providing the instant services. Nonparty 2 was resident of Singapore, Nonparty 3 were resident of the U.S., and Nonparty 5, the non-registered executive officer of the Republic of Korea, and Nonparty 2 were located in Singapore from 2004 to 30% of its shares. Nonparty 2 owned 93.5% of its shares, and Non-Party 2 owned the remainder of the shares, and Non-Party 3’s shares were owned by the non-Party 1, the non-party 2, the non-party 3, the non-party 1, the non-party 2, and the non-party 3, the non-party 1, the directors of the Korea company.

According to the above facts, in light of the status of stocks held or the form of business held by the PEPL, the PEPL is a non-party 2-1 member, and the non-party 5 et al. merely performed its enforcement activities upon the non-party 2's order. Thus, even if the non-party 5 et al. performed part of his duties in Korea, the decision-making place of the PEPL should be determined on the basis of non-party 2. In light of the non-party 2's entry and departure records or the details of sending e-mail, it cannot be determined that the non-party 2 made a decision-making on the MPPL's business, including the CR claim-related business, in Korea at the time of the non-party 2's entry and departure records or the details of sending e-mail, and the management of the corporation necessary for the implementation of the business was

Therefore, we cannot accept the defendant's assertion that PEPL is not subject to zero tax rate under the former Value-Added Tax Act, on the ground that it is a domestic corporation.

○ If so, on the premise of the foregoing circumstances, we examine where the place where the service of this case is provided.

First of all, according to the circumstances of the above disposition, the service of this case consists of mediation, mediation, and the part concerning the collection of claims that have been acquired, and the service price is not divided, but is 850,000 dollars in return for the whole.

In such a case, on the basis of the taxable principle of consumption, whether to apply zero-rate tax rate under Article 11 subparag. 2 of the former Value-Added Tax Act should be determined (see Supreme Court Decision 95Nu1071, Nov. 22, 1996). In the instant case, the following circumstances, which are acknowledged by adding the above evidence and evidence No. 8 to the testimony of Non-Party 2 as well as the witness Non-Party 2’s testimony, namely, ① an investment information related to a foreign investment bank itself has a huge economic value, ② an oral contract was concluded for the provision of the instant service and the payment of USD 850,000 for the price, but around that time, Non-party 2, a major shareholder of the ELPL, also was made between the Plaintiff and the e.g., the Plaintiff’s representative director and the e., the Plaintiff’s e., the e., e., e., graphic investment and its affiliates, and the Plaintiff’s e.g., 8000 U.

In light of the fact that the business of collecting the principal and interest of the loan and collecting the principal and interest of the loan after the above judgment is merely a simple and mechanical business performed in accordance with the terms and conditions of the fixed maturity and interest rate, it is difficult to view the CSS bond brokerage and mediation business as an essential and important part of the service of this case. Therefore, it is reasonable to determine whether the service of this case is subject to zero-rate tax rate based on the place where the service

Accordingly, comprehensively taking account of the following facts: (a) Nonparty 1, the representative director of the Plaintiff, through Nonparty 6, who was working for investment funds in Hong Kong on October 2008, obtained investment information from Korea listed companies, to dispose of overseas convertible bonds, etc. issued by Korea listed companies; (b) from October 23, 2008 to October 27, 2008, the Plaintiff directly visited Hong Kong from November 7, 2008 to November 10, 2008, to enter into negotiations on trading conditions, such as the CR Hong Kong Branch and the bond price, and (c) Nonparty 1, the representative director of the Plaintiff, through Nonparty 6, who was working for the investment funds in Hong Kong, was also aware of the fact that the Hong Kong Branch had been working for the investment fund in Hong Kong; and (d) Nonparty 2, who was working for the above Hong Kong Branch, was also aware of the fact that it had been working for a foreign corporation in the name of the above PE Hong Kong Branch and its domestic purchaser's opportunity to accept the bonds.

Thus, the business of mediating and arranging the acceptance of SS claims is the service provided overseas, and this is the essential and important part of the service of this case as seen earlier. Thus, even if the place where the collection of SS claims was conducted is within Korea, it is reasonable to view the “services provided overseas” under Article 11 subparag. 2 of the former Value-Added Tax Act.

Therefore, regardless of whether the instant service constitutes Article 11 subparag. 4 of the former Value-Added Tax Act, and Article 26(1)1 and 1-2 of the former Enforcement Decree of the Value-Added Tax Act, the instant disposition made on a different premise is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

[Attachment Omission of Related Acts]

Judges Choi Young-young (Presiding Judge)