Suwon District Court 2009Guhap12892 (No. 22, 2010)

early 208 Heavy1392 ( August 20, 2009)

Even if the goods were exported through the customer, the domestic transaction not based on the purchase certificate, etc. shall not be subject to zero tax rate.

In the event that the goods were supplied without being issued a purchase confirmation or a local letter of credit only for a specified taxable period among the goods supplied by a purchase confirmation, the domestic transaction not by the purchase confirmation or the local letter of credit, even if exported through the customer, shall not be subject to zero tax rate.

Article 11 (Tax Rate under Value-Added Tax Act)

Article 24 (Scope of Export)

2011Nu17716 Revocation of Disposition of Imposition of Value-Added Tax

XX

Head of Suwon Tax Office

Suwon District Court Decision 2009Guhap12892 Decided July 22, 2010

Seoul High Court Decision 2010Nu26843 Decided December 27, 2010

Supreme Court Decision 2011Du2774 Decided May 26, 2011

November 9, 2011

December 21, 2011

1. Revocation of a judgment of the first instance;

2. All of the claims filed by the Plaintiff are dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s disposition of imposition of value-added tax for the second term of 2006 imposed on the Plaintiff on January 2, 2008 (including penalty tax) and value-added tax for the first term of 2007 (including penalty tax) was revoked in all (including penalty tax) (the Plaintiff partially reduced its claim in this Court).

2. Purport of appeal

The same shall apply to the order.

1. Details of disposition;

A. The Plaintiff is an entrepreneur who runs the manufacturing business of medical appliances under the trade name called XX Mmerk. The Plaintiff supplied ○○ City New Pacting Korea Branch Co., Ltd. (hereinafter referred to as the “Transaction”) with the amount equivalent to the following table for medical special injection (hereinafter referred to as the “instant goods”) and filed a value-added tax by applying zero tax rate in 2006 and 2007.

[The following table omitted]

B. The Defendant investigated on-site verification of refund of value-added tax against the Plaintiff, and as a result, the transaction between the Plaintiff and the instant transaction parties was a domestic transaction that the Plaintiff manufactured the instant goods, which were exported, and supplied to the instant transaction parties, which were the exporters. The Plaintiff confirmed that the Plaintiff failed to submit the relevant documents even if the local letter of credit or purchase confirmation was submitted as a document attached to the value-added tax return in order to be subject to the zero-rate tax on the supply of the instant goods. On January 2, 2008, the Defendant issued a disposition imposing value-added tax of KRW 91,743,540 (including additional tax) for the second half-year period of value-added tax (including value-added tax), value-added tax of KRW 74,747,120 (including additional tax) for the first half-year period of 207.

C. The Plaintiff, who is dissatisfied with each disposition, filed an appeal with the Tax Tribunal on March 28, 2008, but was dismissed on August 20, 2009.

D. On November 4, 2011, the Defendant reduced 260,564 won of value-added tax for the second term of 2006 to the Plaintiff, and reduced 305,233 won of value-added tax for the first term of 2007 to KRW 74,747,120 (hereinafter “the instant disposition”). The Defendant imposed value-added tax for the second term of 2006 to KRW 91,482,976 and value-added tax for the first term of 2007 to KRW 74,441,87 for the first term of 207.

[Ground for Recognition: Facts without dispute, Gap evidence 1, 2 (including each number; hereinafter the same shall apply), Eul evidence 1, 2, and 4, the purport of the whole pleadings]

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Violation of the no taxation without law

Although there is no express provision excluding the application of zero-rate tax solely on the ground that a local letter of credit or a purchase certificate is not attached, the instant disposition excluding the zero-rate tax does not constitute a legal basis and is in violation of the

2) Violation of substance over form principle

It is confirmed by the export declaration certificate, etc. that the instant goods manufactured and supplied by the Plaintiff are exported goods subject to zero-rate tax. Nevertheless, the instant disposition excluding zero-rate tax solely on the formal requirements that a local letter of credit or a purchase confirmation was not submitted, goes against the principle of substantial taxation.

3) Even if not, the transaction partner of the instant case is merely an export agency, and the Plaintiff actually exported the instant goods to a foreign country, so the transaction of the instant goods is not necessary to attach a local letter of credit or a written confirmation of purchase. The instant disposition on a different premise is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Article 11(1)1 of the former Value-Added Tax Act (amended by Act No. 8826 of Dec. 31, 2007; hereinafter the same shall apply), Article 24(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 20516 of Dec. 31, 2007; hereinafter the same shall apply), Article 9-2(2) of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 12 of Apr. 22, 2008) applies to the supply of exported goods. The zero-rate tax rate shall be applied to the goods exported by a business owner through a local letter of credit or a purchase confirmation, which is included in the zero-rate tax rate of 20 days after the expiration of the taxable period to which the foreign exchange bank’s supply time belongs, and it shall be interpreted that it applies the basis and number of documentary credits, etc. for export and the date of shipment within 30.

2) In light of the facts without dispute, Gap evidence Nos. 3 through 14, and Eul evidence Nos. 1, the plaintiff received a tax invoice, etc. from the customer of this case on the premise that the goods are supplied to the customer of this case, and the goods of this case were exported to a foreign country through the customer of this case. The plaintiff, except for the taxable period of this case, submitted a purchase certificate with regard to the goods exported as above and submitted a zero-rate tax rate. However, it is recognized that the plaintiff supplied the goods of this case to the customer of this case and did not obtain a local letter of credit or a purchase certificate.

3) The Plaintiff supplied the instant goods to the instant transaction partners and exported the instant goods from the instant transaction partners, which is a transaction to which Article 24(2)1 of the former Enforcement Decree of the Value-Added Tax Act applies. Therefore, the instant goods transaction is merely based on the export agency contract, and the Plaintiff’s conjunctive assertion that the instant goods are actually exported to a foreign country through the export agency contract is without merit (the Plaintiff did not submit an export agency contract or materials that submitted the export agency contract or paid the export agency fee to the instant transaction parties).

The Defendant’s disposition of this case pursuant to Article 11(1)1 of the former Value-Added Tax Act and Article 24(2)1 of the former Enforcement Decree of the Value-Added Tax Act on the ground that a local letter of credit or a written confirmation of purchase was not issued with respect to the instant goods transaction, and thus, the instant disposition does not constitute a violation of the principle of no taxation without law. The instant disposition does not constitute a violation of the principle of no taxation, since it is strictly interpreted the provision applying zero tax by including the goods exported from the Republic of Korea through a written confirmation of purchase, etc. in the goods exported from the Republic of Korea. As such, the instant disposition that did not apply zero tax on the ground that a local letter of credit or a written confirmation of purchase was not provided pursuant to

4) The Plaintiff’s assertion is without merit and the instant disposition is lawful.

3. Conclusion

The judgment of the first instance is revoked. All of the claims filed by the plaintiff are dismissed.