The omitted sales of the instant clothing is not subject to zero tax rate.

Inasmuch as it is reasonable to deem that the instant clothing was supplied to AA trade in sequence from AA trade to CCC services, it is not subject to zero tax rate.

Article 11 of the Value-Added Tax Act (Application of Gift Tax)

2014Guhap6052 Revocation of Disposition of Imposing Value-Added Tax

○ ○ Other

00. Head of tax office

on December 23, 2016

October 21, 2016

1. The plaintiffs' claims against the defendants are all dismissed.

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

Each disposition of imposition in attached Tables 1 and 2 against the plaintiffs by the defendant of the Gu office shall be revoked.

1. Details of the disposition;

가. 원고들은 서울 종로구 ㅇㅇ동의 □□시장과 서울 중구 ㅇㅇ동의 △△시장에서 의류 도・소매업을 영위하는 사업자들이다.

B. The director of the Seoul Regional Tax Office, upon conducting a tax investigation into AA Trade Co., Ltd. (hereinafter “AA Trade”), deemed that the Plaintiffs supplied clothing to AA Trade and received the sales proceeds in cash and check, but failed to report the sales, and notified the Defendants of the pertinent taxation data.

C. Accordingly, the head of the ○○ Tax Office revised and notified the value-added tax as stated in the attached Form 2 (Additional Tax Director) as stated in the attached Table 1.

D. The Plaintiffs filed an appeal with the Tax Tribunal on July 16, 2013 and September 5, 2013, but the Tax Tribunal dismissed the appeal on May 26, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 1, Gap evidence 2-4, 6, Gap evidence 6, Eul evidence 1-4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

1) The Plaintiffs are the parties directly exported the clothing to Japan, and the AA trade is in charge of purchase agency business, and the application of zero tax rate should be recognized pursuant to the substance over form principle under the Framework Act on National Taxes.

2) Even though the plaintiffs exported clothing through AA trade in accordance with the market practices for at least 30 years, the defendants were not taxed once, and the merchants who exported clothing to Japan to the same small-scale merchants as the plaintiffs were placed in a white name in △△△△△ City, etc., and the merchants exported through AA trade were about 200 persons but were about 50 persons including the plaintiffs, the disposition of this case is illegal disposition in violation of the principle of equality or the principle of good faith.

B. Relevant statutes

Attached Form 3 is as shown in the relevant statutes.

C. Determination

1) Determination as to the exporting party

A) Article 11(1)1 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) provides that the zero-rate tax rate shall apply to the supply of exported goods, and Article 24(1)1 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 23595, Feb. 2, 2012) provides that exports refer to the shipment of domestic goods into foreign countries.

Under the above value-added tax system, the application of zero-rate tax under the above shall be recognized as a matter of principle only for exports in order to prevent double taxation in cases where value-added tax is levied and collected in the producing supplying country in international trade of goods or services and then in cases where the importing country imposes value-added tax again in the importing country. The taxpayer shall prove that the

B) In full view of the evidence Nos. 2-4, 6, 3-13 through 43, 6, 2-3, 2-2 and 3, and 100 testimony and arguments, the following facts are recognized.

① When AA trade orders the Plaintiffs, it visited the workplace of the Plaintiffs along with the employees of the CCC Services, a Japanese importer, and examined the prices of the products. However, the orders issued to the Plaintiffs are only issued in the name of AA trade, and the export contract was not concluded separately between the Plaintiffs and CCC Services.

② Once the Plaintiffs sent the completed clothes and the simplified receipts in the AA trade markets to the AA trade warehouse, they did not participate in the subsequent transaction or transport process, and did not clearly state the responsibility for the subsequent goods due to their loss or damage.

3. AA trade re-deliverys to Japan after checking and packaging the items to which the plaintiffs sent.

④ The Plaintiffs did not report the export of the clothing exported under their names, and instead, the AA trade set the standards for sales of the company once a quarter, and some of the Plaintiffs reported the export under the name of another business entity.

5. AA trade received the same amount of purchase tax invoices as necessary for reporting sales from the Plaintiffs.

6. AA trade shall be registered as a wholesale business, and on this premise, the AA trade reported corporate tax and value-added tax.

7) AA trade receives the price of goods through the transfer of foreign currency into the United Nations and takes the method of illegally exchanging in Korean currency and paying it to the plaintiffs whenever it is necessary to do so. The exchange profits and losses incurred in the process are borne by AA trade.

8 At the request of CCC services, AA trade established K&J, a separate corporation, in Japan, and made the appearance of CCC services such as the purchase of clothes from the said corporation.

C) Comprehensively taking into account the following circumstances, i.e., the documents related to the instant transaction, such as an order and export declaration certificate, are indicated as only a transaction partner, and there is no evidence to prove that the Plaintiffs and CCC services are directly in a contractual relationship. The Plaintiffs received the instant clothing sales proceeds from AA trade, not in Korean currency from a foreign exchange bank, but in the won currency, the Plaintiffs received the instant clothing sales proceeds from AA trade. Although the Plaintiffs did not participate in the instant transaction after they delivered the clothing subject to the instant transaction to AA trade warehouse, AA trade has the authority to arbitrarily determine export declaration and sales declaration, but there was no objection to the issuance of the tax invoice under the name of AA trade, and the Plaintiffs did not raise any objection to the issuance of the export declaration and export declaration, and acted as the principal agent for the storage of goods and exchange profit and loss burden, the evidence submitted by the Plaintiffs alone is insufficient to recognize that the Plaintiffs directly exported goods in the CCC services were the Plaintiffs, and there is no other evidence to acknowledge otherwise from the Plaintiff’s offering the instant clothing trade from the Plaintiff.

2) Whether the principle of good faith is violated

The principle of trust and good faith, the principle of trust and good faith, or the principle of respect for non-taxation practices, in tax and legal relations, are exceptional legal principles applicable only to cases where there are special circumstances deemed that the protection of taxpayers’ trust is consistent with the justice even if they sacrifice the principle of legality. Therefore, in order to apply the principle of trust and good faith or the principle of protection of trust to a tax authority’s act, the average taxpayer’s trust given by the tax authority through the public opinion list, etc. should have a reasonable and justifiable expectation. Even if the tax authority expressed a certain opinion through the inquiry, if it is followed by questioning without revealing the important facts and legal issues properly, it shall not be deemed a case where there is a trust that can lead to a legitimate expectation by the public opinion list. Moreover, the principle of respect for non-taxation practices may be applied to the interpretation of tax laws generally accepted by the taxpayers in connection with non-taxation or the practice of national tax administration, which may be applied.

Even in cases of erroneous interpretation or practice, it means that a taxpayer, who is not a specific taxpayer, has been accepted as just and without objection to the extent that it is not unreasonable for the taxpayer to trust such interpretation or practice. The mere fact that there was a public opinion on the criteria for interpretation of tax-related Acts cannot be deemed that there was such interpretation or practice. The burden of proving the existence of such interpretation or practice lies on the taxpayer, who is the assertion (see Supreme Court Decision 2011Du5940, Dec. 26, 2013). However, in this case, there was little report on export or sale in the name of the Plaintiffs, and AA trade also did not constitute a non-taxable practice, etc. under the premise of Articles 15 and 18(3) of the Framework Act on National Taxes, since it was difficult for the tax authority to understand the transaction structure by such reasons as filing an export declaration in the name of a third party or receiving the price through foreign currency smuggling, it is difficult to view that the tax authority established a non-taxable practice, etc., which is the premise of this case’s taxation or disposition.

Therefore, the above assertion by the plaintiffs is without merit.

3. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.