DBS Korea Co., Ltd. (Law Firm Dongin, Attorneys Kang Sung-sung et al., Counsel for defendant-appellant)

Head of Pyeongtaek Tax Office

August 27, 2008

1. The Defendant’s imposition of value-added tax of KRW 53,564,660 on September 7, 2006 against the Plaintiff on September 7, 2006 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. The Plaintiff, a company engaged in the manufacture, sale, etc. of computer peripheral devices, core parts, and the patent term from November 15, 2001 to November 14, 201, upon obtaining a license for the establishment and operation of a bonded factory from the head of Pyeongtaek-gu Customs Office, has produced DVDDDDER, DVDRM, etc. in a bonded factory located in Pyeongtaek-gu 8333, Pyeongtaek-gu, Chungcheongnam-do.

B. On March 17, 2003, the Plaintiff supplied DVPER (hereinafter “LOADER”) to the microwaveS Co., Ltd. (hereinafter “non-party company”) in a bonded area. On March 17, 2003, the head of Pyeongtaek-si issued an import tax invoice of KRW 2,682,73,00 to the non-party company, the importer, the value of which was 2,682,73,000.

C. On March 17, 2003, the Plaintiff issued a sales tax invoice with an amount equal to the above amount as the supply value (hereinafter “instant tax invoice”) and submitted to the Defendant the total tax invoice stating the supply value of the instant tax invoice upon filing a return of value added tax for the first time in 2003.

D. On September 7, 2006, the Defendant issued the instant tax invoice by stating the same amount as the value of supply of the import tax invoice issued by the head of Pyeongtaek-si, and submitted the value of supply to the Defendant by entering it in the list of the total tax invoice by buyer, regardless of whether it was before or after the amendment of the Value-Added Tax Act (amended by Act No. 7007 of Dec. 30, 2003; hereinafter referred to as the “Act”) under Article 22(3)2 of the former Value-Added Tax Act (hereinafter referred to as the “Disposition of this case”) by applying the above provision to the Plaintiff on September 7, 2006, on the ground that the whole or part of the value of supply in the list of the total tax invoice by buyer under Article 22(3)2 of the former Value-Added Tax Act (hereinafter referred to as the “Act”).

[Ground of recognition] Facts without dispute, Gap evidence 1-1, 2, Gap evidence 2, 3, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The defendant's assertion

Since the head of Pyeongtaek-si collects value-added tax on the import of goods from the non-party company that is the importer of the goods in this case, the plaintiff should have issued a tax invoice to the non-party company by stating that the value-added tax should be imposed only on the balance obtained by deducting the total amount of the customs duties, special consumption tax, liquor tax, education tax, traffic tax, and special rural development tax, which are the tax base of value-added tax, from the supply value of the goods in this case supplied to the non-party company. However, the plaintiff issued the tax invoice in this case with the same amount as the supply value as the supply value in the tax invoice issued by the non-party company by the head of Pyeongtaek-si as the supply value in duplicate and entered this fact in the list of the total or part of the supply value in the list of the tax invoice by buyer, which

(2) The plaintiff's assertion

(A) The Plaintiff had to issue sales tax invoices, which inevitably indicate the total amount of supply price of the instant goods in order to sell the goods and collect their prices. In addition, as long as sales tax invoices were issued, such fact is bound to be entered in the list of sales tax invoices. As such, the Plaintiff has justifiable reasons to enter the total amount of supply price of the instant goods in the list of sales tax invoices and submit them to

(B) Since the head of Pyeongtaek-si issues and issues an import tax invoice to the non-party company, the Plaintiff did not have a duty to collect the sales proceeds as above, and entered such fact in the list of the total tax invoice and submitted it to the Defendant. This does not constitute an act that interferes with the exercise of the taxation authority’s right to impose taxes due to a reduction report, etc. of the value of supply, but does not constitute a case where the value of supply is entered differently from the fact because it is not an act that interferes with the exercise of the taxation authority’s right to impose taxes due to a reduction report

(C) The instant tax invoice is a tax invoice issued twice by the head of Pyeongtaek-si after the issuance of the tax invoice, and thus there is no validity of the tax invoice, and therefore, the portion entered in the tax invoice by the head of Pyeongtaek-si is also invalid. In addition, in order to constitute an entrepreneur stipulated in Article 22(3) of the Act, there is a duty to pay value-added tax. Since the Plaintiff had no value-added tax liability due to the supply of the instant goods from the beginning, it does not constitute the said entrepreneur. Accordingly, even if

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Article 48(8) of the Enforcement Decree of the Act provides that where an entrepreneur supplies goods to Korea other than a bonded area in a bonded area, and the customs collector collects value-added tax pursuant to Article 23(3) of the Act as it constitutes imported goods provided for in Article 8 of the Act, the amount provided for in Article 13(4) of the Act out of the supply price shall not be included in the tax base. Article 8 of the Act provides that the import of goods shall be the goods arriving in Korea from a foreign country (including marine products caught in high seas by a foreign vessel) and the goods on which an export declaration is accepted are taken into Korea (in a case of goods passing through a bonded area, they shall be taken into Korea from a bonded area). Articles 13(4) and 23(3) of the Act provide that the customs collector collects value-added tax on the import of goods in the same manner as customs duties are collected, and that tax base shall be the sum of customs duties, special consumption tax, liquor tax, education tax, traffic tax and special rural development tax.

In full view of the above provisions, if an entrepreneur supplies goods to Korea outside a bonded area, one transaction becomes simultaneously the import of goods and the supply of goods, and in this case, if the customs collector collects value-added tax on the import of goods out of the supply value, the customs value of customs duties, etc., which the customs collector uses as the value-added tax base, shall not be included

As seen earlier, the Plaintiff supplied the instant goods to the non-party company, and the head of Pyeongtaek-gu customs office collected value-added tax on the import of the instant goods by taking the value of supply 2,682,733,00 won from the non-party company, the importer, as its tax base. The above 2,682,73,00 won shall be excluded from the value-added tax base due to the supply of the instant goods. Nevertheless, the Plaintiff issued the instant tax invoice to the non-party company with the value of supply of KRW 2,682,73,00,000, which is the value of supply.

(2) In order to facilitate the exercise of taxation rights and the realization of tax claims, the additional tax on the total tax invoice by buyer under Article 22(3) of the Act is an additional tax imposed by administrative sanctions without considering the entrepreneur’s intent or negligence when the entrepreneur fails to enter all or part of the registration numbers or supply values by transaction parties in violation of the Act without justifiable grounds, or enters differently from the fact (see, e.g., Supreme Court Decision 2001Du1772, May 16, 2003). If the entrepreneur enters differently from the fact on the list of the total tax invoice by buyer for justifiable reasons, the additional tax may not be imposed on the above total tax invoice by buyer.

(3) According to the statements of Gap evidence Nos. 4, 5, Gap evidence Nos. 6 through 24, Gap evidence Nos. 25, and Gap evidence Nos. 26 through 38, the plaintiff traded by the non-party company's non-party company's non-party local letter of credit, and the plaintiff, based on the above letter of credit, issued the non-party company's non-party company's non-party company's bill of exchange at the place of payment of the country of origin payment for the national bank, which is the issuing bank of the letter of credit, and collected the sales proceeds by means of discounting the above bill at the bank's bank's bank's bank's bank's discount, and the defendant requested a copy of the tax invoice issued by the plaintiff at the time of issuing the bill of exchange, and the bank that purchased the bill of exchange from the plaintiff also requested the non-party company to verify

(4) The additional tax under Article 22(3) of the Act is imposed on the case where an entrepreneur entered the whole or part of the supply price in the list of the total tax invoice by buyer differently from the fact. As above, the Plaintiff supplied the instant goods to the non-party company without a duty to issue the instant tax invoice, and inevitably issued the instant tax invoice to recover the sales proceeds, and submitted it to the Defendant after entering this fact in the list of the total tax invoice by buyer. Thus, even if the Plaintiff entered the amount not included in the value of supply as the value of supply, it cannot be viewed as a case where the value of supply is entered differently from the fact, as long as the Plaintiff supplied the goods to the non-party company in this case equivalent to the supply price of the instant tax invoice by buyer, and in light of the circumstances entered in the list of the total

3. Conclusion

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

[Attachment]

Judges Cho Gi-type (Presiding Judge) and Kim Jin-ok