The meaning of "goods or services supplied to non-residents or foreign corporations having no domestic place of business in Korea" under Article 26 (1) 1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 10981, Dec. 31, 1982) to which the zero-rate

Article 26 (1) 1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 10981, Dec. 31, 1982) provides that "goods or services supplied in the Republic of Korea to a nonresident or foreign corporation having no domestic place of business in the Republic of Korea" means goods or services supplied in the Republic of Korea without any invasion by a direct contract with a nonresident or foreign corporation. Therefore, even a nonresident or foreign corporation having a domestic place of business has a domestic place of business, the zero-rate tax rate under the above Enforcement Decree shall apply to goods or services supplied without a invasion by a direct contract with such nonresident or foreign corporation without a domestic place of business.

Article 11(1)4 of the Value-Added Tax Act, Article 26(1)1 of the Enforcement Decree of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 10981, Dec. 31, 1982)

Supreme Court Decision 84Nu571 Delivered on February 26, 1985

Attorney Shin Chang-dong, Counsel for the defendant-appellant

Head of Yongsan Tax Office

Seoul High Court Decision 83Gu989 delivered on August 30, 1984

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal Nos. 1 through 3 of the defendant litigation performer are also examined.

1. According to Article 11 (1) 4 of the Value-Added Tax Act and Article 26 (1) 1 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 10981 of Dec. 31, 1982), goods or services supplied to non-residents or foreign corporations having no domestic place of business in Korea, which are supplied in foreign exchange certificates or in Korean won at a foreign exchange bank shall apply zero-rate tax. The judgment of the court below is established to the effect that the above provision aims to achieve the consumption taxation principle, and the above "goods or services supplied to foreign corporations having no domestic place of business" is presumed to mean goods or services supplied to foreign corporations directly regardless of their domestic place of business, regardless of their domestic place of business. In this case, even if there is a domestic place of business, it is judged that the above provision is subject to the zero-rate tax rate as a matter of course where services are supplied to

2. The original zero-rate system under the Value-Added Tax Act provides for the purpose of excluding the burden of value-added tax on overseas transactions in accordance with the principle of consumption and taxation of the General Agreement on Taxes and Customs (GT) in order to prevent double taxation on the overseas supply of goods or services in the exporting country and the importing country. Thus, only the transaction of goods or services supplied or consumed overseas shall be subject to the zero-rate system. However, Article 11(1)4 of the Value-Added Tax Act provides that the supply of goods or services supplied or consumed overseas shall be subject to the zero-rate system for the purpose of policy purpose of encouraging foreign exchange earnings, and Article 26 of the Enforcement Decree of the Value-Added Tax Act provides that the supply of goods or services traded domestically exceptionally

In light of the legislative intent of Article 26 (1) 1 of the Enforcement Decree of the former Enforcement Decree of the Tax Act, "goods or services supplied to non-residents or foreign corporations having no domestic place of business in the Republic of Korea" as an exception to the principle of consumption taxation for the policy purpose of encouraging foreign exchange earnings, the phrase "goods or services supplied to non-residents or foreign corporations having no domestic place of business in the Republic of Korea" means goods or services for foreign exchange earnings by supplying a domestic place of business in the Republic of Korea under a direct contract with non-residents or foreign corporations. Therefore, even non-residents or foreign corporations having domestic place of business have no domestic place of business under a direct contract with them, the zero-rate tax rate shall be applied in accordance with the above Enforcement Decree of the Tax Act, just as in the case of goods or services supplied without a domestic place of business and conducted foreign exchange earnings (see Supreme Court Decision 84Nu571

In case where a nonresident or a foreign corporation has a domestic place of business under Article 26 (1) 1-2 of the Enforcement Decree of the Act on December 29, 1983, which was amended by Presidential Decree No. 11285, and Article 26 (1) 1-2 of the Enforcement Decree of the Act on December 29, 1983, provides for the goods or services supplied by a domestic place of business through a direct contract with him, which are supplied in Korean won through a foreign exchange bank, is nothing more than a clear interpretation of the provisions prior to the

Article 26 of the Enforcement Decree of the Value-Added Tax Act is not an exception to the principle of consumption tax, but rather an expression which is inappropriate as if it is a provision consistent with that principle. However, even if there is a domestic place of business, the conclusion that the direct transaction in Korea without going through it is just, and this conclusion is not erroneous in the misapprehension of the legal principles of the Enforcement Decree of the Value-Added Tax Act, or in the interpretation and application of the law, or in the original adjudication as to whether the tax invoice can be issued, and therefore, it is not erroneous in all

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Il-young (Presiding Justice)