Seoul High Court 2009Nu23916 (2010.04.09)

National High Court Decision 2007No4002 (Law No. 2008.06.20)

Since it cannot be seen as having traded zero tax with knowledge that there is a defect in the process of issuing a purchase certificate, the disposition excluding the zero tax rate shall be illegal.

It is insufficient to recognize that the Plaintiff was aware that there was a defect in the process of issuing a purchase certificate at the time of zero-rate transaction, or that the Plaintiff was aware that gold bullion sold to the purchaser was distributed in Korea without being exported. Therefore, the disposition imposing value-added tax is unlawful.

2010du85777 Revocation of Disposition of Imposition of Value-Added Tax

○○ Co., Ltd.

○ Head of tax office

Seoul High Court Decision 2009Nu23916 Decided April 9, 2010

June 30, 2011

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The first instance court, cited by the lower court, recognized the facts as indicated in its reasoning by comprehensively taking account of the relevant employment evidence, and determined that the instant tax invoice, which was received by the Plaintiff from the second half to the first half of 2003 to the first half of 2004, did not constitute a “unlawful tax invoice” different from the actual supplier, which is entered differently by the supplier on the invoice and the actual supplier.

The ground of appeal on this part is that the above judgment of the court below is erroneous, but it is merely an error in the selection of evidence or fact-finding which belongs to the exclusive jurisdiction of the court below and thus cannot be a legitimate ground of appeal.

2. Regarding ground of appeal No. 2

According to Article 11(1)1 of the Value-Added Tax Act and Article 24(2)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 17827, Dec. 30, 2002), the supply of exported goods shall be subject to the zero-rate tax rate, and even where an entrepreneur supplies goods through a local letter of credit or a written confirmation of purchase, the zero-rate tax rate shall apply to such exported goods.

Meanwhile, under the value-added tax system, the application of zero-rate tax rate is recognized only for exports to prevent double taxation, and it is recognized as exceptional and limited only for domestic consumption in compliance with the national policy purpose of encouraging foreign exchange to the extent that it does not impair foreign exchange management and the order of collection of value-added tax (see Supreme Court Decision 83Nu409, Dec. 27, 1983).

In light of the purport of applying the zero-rate tax rate and relevant laws and regulations, where a supplier of goods sells goods by applying a zero-rate tax rate with the knowledge of the defect in obtaining a false purchase certificate in collusion with the buyer or in issuing a false purchase certificate, and where the buyer knowingly knows that he/she uses a defective purchase certificate with the intent to evade taxes by selling them within the country without the purpose of export, the zero-rate tax rate shall not be applied (see, e.g., Supreme Court Decision 2003Du3642, Jun. 11, 2004). Such special circumstance should be proved individually in the relevant case (see, e.g., Supreme Court Decision 2007Du18093, Nov. 26, 2009).

The first instance court, cited by the lower court, recognized the facts based on its employment evidence, and determined that there was no other evidence to acknowledge the fact that the Plaintiff was a corporation that had been engaged in gold bullion import business, import, export business, etc. as a domestic transfer set of the Japanese ○○○○○○ Corporation, and the fact-finding alone, as indicated in its reasoning, is insufficient to find that the Plaintiff was aware of the fact that the Plaintiff was defective in the process of issuing a purchase confirmation certificate at the time of the instant zero tax rate transaction, or that gold bullion sold by

In light of the above legal principles and the records of this case, the above recognition and determination by the court below are just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the transaction based on a purchase confirmation under the Value-Added Tax Act and exception to zero

3. Conclusion

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 on the bench.