[1] The case where the zero-value tax rate is applied to domestic consumption

[2] Where a transaction based on a purchase certificate between a supplier and a buyer of goods fails to qualify for zero tax rate by impairing the order of collection of value-added tax

[1] Article 11(1)1 of the Value-Added Tax Act, Article 24(2)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 17828 of Dec. 30, 2002) / [2] Article 11(1)1 of the Value-Added Tax Act, Article 24(2)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 17828 of Dec. 30, 202)

[1] Supreme Court Decision 83Nu409 delivered on December 27, 1983 (1984, 341) Supreme Court Decision 2005Du12718 Delivered on June 14, 2007 (Gong2007Ha, 1099) / [2] Supreme Court Decision 2003Du3642 Delivered on June 11, 2004

Plaintiff (Law Firm C & Yang, et al., Counsel for the plaintiff-appellant)

Sejong District Tax Office (Law Firm Dongin, Attorneys Lee Gyeong-hwan et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2006Nu26471 decided May 30, 2007

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

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 apply the zero-rate tax rate to the supply of the exported goods, and even where an entrepreneur is a goods supplied through a local letter of credit or a written confirmation of purchase as prescribed by the Ordinance of the Ministry of Finance and Economy, the zero-rate

On the other hand, the application of zero tax rate under the value-added tax system 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 within the scope of not impairing foreign exchange management and the order of collection of value-added tax (see Supreme Court Decision 83Nu409 delivered on December 27, 1983, etc.).

In light of the purport of applying the zero-rate tax rate and the relevant laws and regulations, where a supplier of goods sells goods by applying the zero-rate tax with knowledge that there is a defect in obtaining a false purchase certificate in collusion with the buyer or in issuing a purchase certificate, and where there is any special circumstance that impairs the order of collection of value-added tax, such as where the buyer knowingly knows that he/she uses a defective purchase certificate with the intent to evade the tax by selling them in Korea without the purpose of export, he/she shall not be subject to zero-rate tax (see Supreme Court Decision 2003Du3642, Jun. 11, 2004).

The court below acknowledged the facts as stated in its decision after comprehensively taking account of the adopted evidence, and held that the transaction in this case was not zero, even though the plaintiff conspireds to evade the transaction in this case with the Mcamer and the tax or did not publicly invite to do so, on the ground that the transaction in this case was not subject to zero tax, with the knowledge that there was a significant defect in the process of issuing the letter of approval for purchase in this case, and in light of the above legal principles and the records, the above fact-finding and determination of the court below are just and acceptable, and there is no error of law such as misunderstanding of legal principles as to exceptions to the transaction in accordance with the letter of approval for purchase under the Value-Added Tax

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 Ahn Dai-hee (Presiding Justice)