Seoul High Court 2010Nu26843 ( December 27, 2010)

Even if the goods were exported through the customer, the domestic transaction not based on the purchase certificate, etc. shall not be subject to zero tax rate.

Since the applicable laws and regulations of zero tax rate based on a written confirmation of purchase are strictly interpreted, in the event that the goods were supplied without a written confirmation of purchase only for a specific taxable period during the supply of the goods through a written confirmation of purchase, the domestic trade without a written confirmation of purchase shall not be subject to zero tax rate even if the goods were exported

2011Du2774 Revocation of Disposition of Imposition of Value-Added Tax

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○ Head of tax office

The Seoul High Court Decision 2010Nu26843 Decided December 27, 2010

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. According to the reasoning of the judgment of the court of first instance cited by the court below, the court below maintained the judgment of the court of first instance, which held that the disposition of this case, which excluded the supply of the above goods from zero tax rate due to formal reasons that the supply of the goods was not based on a purchase certificate, was illegal, since the plaintiff supplied the goods to the domestic customer of this case before and after the taxable period of this case, and all of the goods were exported to a foreign country through the customer. The plaintiff submitted a purchase certificate for the exported goods except for the taxable period of this case and submitted a value-added tax return. The plaintiff recognized that the goods supplied to the above customer of this case were exported entirely during the taxable period of this case.

2. However, we cannot accept the judgment of the court below for the following reasons.

A. Article 11(1)1 of the former Value-Added Tax Act (amended by Act No. 8826 of Dec. 31, 2007); Article 24(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 20516 of Dec. 31, 2007); Article 9-2(2) of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 12 of Apr. 22, 2008); and Article 9-2(2) of the former Enforcement Rule of the Value-Added Tax Act shall apply to the supply of exported goods; and even in the case of goods supplied by a business operator through a local letter of credit or a purchase certificate, the zero-rate tax rate shall apply to the export of the goods; however, “purchase certificate” refers to a written confirmation issued by the head of a foreign exchange bank within 20 days after the end of the taxable period to which the time of supply belongs.

B. Meanwhile, the application of zero tax rate in the value-added tax system is recognized as a matter of principle only for exports in order to prevent double taxation, and it is recognized as exceptional and restrictive as prescribed by statutes only in cases where domestic consumption corresponds to the national policy purpose of encouraging foreign exchange earnings within the scope not impairing foreign exchange management and the order of collection of value-added tax. Therefore, the pertinent statutes that apply zero tax rate should be strictly interpreted by including goods exported from the country in accordance with a purchase confirmation, etc., in the goods exported from the country (see Supreme Court Decisions 83Nu409, Dec. 27, 1983; 2007Du22863, Apr. 9, 2009).

C. In light of the relevant statutes, the legal principles as seen earlier, and the records, if the Plaintiff supplied goods to the domestic customers of this case and did not follow a purchase confirmation, such transaction shall not be subject to zero tax rate. Therefore, the lower court erred by misapprehending the legal principles on the application of zero tax rate to goods supplied through a purchase confirmation, etc. on different premise, which affected the conclusion of the judgment. The first ground for appeal pointing this out has merit.

3. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.