Whether the zero tax rate can be applied if any defect exists in the process of issuing a purchase certificate.

Unless there are special circumstances, such as that the supplier of the goods knew of the defect in the process of issuing a purchase certificate, the defect in the issuance process cannot be immediately excluded from zero tax rate application, and the burden of proof as to whether the supplier knew of the defect shall be borne by the tax authority.

Article 11 of the Value-Added Tax Act [permanent Tax Rate]

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The court below acknowledged the facts as stated in its reasoning after comprehensively taking account of the adopted evidence. The court below determined that the defendant bears the burden of proving the existence of the taxation requirement and the legality of the disposition imposing taxes, and that the defendant's application evidence alone alone did not establish any defect in the process of issuing a false purchase certificate, barring special circumstances such as where the plaintiff, a supplier of goods, knew of the defect in the process of issuing a false purchase certificate, can not immediately exclude the supply of goods by the purchase certificate from the zero-rate tax rate under the Value-Added Tax Act. In this case, the court below determined that there was no other evidence to acknowledge that there was a defect in the process of issuing a false purchase certificate or that there was a defect in the plaintiff's supply of this case.

In light of the relevant legal principles and records, the fact-finding and judgment of the court below are just and acceptable, and there is no violation of the rules of evidence or incomplete deliberation, as alleged in the grounds of appeal.

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.

[Seoul High Court 2007Nu3475 ( September 4, 2007)]

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s imposition of KRW 362,928,570 on October 18, 2004, and KRW 12,304, and value-added tax on KRW 2004 on KRW 12,304, and KRW 150 on KRW 1,30,138,630 on KRW 204 on KRW 1,00, respectively, and each refusal to refund value-added tax on KRW 118,095,730 on KRW 2,204 on KRW 204 on KRW 1,30,138,630 on KRW 20

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

The court's explanation concerning this case is the same as the reasoning of the judgment of the court of first instance, and thus, it refers to Article 8 of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

Therefore, the judgment of the first instance court is legitimate, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

[Seoul Administrative Court 2005Guhap24643, Dec. 14, 2006]

1. The Defendant’s imposition of KRW 362,928,570 on October 18, 2004 against the Plaintiff, and KRW 12,304,150 on the value-added tax of KRW 12,304,150 on the second-year value-added tax of KRW 1,30,138,630 on the second-year value-added tax of KRW 2004, and each rejection of refund of KRW 118,095,730 on the second-year value-added tax of KRW 2004 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

The following facts do not conflict between the parties, or can be acknowledged by comprehensively taking into account the following facts: Gap evidence 1-1 to Gap evidence 1-1-2, Eul evidence 20-2 to Eul evidence 1-2, Eul evidence 2-2, Gap evidence 3-1 to 4, Gap evidence 4-2, Gap evidence 5, Eul evidence 1 through 6, Eul evidence 7-1 to 11-3, Eul evidence 12-2, Eul evidence 13, Eul evidence 14-1 to 17, Eul evidence 15-1 through 5, Eul evidence 18-2, Eul evidence 19, Eul evidence 21-1, and Eul evidence 21-2.

A. On March 25, 2004, the Plaintiff, a corporation established for the purpose of computer peripheral devices, wholesale and retail business, and trade business, etc., imported central processing equipment (CPU; hereinafter "CPU") which is a computer component, and supplied ○○○○○ (hereinafter "○○○○○") Co., Ltd. (hereinafter "the instant product") 24 times from April 7, 2004 to July 9, 2004, as shown in the sales statement (hereinafter "the instant transaction"), again supplied 7,178,492,798 won (hereinafter "the instant goods") to 300,46.4% from around 200 to April 204, 204 (the instant goods). From around 30,000 to 304, 204, the Plaintiff supplied the instant goods to 304,000 electrical company (the instant goods).

B. In doing the instant transaction, the Plaintiff did not collect an amount equivalent to value-added tax from ○○○ by applying zero tax rate on the ground that 24th “certificate of purchase of raw materials for foreign exchange earnings (goods, etc.) issued by ○○○○○○, a foreign exchange president, was presented in the course of the instant transaction, and instead did not collect an amount equivalent to the value-added tax from ○○○○○ by applying zero tax rate on May 25, 2004 with respect to the input tax amount of the instant goods corresponding to the instant transaction from 267,482,02 won on April 25, 2004, 137,035,314 won on June 5, 2004, and 193,103,320 won on July 25, 2004, and 118,095,75,735 won on August 25, 2004.”

C. As to the amount of KRW 267,482,020, which was on June 4, 2004, the Defendant issued a refund to the Plaintiff via a simple written review procedure, but even thereafter, the Defendant conducted an investigation of value-added tax for which the Plaintiff’s continued early refund was reported.

D. On the other hand, the purchase confirmation of this case, which the Plaintiff received from ○○○○○○○○○○○○ branch, is based on the purchase confirmation issued at ○○○○○○○○ branch (hereinafter “the second purchase confirmation”). The second purchase confirmation of this case is based on the purchase confirmation issued at ○○○○○○ branch as a supplier, and the second purchase confirmation of ○○○○○ branch as a company as a supplier, and the computer ○○○ branch was based on the purchase confirmation issued at ○○○○ branch at ○○○○○○○ branch, and the first purchase confirmation issued at ○○○○○○ branch (hereinafter “the first purchase confirmation”). However, as a result, ○○○○○ branch and the computer ○○ branch submitted to obtain the first purchase confirmation of this case, △△△△△ branch as an export trading company, which entered as an export trading company, which entered as a △△△ branch as a △△ branch, which was requested by △△△ branch to verify the first purchase confirmation.

E. Although the purchase confirmation of this case was not revoked, the Defendant was a corporation newly established at the beginning of 2004, and all of the companies involved in the instant goods transaction were supplied to ○○○○○. Thus, it is difficult to apply zero tax rate on the grounds that the Plaintiff’s act of internal transaction, such as submitting export documents, such as a false export contract, and filing a false purchase confirmation and filing a disguised declaration at zero tax rate, upon systematically abusing the purchase confirmation procedure. Accordingly, on October 18, 2004, 30,138,630 won (i.e., 137,035,310 won + 193,103,320 won, and below 10 won), 118,095, and 304 of value-added tax (i.e., value-added tax for less than 200,000 won) for each of 20 years and six months following the Plaintiff’s early refund.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

In doing the instant transaction with ○○○○, the Plaintiff applied the zero-rate tax rate with the belief that the instant purchase certificate presented by ○○○○○ was issued lawfully by the President of the Korea Exchange Bank. The legal requirements for applying zero-rate tax rate are “Presentation of purchase authorization issued by the President of the Korea Foreign Exchange Bank within the taxable period to which the time of supply of goods belongs.” The Plaintiff accepted the Plaintiff’s report on early refund of zero-rate tax, etc. for April 2004 against the Defendant, and thus, the Plaintiff continued to supply the instant goods upon receipt of the instant purchase confirmation without any doubt, and the Plaintiff did not engage in the instant transaction with ○○○○○, etc. or with knowledge of the defects of the instant purchase confirmation, and thus, the instant disposition was unlawful.

(b) Related statutes;

○ Application of Article 11 of the Value-Added Tax Act

(1) zero tax rates shall apply to the supply of goods or services falling under any of the following subparagraphs:

1. Exported goods;

(3) Matters necessary for the scope of goods and services under paragraph (1) shall be prescribed by Presidential Decree.

Article 24 of the Enforcement Decree of the Value-Added Tax Act

(2) The exported goods under Article 11 (1) 1 of the Act shall be deemed to include the following goods:

1. Goods which a businessman supplies by means of a local letter of credit or a written confirmation of purchase as prescribed by the Ordinance of the Ministry of Finance and Economy;

Article 9-2 of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 422 on Mar. 11, 2005)

(2) The term "purchase confirmations provided for in Article 24 (2) 1 of the Decree and Article 26 (1) 2-2 of the Decree means confirmations issued by the head of a foreign exchange bank under Articles 38-2 and 116 (14) of the Enforcement Decree of the Foreign Trade Act within 20 days after the end of the taxable period to which the time of supply for goods or services belongs in accordance with a local letter of credit referred to in paragraph (1) and stating the export letters of credit, etc., the number thereof, effective date, shipment date, etc.

○ General Rules 11-24-9 of the Value-Added Tax Act

Tax rates of zero shall apply to goods supplied under a local letter of credit or a purchase approval as prescribed by the Foreign Trade Act, regardless of whether such goods are used for export after they are supplied.

C. Determination

According to the above, the purchase confirmation of this case, which the Plaintiff received from ○○○, while engaging in the instant transaction with ○○○○, may be recognized as having been issued based on false documents, and the fact that the instant purchase confirmation was defective due to non-export of the instant goods. However, the purchase confirmation issued by the head of a foreign exchange bank cannot be deemed as being null and void as a matter of course on the sole basis of the fact that the instant purchase confirmation was issued by the head of the foreign exchange bank. Whether the instant goods supplied to ○○○○○ was actually exported or not does not require the application of zero-rate tax rate (in particular, see General Rule 11-24-9 of the Value-Added Tax Act). Therefore, it may not affect whether the Plaintiff applied zero-rate tax rate to the Plaintiff.

In addition, barring special circumstances, such as the supplier’s knowledge of the defect in the process of issuing the purchase certificate at the time of the supply of the goods, the supply of the goods based on the purchase certificate may not be deemed to be excluded from zero-rate tax (see, e.g., Supreme Court Decisions 2003Du3642, Jun. 11, 2004; 2002Du9100, Aug. 30, 2004); 20-1; 5; 7 through 11; 5; 7 through 11; 12-1 through 3; 13; 1, 15 through 17; 2; 1, 2, 15-2; 21-3, 21-3, 24-2, 25-2, 32-4, 24-2, 30-2, 2, and 4-2, and 3-4 of the instant transaction.

Therefore, the instant disposition, which did not apply zero tax rate to the instant transaction, is unlawful, unless there are circumstances to deem the instant transaction not subject to zero tax rate under the Value-Added Tax Act.

3. Conclusion

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