The meaning of “goods or services supplied to a nonresident or foreign corporation 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) which applies the zero-rate tax

Article 26 (1) 1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 10981, Dec. 31, 1982) "goods or services supplied to a nonresident or foreign corporation having no domestic place of business in the Republic of Korea who has no domestic place of business in the Republic of Korea" means goods or services for which a foreign exchange is obtained by a direct contract with a nonresident or foreign corporation having a domestic place of business in the Republic of Korea, as well as goods or services supplied without a domestic place of business under a direct contract with the nonresident or foreign corporation having a domestic place of business, shall be deemed to be subject to zero tax rate under the above Enforcement Decree, as in the case where there is no domestic place of business, and Article 26 (1) 1-2 of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 11285, Dec. 29, 1983) is not merely a clear interpretation of the above provision prior to the amendment. It is difficult to view

Article 11 of the Value-Added Tax Act, Article 26(1)1-2 of the Enforcement Decree of the Value-Added Tax Act, Article 26(1)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 10981, Dec. 31, 1982

Supreme Court Decision 84Nu571 Decided February 26, 1985 84Nu648 Decided March 12, 1985

Plaintiff 1 and 2 plaintiffs, et al., Counsel for the defendant-appellant-appellee and 3 others

The director of the tax office

Seoul High Court Decision 83Gu955 delivered on June 13, 1984

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal Nos. 1, 2, and 3 of the defendant litigation performer are also examined.

1. Article 11(1)4 of the Value-Added Tax Act provides that goods or services acquired in foreign currency other than those provided for in subparagraphs 1 through 3 shall be subject to the zero-rate tax rate, and accordingly, inclusion of foreign exchange goods or services traded in Korea under Article 26 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 10981 of Dec. 31, 1982) in the zero-rate tax rate is recognized as an exception to the principle of consumption taxation for the policy purpose of encouraging foreign exchange earnings. Thus, Article 26(1)1 of the Enforcement Decree of the same Act provides that “goods or services supplied to non-residents or foreign corporations having no domestic place of business in Korea” means goods or services supplied in Korean by a direct contract with non-residents or foreign corporations and thus, it is difficult to view the supply of goods or services in Korea as a zero-rate tax rate under Article 26(1)5 of the same Enforcement Decree of the same Act as that of a non-residents or foreign corporation which has no domestic place of business under a direct foreign exchange contract with such non-residents or foreign corporation.

2. The decision of the court below is just to interpret Article 26 (1) 1 of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 10981 of Dec. 31, 1982) to the same effect that the direct transaction in the plaintiffs' decision is subject to zero-rate tax, and there is no error in the misapprehension of legal principles of the Enforcement Decree of the Value-Added Tax Act or the interpretation and application of the law as to the theory of lawsuit, and there is no error in the misapprehension of legal principles or the interpretation and application of law.

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 on the bench.

Justices Yoon Il-young (Presiding Justice) Gangwon-young Kim Young-ju