[1] Where an entrepreneur exports raw materials for processing purposes and provides them to a foreign contractor, whether it constitutes a supply of goods that can be seen as a taxable transaction subject to zero tax rate (negative)

[2] Where a business operator exports raw materials to and processes them, and then directly delivers or transfers them to a foreign buyer, the time of supply for the said raw materials (=the time of delivery abroad of the processed goods)

[1] Article 1(1) of the Value-Added Tax Act provides that the supply of goods and services and the import of goods shall be subject to value-added tax, but the export of the goods itself is not subject to value-added tax, and Article 11(1)1 of the same Act provides that "supply of exported goods" shall be subject to zero-rate tax transaction. Meanwhile, the "delivery or transfer" under Article 6(1) of the same Act, which provides for the supply of goods, must ultimately involve a transfer of the right to use and consume the goods. Thus, the mere fact that the business operator exports raw materials for the purpose of discretionary processing and yet provides them to foreign officers cannot be deemed as a subject transaction regardless of zero-rate tax rate because it does not entail any transfer of the right to use and consume the goods.

[2] Article 21 (1) 10 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 16661 of Dec. 31, 199) cannot apply to the time of supply of the raw materials where a business operator exports the raw materials to and processes them, and then directly delivers or transfers them to a foreign buyer. In such a case, the time of delivery of the processed products in a foreign country pursuant to Article 9 (1) 1 of the Value-Added Tax Act shall be the time of supply of the said raw materials.

[1] Articles 1(1), 6(1), and 11(1)1 of the Value-Added Tax Act, Article 24(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 16661 of Dec. 31, 199) / [2] Article 9(1)1 of the Value-Added Tax Act, Article 21(1)10 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 16661 of Dec. 31, 199)

[1] Supreme Court Decision 85Nu286 delivered on September 24, 1985 (Gong1985, 1441) Supreme Court Decision 90Nu3157 delivered on August 10, 1990 (Gong1990, 1974) Supreme Court Decision 93Nu18396 delivered on February 10, 1995 (Gong195Sang, 1355), Supreme Court Decision 96Nu371 delivered on June 11, 1996 (Gong196Ha, 2248), Supreme Court Decision 98Du1675 delivered on February 9, 199 (Gong199Sang, 501)

Radar Co., Ltd. (Attorney Im-soo et al., Counsel for defendant-appellant)

Head of the East District Tax Office (Attorney Lee Jae-chul et al., Counsel for the defendant-appellant)

Seoul High Court Decision 99Nu1825 delivered on July 29, 1999

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

Article 6 (1) of the Value-Added Tax Act (hereinafter referred to as the "Act") provides that the supply of goods subject to value-added tax shall be the delivery or transfer of goods on all contractual or legal grounds. Article 9 (1) of the Act provides that the time when the goods are supplied shall be the time when the goods are delivered, the time when the goods are delivered if the transfer of the goods is required (Article 1), the time when the goods are made available if the transfer of the goods is not required (Article 2 (2) 1 and 2, and the time when the supply of the goods is decided (Article 3). Article 21 (1) of the Enforcement Decree of the Act (amended by Presidential Decree No. 16661 of Dec. 31, 199); Article 1 (1) of the Enforcement Decree of the Value-Added Tax Act (hereinafter referred to as the "Enforcement Decree") provides that the domestic goods subject to value-added tax shall be the shipment of the exported goods, and Article 11 (1) 1 of the Enforcement Decree of the Act shall apply to the export of the goods.

However, Article 1(1) of the Act provides that the supply of goods and services and the import of goods shall be subject to value-added tax. The export of goods is not subject to value-added tax, and Article 11(1)1 of the Act provides that "supply of exported goods" shall also be subject to zero-rate tax, while "delivery or transfer" under Article 6(1) of the Act that provides for the supply of goods must ultimately involve the transfer of the right to use and consume the goods (see, e.g., Supreme Court Decisions 85Nu286, Sept. 24, 1985; 90Nu3157, Aug. 10, 1990). Thus, the mere fact that an entrepreneur exports raw materials for the purpose of clinical processing and supplies them to a foreign contractor cannot be deemed a subject-rate transaction regardless of whether the domestic authority to use and consume them is not accompanied by the transfer of the right to use and consume them, and therefore, if the entrepreneur directly transfers the processed goods to the purchaser of the raw materials after the delivery of them, it cannot be deemed as a subject-rate 10(1).

In the same purport, the court below is just in holding that it is unlawful to impose a tax base return of zero-rate tax on the grounds that the Plaintiff exported the raw body of this case for the purpose of processing and processed it to a contractor of the Vietnamese for the purpose of processing, and sold the processed products directly to a buyer of a third country, as long as the time of delivery abroad at which the raw body of this case was delivered at the time of supply of the raw body of this case, and the base of zero-rate tax is returned to the buyer of a third country, and that the Plaintiff did not report the date of shipment at the time of supply of the raw body of this case at the time of supply.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition.

Justices Zwon (Presiding Justice)