Court of Tax Appeals grants P32.7-M refund to Maersk

Court of Tax Appeals grants P32.7-M refund to Maersk
Benjamin Pulta November 6, 2019 https://www.pna.gov.ph/articles/1085204

MANILA -- The Court of Tax Appeals (CTA) has granted a tax refund to an international shipping firm for PHP32.7 million representing excess and unutilized value-added taxes it paid for PHP2.15 billion in transactions with its affiliate firm five years ago.

In its 23-page decision dated October 23 and made public Wednesday, the tax court's Third Division, through Associate Justice Ma. Belen Ringpis-Liban, partially granted the petition for review for the claim for refund or issuance of a tax credit certificate to Maersk Global Services Centers (Phils.) for zero-rated sales for the 2014 tax period.

Associate Justices Erlinda Uy and Maria Rowena Modesto-San Pedro concurred.

The firm renders corporate and administrative services for the ocean transportation business of its affiliate, AP Moller Maersk (APMM), a corporation based in Copenhagen, Denmark.

During the tax period in question, Maersk Global Services Centers Phils. made PHP2.1 billion in sales to APMM.

The company took the case to the tax court to appeal the Bureau of Internal Revenue (BIR)'s findings that the firm is not entitled to the benefit of the zero-rate VAT because APMM, as a recipient of the services, is an entity doing business in the Philippines.

Revenue officials noted that pursuant to the National Internal Revenue Code, to qualify as a transaction with zero percent rate, among other things, requires that the services be rendered to a person engaged in business conducted outside the Philippines.

As such, the BIR said the sale of services to APMM is subject to VAT equivalent to 12 percent of gross receipts derived from the sale or exchange of services.

In ruling in favor of a tax refund for Maersk, the tax court said that while the sale of services to APMM was indeed not entitled to zero-rated transactions since it does business in the Philippines, Maersk may still claim zero-rated sales for its transactions with APMM under a different provision of the tax code which includes services rendered to persons engaged in international shipping or international air transport operations as among the transactions subject to zero percent-rate.

"Petitioner's (Maersk) sales of services to APMM cannot qualify for VAT zero-rating under Sec. 108 (B)(2) of the Tax Code since the recipient of such services, APMM, is doing business in the Philippines. However, all is not lost. As already established, APMM is engaged in international shipping. Hence the sale of services to the latter are subject to VAT at zero-percent rate pursuant to Sec. 108 (B)(4)," the court ruled. (PNA)