By Vann Marlo M. Villegas

THE Court of Tax Appeals (CTA) denied the appeal of Deutsche Knowledge Pte., Ltd., over the cancellation of its tax refund claim worth P28.9 million.

In a nine-page Feb. 14 resolution, the court denied for lack of merit the motion for reconsideration of Deutsche Knowledge, a subsidiary of Deutsche Bank Group in Singapore.

The court in its decision in October last year said the company failed to show that its sales of services for the third quarter of 2013 qualify for value-added tax zero-rating.

The court said the company failed to present specific evidence that some of its service recipients, who are non-resident foreign corporations, were given services other than processing, manufacturing or repacking of goods, which is a requirement in the Tax Code to consider a transaction as zero-percent VAT.

The petitioner claimed that the court erred in relying only on the intra group service agreement (IGSA) to establish the nature of the services it rendered.

It also said that the court should have considered the fact that it is a regional operating headquarters (ROHQ) and can provide services allowed by law which excludes processing, manufacturing or repackaging of goods.

“It must be remembered that petitioner, as a ROHQ, is not prohibited from engaging in services of processing, manufacturing or repacking of goods,” the court said.

“Hence, it is incumbent upon petitioner to present sufficient evidence to show that the services it performed to its service recipients fall under ‘services other than processing, manufacturing or repacking of goods’. However, petitioner failed to do so in the instant case,” it added.

The company also said that it is engaged in services performed only in the Philippines as an ROHQ and it does not necessarily mean that if the IGSA does not indicate the place where service is done, the company has rendered services outside the country.

The court, however, said that Deutsche Knowledge cannot rely on the provision that ROHQs are licensed to do business in the Philippines and it is still needed to be proven.

The testimony of the witness also failed to establish that the services were done outside the country and the verification of its zero-rated sales by the independent accountant “failed to satisfactorily establish the same.”

The court also said the company failed to prove that the sales were rendered to non-resident corporations doing business outside the Philippines.

“It must be emphasized that petitioner failed to refute the findings of this Court. Bare and unsubstantiated allegations do not constitute substantial evidence and have no probative value. As such, petitioner’s bare allegations, unsubstantiated by sufficient documentary evidence, cannot be given credence by the court,” the court said.

The court also countered the claim of the petitioner that the CTA failed to consider the AMINET database, saying the IGSA and foreign business registration retrieved from the database establishes the location and addresses of its clients, proving that its clients are “branches, subsidiaries or segments of the Deutsche Bank Group of Companies which have business domiciles and activities outside of the Philippines.”

The court said that to be considered non-resident foreign corporation doing business outside the Philippines, it must be supported by both the certificate of non-registration or corporation/partnership issue by the Securities and Exchange Commission and certificate of foreign incorporation/association.

It also said that information from the database are not sufficient as “they may be considered self-serving because the said documents were retrieved from the AMINET database, a database set up by Deutsche Bank Group.”

According to the Tax Code, the transaction should be treated as zero-rated VAT if the following elements are met: services must be performed outside the Philippines, recipient of services is doing business outside the country, service offered must be other than processing, manufacturing or repackaging of goods and paid in acceptable foreign currency accounted for in laws of the local central bank.