Tax court grants smaller P17-M refund to Deutsche services unit
By Kristine Joy V. Patag,
Reporter
THE Court of Tax Appeals (CTA) has granted P17 million of tax refund to Deutsche Knowledge Services Pte. Ltd. after it fails to substantiate its claim for refund for P153 million to foreign clients.
Acting on four consolidated petitions for review by Deutsche Knowledge Services Pte. Ltd., the tax court’s Third Division ordered the issuance P17,188,625.90 for the four quarters of calendar year 2011.
Petitioner Deutsche Knowledge filed four separate petitions for review for its alleged unutilized input value-added tax (VAT) for the four quarters of 2011 in the amount of P30,987,110.54 for the first quarter; P43,438,971.55 for the second quarter; P39,444,853.68 for the third quarter; and P39,285,207.94 for the fourth quarter.
Deutsche Knowledge, a subsidiary of Deutsche Bank Group in Singapore, “provides accounting, valuation and information systems maintenance and development services” to its mother company.
The tax court noted that the petitioner is licensed to operate under the regional operating headquarters.
Deutsche Knowledge claimed that it reported zero-rated sales for the four quarters of 2011.
“Petitioner posits that its sales of services to its various non-resident affiliates, the consideration for which was paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas are subject to zero percent VAT,” the court noted.
To support its claim of service to foreign clients, Deutsche Knowledge presented Securities and Exchange Commission (SEC) certifications of non-registration of company, various registration documents and intragroup service agreements.
However, upon examination of the court, it held that the documents are “inadequate proof that petitioner’s clients are non-resident foreign corporations doing business outside the Philippines.”
The court said that “to be considered a non-resident foreign corporation doing business outside the Philippines, each entity must be supported at the very least by both SEC Certificate of Non-Registration of Corporation/Partnership and Certificate/Articles of Foreign Incorporation/Association/Registration and that there is no other indication of the services is doing business in the Philippines.”
The CTA said that “only the sales of services by petitioner to entities which have two required documents will be treated as subject to 0% VAT rate.” It then proceeded to recompute the tax refund claim of Deutsche Knowledge Services, based on the entities it serviced in 2011.
The court thus ruled: “Accordingly, let a tax refund or a tax credit certificate be issued in favor of petitioner in the reduced amount of P17,188,625.90, representing its unutilized and excess input VAT attributable to zero-rated sales for the first, second, third, and fourth quarters of calendar year 2011.”
The 38-paged decision dated Aug. 4, 2017 was penned by Associate Justice Esperanza R. Fabon-Victorino. Concurring are Associate Justices Lovell R. Bautista and Ma. Belen M. Ringpis-Liban.
