GR 234445; (July, 2020) (Digest)
G.R. No. 234445 . July 15, 2020.
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. DEUTSCHE KNOWLEDGE SERVICES PTE. LTD., RESPONDENT.
FACTS
Deutsche Knowledge Services Pte. Ltd. (DKS) is the Philippine branch of a Singaporean company, licensed as a Regional Operating Headquarters (ROHQ). It rendered qualifying services to its foreign affiliates/clients under Intra-Group Services Agreements. DKS, a VAT-registered enterprise, filed an administrative claim for refund/credit of unutilized input VAT amounting to P33,868,101.19 for the first quarter of 2010, asserting that its sales were zero-rated. Alleging inaction by the Commissioner of Internal Revenue (CIR), DKS filed a judicial claim with the Court of Tax Appeals (CTA). The CIR contested the claim, arguing, among others, that DKS failed to prove its clients were non-resident foreign corporations doing business outside the Philippines. The CTA Division partially granted the claim, reducing the refundable amount to P14,882,227.02 after disallowing certain input VAT and finding only 15 of the 34 claimed clients were sufficiently proven to be NRFCs. Both parties appealed to the CTA En Banc, which further reduced the number of established NRFC clients to 11 and the refundable amount to P14,527,282.57. The CIR filed the present petition.
ISSUE
Whether DKS is entitled to a tax refund/credit amounting to P14,527,282.57.
RULING
The petition is unmeritorious. The Supreme Court affirmed the CTA En Banc’s decision. On procedural grounds, the Court held DKS’s judicial claim was timely filed. The 120-day period for the CIR to act on the administrative claim commenced from DKS’s own declaration of completeness of its submitted documents, not from the CIR’s determination of completeness. On substantive grounds, the Court upheld the requirement that to prove a client is an NRFC for zero-rating under Section 108(B)(2) of the Tax Code, the taxpayer must submit, at minimum, a Securities and Exchange Commission (SEC) Certificate of Non-Registration and a certificate or articles of foreign incorporation/association. The CTA En Banc correctly found that DKS only substantiated the NRFC status of 11 clients using these requisite documents, properly excluding four entities whose status was supported only by self-serving printouts from DKS’s internal database. Consequently, DKS is entitled to a refund/credit only for the input VAT attributable to its zero-rated sales to these 11 duly-established NRFC clients, amounting to P14,527,282.57.