03-20-2023, 05:35 PM
AMADEUS MARKETING PHILIPPINES, INC. ,
Vs COMMISSIONER OF INTERNAL REVENUE
CTA EB NO. 2496, March 16, 2023
Proof of Non-Resident Foreign Corporation
Sales of Services – 0%
For the sale of services to be subject to a 0% VAT rate, it is required, that the services were "rendered to a person engaged in business outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed."
In Accenture, Inc. vs. Commissioner of Internal Revenue, the Supreme Court ruled that to come within the coverage of Section 108(B)(2) of the NIRC of 1997, as amended, the taxpayer must show that the entity to whom it rendered services is a foreign corporation not engaged in business in the Philippines. (G.R. No. 190I02. July 11, 2012).
Requisites for 0% rate supply of services
In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., the Supreme Court held that in order to for the supply of services to be considered VAT zero-rated under Section 108 (8)(2) of the NIRC of 1997, as amended the following requisites must be satisfied:
1. The services by VAT-registered person must be other than processing, manufacturing or repacking of goods;
2. The payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and
3. The recipient of such services is doing business outside the Philippines. (Boldfacing and underscoring supplied)
Judicial claim for tax refund or tax credit brought to the CTA is by no means an original action but an appeal by way of a petition for review of the taxpayer's unsuccessful administrative claim; hence, the taxpayer has to convince the CTA that the quasijudicial agency a quo should not have denied the claim, and to do so the taxpayer should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA, including whatever was required for the successful prosecution of the administrative claim as the means of demonstrating to the CTA that its administrative claim should have been granted in the first place. (G.R. No. 188260, November 13. 2013).
Needless to state, the basic rule is that mere allegation is not evidence and is not equivalent to proof. Interestingly, despite the admission of petitioner of the existence of the said Distribution Agreement, it did not offer the same in evidence for this Court's examination. This then calls for the application of the presumption "[t]hat evidence willfully suppressed would be adverse if produced."
By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (Article 1868 of the Civil Code of the Philippines (Republic Act No. 386).
Doing Business in the Philippines
Fortunately, jurisprudence has supplied the deficiency and has held that the term 'implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object for which the corporation was organized.'(G.R. No. 138I04, April 11, 2002).
The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. 72 Phil. 524 (1941).
Republic Act No. 7042, otherwise known as the 'Foreign Investment Act of 1991,' defines 'doing business' as follows:
The phrase 'doing business' shall include soliciting orders, service contracts, opening offices, whether called 'liaison' or branches; offices appointing representatives distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works; or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization; Provided, however, That the phrase 'doing business' shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor having a nominee director or officer to represent its interests in such corporation, nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.'
Simply put, in order that a foreign corporation may be considered engaged in trade or business, its business transaction must be continuous. And such continuity may be shown by "the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of the business organization" and 1s exemplified by "the appointment of a local agent."
Vs COMMISSIONER OF INTERNAL REVENUE
CTA EB NO. 2496, March 16, 2023
Proof of Non-Resident Foreign Corporation
In the case of Commissioner of Internal Revenue vs. Deutsche Knowledge Services Pte Ltd., the Supreme Court clarified that the SEC Certification of Non-registration proves that an entity is a foreign corporation, while the Articles of Incorporation of the foreign client is prima facie evidence that it is not engaged in trade or business in the Philippines. (G.R. No. 234445, July 15, 2020).
Sales of Services – 0%
For the sale of services to be subject to a 0% VAT rate, it is required, that the services were "rendered to a person engaged in business outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed."
In Accenture, Inc. vs. Commissioner of Internal Revenue, the Supreme Court ruled that to come within the coverage of Section 108(B)(2) of the NIRC of 1997, as amended, the taxpayer must show that the entity to whom it rendered services is a foreign corporation not engaged in business in the Philippines. (G.R. No. 190I02. July 11, 2012).
Requisites for 0% rate supply of services
In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., the Supreme Court held that in order to for the supply of services to be considered VAT zero-rated under Section 108 (8)(2) of the NIRC of 1997, as amended the following requisites must be satisfied:
1. The services by VAT-registered person must be other than processing, manufacturing or repacking of goods;
2. The payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and
3. The recipient of such services is doing business outside the Philippines. (Boldfacing and underscoring supplied)
Judicial claim for tax refund or tax credit brought to the CTA is by no means an original action but an appeal by way of a petition for review of the taxpayer's unsuccessful administrative claim; hence, the taxpayer has to convince the CTA that the quasijudicial agency a quo should not have denied the claim, and to do so the taxpayer should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA, including whatever was required for the successful prosecution of the administrative claim as the means of demonstrating to the CTA that its administrative claim should have been granted in the first place. (G.R. No. 188260, November 13. 2013).
Needless to state, the basic rule is that mere allegation is not evidence and is not equivalent to proof. Interestingly, despite the admission of petitioner of the existence of the said Distribution Agreement, it did not offer the same in evidence for this Court's examination. This then calls for the application of the presumption "[t]hat evidence willfully suppressed would be adverse if produced."
By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (Article 1868 of the Civil Code of the Philippines (Republic Act No. 386).
Doing Business in the Philippines
Fortunately, jurisprudence has supplied the deficiency and has held that the term 'implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object for which the corporation was organized.'(G.R. No. 138I04, April 11, 2002).
The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. 72 Phil. 524 (1941).
Republic Act No. 7042, otherwise known as the 'Foreign Investment Act of 1991,' defines 'doing business' as follows:
The phrase 'doing business' shall include soliciting orders, service contracts, opening offices, whether called 'liaison' or branches; offices appointing representatives distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works; or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization; Provided, however, That the phrase 'doing business' shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor having a nominee director or officer to represent its interests in such corporation, nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.'
Simply put, in order that a foreign corporation may be considered engaged in trade or business, its business transaction must be continuous. And such continuity may be shown by "the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of the business organization" and 1s exemplified by "the appointment of a local agent."