CTA affirms partial refund for Deutsche Knowledge

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THE Court of Tax Appeals (CTA) affirmed its division ruling partially granting Deutsche Knowledge Services Pte. Ltd.’s (DKSPL) claim for a refund worth P990,730.56 representing its excess input value-added tax (VAT) traced to zero-rated sales for the first quarter of 2007.

In a 23-page decision on July 1 and made public on July 6, The CTA full court said DKSPL was able to sufficiently prove that its clients were foreign corporations not engaged in trade or business in the Philippines.

The court noted the company presented certificates of non-registration from the Securities and Exchange Commission (SEC), which the court deemed competent evidence to prove its clients were foreign entities.

“This court finds no compelling reason to reverse or modify the findings of the court a quo in the assailed decision and resolution,” according to the ruling written by CTA Associate Justice Erlinda P. Uy.

The CTA Second Division earlier ruled DKSPL successfully substantiated P990,730.56 out of the original P12,549,446.30 claim.

“The commissioner of internal revenue (CIR) did not indicate any reversible error made by the Court in Division in its appreciation of the subject Certificates, nor did he disprove DKSPL’s justifications for the said disparities,” said the tribunal.

The CIR, the petitioner, argued that the CTA Second Division made an error in giving weight to the SEC certifications of non-registration.

The CTA full court also rejected DKSPL’s appeal to refund its original claim of P12,549,446, as the court upheld its division ruling.

DKSPL provides its clients with corporate finance advisory services, research and development services, and logistics services among others. The company is also a subsidiary of Deutsche Bank Group in Singapore.

The CIR has the authority to act upon and approve claims for refund or tax credit in accordance with the country’s tax code.

Under the country’s tax code, a transaction should be treated as zero-rated VAT if the following conditions are met: services must be performed outside the Philippines, the recipient of services is doing business outside the country, service offered must be other than processing, manufacturing or repacking of goods and paid in acceptable foreign currency accounted for in the laws of the local bank. — John Victor D. Ordoñez