G.R. No. 201326, February 08, 2017
SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
D E C I S I O N
(TAX CREDIT AND REFUND)
FACTS: Sitel, a corporation organized and extsting under the laws of the Philippines, is engaged in the business of providing call center services from the Philippines to domestic and offshore businesses. It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer, as well as with the Board of Investments on pioneer status as a new information technology service firm in the field of call center.
Sitel filed separate formal claims for refund or issuance of tax credit with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance for its unutilized input VAT arising from domestic purchases of goods and services attributed to zero-rated transactions and purchases/importations of capital goods for the 1st, 2nd, 3rd and 4th quarters of 2004 in the aggregate amount of P23,093,899.59.7
On March 30, 2006, Sitel filed a judicial claim for refund or tax credit via a petition for review before the CTA.
Ruling of the CTA Division
CTA Division partially granted Sitel’s claim for VAT refund or tax credit. Petitioner is entitled to the instant claim in the reduced amount of P11,155,276.59.
APPROVED: The reduced amount of P11,155,276.59 representing unutilized input VAT arising from petitioner’s domestic purchases of goods and services which are attributable to zero-rated transactions and purchases/importations of capital goods for the taxable year 2004.
- P7,170,276.02 claim for unutilized input VAT attributable to its zero-rated sales for the four quarters of 2004. CTA Division found that Sitel failed to prove that the recipients of its services are doing business outside the Philippines, as required under Section 108(B)(2) of the National Internal Revenue Code of 1997 (NIRC), as amended.11
2. P2,668,852.55 representing input VAT paid on capital goods purchased for taxable year 2004 for failure to comply with the invoicing requirements under Sections 113, 237, and 238 of the NIRC of 1997, as amended, and Section 4.108-1 of Revenue Regulations No. 7-95 (RR 7-95).12
- Aggrieved, Sitel filed a motion for partial reconsideration for the denied claims and for Partial Execution of Judgmentseeking the execution pending appeal of the portion of the CTA Decision granting refund in the amount of P11,155,276.59, which portion was not made part of its motion for partial reconsideration.
Ruling of the CTA En Banc
CTA En Banc reversed and set aside the ruling of the CTA Division.
Reason: Citing the case of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.18 (Aichi), the CTA En Banc ruled that the 120-day period for the CIR to act on the administrative claim for refund or tax credit, under Section 112(D) of the NIRC of 1997, as amended, is mandatory and jurisdictional.
In this case, Sitel filed its judicial claim for VAT refund or credit without waiting for the lapse of the 120-day period for the CIR to act on its administrative claim, the CTA did not acquire jurisdiction as there was no decision or inaction to speak of.Thus, the CTA En Banc denied Sitel’s entire refund claim on the ground of prematurity
I – WHETHER OR NOT THE CTA EN BANC CAN VALIDLY WITHDRAW AND REVOKE THE PORTION OF THE REFUND CLAIM ALREADY GRANTED TO PETITIONER IN THE AMOUNT OF P11,155,276.59 AFTER TRIAL ON THE MERITS, NOTWITHSTANDING THAT SUCH PORTION OF THE DECISION HAD NOT BEEN APPEALED.
II – WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND OR TAX CREDIT OF ITS UNUTILIZED INPUT VAT ARISING FROM PURCHASES OF GOODS AND SERVICES ATTRIBUTABLE TO ZERO-RATED SALES AND PURCHASES/IMPORTATIONS OF CAPITAL GOODS
I – WHETHER OR NOT THE CTA EN BANC CAN VALIDLY WITHDRAW AND REVOKE THE PORTION OF THE REFUND CLAIM ALREADY GRANTED?
Answer: No. Site/’s Judicial Claim for VAT Refund was deemed timely filed.
For clarity and guidance, the Court deems it proper to outline the rules laid down in San Roque with regard to claims for refund or tax credit of unutilized creditable input VAT. They are as follows:chanRoblesvirtualLawlibrary
1. When to file an administrative claim with the CIR:
- General rule- Section 112(A) and Mirant :
Within 2 years from the close of the taxable quarter when the sales were made.
- Exception – Atlas
Within 2 years from the date of payment of the output VAT, if the administrative claim was filed from June 8, 2007 (promulgation of Atlas) to September 12, 2008 (promulgation of Mirant).
2. When to file a judicial claim with the CTA:
- General rule-Section 112(D); not Section 229
- Within 30 days from the full or partial denial of the administrative claim by the CIR; or
- Within 30 days from the expiration of the 120-day period provided to the CIR to decide on the claim. This is mandatory and jurisdictional beginning January 1, 1998 (effectivity of 1997 NIRC).
- Exception – BIR Ruling No. DA-489-03
The judicial claim need not await the expiration of the 120-day period, if such was filed from December 10, 2003 (issuance of BIR Ruling No. DA-489-03) to October 6, 2010 (promulgation of Aichi).
In this case, records show that Sitel filed its administrative and judicial claim for refund on March 28, 2006 and March 30, 2006, respectively, or after the issuance of BIR Ruling No. DA-489-03, but before the date when Aichi was promulgated. Thus, even though Sitel filed its judicial claim prematurely, i.e., without waiting for the expiration of the 120-day mandatory period, the CTA may still take cognizance of the case because the claim was filed within the excepted period stated in San Roque.
In other words, Sitel’s judicial claim was deemed timely filed and should have not been dismissed by the CTA En Banc. Consequently, the October 21, 2009 Decision34 of the CTA Division partially granting Sitel’s judicial claim for refund in the reduced amount of P11,155,276.59, which is not subject of the instant appeal, should be reinstated. In this regard, since the CIR did not appeal said decision to the CTA En Banc, the same is now considered final and beyond this Court’s review.
II- WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND OR TAX CREDIT OF ITS UNUTILIZED INPUT VAT? (the portion that was denied: P7,170,276.02 and P2,668,852.55.)
Answer: No. Firstly, Sitel failed to prove that the recipients of its call services are foreign corporations doing business outside the Philippines. Secondly, Sitel failed to strictly comply with invoicing requirements for VAT refund.
First: Sitel’s claim for refund is anchored on Section 112(A)40 of the NIRC, which allows the refund or credit of input VAT attributable to zero-rated or effectively zero-rated sales. The Court clarified that an essential condition to qualify for zero-rating under the aforequoted provision:
- services be other than “processing, manufacturing or repacking of goods” and
- that payment for such services be in acceptable foreign currency accounted for in accordance with BSP rules.
- the recipient of such services is doing business outside the Philippines
The Tax Code not only requires that the services be other than “processing, manufacturing or repacking of goods” and that payment for such services be in acceptable foreign currency accounted for in accordance with BSP rules. Another essential condition for qualification to zero-rating under Section 102(b)(2) is that the recipient of such services is doing business outside the Philippines.
In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character.
|NOTE that the court cited Accenture case: Accenture), emphasized that a taxpayer claiming for a VAT refund or credit under Section 108(B) has the burden to prove not only that the recipient of the service is a foreign corporation, but also that aid corporation is doing business outside the Philippines. For failure to discharge this burden, the Court denied Accenture‘s claim for refund. We rule that the recipient of the service must be doing business outside the Philippines for the transaction to qualify for zero-rating under Section 108(B) of the Tax Code.|
The evidence presented by Accenture may have established that its clients are foreign. This fact does not automatically mean, however, that these clients were doing business outside the Philippines.
In this case, Sitel fell short of proving that the recipients of its call services were foreign corporations doing business outside the Philippines. As correctly pointed out by the CTA Division, while Sitel’s documentary evidence, which includes Certifications issued by the Securities and Exchange Commission and Agreements between Sitel and its foreign clients, may have established that Sitel rendered services to foreign corporations in 2004 and received payments therefor through inward remittances, said documents failed to specifically prove that such foreign clients were doing business outside the Philippines or have a continuity of commercial dealings outside the Philippines.
Second: The NIRC requires that the creditable input VAT should be evidenced by a VAT invoice or official receipt,45 which may only be considered as such when the TIN-VAT is printed thereon. To be considered a ‘VAT invoice,’ the TIN-VAT must be printed, and not merely stamped.
The applicant must prove not only entitlement to the grant of the claim under substantive law, he must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit and compliance with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them.
Consequently, purchases supported by invoices or official receipts, wherein the TIN-VAT is not printed thereon, shall not give rise to any input VAT. Likewise, input VAT on purchases supported by invoices or official receipts which are NON-VAT are disallowed because these invoices or official receipts are not considered as ‘VAT Invoices. In the same vein, considering that the subject invoice/official receipts are not imprinted with the taxpayer’s TIN followed by the word VAT, these would not be considered as VAT invoices/official receipts and would not give rise to any creditable input VAT in favor of Sitel.
At this juncture, it bears to emphasize that “[t]ax refunds or tax credits just like tax exemptions are strictly construed against taxpayers, the latter having the burden to prove strict compliance with the conditions for the grant of the tax refund or credit.”
WHEREFORE, premises considered, the instant petition for review is GRANTED IN PART. The Decision dated November 11, 2011 and Resolution dated March 28, 2012 of the CTA En Banc in CTA EB No. 644 are hereby REVERSED and SET ASIDE. Accordingly, the October 21, 2009 Decision of the CTA First Division in CTA Case No. 7423 is hereby REINSTATED.
Respondent is hereby ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE, in favor of the petitioner in the amount of P11,155,276.59, representing unutilized input VAT arising from purchases/importations of capital goods for taxable year 2004.