The Court of Tax Appeals (CTA) has ruled that certificates of nonregistration issued by the Securities and Exchange Commission (SEC) are not enough proof that the clients of a value-added tax (VAT)-registered company are nonresident corporations not doing business in the Philippines, so that services rendered to such clients will be subject to zero-percent VAT.
The CTA also ruled that additional evidence cannot be presented by the VAT-registered taxpayer in its motion for reconsideration to prove that its dealings clients are zero-rated VAT transactions, unless such additional evidence are newly discovered evidence that could not have been obtained during the trial using reasonable diligence.
In the case of WNS Global Services Philippines Inc. v Commissioner of Internal Revenue, the CTA en banc affirmed the denial of the petitioner’s claim for tax credit certificates allegedly representing its unused input VAT attributable to zero-rated sale of services to its clients who were claimed to be nonresident corporations not doing business in the Philippines.
Under the Tax Code, one of the transactions that may be subject to zero-rated VAT are “services rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas.”
Input VAT incurred by a VAT-registered taxpayer in rendering services that are subject to zero-rated VAT may claim such input VAT as refund or tax credit, subject to certain documentary requirements.
But in this case, the CTA said the evidence presented by the petitioner, consisting of certificates of non-registration issued by the SEC showing that its clients are not registered with the SEC, do not prove that such clients are nonresident corporations not doing business in the Philippines.
“Here, while the SEC Certificates of Non-Registration show that the entities named therein are not registered corporations or partnerships in the Philippines, the same do not prove that such entities are nonresident corporations doing business outside the Philippines,” the decision said.
The CTA also denied the petitioner’s petition to admit additional evidence in support of its motion for reconsideration because of its absence at a hearing ordered by the court where it was allowed to mark additional evidence and subsequently file a supplemental formal offer of evidence.