February 9, 2023

Filipino Guardian

Sentinels of Filipino Free Press

CTA upholds ruling partially upholding the shipping company’s VAT refund claim


THE Court of Tax Appeals (CTA) has upheld its decision granting BW Shipping Philippines, Inc. a partial refund of BW Shipping Philippines, Inc.’s 3.18 million pesos refund claim for its excessive input tax (VAT) ) attributable to tax-free sales for 2015.

In a 22-page decision dated Dec. 22, released Dec. 28, the CTA Full Court ruled that its third chamber had not abused its discretion by awarding a reduced amount from the shipping company’s VAT refund claim of 4, 95 million pesos granted.

The Commissioner of Internal Revenue (CIR) argued that the services provided by the company to foreign shipping companies are not eligible for a 0% VAT rate as they conduct business in the Philippines.

Under the country’s income law, taxpayers who work with foreign companies outside the Philippines are entitled to tax-free sales that are not converted into an output tax.

The tribunal said BW Shipping was able to prove that its foreign customers were non-resident foreign companies doing business outside of the Philippines.

“The shipping company’s foreign customers cannot be considered to be operating in the Philippines because they have not solicited orders…or the performance of some of the functions normally associated with and in the progressive pursuit of commercial gain or the purpose and purpose of the foreign’s business organization.” Clients,” CTA Associate Justice Marian Ivy F. Reyes-Fajardo.

The court also upheld its department’s decision to dismiss BW Shipping’s appeal for a new trial to produce corrected evidence which it claimed proved its entitlement to the full refund amount.

The company argued that the inaccurate entries found on its VAT receipts were due to “excusable” errors made by its cashier who prepared them, which have since been corrected.

The CTA said negligence is not an excuse to warrant a new process to grant the company full recovery rights.

“It must be emphasized that litigation is not a ‘trial and error’ process,” the tribunal said.

“A party who requests a new trial by error must show that ordinary prudence could not have protected itself.” — John Victor D. Ordoñez