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    Cir vs. Burmeister

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    Francise Mae Montilla Mordeno
    The Court of Appeals affirmed the decision of the CTA ordering the BIR to issue a tax credit certificate to the respondent. The respondent had provided operation and maintenance services for two power barges owned by NAPOCOR. While the services were performed in the Philippines, the recipient of the services was a foreign consortium doing business within the Philippines under a long-term contract. Therefore, the respondent was not entitled to the 0% VAT rate and had correctly paid the 10% VAT originally. However, subsequent BIR rulings confirmed the services should be VAT exempt, so a tax credit for the amount paid was due.

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    Cir vs. Burmeister

    Uploaded by

    Francise Mae Montilla Mordeno
    72 views1 page
    The Court of Appeals affirmed the decision of the CTA ordering the BIR to issue a tax credit certificate to the respondent. The respondent had provided operation and maintenance services for two power barges owned by NAPOCOR. While the services were performed in the Philippines, the recipient of the services was a foreign consortium doing business within the Philippines under a long-term contract. Therefore, the respondent was not entitled to the 0% VAT rate and had correctly paid the 10% VAT originally. However, subsequent BIR rulings confirmed the services should be VAT exempt, so a tax credit for the amount paid was due.

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    TAX

    Original Title

    7. CIR VS. BURMEISTER

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    The Court of Appeals affirmed the decision of the CTA ordering the BIR to issue a tax credit certificate to the respondent. The respondent had provided operation and maintenance services for two power barges owned by NAPOCOR. While the services were performed in the Philippines, the recipient of the services was a foreign consortium doing business within the Philippines under a long-term contract. Therefore, the respondent was not entitled to the 0% VAT rate and had correctly paid the 10% VAT originally. However, subsequent BIR rulings confirmed the services should be VAT exempt, so a tax credit for the amount paid was due.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    72 views1 page

    Cir vs. Burmeister

    Uploaded by

    Francise Mae Montilla Mordeno
    The Court of Appeals affirmed the decision of the CTA ordering the BIR to issue a tax credit certificate to the respondent. The respondent had provided operation and maintenance services for two power barges owned by NAPOCOR. While the services were performed in the Philippines, the recipient of the services was a foreign consortium doing business within the Philippines under a long-term contract. Therefore, the respondent was not entitled to the 0% VAT rate and had correctly paid the 10% VAT originally. However, subsequent BIR rulings confirmed the services should be VAT exempt, so a tax credit for the amount paid was due.

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    7.

    CIR vs BURMEISTER AND WAIN In affirming the CTA, the Court of Appeals rejected
    G.R. NO. 153205 JANUARY 22, 2007 petitioner’s view that since respondent’s services are not
    destined for consumption abroad, they are not of the same
    FACTS: nature as project studies, information services,
    engineering and architectural designs, and other similar
    ] a foreign consortium composed of Burmeister and Wain services mentioned in Section 4.102-2(b)(2) of Revenue
    Scandinavian Contractor A/S (BWSC-Denmark), Mitsui Regulations No. 5-967 as subject to 0% VAT.
    Engineering and Shipbuilding, Ltd., and Mitsui and Co., Ltd.
    entered into a contract with the National Power Thus, according to petitioner, respondent’s services
    Corporation (NAPOCOR) for the operation and cannot legally qualify for 0% VAT but are subject to the
    maintenance of [NAPOCOR’s] two power barges. regular 10% VAT.8

    The Consortium appointed BWSC-Denmark as its


    coordination manager.
    ISSUE: Is respondent entitled to 0% VAT?
    BWSC-Denmark established [respondent] which
    subcontracted the actual operation and maintenance of
    NAPOCOR’s two power barges as well as the performance RULINGl yes
    of other duties and acts which necessarily have to be done
    in the Philippines. Respondent, as subcontractor of the Consortium, operates
    and maintains NAPOCOR’s power barges in the
    NAPOCOR paid capacity and energy fees to the Consortium Philippines.
    in a mixture of currencies (Mark, Yen, and Peso). the
    NAPOCOR pays the Consortium, through its non-resident
    Consortium pays [respondent] in foreign currency
    inwardly remitted to the Philippines through the banking partners, partly in foreign currency outwardly remitted. In
    system. turn, the Consortium pays respondent also in foreign
    currency inwardly remitted and accounted for in
    In order to ascertain the tax implications of the above accordance with BSP rules.
    transactions, [respondent] sought a ruling from the BIR This payment scheme does not entitle respondent to 0%
    which responded with BIR Ruling No. 023-95 dated
    VAT.
    February 14, 1995, declaring therein that if [respondent]
    chooses to register as a VAT person and the consideration As the Court held in Commissioner of Internal Revenue v.
    for its services is paid for in acceptable foreign currency American Express International, Inc. (Philippine Branch),
    and accounted for in accordance with the rules and 462 SCRA 197 (2005), the place of payment is immaterial,
    regulations of the Bangko Sentral ng Pilipinas, the
    much less is the place where the output of the service is
    aforesaid services shall be subject to VAT at zero-rate.
    ultimately used.
    [Respondent] chose to register as a VAT taxpayer. An essential condition for entitlement to 0% VAT under
    Section 102(b)(1) and (2) is that the recipient of the
    For the year 1996, [respondent] seasonably filed its
    services is a person doing business outside the Philippines.
    quarterly Value-Added Tax Returns reflecting, among
    others, a total zero-rated sales of P147,317,189.62 with In this case, the recipient of the services is the Consortium,
    VAT input taxes of P3,361,174.14 which is doing business not outside, but within the
    Philippines because it has a 15-year contract to operate
    On December 29, 1997, [respondent] availed of the
    and maintain NAPOCOR’s two 100-megawatt power
    Voluntary Assessment Program (VAP) of the BIR. It
    barges in Mindanao
    allegedly misinterpreted Revenue Regulations No. 5-96
    dated February 20, 1996 to be applicable to its case
    The Court recognizes the rule that the VAT system
    In [conformity] with the aforecited Revenue Regulations, generally follows the “destination principle” (exports are
    [respondent] subjected its sale of services to the zero-rated whereas imports are taxed).
    Consortium to the 10% VAT
    However, as the Court stated in American Express, there is
    It paid the amount of P6,994,659.67 through BIR’s an exception to this rule.
    collecting agent, PCIBank, as its output tax liability for the
    year 1996 This exception refers to the 0% VAT on services
    enumerated in Section 102 and performed in the
    On January 7,1999, [respondent] was able to secure VAT Philippines.
    Ruling No. 003-99 from the VAT Review Committee which
    reconfirmed BIR Ruling No. 023-95 "insofar as it held that For services covered by Section 102(b)(1) and (2), the
    the services being rendered by BWSCMI is subject to VAT recipient of the services must be a person doing business
    at zero percent (0%)." outside the Philippines.

    On the strength of the aforementioned rulings, Thus, to be exempt from the destination principle under
    [respondent] on April 22,1999, filed a claim for the Section 102(b)(1) and (2), the services must be
    issuance of a tax credit certificate
    (a) performed in the Philippines;
    Respondent] believed that it erroneously paid the output (b) for a person doing business outside the
    VAT for 1996 due to its availment of the Voluntary Philippines; and
    Assessment Program (VAP) of the BIR (c) paid in acceptable foreign currency accounted for
    in accordance with BSP rules.
    CTA ordered petitioner to issue a tax credit certificate
    for P6,994,659.67 in favor of respondent

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