CTA affirms ruling partially granting shipping firm’s VAT refund claim

THE Court of Tax Appeals (CTA) has affirmed its ruling partially granting BW Shipping Philippines, Inc.’s P3.18-million refund claim representing its excess input value-added tax (VAT) traced to zero-rated sales for 2015.

In a 22-page decision dated Dec. 22 and made public on Dec. 28, the CTA full court ruled that its third division did not abuse its discretion in granting a reduced amount from the shipping firm’s P4.95 million VAT refund claim.

The commissioner of internal revenue (CIR) argued that the services rendered by the firm to foreign shipping companies cannot qualify for a 0% VAT rating as they were doing business in the Philippines.

Under the country’s revenue code, taxpayers that engage with foreign firms outside the Philippines are entitled to zero-rated sales that do not translate to output tax.

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

“The foreign clients of the shipping firm cannot be considered as doing business in the Philippines because it did not solicit orders… or the exercise of some of the functions normally incident to and in progressive prosecution of commercial gain or of the purpose and object of the foreign client’s business organization,” CTA Associate Justice Marian Ivy F. Reyes-Fajardo.

The court also affirmed its division’s decision to reject BW Shipping’s appeal for a new trial to present corrected pieces of evidence that it claimed proved its entitlement to the full refund amount.

The firm argued that the inaccurate entries found in its VAT receipts stemmed from “excusable” mistakes of its cashier who prepared them and have since been corrected.

The CTA said negligence is not an excuse to justify a new trial to grant the firm’s full refund claim.

“It bears stressing that litigation is not a ‘trial and error’ proceeding,” the tribunal said.

“A party who moves for a new trial on the ground of mistake must show that ordinary prudence could not have guarded against it.” — John Victor D. Ordoñez