[CERTIFICATE OF NON-REGISTRATION FROM SEC AND CERTIFICATE/ARTICLES OF FOREIGN INCORPORATION/ASSOCIATION ARE SUFFICIENT PROOF THAT AN NRFC IS DOING BUSINESS OUTSIDE THE PHILIPPINES] [ACTIVITY UNDERTAKEN MUST INVOLVE PROFIT-MAKING FOR AN NRFC TO BE CONSIDERED AS ONE DOING BUSINESS IN THE PH]

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the previous Decision and Resolution of the Court of Tax Appeals (CTA) First Division granting Respondent BW Shipping Philippines Inc. (BWSPI)’s claim for refund of its unutilized input taxes attributable to zero-rated sales. Petitioner posited that the Court in Division erred in holding that the recipient of Respondent’s services are foreign corporations doing business outside the Philippines, hence, such services should have been disqualified from being zero-rated and the corresponding input taxes attributable to such sales should not have been granted refund. It has been previously established in the case of Chevron Holdings, Inc. vs. CIR that for a corporation to be considered a Non-Resident Foreign Corporation (NRFC) doing business outside the Philippines, the following documents must be present: (a) Certificate of Non-Registration issued by the Securities and Exchange Commission (SEC); and (b) Certificate/Articles of Foreign Incorporation/Association. As per the Court’s findings, Respondent was able to present the necessary documents to establish that the recipient of the services it rendered are indeed foreign corporations which were organized, registered, and doing business outside the Philippines. Furthermore, to constitute doing business in the Philippines, the activity undertaken should involve profit-making which is clearly not the case with the Respondent as it simply rendered manning and crewing services to foreign shipping companies. While the immediately available information showed that an overwhelming majority of Respondent’s clients subject of this case are affiliates of the bigger BW Group, the fact remains that there is no evidence that the foreign companies to which Respondent provided services are doing business in the Philippines; hence, such sales of services are still qualified for VAT zero-rating. In view of the foregoing, the Petition was DENIED, and the assailed Decision and Resolution were AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. BW SHIPPING PHILIPPINES INC., CTA EN BANC CASE NO. 2254, OCTOBER 29, 2021]

GOOD FAITH RELIANCE ON PREVIOUS INTERPRETATION OF GOVERNMENT AGENCIES IS SUFFICIENT JUSTIFICATION TO CANCEL IMPOSITION OF INTEREST AND COMPROMISE PENALTY

Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking to reverse the earlier Decision and Resolution of the CTA 3rd Division cancelling the imposition of interest and compromise penalty imposed against the Respondent Perpetual Succour Hospital of Cebu, Inc.  In the previous decision and resolution, the Court in Division held that Respondent is not liable to pay interest and compromise penalty for it relied in good faith on a prevailing CTA Case exempting it from paying income tax. Petitioner argued that the aforementioned case is not binding in the instant case since both involve different taxable years. Likewise, Sections 247 and 249 of the 1997 Tax Code do not admit any exemption in the imposition of deficiency and delinquency interests in cases of non-payment of taxes. On the other hand, Respondent countered that it is not subject to interest and compromise penalty for the assessment issued against it is void. In ruling, the Court cited numerous cases decided in the past which provide that reliance, in good faith, on previous interpretations made by government agencies is sufficient justification to cancel the imposition of interest and compromise penalty. Such cases involved honest belief of the taxpayers that they are exempt from paying certain taxes based on a previous interpretation of a government agency, hence, when they were found liable thereafter, the same should not be charged for penalties. Furthermore, the cancellation of interest and compromise penalty was hinged on the fact that Respondent had no intention to violate the Tax Code and merely relied in good faith on previous interpretations of the Court ruling that it is exempt from paying income tax. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. PERPETUAL SUCCOUR HOSPITAL OF CEBU, INC., CTA EN BANC CASE NO. 2122, OCTOBER 28, 2021]

[PERIOD OF RECOVERY, FOR EXCISE TAX EXEMPTION PURPOSES, IS RECKONED FROM THE DATE OF COMMENCEMENT OF COMMERCIAL OPERATION OR FOR A PERIOD NOT EXCEEDING FIVE (5) YEARS OR AT A DATE WHEN THE AGGREGATE OF THE NET CASH FLOWS FROM THE MINING OPERATIONS IS EQUAL TO THE AGGREGATE OF ITS PRE-OPERATING EXPENSES, WHICHEVER COMES EARLIER]

Petitioner OceanaGold (Philippines), Inc. filed a Petition for Review seeking to reverse the earlier Decision and Resolution of the Court in Division upholding the 2014 excise tax assessment issued by the Respondent Commissioner of Internal Revenue. The case arose when Petitioner entered into an Assignment, Accession and Assumption Agreement with Climax-Arimco Mining Corporation. The latter earlier entered into a Financial or Technical Assistance Agreement (FTAA) with the Republic of the Philippines involving the mineral exploration, development, and commercial utilization of mineral deposits that may be found within the Exploration Contract Area spanning the provinces of Nueva Vizcaya and Quirino, or also known as Didipio Gold-Copper Project ("Didipio Project"). The assignment was approved by Department of Environment and Natural Resources (DENR) making the Petitioner a mining service contractor of the Philippines pursuant to the FTAA. Following this, Petitioner filed a letter to the DENR Secretary, copy furnished the Mines and Geosciences Bureau (MGB) of the DENR, declaring that the Date of Commencement of Commercial Production pursuant to the FTAA is on April 1, 2013. In its defense, Petitioner asserted that the subject taxable year is still within the 5-year recovery period from the date stated in its letter to the DENR; thus, exempt from excise tax pursuant to the Mining Act. Following its implementing rules and regulations, the 'Date of Commencement of Commercial Operation' is the date declared by the contractor or as stated in the feasibility study, whichever is earlier. Petitioner presented in evidence the letter to the DENR Secretary declaring that the Date of Commencement of Commercial Operation as April 1, 2013. However, none was presented with respect to the date stated in the feasibility study. Without such, the Court cannot ascertain the 'date stated in the feasibility study.' Consequently, the Court will have no basis to determine the reckoning point of the recovery period, which is the earlier date between the date declared by the contractor, or the date stated in the feasibility study. In ruling, the Court reiterated the finding of the Court in Division that Petitioner should have commenced commercial operation and production on the fourth quarter of the year 2008. It was only in the year 2013, about eight (8) years after the approval of its Partial Declaration of Mining Feasibility (PDMF) that Petitioner officially declared that it has started commercial production. It was claimed that escalating costs and uncertainty in the financial markets ultimately caused the delay. However, further investigation revealed that Petitioner failed to present evidence to prove such. All told, the Court does not find error in the finding of the Court in Division that Petitioner failed to present evidence to prove that the imposition of excise tax was made during the recovery period. Without proof, the Court cannot cancel the assessment on the basis that Petitioner is exempt from excise tax. Thus, the Petition was DENIED for lack of merit and the earlier Decision and Resolution were AFFIRMED. [OCEANAGOLD (PHILIPPINES), INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2216, OCTOBER 21, 2021]

PRIOR TO THE EFFECTIVITY OF RMC NO. 74-99, THE OLD VAT RULE FOR PEZA-REGISTERED ENTERPRISES WAS BASED ON THEIR CHOICE OF FISCAL INCENTIVES, HOWEVER, WITH THE ISSUANCE OF RMC NO. 74-99, THE DISTINCTION UNDER THE OLD RULE WAS DISREGARDED

Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking cancellation of the CTA 2^nd Division’s earlier Decision and Resolution ordering Petitioner to issue Tax Credit Certificate to Respondent Kurimoto (Philippines) Corporation. Petitioner averred that Respondent's sales of services to THPAL, a PEZA registered enterprise, do not qualify as zero-rated sales but subject to 12% VAT. Likewise, to qualify as zero-rated sales, the PEZA registered enterprise which is the client or service-recipient of Respondent, should have availed of the 5% preferential tax, otherwise, they are subject to 12% VAT. In ruling, the Court did not agree with the Petitioner’s argument. As a PEZA-registered entity, THPAL is qualified for VAT zero-rating of its transactions with local suppliers because of Section 8 of Republic Act (R.A.) No. 7916 or the PEZA Law, establishing the fiction that ecozones are foreign territory. Thus, Respondent's reported sales to THPAL into the ecozone are considered exports made to a foreign territory, thus, qualified for VAT zero-rating. In Coral Bay Nickel Corporation case, the Supreme Court ruled that the previous rule requiring that the PEZA-registered enterprise chose the 5% preferential tax rate on its gross income in lieu of all taxes is now disregarded after the issuance of RMC No. 74-99, which recognized the Cross Border Doctrine and the Destination Principle. Thus, the question of whether a PEZA-registered enterprise is VAT-exempt is no longer dependent on the type of fiscal incentives it opts to avail of. In this case, Respondent's reported sales to THPAL, a PEZA-registered enterprise within an ecozone, are correctly subjected to zero-rated VAT, without regard to the type of fiscal incentives THPAL would opt to avail of. Consequently, the Petition was DENIED, and the earlier decision and resolution were AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. KURIMOTO (PHILIPPINES) CORPORATION, CTA EN BANC CASE NO. 2190, OCTOBER 19, 2021]