THE Court of Tax Appeals has denied Pacific Ocean Manning, Inc.’s appeal to review and set aside its tax liabilities worth P13.04 million allegedly representing its unused input taxes traced to zero-rated sales in 2016.
In a decision dated Nov. 10 and made public on Nov. 17, the CTA Special Third Division ruled that the firm failed to prove it engaged in zero-rated sales in 2016.
“A perusal of the records shows that Pacific Ocean Manning failed to submit in evidence any proof that its foreign clients are not doing business in the Philippines,” Associate Justice Maria Rowena Modesto-San Pedro said in the ruling, citing the country’s revenue code.
It noted that a taxpayer has the burden of proof to show that it complied with mandated conditions for a tax refund.
Under the law, taxpayers that engage with foreign corporations outside the Philippines are entitled to zero-rated sales that do not translate to output tax.
The term “zero-rated sale” must be written on the company’s official invoices.
Sales that qualify for 0% value-added tax (VAT) include services other than processing, manufacturing, or repacking of goods; services performed in the Philippines by VAT-registered persons and sales paid in acceptable foreign currency in line with the central bank’s rules.
The firm provides its clients, usually seafarers, with services that include arranging the procedural requirements when they apply for a job in shipping companies.
The court said the petitioner did not provide evidence to substantiate its services to its client V. Ships UK, Ltd., which the firm said resulted in zero-rated sales.
The manning agency agreement between Pacific Ocean Manning and its client only took effect on July 1, 2016, despite its refund claim covering four quarters of that year.
“There is no way to establish the type and nature of services actually rendered by petitioner to V. Ships UK, Ltd. prior to said effectivity date,” said the tribunal.
“It is thus unnecessary for this court to look into petitioner’s compliance with the other remaining requirements for the claim for unutilized input VAT refund to prosper,” it added. — John Victor D. Ordoñez