MANILA: THE Court of Tax Appeals (CTA) en banc affirmed an earlier court order for the Bureau of Internal Revenue (BIR) to refund P27.62 million in taxes to Nokia (Philippines), Inc.
Voting 7-2, the CTA en banc upheld the ruling of the court’s Second Division, rejecting an appeal by the Commissioner of Internal Revenue to reverse the order to repay millions to the telecommunications products distributor.
The court en banc found merit in the argument of Nokia Philippines that the subject input value-added tax (VAT) for the four quarters of taxable year 2010 were zero-rated, as it was imposed on the sales that Nokia Philippines made from its foreign client Nokia Corporation (Finland). The tax court cited Section 108(a) of the National Internal Revenue Code of 1997, which provides for the coverage of VAT imposition.
Under the law, a company’s VAT is equal to 10% of gross receipts on the “sale and exchange of services” which pertain to those rendered in the Philippines. To prove that Nokia Corporation (Finland) is a non-resident foreign corporation that is not registered to engage in business in the Philippines, Nokia Philippines provided the court with a notarized and certified Extract From Trade Register issued by the National Board of Patents and Registration Finland as well as a Certificate of Non-Registration from the Securities and Exchange Commission of the Philippines.
In arguing for its case, the BIR commissioner said Nokia Philippines failed to supply relevant documents supporting its tax refund claim, providing the court with four letters where the company was requested to complete the documentary proof needed.
But the CTA said the BIR letters submitted as evidence did not show failure on the part of Nokia Philippines but was simply a checklist of needed documents, some of which had already been submitted before the issuance of the letters.
“Nowhere in said exhibit is it stated that the BIR has evaluated the documents submitted on December 2, 2011, and had found them wanting… Surely, these are not the requests for additional documents contemplated by law,” the CTA decision reads.
The tax court ruled that it cannot interpret the evidence provided by the BIR to mean failure on the part of Nokia Philippines.
“A misplaced reliance on an erroneous interpretation, such as in this case, would cause much prejudice to a taxpayer claiming for refund/ tax credit,” it said. The 16-page decision was penned by CTA Associate Justice Ma. Belen M. Ringpis-Liban and concurred by six others. CTA Presiding Justice Roman G. Del Rosario and Associate Justice Erlinda P. Uy each penned their dissenting opinions.
The dissenters regarded as admissible evidence a note from the audited financial statement of Nokia Philippines that showed it is engaged in providing support services and focused on business matters for Nokia’s operations in the Philippines, making its sales subject to VAT.
