BW SHIPPING PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION BW SHIPPING PHILIPPINES, CTA Case No . 9448 INC. , Petitioner, Members: -versus- DEL ROSARIO, P.J. ,-chairperson, FABON-VICTORINO, and MANAHAN, JJ. Promulgated: �(3\::>~ COMMISSIONER OF INTERNAL REVENUE, ~ Respondent. ){- - - - - - - - - - - - - - - - - - - - - - - - - - -- RESOLUTION MANAHAN, J. : This resolves the Motion for Reconsideration filed by respondent Commissioner of Internal Revenue (CIR) , praying that a new decision be rendered denying petitioner's claim for refund of e){cess/unutilized input VAT for the four quarters of ta){able year 2014. On September 23, 2019, the Court partially granted petitioner's claim for refund, as follows: WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly , respondent is ORDERED to REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of Php5,503,628.95 representing unutilized input VAT attributable to zero-rated sales for the four quarters of ta){able year 2014. SO ORDERED.l In his Motion, respondent argues that the recipients of services rendered by petitioner were doing business in the 1 Decision d ated Sep tember 23, 20 19, p. 20 .,..,

RESOLUTION CTA CASE No. 9448 Philippines, and should not be considered as VAT zero-rated. Respondent states that the recipients of services/customers of petitioner were entities doing business in the Philippines, through the appointment of the latter as "agent" of its customers, acting as "principal" for the purposes of recruiting Filipino seamen for employment on board the vessels managed by the said principal. Respondent also points to the Crew Agency Agreements which were executed as early as 2008 as evidence of the continuity of conduct and intention to establish a continuous business in the Philippines on the part of the petitioner and its customers. Petitioner, in its Comment/Opposition (To Respondent's Motion for Reconsideration),2 states that it has sufficiently proven that its customers are not registered and are not doing business in the Philippines by the presentation of: (1) consularized Certificate/Articles of Foreign Incorporation; (2) official online websites; and (3) Certificates of Non-Registration of Company issued by the Securities and Exchange Commission. Petitioner states that it simply renders manning or crewing services to foreign shipping companies. Petitioner screens competent and qualified Filipino seamen for employment on board the vessels of the foreign shipping company, and other services in furtherance thereof. Petitioner states that this activity does not constitute a business activity or commercial dealing by the foreign shipping companies in the Philippines. The Motion has no merit. The Court found that the recipients of petitioner's services are doing business outside the Philippines as shown by the Certificates of Non-Registration of Company issued by the SEC, Certificates of Registration/Articles of Incorporation issued by foreign government agencies, screenshots of foreign registration per foreign regulatory websites and consularized Manning Agreements/Purchasing & Infrastructure Support Agreements, as follows: Registered Name SEC Certificate Other BW Gas Foreign Manning AS Certificate of Supporting BW Maritime PTE Ltd. Documents of Non� Incorporation Registration P-31 I P-23 P-30 P-29 P-34 P-33 P-32 2 Filed on November 21, 2019._

RESOLUTION P-35 P-36 P-37 I P-25 CTA CASE No. 9448 P-38 P-39 P-40 I P-26 Page 3 of 4 P-41 P-42 P-43 I P-27 P-44 P-45 P-46 I P-28 Berge Bulk Maritime PTE Ltd. BW Offshore Global Manning PTE Ltd. BW Fleet Management PTE Ltd. BW Fleet Management AS We find no merit to respondent's allegation that the appointment of petitioner as "agent" and the duration of the Crew Agency Agreements shows that petitioner's customers are engaged in business in the Philippines. As previously ruled in Accenture, Inc. v. Commissioner of Internal Revenue:3 There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. We ruled thus in Commissioner of Internal Revenue v. British Overseas Airways Corporation: x x x. There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged in light of its peculiar environmental circumstances. The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of the business organization. "In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character." The alleged "agency" between petitioner and its customers is limited to petitioner's authority to act on behalf of its customers for the screening of Filipino seamen, which will be subsequently hired by the foreign shipping companies. There is no evidence that petitioner acts in furtherance of its customers' shipping activities. 3 G.R. No. 190102, July 11,2012, recently cited in Site/Philippines Corp. v. Commissioner oflntemal Revenue, G.R. No. 201326, February 8, 2017.0,....

RESOLUTION CTA CASE No. 9448 Based on the foregoing, the Court finds no reason to reverse its Decision dated September 23, 2019, which partially granted petitioner's claim for refund. WHEREFORE, respondent's Motion for Reconsideration is DENIED for lack of merit. SO ORDERED. C~T-~ CATHERINE T. MANAHAN Associate Justice WE CONCUR: Presiding Justice ESPE~