FIRMENICH (PHILIPPINES), INC. v. COMMISSIONER OF INTERNAL REVENUE

CTA Fonn No. 8 (For DCC) 1111111111111111111111 1111111111 11111 1111111111111111111111111111111111111111111 22-000366-0057 REPUBLIC OF THE PIDLIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE NO. 10938 FIRMENICH (PHILIPPINES), INC., Petitioner, -versus- NOTICE OF RESOLUTION COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legazpi Village Makati City ATTY. FELIX PAUL R. VELASCO lli ATTY. SYLVIA R. ALMA JOSE ATTY. DOROTHY JOY A. CAY-AN ATTY. ANGELINA RAYANNA 0. MAPAGU Bureau of Internal Revenue Room 703, Litigation Division, BIR Main Building Sen. Miriam P. Defensor-Santiago Avenue Diliman, Quezon City CASTILLO LAMAN TAN PANTALEON & SAN JOSE ( Petitioner's new counsel) 2nd to 5th and 9th Floors, Tbe Valero Tower 122 Valero Street, Salcedo Village 1227 Makati City GREETINGS: You are hereby notified by these presents that on June 11, 2026, a Resolution was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, June 17, 2026. Atty. Maria ~F. Chan-Te Executiv~ ~f Court III

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION FIRMENICH CTA Case No.10938 (PHILIPPINES), INC., Members: Petitioner, -versus- BACORRO-VILLENA, Acting Chairperson, and CUI-DAVID, JL. COMMISSIONER OF INTERNAL REVENUE, PromulBated: Respondent. ~U~J::::-2~26 ,l 2:B>PM X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X RESOLUTION BACORRO-VILLENA, L: For the Court's resolution is petitioner Firmenich (Philippines), Inc.'s (petitioner's) "Motion for Reconsideration"� (MR), filed on 19 December 2025, with respondent Commissioner of Internal Revenue's (respondent's/ CIR's) Opposition2 filed on 16 February 2026. The MR assails the Court's Decision3 promulgated on 12 November 2025 (assailed Decision), which denied the instant Petition for Review. The dispositive portion of the assailed Decision reads: WHEREFORE, in view of all the foregoing, the Petition for Review filed by petitioner Firmenich (Philippines), Inc. on 25 July 2 0 22 i~�ht DENIED for Jack ofmerit. Division Docket, Volume II, pp. 629-648. ld., pp. 654-657. ld., pp. 587-627.

RESOLUTION CTA Case No. 10938 Firmenich (Philippines), Inc. v. Commissioner of Internal Revenue Page 2 of lO x--- ------------------------- ---- --------- ------- ---x In the assailed Decision, the Court ruled that petitioner is not entitled to a tax refund or an issuance of a tax credit certificate (TCC) representing its unutilized input value-added tax (VAT) credits because it failed to prove that it rendered services to a non-resident foreign corporation (NRFC). Specifically, the Court found that based on the Agency Agreement4 between petitioner and Firmenich Asia Pte. Ltd. (FAPL), its alleged sole customer, FAPL pays commissions to petitioner not only for services rendered to FAPL, but also to its affiliates, whose status as NRFCs was not proven. Further, even granting that petitioner indeed rendered services exclusively to FAPL, the Court held that FAPL is doing business in the Philippines through petitioner. The Court also found that although petitioner may be considered to be engaged in the business of an indentor, it performed services in excess of being merely a "go-between" or as a middleman. In addition, the Court held that the official receipts (ORs) and the corresponding sales invoices (Sis) presented by petitioner in support of its zero-rated sales are not compliant with the VAT invoicing requirements provided by the National Internal Revenue Code (NIRC) of 1997, as amended, and regulations as they do not contain any information on the nature of services performed by petitioner. Meanwhile, in the present MR, petitioner argues that although other entities within the Firmenich group may incidentally benefit from its services, such services are rendered at the instance and under the engagement of FAPL alone. Petitioner also avers that its ORs and Sis evidencing the zero- rated sales are compliant with the invoicing requirements of the NIRC of 1997, as amended, since the law, regulations, and jurisprudence do not expressly state the required degree of particularity in describing the nature of the service on ORs and Sis. Nonetheless, petitioner alleges, citing Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue5 (Intel Technology), that the NIRC of 1997, as amended, only t provides the penalty of fine and imprisonment for invoices or receipts that do not truly reflect or contain the required information, but does not state that the claim for refund must be invalidated. 4 Exhibit " P-4... id., Volume I, pp. 434-445. G. R. No. 166732, 27 Apri l 2007.

RESOLUTION CTA Case No. 10938 Firmenich (Philippines), Inc. v. Commissione r of Internal Revenue X-------------------------------------------- ------- X Moreover, petitioner maintains that FAPL is not doing business in the Philippines through petitioner and demonstrated that the four (4) tests used by the Court to determine whether FAPL is doing business in the Philippines (i.e., Substance Test, Contract Test, Intention Test, and Actual Performance Test) are, in fact, not satisfied. To further support its argument that FAPL is a non-resident foreign corporation, petitioner claims that FAPL's sale of goods is done outside the Philippines since the goods it sells are located in Singapore and the sale is also perfected there. In relation to the above issue, petitiOner insists that it is an indentor that transacts business in its own name and for its own account. According to petitioner, the acts of ensuring that FAPL's customers are in sound financial standing and that payment is made on time and in full are activities consistent with its role as an indentor and are not in excess of its scope of work. In his or her Opposition,6 respondent argued that petitioner's services to FAPL will ultimately result in the successful sale of FAPL's products within the Philippine territory, thus, it is just appropriate to subject the said services to tax. We resolve. At the outset, petitioner received a copy of the assailed Decision on 04 December 2025.7 Thus, the instant MR personally filed fifteen (15) days la ter,8 or o n 19 Decembe r 2025, 9 and e lectronically filed 10 on 22 December 2025 11 or within the next working day, 12 was filed on time. Nonetheless, after a careful perusal of the instant MR and the arguments raised therein, the Court finds no basis to reverse the assailed Decision.~ 6 Supra ote 2. See Notice of Decision, id., p. 585. See Section II of Republic Act (RA) No. 11 25, as amended & Rule 15, Section I of the Revi sed Rules ofthe Court ofTax Appea ls (RRCTA). 9 See Motion for Reconsideration, supra at note I. 10 As required by paragraph 2 ofCTA En Bane Reso lution No. 8-2024 (Guidelines on the Submission of Electronic Copies of Pleadings and Other Court Subm issions Be fore the Court of Tax Appeals Pursuant to A.M. No. I0-3-7-SC and A.M. No. I 1-9-4-SC). II Division Docket, Volume II, p. 65 1. 12 See paragraph 5 ofCTA En Bane Resolution No. 1-2025 (Interim G uidelines on the Subm ission of Electron ic Copies of Pleadings and Other Court Submissions Before the Cowt ofTax Appeals).

RESOLUTION CTA Case No. 10938 Firmenich (Philippines), Inc. v. Commissioner of Internal Revenue x------------------------------- --- ----- -- ----------x In its MR, petitioner asserts that a holistic reading of the Agency Agreement reveals the parties' intent in entering into the agreement was for FAPL to engage petitioner's services for the promotion of the products of Firmenich affiliates in the Philippines. It likewise argued that the Agency Agreement in its entirety reflects FAPL's appointment of petitioner as the indentor for all Firmenich products in the Philippines, including those of its affiliates. In support ofthis, petitioner highlighted that all of petitioner's zero-rated sales for the third quarter of 2020, as shown by its quarterly VAT return, were for services rendered to FAPL alone. We are not persuaded. The controlling fact in determining whether a particular service is entitled to zero-rating is not who paid for the services or who contracted the services, but to whom the service was rendered, as provided in Section 108 (B)(2) of the NIRC of 1997, as amended: (B) Transactions Subject to Zero Percent (o%) Rate - The fo llowing services performed in the Philippines by VAT- registered persons shall be subject to zero percent (o%) rate. (2) Services other than those mentioned in the preceding paragraph, rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); 13 While it may be easily argued that the entity who contracted and paid for a particular service is the party to whom the service was rendered, it is likewise plausible that such entity merely acted for and on behalf of another entity, especially when the entities involved are related parties, for several possible reasons. In the context ofVAT, service recipients who would be subject to regular VAT can avoid paying such by arranging for an affiliate entity or a related party that qualifies for VAT zero-rating to contract and pay for ~ 13 Emphasis in the original and supplied and underscoring supplied . U

RESOLUTION CTA Case No. 10938 Firmenich (Philippi nes), Inc. v. Commissioner of Internal Reven ue x--------------- ------- ----- ------- ------ ------ -- --- x the services, notwithstanding that the services are ultimately rendered for the benefit of the original service recipient. In the same vein, service providers who are otherwise not qualified for a refund or issuance of tax credit for input VAT attributable to their sales to entities doing business in the Philippines may circumvent the law by contracting with an affiliate not doing business in the Philippines for the services it rendered to other affiliates doing business in the Philippines. Hence, the determination of the party for whom the services were performed for VAT purposes requires a thorough examination of the terms of the agreement for the performance of the subject services and the circumstances surrounding its actual performance. In the present case, several provisions in the Agency Agreement demonstrate the parties' intention to appoint petitioner not only as FAPL's agent but also as FAPL's other affiliates' agent: AGENCY AGREEMENT WHEREAS, in consideration of the development and expansion of the operations carried by [petitioner], ... [petitioner] shall be appointed as Firmenich's agent representative for the Philippines and shall be fairly compensated for any sales support services rendered to [FAPL] and affiliates. ARTICLE II : NON-EXCLUSIVITY [FAPL] or other Mfiliates remain entitled to market or sell Firmenich product s without [petitioner's] support. ARTICLE III: RI GHTS AND OBLIGATIONS OF THE PARTIES Acting as an agent, [petitioner] shall have neither power nor authority to represent or to bind [FAPLl or other Affiliates in any manner except as expressly provided therein. [Petitioner] shall act on behalf of [FAPLl or other Mfiliates but sales shall be concluded directly between the customers and [FAPLl or other Affiliates. [Petitioner] shall transmit to [FAPL] or other t Mfiliates whenever the case may be, any orders for their approval and [FAPL] or other Affiliates shall be responsible for the delivery, invoicing a nd collection of '"ceivables.

RESOLUTION CTA Case No. 10938 Firmenich (Philippines), Inc. v. Commissioner of Internal Revenue x----------------- ------- ---------------------------x [FAPL] shall be entitled to refuse certain orders transmitted by [petitioner]. In which case, [FAPL] or such Mfiliate will inform [petitioner1 of its refusal within 3 (three) working days after the transmission of said order. The Parties will ensure that all clients are of sound financial background and will exchange all information they can acquire on this respect. Moreover, contrary to petitioner's claim [petitioner] accepts to assist [FAPLl or other Affiliates in its receivables collection of directly invoiced sales. ARTICLE VI: CONFIDENTIALITY [Petitioner] undertakes not to disclose, use or sell to third Parties business, manufacturing or any other technical information it has become aware through its relationship with [FAPL] or other Mfiliates whenever the case may be. [Petitioner] binds itself to ensure the same obligations to comply are imposed upon its employees and agents, and shall be liable to [FAPL] or other Affiliates for these obligations. Further, the fact that petitioner's invoices and VAT returns show that its services by virtue of the Agency Agreement were paid for solely by FAPL does not mean that petitioner's services were rendered only to FAPL. Rather, FAPL solely paid the commissions because it is the one responsible for organizing internal compensations with its affiliates, as provided in Article IV of the Agency Agreement: ARTICLE IV: COMPENSATION [FAPLl or other Affiliates shall pay to [petitioner] as compensation for its activities as commercial agent a commission computed on the amount of the sales invoiced by [FAPL] or other Mfiliates to third- party clients in the Philippines, after deduction of the "nationalization" costs[.] ... Commissions will be computed on a quarterly basis by [FAPL] and shall be payable at 30 days. Sales invoiced by other Mfiliates shall be entitled to the same commission rates in consideration of [petitioner's] effective sales support. Such commissions shall be paid by [FAPL] who is responsible for organizing internal compensations with the other Affiliates.

RESOLUTION CTA Case No. 10938 Firmenich (Philippines), Inc. v. Commiss ioner of Internal Revenue x--- -------- ---- -------- ----- ---- ------- --------- ---x At any rate, petitioner claims that it is the only Firmenich entity doing business in the Philippines and registered with the Securities and Exchange Commission (SEC), and all other Firmenich affiliates are non- resident foreign corporations not doing business in the Philippines. However, a plain reading ofFAPL's SEC Certificate ofNon-Registration14 shows that an entity bearing the name "Firmenich Aromatics Pte. Ltd." is also registered with the SEC. Notwithstanding the foregoing, even ifWe assume that petitioner rendered services exclusively to FAPL, We still find no reason to reverse the assailed Decision. Petitioner insists that its alleged sole customer, FAPL, is an NRFC not doing business in the Philippines. It argues that the Substance Test is not satisfied because FAPL's business of selling goods, which is the substance of the business or enterprise for which FAPL was organized, is concluded outside the Philippines. It claims that the goods FAPL sells are located in Singapore and the sale is likewise perfected there. However, aside from this bare assertion, petitioner failed to point to any evidence that would support such. In addition, petitioner argues that the Actual Performance Test used in determining whether FAPL is doing business in the Philippines is likewise not satisfied since the acts it performed as FAPL's agent, particularly, promotion of FAPL's products, checking of FAPL's buyer's financial background and sharing of such information, and assistance in the collection of receivables, do not constitute "doing business" as defined in Section 3(d) of Republic Act (RA) No. 7042: 15 SEC. 3� Definitions. - As used in this Act: d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance ofacts 14 Exhibit " P-6��, Division Docket, Volume I, p. 43 I. 15 Foreign Investm ents Act of 199 1.

RESOLUTION CTA Case No. 10938 Firmenich (Philippines), Inc. v. Commissioner of Internal Revenue x---------------------------------------------------x or works, 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 business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own accoun t; 16 However, it is evident from the above definition that the exercise of functions normally incident to the purpose and object of the business organization constitutes "doing business". Consequently, the acts that petitioner performed in the Philippines on FAPL's behalf, which petitioner itself described as incidental to the substance of FAPL's business,17 constitute doing business in the Philippines. Petitioner likewise insists that it is an indentor and that its activities of conducting a sound financial background check of all clients, exchanging information with FAPL, and assisting FAPL or other affiliates in the collection of receivables are within the scope of its role as an indentor. Petitioner submits that it is in the interest of an indentor to ensure that buyers are in good financial standing and capable of paying purchase orders, and that payment is made on time and in full, considering that it earns commissions from the successful sale of the products it markets. This argument is inconsistent with the Agency Agreement between petitioner and FAPL, which provides that the commissions petitioner will receive for its services shall be computed based on the amount of sales invoiced by FAPL or other Affiliates to third-party clients in the Philippines. It did not state that the commissions will be based on the amount collected from the third-party clients. Neither was there a mention that its commissions shall be reduced should a third- party client fail to pay its orders on time and in full. t Anent petitioner's ORs and Sis' compliance with the invOICing requirements of the NIRC of 1997, as amended, while We find merit in 16 Emphasis supplied. 17 See paragraph 30 of petitioner's Motion for Reconsideration, Division Docket, Volume II , p. 641.

RESOLUTION CTA Case No. 10938 Firme ni ch (Philippines), Inc. v. Commissioner o f Inte rnal Revenue Page 9 of10 x---------------- ------------ --- --- ------- - ---------x petitioner's argument that the law, regulations, and jurisprudence, do not expressly state the required degree of particularity in describing the nature of the services on VAT 0 Rs and Sis, it is however clear that the law and regulations require VAT-registered persons to indicate nature ofservices on their VAT 0 Rs and Sis. The word "commission," as defined in jurisprudence,18 pertains to the nature of the payments petitioner received from its customer and not to the nature of the services it rendered. Petitioner, citing Intel Technology, additionally posits that the NIRC of 1997, as amended, imposes only the penalty of fine and imprisonment for invoices or receipts that do not truly reflect or contain the required information, but does not mandate the outright denial ofa claim for refund. However, Intel Technology pertained to a taxpayer's failure to indicate its authority to print in its Sis, an item not required to be indicated on VAT ORs and Sis under the NIRC of 1997, as amended. Contrariwise, the nature of services is explicitly required to be indicated on VAT ORs and Sis under the law. Moreover, the High Court in Intel Technology found that the taxpayer therein submitted sufficient documentary evidence to substantiate its claim that it was engaged in zero-rated export sales. In contrast, in the present case, there remains doubt as to whether petitioner is engaged in zero-rated sale of service - a matter that could possibly be clarified by a proper description of the nature of the services rendered. To reiterate, actions for tax refund or credit, as in the instant case, are in the nature of a claim for exemption, and the pieces of evidence presented to entitle a taxpayer to an exemption are strictissimi t scrutinized and must be duly proven. The burden is on the taxpayer- claimant to show that it has strictly complied with the conditions for the grant of the tax refund or credit. 19 IS Jose Songco, et a/. v. National Labor Relations Commission (First Division), et a/., G.R. Nos. L-50999-5 1000, 23 March 1990. 19 Coca-Cola Bolllers Philippines, Inc. v. Commissioner ({(Internal Revenue, G.R. o. 222428, 19 February 20 18. citing Atlas Consolidated Jllining and Development Corporation v. Commissioner of Internal Revenue, G.R. o. I59490. 18 Februar) 2008.

RESOLUTION CTA Case No. 10938 Firmenich (Philippines), Inc. v. Commissioner of Internal Revenue x------------------ -- ---- ----- ----------------- ---- -x WHEREFORE, in view of the foregoing, petitioner's Motion for Reconsideration, filed on 19 December 2025, is hereby DENIED for lack of merit. SO ORDERED. I CONCUR: LANE/E#us.MCfUJIM-DiA�~D Associate Justice