PPD PHARMACEUTICAL DEVELOPMENT PHILIPPINES CORP., v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PPD PHARMACEUTICAL CTA EB NO. 2839 (CTA Case No. 10249) DEVELOPMENT P resent: PHILIPPINES CORP., Petitioner, -versus- RINGPIS-LIBAN, Acting P.j. , MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, ]]. COMMISSIONER OF Promulgated: INTERNAL REVENUE, X ---------------------------------~'!:~~~~~~------~~-~-- ~-~--~~1t:-~/~ � RESOLUTION RINGPIS-LIBAN,J.: For resolution is the petitioner's Motion for Reconsideration (Re: D ecision dated 03 Aptil 2025) filed on April 25, 2025,1 without comment from respondent despite due notice and opportunity.2 Petitioner moves for the reconsideration o f the Court's decision which affirmed the court a quo's decision denying petitioner's claim for refund o f its excess and / or unutilized creditable input VAT attributable to its zero-rated sales made in the third and fourth quarters of calendar year (CY) 2017 in the to tal amount of T hirteen Million Two H undred Eighty Thousand Eighty-Nine and 79/ 100 Pesos (PhP1 3,280,089. 7~ � 1 Rollo, pp. 412-434. 2 Records Verification dated July 3, 2025.

RESOLUTION CTA EB NO. 2839 (CTA CASE NO. 10249) Petitioner's motion espouses the view that the law does not limit claims for refund to a specific office of the Bureau oflnternal Revenue (BIR) as, in fact, the Tax Code only requires that the claim be filed with the Commissioner of Internal Revenue (CIR). Recent legislation amending the Tax Code acknowledge that the BIR is only one office. Secondly, the motion takes issue with the Court's finding that there was a principal-agent relationship between petitioner and its sole client, PPD Global. It argues that petitioner does not conclude contracts for PPD Global and their activities are different from each other. Finally, petitioner's motion asserts that the Court's decision disregards basic Organization for Economic Cooperation and Development (OECD) guidelines and the tax treaty definition of Permanent Establishment. The Court is tmconvinced and must, therefore, deny the motion. First, the requirement to file the administrative claim for refund with the V/\T Credit and Audit Division (VCAD) found in Revenue Regulations No. (RR) 13-2018, Revenue Memorandum Circular No. (RJ.\IC) 17-2018 and RMC 47-2019, is a valid exercise of the CIR's authorit:v found in Sections 4 and 244 of the Tax Code, as amended. The Court's discussion on this point is worth repeating: "RR 13-2018, RMC 17-2018 and R1!C 47-2019 are not mere BIR issuances, as petitioner would appear to dismiss them, but quasi-legislative issuances which were issued pursuant to Sections 4 and 244 of the NIRC: 'SEC. 4. Power oft!Je CommiSJioner to Intetp!~t Tax LtwJ and to De<ide Tax CmeJ. -The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Cotntnissioncr subject to re,�iew by the Secretary of finance. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Rc,�enuc is nsted in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.' 'SEC. 244. Alllhonty of Semtmy o/l:znanee to Promulgate R11les and Regulations. - The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effecti,�e enforcement of the prm�isions of this Code.' Tax revenue regulations are 'issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescnbe or define rules and regulations for the effecti1�e enforcement of the provisions of the [NIRC] and related statutes.' As these issuances are mandated bv the NIRC itself, the1� are in the nature of a ~ ' '

RESOLUTION CTA EB NO. 2839 (CTA CASE NO. 10249) .rubordinale !egi.rlation that are as compelling as the provisions of the tax law they implement. Legislati,-e rules are a form of subordinate legislation where the agency is acting in a legislative capacity, supplementing the statute, filling in the details, pursuant to a specific delegation of legislative power. They implement a primary legislation bv providing the details thereof. They impose additional obligations pursuant to authority from Congress and affect indi\'idual rights and obligations. Thus, they can rightfully be considered to provide a binding set of rules in the filing of claims for VAT refund or TCC. .r\bsent any proof that these issuances are ultra ?JireJ acts or contravene the NIRC, petitioner's argument must fail." (CitationJ omitted; underJco!ing in the original text) Subsequent legislation amending Section 248(A) of the Tax Code on the filing of ret11ms have little bearing on the filing of administrative claims for input VAT refund. Precisely, RR 13-2018, RMC 17-2018 and RlviC 47-2019 are administrative issuances that govern the filing of administrative claims that were issued by the CIR in the exercise of rule-making powers. Second, the Court's findings on the principal-agent ties between petitioner and its client-affiliate, PPD Global, are squarely based on the law between these parties: the Affiliate Se17Jices Agreement. Petitioner cannot, therefore, insist that the agency relationship was merely presumed by the Court. The Court was able to establish that there was principal- agent relation between petitioner and PPD Global based on (a) the context where that relation was cultivated such as that fact that both are affiliates and, therefore, share a common parent or beneficial interest; that petitioner was performing services not merely incidental but integra! to the PPD Global's business; that PPD Global is petitioner's sole client and contributes 100% of petitioner's quarterly sales; that PPD Global exercises control over how petitioner conducts its business through mechanisms embedded in the agreement; that petitioner's independence is encumbered when evaluated under the arm's length principle; and (b) the several specific provisions in the agreement. The facts as understood by the Court run counter to petitioner's position that PPD Global is a non-resident foreign corporation not doing business in the Philippines. By peering closely into these contexts and contractual obligations enumerated above, the Court can only conclude that PPD Global is doing business in the Philippines through petitioner: "Although petitioner and PPD Global were set-up as independent entities thev did not necessarilv function or operate as such in realit:v. The levers of control stipulated in the Ajji!iate SenJiceJ Agreement undermine petitioner's independence in carrying out its own business as a separate entitv. Thev restrict PPD's abihtv to act on its own self-interest since it is sub;rdinat~ to the interests ofPPD Global. Furthermore, PPD Global own.r the technology, know-how and other intellectual properties, a.rJtlllle.r the risks, and is able to Jet i!J flnan,ia! largel.r by limiting the cost passed on by ~

RESOLUTION CTA EB NO. 2839 (CTA CASE NO. 10249) petitioner. Contrary to petitioner's claim, therefore, the activities to be undertaken locally are precisely for profit-making. PPD Global ensures the profitability of these transactions through the price caps and the other mechanisms. As a result, PPD Global effectively operates as the principal entity doing business in the Philippines through the petitioner, which merely sen-es as a conduit or adjunct to PPD Global's operations- activities it cannot carry out directly without a Philippine license. XXX XXX XXX The Court has considered several factors, including the common ownership of petitioner and PPD Global, the similarity of their core business activities, the financial contribution of PPD Global to petitioner's bottom line, the agency relationship between them, and the degree of control exercised by PPD Global. Taken together, these factors lead to the satne conclusion as in .. -1ir Canada. In the language of Air Canada, the records do not show that petitioner solicited orders alone and without interference from, let alone direction of, PPD Global. On the contrarv, PPD Global identifies the clinical trial projects for petitioner, which, in turn, provides clinical trial coordination and support setYices to the Sponsors in accordance with PPD Global's required standards. Additionally, as PPD Global owns the intellectual property assets and assumes the associated risks, it must ensure the profitability of its business venture by exercising control, as previously discussed. Thus, through the petitioner, PPD Global engages in economic activit\� in the Philippines as the principal. Contran� to petitioner's assertion, there is sufficient evidence to support the conclusion that it acted as PPD Global's agent." (Citations omitted; tmdem'Oiing s11pplied) Accordingly, petitioner's Motion for Recomideration (Re: Decision dated 03 April 2025) is DENIED for lack of merit. SO ORDERED. ~.~ MA. BELEN M. RINGPIS-LIBAN Associate Justice WE CONCUR: ~~�7~ CATHERINE T. MANAHAN :\ssociatc Justice

RESOLUTION CfA EB NO. 2839 (CfA CASE NO. 10249) ~ ~ p. ~- fajattrh> MARIAN IVY I! REYE~FAJARDO Associate Justice LA~IrL;~~IAUAI'-dDrtA!l~D Associate Justice co~tF~R~s Associate Justice / HENRY l!i.NGELES Associate Justice