G.R. No. 261171 - Commissioner of Internal Revenue vs. BW Shipping Philippines, Inc.

Petitioner: Commissioner of Internal Revenue (CIR).
Respondent: BW Shipping Philippines, Inc., a VAT-registered corporation (TIN 000-160-779-000) engaged in shipping, manning, and crewing services.

On March 30, 2016, respondent filed an administrative claim for refund or issuance of a Tax Credit Certificate (TCC) for unutilized input VAT of PHP 7,346,268.45 attributable to zero-rated sales for taxable year (TY) 2014.
Respondent rendered manning services to foreign shipping companies, generating zero-rated sales of PHP 129,866,272.96 and input VAT payments of PHP 7,346,268.45.
By letter dated August 16, 2016 (received August 22, 2016), the Bureau of Internal Revenue (BIR) denied the claim.

Respondent filed a Petition for Review with the Court of Tax Appeals (CTA) First Division; the CIR opposed, alleging lack of proof of erroneous collection and insufficient documentation.
In its Decision dated September 23, 2019, the CTA First Division partially granted the petition, ordering refund or TCC of PHP 5,503,628.95 based on:

Valid zero-rated sales of PHP 115,630,375.65 out of the declared PHP 129,866,272.96.
Valid input VAT of PHP 5,841,616.63 out of the declared PHP 7,346,268.45.
Compliance with BIR registration, zero-rating requisites, absence of output VAT, and timely filing within statutory periods.

The CIR’s motion for reconsideration was denied on February 19, 2020; the CIR elevated the case to the CTA En Banc.

In its Decision dated October 29, 2021, the CTA En Banc affirmed the First Division, holding that:

Certificates of Non-Registration from the SEC and foreign incorporation documents established that recipient shipping companies were non-resident entities not doing business in the Philippines.
Manning Agreements and Purchasing & Infrastructure Support Agreements did not demonstrate continuity of commercial dealings or control by the foreign principals within the Philippines.

The CIR’s motion for reconsideration was denied on May 30, 2022, leading to the present Supreme Court petition.

The CIR contended that the Manning Agreements and related contracts showed foreign shipping companies “doing business” in the Philippines through respondent as local agent, thus negating zero-rating entitlement.

Whether the CTA En Banc correctly affirmed the CTA First Division’s order to refund or issue a TCC for respondent’s excess/unutilized input VAT attributable to zero-rated sales for the four quarters of TY 2014.