Case Summary (G.R. No. 190102)
Key Individuals and Context
Petitioner: Accenture, Inc., a VAT-registered management consulting and software licensing firm in the Philippines
Respondent: Commissioner of Internal Revenue (CIR)
Primary Venue: Court of Tax Appeals (First Division and En Banc) and Supreme Court of the Philippines
Geographic Context: Services performed in the Philippines for foreign clients; inward remittances duly accounted for under Bangko Sentral ng Pilipinas (BSP) rules
Petitioner’s Activities and Transactions
Accenture filed monthly and quarterly VAT returns for periods covering 1 July 2002–31 August 2002 (“1st period”) and 1 September 2002–30 November 2002 (“2nd period”). Its zero-rated sales generated excess input VAT credits of ₱9,355,809.80 (1st period) and ₱27,682,459.38 (2nd period), totaling ₱37,038,269.18. Of these, ₱35,178,844.21 were attributable to domestic purchases of taxable goods and services not directly linked to zero-rated sales.
Administrative and Judicial Claim for Refund
On 1 July 2004, Accenture filed an administrative claim with the Department of Finance for a refund or issuance of a Tax Credit Certificate (TCC) in the amount of ₱35,178,844.21. The claim went unacted upon, prompting Accenture to file a petition with the CTA First Division on 31 August 2004. The CIR opposed, contending that Accenture had not substantiated its entitlement to zero-rate VAT on services to foreign clients.
Procedural History
– CTA First Division (13 November 2008): Denied Accenture’s petition for failure to prove that its foreign clients were doing business outside the Philippines.
– CTA En Banc (22 September 2009): Affirmed, holding that Section 108(B)(2) of the 1997 Tax Code (a verbatim reproduction of Section 102(b)(2) of the 1977 Tax Code) requires the recipient of services to be engaged in business outside the Philippines to qualify for zero-rating.
– CTA En Banc Resolution (23 October 2009): Denied reconsideration.
– Supreme Court (11 July 2012): Denied Accenture’s Rule 45 petition.
Applicable Legal Framework
– 1987 Philippine Constitution (decision post-1990)
– National Internal Revenue Code of 1997, Section 108(B): Zero-rated VAT transactions for services paid in foreign currency and duly accounted for with BSP; as amended by R.A. 9337, effective 1 November 2005.
– Section 112(A) of the 1997 Tax Code: Refund or tax credit of unutilized input tax attributable to zero-rated sales, within two years after close of taxable quarter.
Interpretation of Zero-Rating Requirements
Section 108(B)(2) provides that zero-rating applies to services performed in the Philippines by VAT-registered persons when:
- The consideration is paid in acceptable foreign currency and accounted for under BSP rules; and
- The services are rendered to persons engaged in business outside the Philippines or to nonresident persons outside the Philippines when services are performed (as inserted by R.A. 9337).
Jurisprudential Foundation (Burmeister and Amex)
– Burmeister v. CIR (515 SCRA 124, 2007): Held that Section 108(B)(2)’s predecessor required both payment in foreign currency and that the recipient conduct business outside the Philippines; zero-rating cannot be circumvented by mere inward remittance.
– American Express v. CIR (500 Phil. 586, 2005): Clarified that place of service performance or consumption is immaterial; did not dispute the requirement that the recipient be doing business abroad.
Supreme Court’s Analysis
- Verbatim Transfer of 1977 Provision: Section 108(B)(2) of the 1997 Code replicates Section 102(b)(2) of the 1977 Code; thus, Burmeister’s interpretation applies.
- Non-Retroactivity Challenge: A Supreme Court interpretation becomes part of the law from its promulgation; application of Burmeister did not retroactively alter statutory requirements.
- Harmonization of Amex and Burmeister: Amex’s holding on place of consumption does not conflict with Burmeister’s recipient-business-outside-Philippines requiremen
Case Syllabus (G.R. No. 190102)
Facts
- Accenture, Inc. (“Accenture”) is registered with the BIR as a VAT taxpayer, engaged in management consulting, business strategy development, and software licensing.
- For the periods 1 July–31 August 2002 (1st period) and 1 September–30 November 2002 (2nd period), Accenture filed monthly and quarterly VAT returns, later amended in June 2004.
- Reported zero-rated sales of ₱316,113,513.34 (1st period) and ₱545,686,639.18 (2nd period).
- Claimed input VAT credits on domestic purchases of taxable goods and services totaling ₱37,038,269.18: ₱9,355,809.80 (1st period) and ₱27,682,459.38 (2nd period).
- Of these, ₱35,178,844.21 was allocable to domestic purchases not directly attributable to zero-rated services: ₱8,811,301.66 (1st period) and ₱26,367,542.55 (2nd period).
- Accenture did not apply excess input VAT against output VAT liabilities; instead, it carried the unutilized credits into its 2nd quarter 2003 return.
Procedural History
- 1 July 2004: Accenture filed an administrative claim for refund/tax credit with the DOF for ₱35,178,844.21.
- 31 August 2004: DOF took no action; Accenture petitioned the CTA First Division for issuance of a Tax Credit Certificate (TCC).
- 13 November 2008: CTA Division denied the petition for failure to prove that foreign clients did business outside the Philippines.
- Motion for Reconsideration denied on 12 March 2009.
- Accenture appealed to the CTA En Banc, arguing non-applicability of new R.A. 9337 requirements and reliance on Amex.
- 22 September 2009 Decision and 23 October 2009 Resolution: CTA En Banc affirmed Division’s ruling, reading Sec. 108(B)(2) of the 1997 Tax Code as reenacting the foreign-business requirement of Sec. 102(b)(2) of the 1977 Code.
- Accenture filed this petition under Rule 45.
Issues Presented
- Whether Accenture’s sales of goods and services are zero-rated under Sec. 108(B)(2)(3) of the 1997 Tax Code.
- Whether Accenture’s claim for refund (₱35,178,844.21) represents unutilized input VAT on domestic purchases for 1 July–30 November 2002.
- Whether Accenture carried over and fully applied such unutilized credits to output VAT liabilities in the succeeding perio