Tax court rejects software firm’s refund claim


THE Court of Tax Appeals has rejected the refund claim of Avaloq Group AG’s Philippine regional headquarters worth P3.2 million representing its excess value-added tax (VAT) traced to zero-rated sales for the first and second quarters of 2017.

In a 23-page decision dated Jan. 9 and made public on Jan. 11, the tax court’s Special Third Division said the firm failed to prove that its sales qualified for a VAT zero rating.

“The petitioner’s sales cannot qualify as subject to 0% VAT under the 1997 National Internal Revenue Code (NIRC) since it was never established that the place of performance of the subject services was in the Philippines to non-resident foreign corporations not engaged in business in the Philippines,” Associate Justice Maria Belen M. Ringpis-Liban said in the ruling.

“It is a claimant’s burden to prove the factual basis of a claim for refund or tax credit.”

Avaloq, the petitioner, is a Swiss firm that provides cloud software to banks worldwide. Its office is based in Makati City and is licensed by the Securities and Exchange Commission.

The firm generated gross receipts in the amount of P53.06 million in 2017 and accumulated input VAT for the first and second quarters worth P3.2 million. It claimed that its services were rendered in the Philippines to non-resident foreign clients and were paid for in accepted foreign currencies.

Under the NIRC, zero-rated sales are sales made by VAT-registered taxpayers that do not translate to any output tax. Receipts must have the term “zero-rated” on them to qualify for a 0% VAT rating.

The tax court agreed with the Bureau of Internal Revenue’s finding that Avaloq failed to provide enough documentation to substantiate its refund claim.

“Although petitioner is the regional operation headquarters of Avaloq Group AG (head office), it is still necessary on its part to prove that its services were performed in the Philippines,” it said.

“In cases filed before this court, party-litigants must prove every minute aspect of their case.” — John Victor D. Ordoñez