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Maersk’s regional HQ loses tax suit

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THE COURT of Tax Appeals (CTA) dismissed a bid by the Philippine-based regional back office of the Maersk Group to collect from the Philippine government almost P8 million in tax refund, saying the latter failed to meet a necessary requisite to back its claim.

Maersk Global Services Centres (Philippines), Ltd., a foreign company organized in Hong Kong and has license to do business here as a regional operating headquarters, had been seeking since 2010 a value-added tax (VAT) refund for supposed input tax on zero-rated sales for 2009.

Its sole client is A.P. Moller-Maersk A/S, a Denmark-based shipping and oil company active in the container logistics and upstream oil value chains. Under a service agreement signed on Oct. 15, 2007, Maersk Global will provide corporate and administrative services to the Danish company.

In junking the petition, the tax court’s Second Division said that in order for the supply of services to be subject to zero-rated VAT, a company must comply with the three requisites outlined in the National Internal Revenue Code of 1997.

These requirements are as follows: the services must be other than processing, manufacturing, or repacking goods; the payment for such services must be in acceptable foreign currency accounted for in accordance with the Bangko Sentral ng Pilipinas rules and regulations; and, the recipient of such services must be doing business outside the Philippines.

The tax court said Maersk Global satisfactorily complied with the first two requirements.

“Petitioner complied with the first requisite as the services it rendered to A.P. Moller-Maersk A/S such as back office tasks, documentation and other processes related to export and import documentation... are not in the same category as ‘processing, manufacturing, or repacking of goods,’ the CTA ruled, adding it also met the second requirement after Maersk Global received foreign currency payments.

But the tax court found that Maersk Global’s client has been doing business in the Philippines, citing a 2013 report of a Court-commissioned accountant who said that “a portion of the international shipping business relates to Philippine business.”

The court also took into consideration the testimony of Arthur T. Arana, the company’s site finance and office management lead. Mr. Arana has disclosed that Maersk Philippines rendered services to A.P. Moller-Maersk pertaining to shipments of cargoes to or from the Philippines.

“Clearly, petitioner was unable to comply with the third requisite because its non-resident foreign client, A.P. Moller-Maersk A/S is actually doing business in the Philippines,” the CTA said.

The tax court then said the petition lacked merit. “Consequently, petitioner’s sales of services to A.P. Moller-Maersk A/S cannot qualify for VAT zero-rating and the claimed input taxes attributable thereto in the amount of P7.86 million cannot be refunded. Accordingly, it is unnecessary to discuss petitioner’s compliance with the remaining requisites,” the CTA added.

The case was docketed as CTA Case No. 8549, Maersk Global Services Centres (Philippines) Ltd. versus Commissioner of Internal Revenue. -- R. D. Madrid

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