Revenue v. American Express International

PANGANIBAN, J.:

As a general rule, the value-added tax (VAT) system uses the destination principle. However, our VAT law itself provides for a clear exception, under which the supply of service shall be zero-rated when the following requirements are met: (1) the service is performed in the Philippines; (2) the service falls under any of the categories provided in Section 102(b) of the Tax Code; and (3) it is paid for in acceptable foreign currency that is accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas. Since respondent's services meet these requirements, they are zero-rated.

Petitioner's Revenue Regulations that alter or revoke the above requirements are ultra vires and invalid. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the February 28, 2002 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 62727. The assailed Decision disposed as follows: "WHEREFORE , premises considered, the petition is hereby DISMISSED for lack of merit.

The assailed decision of the Court of Tax Appeals (CTA) is AFFIRMED 3 The Facts Quoting the CTA, the CA narrated the undisputed facts as follows: "[Respondent] is a Philippine branch of American Express International, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, U.S.A., with office in the Philippines at the Ground Floor, ACE Building, corner Rada and de la Rosa Streets, Legaspi Village, Makati City. It is a servicing unit of American Express International, Inc. - Hongkong Branch (Amex-HK) and is engaged primarily to facilitate the collections of Amex-HK receivables from card members situated in the Philippines and payment to service establishments in the Philippines. "Amex Philippines registered itself with the Bureau of Internal Revenue (BIR), Revenue District Office No. 47 (East Makati) as a value-added tax (VAT) taxpayer effective March 1988 and was issued VAT Registration Certificate No. 088445 bearing VAT Registration No. 32A-3-004868.

For the period January 1, 1997 to December 31, 1997, [respondent] filed with the BIR its quarterly VAT returns as follows: Exhibit Period Covered Date Filed D 1997 1st Qtr. April 18, 1997 F 2nd Qtr. July 21, 1997 G 3rd Qtr.

October 2, 1997 H 4th Qtr. January 20, 1998 "On March 23, 1999, however, [respondent] amended the aforesaid returns and declared the following: Exh 1997 Taxable Sales Output VAT Zero-rated Sales Domestic Purchases Input VAT I 1st qtr ₱59,597.20 ₱5,959.72 ₱17,513,801.11 ₱6,778,182.30 ₱677,818.23 J 2nd qtr 67,517.20 6,751.72 17,937,361.51 9,333,242.90 933,324.29 K 3rd qtr 51,936.60 5,193.66 19,627,245.36 8,438,357.00 843,835.70 L 4th qtr 67,994.30 6,799.43 25,231,225.22 13,080,822.10 1,308,082.21 Total