G.R. No.

153205 January 22, 2007

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR MINDANAO, INC., Respondent.

FACTS:
A foreign consortium, parent company of Burmeister, entered into an O&M contract with NPC. The
foreign entity then subcontracted the actual O&M to Burmeister. NPC paid the foreign consortium a
mixture of currencies while the consortium, in turn, paid Burmeister foreign currency inwardly
remitted into the Philippines. BIR did not want to grant refund since the services are “not destined for
consumption abroad” (or the destination principle).

ISSUE:
Are the receipts of Burmeister entitled to VAT zero-rated status?

HELD:
PARTIALLY. Respondent is entitled to the refund prayed for BUT ONLY for the period covered prior
to the filing of CIR’s Answer in the CTA.

The claim has no merit since the consortium, which was the recipient of services rendered by
Burmeister, was deemed doing business within the Philippines since its 15-year O&M with NPC can
not be interpreted as an isolated transaction.
In addition, the services referring to ‘processing, manufacturing, repacking’ and ‘services other than
those in (1)’ of Sec. 102 both require (i) payment in foreign currency; (ii) inward remittance; (iii)
accounted for by the BSP; AND (iv) that the service recipient is doing business outside the
Philippines. The Court ruled that if this is not the case, taxpayers can circumvent just by stipulating
payment in foreign currency.

The refund was partially allowed since Burmeister secured a ruling from the BIR allowing zero-rating
of its sales to foreign consortium. However, the ruling is only valid until the time that CIR filed its
Answer in the CTA which is deemed revocation of the previously-issued ruling. The Court said the
revocation can not retroact since none of the instances in Section 246 (bad faith, omission of facts,
etc.) are present.