Calamba Premier Realty Corporation v. CIR

 

Calamba Premier Realty Corporation v. CIR

 CTA EB NO. 2312

February 3, 2022

Doctrine:

Interest income from loans extended to affiliates shall be subject to value added tax (VAT). 

Facts:

The petitioner for review was denied. Unconvinced, petitioner filed the instant Motion for Reconsideration on November 4, 2019, asserting that the single and isolated loan transaction it had with SEMPHIL is not subject to VAT. Citing Section 105 of the National Internal Revenue Code (NIRC) of 1997, as amended, petitioner contends that the interest-bearing loan extended to it by SEMPHIL could not be considered as a sale of service made in the regular course of trade or business being a single isolated transaction. Besides, the transaction could not be deemed incidental to the trade or business of SEMPHIL, an entity that is primarily into the manufacture wholly for export of micro chips used in cellular and other electronic devices.

Issue:

Whether or not the interest income from loan extended to affiliates shall be subject to value added tax.

Held: 

Yes. whether the parent corporation realized profit or not is of no consequence as long as the parent corporation has provided financial assistance or services for a fee, remuneration or consideration, the same shall be subject to VAT. There is no denying that petitioner and Samsung Electro-Mechanics Philippines Corporation (the company who extended the loan) are affiliated companies and both are under the group of Samsung Electro-Mechanics Company Limited. The Court found petitioner unable to prove that its loan transaction with Samsung Electro-Mechanics Philippines Corporation (SEMPHIL) is zero-rated or effectively zero-rated sale transaction. The Court explained that while the Certificate of Registration presented by petitioner proved that SEMPHIL was registered with the Philippine Economic Zone Authority (PEZA) on October 16, 1997, there is no showing that SEMPHIL was still registered with the PEZA during the calendar year 2014, the period subject of the present claim.