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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

ZenX Engineering, Inc. (ZEI), a Philippine corporation, provides engineering design and consulting services to OmegaWind Ltd., a foreign company with wind-farm projects in Cambodia. The services are performed by ZEI’s engineers in Manila. Invoices are issued in US dollars, and payment is wired to ZEI’s Manila bank account. OmegaWind uses the service in Cambodia. (a) Identify the controlling rule for determining whether the sale of services is taxed in the Philippines or considered an export of services (zero-rated VAT). (b) Distinguish the place-of-supply rule for services from the export-of-services rule and explain how they interact in this scenario. (c) Apply the rules to determine whether ZEI’s service qualifies for zero-rated VAT, and justify with governing doctrine and documentary requirements the BIR may demand.

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Export of services applies to IT and engineering services regardless of where the service is performed or consumed. Invoicing in US dollars triggers zero-rating because the transaction is denominated in a foreign currency and the recipient is abroad. The place of supply is the location of the recipient; since OmegaWind operates in Cambodia, the service is supplied outside the Philippines and is zero-rated. The sale is not zero-rated; the place of supply of services is the Philippines because the services are performed in Manila; therefore the service is subject to ordinary VAT (12%); zero-rating would apply only if the service qualifies as an export of services, which requires the service to be exported or consumed outside the Philippines and supported by documentary requirements (e.g., contract and proof of outside-use).

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