1

PART D

I VAT
(1) SOUTHERN PHILIPPINES POWER CORPORATION V. CIR Rod. (ORIGINAL IS WITH ME.) (2) ACCENTURE INC. V. CIR July 11, 2012 J Sereno Topic: VAT; Zero Rated DOCTRINE: The recipient of the service should be doing business outside the Philippines to qualify for zero-rating To come within the purview of Section 108(B)(2), it is not enough that the recipient of the service be proven to be a foreign corporation; rather, it must be specifically proven to be a nonresident foreign corporation. A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis of that claim. Tax refunds, like tax exemptions, are construed strictly against the taxpayer. QUICK FACTS: Accenture is claiming that their clients are doing business outside the Philippines and thus, the transactions are zero rated. CTA thinks otherwise (see doctrine) SC Ruled in favor of CTA FACTS: Tax: Zero-Rated Tax Accenture is a corporation which provides management consulting, business strategies. It is registered with BIR as a VAT Taxpayer in accordance with Section 236 of NIRC. Accenture filed its monthly VAT return for July to Aug 2002, then it filed a quarterly VAT return which was amended June 21 2002. The following were reflected in the th VAT Return of 4 Quarter: Accenture filed its Monthly VAT Return for the month of September 2002 on 24 October 2002; and that for October 2002, on 12 November 2002. These returns were amended on 9 January 2003. Accentures

Quarterly VAT Return for the first quarter of 2003, which included the period 1 September 2002 to 30 November 2002 (2nd period), was filed on 17 December 2002; and the Amended Quarterly VAT Return, on 18 June 2004. The latter contains the following information: The monthly and quarterly VAT returns of Accenture show that, notwithstanding its application of the input VAT credits earned from its zero-rated transactions against its output VAT liabilities, it still had excess or unutilized input VAT credits. These VAT credits are in the amounts of 9,355,809.80 for the 1st period and 27,682,459.38 for the 2nd period, or a total of 37,038,269.18 Out of the 37,038,269.18, only 35,178,844.21 pertained to the allocated input VAT on Accentures domestic purchases of taxable goods which cannot be directly attributed to its zero-rated sale of services. This allocated input VAT was broken down to 8,811,301.66 for the 1stperiod and 26,367,542.55 for the 2nd period. The excess input VAT was not applied to any output VAT that Accenture was liable for in the same quarter when the amount was earned or to any of the succeeding quarters. Instead, it was carried forward to petitioners 2nd Quarterly VAT Return for 2003 On 1 July 2004, Accenture filed with the Department of Finance (DoF) an administrative claim for the refund or the issuance of a Tax Credit Certificate (TCC). The DoF did not act on the claim of Accenture. Hence, on 31 August 2004, the latter filed a Petition for Review with the First Division of the Court of Tax Appeals (Division), praying for the issuance of a TCC in its favor in the amount of 35,178,844.21. CIRs Answer: 1. The sale by Accenture of goods and services to its clients are not zero-rated transactions. 2. Claims for refund are construed strictly against the claimant, and Accenture has failed to prove that it is entitled to a refund, because its claim has not been fully substantiated or documented. Division denied the Petition of Accenture for failing to prove that the latters sale of services to the alleged foreign clients qualified for zero percent VAT. Accenture had failed to present evidence to prove that the foreign clients to which the former rendered services did business outside the Philippines. Division cited Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. (Burmeister) as basis. In MR, Accenture argued: 1. The issue involved in Burmeister was the entitlement of the applicant to a refund, given that the recipient of its service was doing business in the Philippines; it was

not an issue of failure of the applicant to present evidence to prove the fact that the recipient of its services was a foreign corporation doing business outside the Philippines. 2. Burmeister emphasized that, to qualify for zero-rating, the recipient of the services should be doing business outside the Philippines, and Accenture had successfully established that. 3. Having been promulgated on 22 January 2007 or after Accenture filed its Petition with the Division, Burmeister cannot be made to apply to this case MR Denied so Accenture appealed to CTA en banc CTA: even though the provision used in Burmeister was Section 102(b)(2) of the earlier 1977 Tax Code, the pronouncement therein requiring recipients of services to be engaged in business outside the Philippines to qualify for zero-rating was applicable to the case at bar, because Section 108(B)(2) of the 1997 Tax Code was a mere reenactment of Section 102(b)(2) of the 1977 Tax Code. Accenture failed to discharge the burden of proving the latters allegation that its clients were foreign-based ISSUES: 1. Should the recipient of the services be doing business outside the Philippines for the transaction to be zero-rated under Section 108(B)(2) of the 1997 Tax Code? YES 2. Has Accenture successfully proven that its clients are entities doing business outside the Philippines? NO HELD: 1. The recipient of the service must be doing business outside the Philippines for the transaction to qualify for zero-rating under Section 108(B) of the Tax Code. Even though Accentures Petition was filed before Burmeister was promulga ted, the pronouncements made in that case may be applied to the present one without violating the rule against retroactiveapplication. When this Court decides a case, it does not pass a new law, but merely interprets a preexisting one. That the recipient of the service should be doing business outside the Philippines to qualify for zero-rating is the only logical interpretation of Section 102(b)(2) of the 1977 Tax Code, as we explained in Burmeister 2. The documents presented by Accenture merely substantiate the existence of the sales, receipt of foreign currency payments, and inward remittance of the proceeds of these sales duly accounted for in accordance with BSP rules. Petitioner presented

no evidence whatsoever that these clients were doing business outside the Philippines The evidence presented by Accenture may have established that its clients are foreign. This fact does not automatically mean, however, that these clients were doing business outside the Philippines. After all, the Tax Code itself has provisions for a foreign corporation engaged in business within the Philippines and vice versa To come within the purview of Section 108(B)(2), it is not enough that the recipient of the service be proven to be a foreign corporation; rather, it must be specifically proven to be a nonresident foreign corporation. A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis of that claim. Tax refunds, like tax exemptions, are construed strictly against the taxpayer. Accenture failed to discharge this burden RULED in favor of CTA Dispositive: WHEREFORE, the instant Petition is DENIED. The 22 September 2009 Decision and the 23 October 2009 Resolution of the Court of Tax Appeals En Bane in C.T.A. EB No. 477, dismissing the Petition for the refund of the excess or unutilized input VAT credits of Accenture, Inc., are AFFIRMED.

(3) FORT BONIFACIO DEVELOPMENT CORP v CIR and RDO (Rev District 44) DOCTRINE: There is nothing in Sec 105 of the NIRC that indicate that prior payment of taxes is necessary for the availment of the 8% transitional input tax credit. QUICK FACTS: FBDCs claim for tax refund was denied. They were not allowed to avail of the 8% transitional input tax credit because this benefit comes with the condition that business taxes should have been paid first. Since FBDC bought the property from the national government tax-free, it was not allowed to claim tax credit. FBDC filed petition for Certiorari under Rule 45 before the SC. Supreme Court ruled in favor of FBDC. FACTS: On 08 February 1995, Fort Bonifacio Development Corp (FBDC) purchased from the national government a portion of the Fort Bonifacio reservation now known as Fort Bonifacio Global City.

On 01 Jan 1996, RA 7716 restructured the VAT system. It extended the coverage of VAT to real property held primarily for sale or held for lease in the ordinary course of trade or business. On 19 September 1996, FBDC submitted to the BIR an inventory of all its real properties with aggregated book value amounting to Php71bio. Based on this value, it claimed that it was entitled to a transitional input tax credit of Php5bio pursuant to Sec 105 of the NIRC . During the 1st quarter of 1997, FBDC generated from sales and lease of lots around Php3bio, with VAT payable in the amount of Php368mio. FBDC paid output VAT of Php359bio and credited its unutilized input tax credit on purchases of goods and services of Php8mio. When it realized that its transitional input tax credit was not applied in computing its output VAT, it filed with the BIR a claim for refund of the amount Php359mio erroneously paid as output VAT. CIR Did not act on the petition CTA Due to the inaction of the CIR, FBDC elevated the case to the CTA. CTA denied claim for refund. It reasoned that the benefit of transitional input tax credit comes with the condition that business taxes should have been paid first. In this case, since FBDC purchased the Global City property under a tax-free sale transaction, it cannot avail of the transitional input tax credit. The CTA likewise pointed out that under RR7-95, implementing Sec 105 of the old NIRC, the 8% transitional input tax credit should be based on the value of the improvements on land such as buildings, roads, drainage system and other similar structures, constructed on or after 01 Jan 1998, and not on the book value of the property. CA Affirmed the decision of the CTA.

ISSUES: 1 - WON there should be a prior payment of taxes in order to avail of the 8% transitional input tax credit? 2 - WON the RR 7-95, implementing Sec 105, is inconsistent with Sec 105

HELD/RATIO: 1. No. There is nothing in Sec 105 of the NIRC that indicate that prior payment of taxes is necessary for the availment of the 8% transitional input tax credit. 2. Yes. The SC explained that RR 7-95 by limiting the 8% transitional input tax credit to the value of improvements on the land contravenes Secc 105 in relation to Sec 100, as amended by RA 7716, which defined goods or properties to include Real Properties held primarily for sale to customers or held for lease in the ordinary course of trade or business. The SC quoting its resolution in a related case said: As mandated by Art 7 of the Civil Code, an administrative rule or regulation c annot contravene the law on which it is based The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the objects and purposes of the law, and should not be in contradiction to, but in conformity with, the standards prescribed by law. (4) EASTERN TELECOMMUNICATIONS PHILS. INC. V. CIR Raj. (ORIGINAL IS WITH ME.)

that can be imagined as a form of service rendered for a fee should be deemed included unless some provision of law especially excludes it. FACTS: Diaz and Timbol allege that the BIR attempted during the administration of President Gloria Macapagal-Arroyo to impose VAT on toll fees. The imposition was deferred, however, in view of the consistent opposition of Diaz and other sectors to such move. But, upon President Benigno Aquino IIIs assumption of office in 2010, the BIR revived the idea and would impose the challenged tax on toll fees beginning August 16, 2010 unless judicially enjoined. Diaz and TImbol hold the view that Congress did not, when it enacted the NIRC, intend to include toll fees within the meaning of sale of services that are subject to VAT; that a toll fee is a users tax, not a sale of services; that to impose VAT on toll fees would amount to a tax on public service; and that, since VAT was never factored into the formula for computing toll fees, its imposition would violate the non-impairment clause of the constitution. The government, on the other hand, avers that the NIRC imposes VAT on all kinds of services of franchise grantees, including tollway operations, except where the law provides otherwise; that the Court should seek the meaning and intent of the law from the words used in the statute; and that the imposition of VAT on tollway operations has been the subject as early as 2003 of several BIR rulings and circulars. ISSUE: Whether or not the government is unlawfully expanding VAT coverage by including tollway operators and tollway operations in the terms franchise grantees and sale of services under Section 108 of the Code. HELD: No, the government is not unlawfully expanding VAT coverage. The law imposes VAT on all kinds of services rendered in the Philippines for a fee, including those specified in the list. The enumeration of affected services is not exclusive. By qualifying services with the words all kinds, Congress has given the term services an all-encompassing meaning. The listing of specific services are intended to illustrate how pervasive and broad is the VATs reach rather than establish concrete limits to its application. Thus, every activity that can be imagined as a form of service rendered for a fee should be deemed included unless some provision of law especially excludes it. Presidential Decree (P.D.) 1112 or the Toll Operation Decree establishes the legal basis for the services that tollway operators render. Essentially, tollway operators construct, maintain, and operate expressways, also called tollways, at the operators expense. Tollways serve as alternatives to regular public highways that meander through populated areas and branch out to local roads. Traffic in the regular public highways is for this reason slow-moving. In consideration for

(5) DIAZ AND TIMBOL VS. SECRETARY OF FINANCE Topic: Focus Cases - VAT Date: July 19, 2011 Ponente: Abad, J. QUICK FACTS: Petitioners Renato Diaz and Aurora Ma. Timbol (petitioners) filed a petition for declaratory relief assailing the validity of the impending imposition of value-added tax (VAT) by the Bureau of Internal Revenue (BIR) on the collections of tollway operators. DOCTRINE: The law imposes VAT on all kinds of services rendered in the Philippines for a fee, including those specified in the NIRC. The enumeration of affected services is not exclusive. By qualifying services with the words all kinds, Congress has given the term services an all-encompassing meaning. The listing of specific services are intended to illustrate how pervasive and broad is the VATs reach rather than establish concrete limits to its application. Thus, every activity

constructing tollways at their expense, the operators are allowed to collect government-approved fees from motorists using the tollways until such operators could fully recover their expenses and earn reasonable returns from their investments. When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latters use of the tollway facilities over which the operator enjoys private proprietary rights that its contract and the law recognize. In this sense, the tollway operator is no different from the following service providers under Section 108 who allow others to use their properties or facilities for a fee: 1. Lessors of property, whether personal or real; 2. Warehousing service operators; 3. Lessors or distributors of cinematographic films; 4. Proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; 5. Lending investors (for use of money); 6. Transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes; and 7. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines. It does not help Diazs and Timbols cause that Section 108 subjects to VAT all kinds of services rendered for a fee regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. This means that services to be subject to VAT need not fall under the traditional concept of services, the personal or professional kinds that require the use of human knowledge and skills. (6) CIR V. SM PRIME HOLDINGS Topic: VAT Date: 26 Feb 2010 Ponente: Del Castillo DOCTRINE: Gross receipts derived from admission tickets by cinema/theater operators or proprietors are not subject to VAT (they are, however, subject to 30% amusement tax under 140 of the LGC). QUICK FACTS: The CIR assessed SM Prime and First Asia for VAT deficiency for the years 1999 and 2000; both taxpayers filed a protest, contending that exhibition of cinematographic film is not an activity subject to VAT.

SC: Movie tickets not subject to VAT. Tax Law: SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. FACTS: SM Prime Holdings, Inc. (SM Prime) and First Asia Realty Development Corporation (First Asia) are domestic corp., engaged in the business of operating cinema houses, among others. The CIR sent several Preliminary Assessment Notices (PAN) to SM Prime and First Asia for tax VAT deficiency on cinema ticket sales for the years 1999 and 2000. Each filed their respective protest which resulted in several CTA cases, which were then consolidated for the reason that they raise identical issues and that SM Prime is a majority SH of First Asia. CIRs contention: The enumeration of services subject to VAT in 108 NIRC is not exhaustive because it covers all sales of services unless exempted by law. Thus, the exhibition of movies by cinema operators or proprietors to the paying public, being a sale of service, is subject to VAT. SM Primes contention: 1. A plain reading of 108 NIRC shows that the gross receipts of proprietors or operators of cinemas/theaters derived from public admission are not among the services subject to VAT. 2. RMC No. 28-2001 on which the deficiency assessments were based is an unpublished administrative ruling. CTA 1st Div. - ifo SM Prime. Ruling: The activity of showing cinematographic films is not a service covered by VAT under NIRC, but an activity subject to amusement tax under RA 7160 (LGC of 1991). CTA En Banc - affirmed. Ruling: 108 NIRC sets forth an exhaustive enumeration of what services are intended to be subject to VAT - exhibition of motion movies by cinema operators is not among the enumerated activities. ISSUE: W/N gross receipts derived from admission tickets by cinema/theater operators or proprietors are subject to VAT. HELD:

NO. Gross receipts derived from admission tickets by cinema/theater operators or proprietors are not subject to VAT; they are subject to 30% amusement tax under 140 of the LGC. RATIO: 1. Enumeration in 108 NIRC not exhaustive The enumeration of the "sale or exchange of services" subject to VAT is not exhaustive. The words, "including," "similar services," and "shall likewise include," indicate that the enumeration is by way of example only. 2. "lease of motion picture films, etc. is not the same as showing or exhibition thereof Among those included in the enumeration is the "lease of motion picture films, films, tapes and discs." This, however, is not the same as the showing or exhibition of motion pictures or films. "Exhibition" in Blacks Law Dictionary is defined as "To show or display. To produce anything in public so that it may be taken into possession," while the word "lease" is defined as "a contract by which one owning such property grants to another the right to possess, use and enjoy it on specified period of time in exchange for periodic payment of a stipulated price, referred to as rent. 3. History of legislature would show that the legislature never intended operators or proprietors of cinema/theater houses to be covered by VAT. Based on a study if legislative history , the following facts can be established: a. Historically, the activity of showing motion pictures, films or movies by cinema/theater operators or proprietors has always been considered as a form of entertainment subject to amusement tax. b. Prior to the Local Tax Code, all forms of amusement tax were imposed by the national government. c. When the Local Tax Code was enacted, amusement tax on admission tickets from theaters, cinematographs, concert halls, circuses and other places of amusements were transferred to the local government. d. Under the NIRC of 1977, the national government imposed amusement tax only on proprietors, lessees or operators of cabarets, day and night clubs, Jai-Alai and race tracks. e. The VAT law was enacted to replace the tax on original and subsequent sales tax and percentage tax on certain services. f. When the VAT law was implemented, it exempted persons subject to amusement tax under the NIRC from the coverage of VAT.1auuphil g. When the Local Tax Code was repealed by the LGC of 1991, the local government continued to impose amusement tax on admission tickets

h. i.

from theaters, cinematographs, concert halls, circuses and other places of amusements. Amendments to the VAT law have been consistent in exempting persons subject to amusement tax under the NIRC from the coverage of VAT. Only lessors or distributors of cinematographic films are included in the coverage of VAT.

These reveal the legislative intent not to impose VAT on persons already covered by the amusement tax. This holds true even in the case of cinema/theater operators taxed under the LGC of 1991 precisely because the VAT law was intended to replace the percentage tax on certain services. The mere fact that they are taxed by the local government unit and not by the national government is immaterial. The Local Tax Code, in transferring the power to tax gross receipts derived by cinema/theater operators or proprietor from admission tickets to the local government, did not intend to treat cinema/theater houses as a separate class. No distinction must, therefore, be made between the places of amusement taxed by the national government and those taxed by the local government. 4. To hold that cinema operators are subject to VAT would an unreasonable burden to the taxpayer. To hold otherwise would impose an unreasonable burden on cinema/theater houses operators or proprietors, who would be paying an additional 10% VAT on top of the 30% amusement tax imposed by 140 of the LGC of 1991, or a total of 40% tax. Such imposition would result in injustice, as persons taxed under the NIRC of 1997 would be in a better position than those taxed under the LGC of 1991. We need not belabor that a literal application of a law must be rejected if it will operate unjustly or lead to absurd results. Thus, we are convinced that the legislature never intended to include cinema/theater operators or proprietors in the coverage of VAT. 5. Revenue Memorandum Circular No. 28-2001 is invalid Considering that there is no provision of law imposing VAT on the gross receipts of cinema/theater operators or proprietors derived from admission tickets, RMC No. 28-2001 which imposes VAT on the gross receipts from admission to cinema houses must be struck down. (7) KEPCO PHILS v CIR Topic: VAT; Substantiation requirements Ponente: Mendoza, J. Date: November 24, 2010

DOCTRINE: "[T]o be considered a 'VAT invoice,' the TIN-VAT must be printed, and not merely stamped. Consequently, purchases supported by invoices or official receipts, wherein the TIN-VAT is not printed thereon, shall not give rise to any input VAT. Likewise, input VAT on purchases supported by invoices or official receipts which are NON-VAT are disallowed because these invoices or official receipts are not considered as 'VAT Invoices.'" QUICK FACTS: Kepco Philippines Corporation (Kepco), an Independent Power Producer (IPP) selling electricity exclusively to tax-exempt National Power Corporation (NPC), insists that the CTA Second Division erred in not considering P8,691,873.81 in addition to P2,890,005.96 as refundable tax credit for Kepco's zero-rated sales to NPC for taxable year 2002 because nothing in the law allows the automatic invalidation of official receipts/invoices which were not imprinted with "TIN-VAT;" and the reduction of their claim representing input VAT on purchase of goods not supported by invoices and input VAT on purchase of services not supported by official receipts because the law makes use of invoices and official receipts interchangeably. The Supreme Court disagrees and denied their petition. FACTS: In the course of doing business with NPC, Kepco claimed expenses reportedly sustained in connection with the production and sale of electricity with NPC. Based on Kepco's calculation, it paid input VAT amounting to P11,710,868.86 attributing the same to its zero-rated sales of electricity with NPC. On April 20, 2004, Kepco filed before the CIR (and later the CTA) a claim for tax refund covering unutilized input VAT payments attributable to its zero-rated sales transactions for taxable year 2002. During the hearing, Kepco presented court-commissioned Independent Certified Public Accountant, Victor O. Machacon, who audited their bulky documentary evidence consisting of official receipts, invoices and vouchers, to prove its claim for refund of unutilized input VAT. On February 26, 2007, the CTA Second Division ruled that out of the total declared zero-rated sales of P3,285,308,055.85, Kepco was only able to properly substantiate P1,451,788,865.52 as its zero-rated sales. After factoring, only 44.19% of the validly supported input VAT payments being claimed could be considered. The CTA Second Division likewise disallowed the P5,170,914.20 of Kepco's claimed input VAT due to its failure to comply with the substantiation requirement. CTA Second Division: partially granted Kepco's claim for refund to the amount of Php2,890,005.96 representing unutilized input value-added tax for taxable year 2002. MR denied.

CTA En Banc: dismissed the petition and ruled that "in order for Kepco to be entitled to its claim for refund/issuance of tax credit certificate representing unutilized input VAT attributable to its zero-rated sales for taxable year 2002, it must comply with the substantiation requirements and concluded that the Court in Division was correct in disallowing a portion of Kepco's claim for refund on the ground that input taxes on Kepco's purchase of goods and services were not supported by invoices and receipts printed with "TIN-VAT." ISSUE 1/HELD: WON the claiming party who fails to issue VAT official receipts/invoices for its sales should only be imposed penalties as provided under Section 264 of the 1997 NIRC? No, it would result in automatic denial of claim. Section 264 (formerly Section 263) of the 1997 NIRC was not intended to excuse the compliance of the substantive invoicing requirement needed to justify a claim for refund on input VAT payments. Internal Revenue Regulation 7-95 (Consolidated Value-Added Tax Regulations) is clear. Section 4.108-1 thereof reads: Only VAT registered persons are required to print their TIN followed by the word "VAT" in their invoice or receipts and this shall be considered as a "VAT" Invoice. All purchases covered by invoices other than 'VAT Invoice' shall not give rise to any input tax. ISSUE 2/HELD: WON the word "TIN-VAT" and zero-rated should be imprinted on invoices and/or official receipts as part of the invoicing requirement? Yes, it should be imprinted and not merely stamped. In Panasonic Communications Imaging Corporation of the Philippines vs. Commissioner of Internal Revenue the Supreme Court held that Section 4.108-1 of RR 7-95 proceeds from the rule-making authority granted to the Secretary of Finance under Section 245 of the 1977 NIRC (Presidential Decree 1158) for the efficient enforcement of the tax code and of course its amendments. The requirement is reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services. As aptly explained by the CTA's First Division, the appearance of the word "zero-rated" on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually paid. If, absent such word, a successful claim for input VAT is made, the government would be refunding money it did not collect. Further, the printing of the word "zero-rated" on the invoice helps segregate sales that are subject to 10% (now 12%) VAT from those sales that are zero-rated. Unable

to submit the proper invoices, petitioner Panasonic has been unable to substantiate its claim for refund. Contrary to Kepco's allegation, the , Internal Revenue Regulation 7-95 (Consolidated Value-Added Tax Regulations) specifically requires the VAT registered person to imprint TIN-VAT on its invoices or receipts. Thus, the Court agrees with the CTA when it wrote: "[T]o be considered a 'VAT invoice,' the TIN-VAT must be printed, and not merely stamped. Consequently, purchases supported by invoices or official receipts, wherein the TIN-VAT is not printed thereon, shall not give rise to any input VAT. Likewise, input VAT on purchases supported by invoices or official receipts which are NON-VAT are disallowed because these invoices or official receipts are not considered as 'VAT Invoices.'" DISPOSITIVE: Kepcos petition denied. (8) LVM CONSTRUCTION CORPORATION V. F.T. SANCHEZ/SOCOR/KIMWA ET. AL. Raj. (9) GALILEO ASIA, LLC- PHILIPPINE BRANCH V CIR Topic: Value Added Tax Ponente: PALANCA-ENRIQUEZ, J. Date: August 22, 2012 DOCTRINE: Pursuant to the above provision, in order to be entitled to a refund or issuance of a TCC of input VAT paid, petitioner must prove the following: 1) the claimant must be a VAT -registered person; 2) there must be zero-rated or effectively zero-rated sales; 3) input taxes were incurred or paid; 4) such input taxes are attributable to said zero-rated or effectively zero-rated sales; 5) said input taxes were not applied against any output VAT liability; and 6) the claim for refund was filed within the prescriptive period. It is imperative, therefore, that petitioner should be able to prove its compliance with the above requirements. QUICK FACTS: Petitioner filed with the BIR, Revenue District Office (RDO) No. 49, an administrative claim for refund or tax credit of the total amount of P5,616,836.51, representing its excess and unutilized input VAT on its domestic purchases of goods and services attributable to zero-rated sales of services for the period May 1, 2008 to July 31 , 2009. TAX: Section 112 (A) of the NIRC of 1997, as amended by RA 9337. FACTS:

Petitioner, being a foreign corporation, has a branch office in the Philippines which provides travel reservations, products and services, using GRS to travel agencies and foreign and domestic airlines in the Philippines. Pursuant to a Service Agreement with its foreign affiliate, petitioner was appointed to promote and market its affiliate's Computerized Registration System services in the region. For the period May 1, 2008 to July 31, 2009, petitioner rendered services in the Philippines to its foreign affiliate engaged in the business outside of the Philippines. Petitioner's total sales for said period amounted to P 88,778,212.95, broken down, as follows: Total Vatable Sales p 61 ,857.62 Total Zero-rated Sales 88,713,655.33 Total Exempt Sales 2,700.00 TOTAL SALES (May 2008 to July 2009) P88, 778,212.95 For the same period, petitioner likewise incurred a total ofP6,297,687.83 accumulated input VAT from domestic purchases of non-capital goods and services, P6,293, 108.29 of which was attributable to its zero-rated sales of services. On March 11, 2010, petitioner filed with the BIR, Revenue District Office (RDO) No. 49, an administrative claim for refund or tax credit of the total amount of P5,616,836.51, representing its excess and unutilized input VAT on its domestic purchases of goods and services attributable to zero-rated sales of services for the period May 1, 2008 to July 31 , 2009. ISSUE: WON petitioner is entitled to a refund or issuance of a TCC in the amount of P5,616,836.51, representing unutilized input VAT on domestic purchases of goods and services attributable to its VAT zero-rated sales of services for the period May 1, 2008 to July 31, 2009. HELD: No. RATIO: In order to be entitled to a refund or issuance of a TCC of input VAT paid, petitioner must prove the following: 1) the claimant must be a VAT -registered person; 2) there must be zero-rated or effectively zero-rated sales; 3) input taxes were incurred or paid; 4) such input taxes are attributable to said zero-rated or effectively zero-rated sales; 5) said input taxes were not applied against any output VAT liability; and 6) the claim for refund was filed within the prescriptive period. It is imperative, therefore, that petitioner should be able to prove its compliance with the above requirements. As regards the first requisite, records show that petitioner is a registered VAT entity, as evidenced by a Certificate of Registration.

Section 113 of the NIRC of 1997, as amended by RA 9337, which provides: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - A VAT registered person shall issue: ( 1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and {or everv sale, barter or exchange of services. xxx xxx." (Emphasis ours) Clearly, the above provision requires the issuance of either an invoice or receipt for every sale by a VAT registered person. In this case, considering that petitioner is engaged in the sale of services, its transactions should be properly supported by VAT official receipts. A perusal of the evidence on record shows that petitioner presented merely inter-company invoices, not official receipts, to prove its sale of services to its foreign affiliates. Without proper VAT official receipts issued to its clients, petitioner cannot claim such sales as zero-rated VAT not subject to output tax. (10) CIR v. MINDANAO II GEOTHERMAL PARTNERSHIP Topic: Value Added Tax Ponente: CTA EB No. 863 Date: 23 October 2012 DOCTRINE: Failure to show the amount of input VAT in the invoice or receipt is fatal to a claim for refund or issuance of tax credit certificate (TCC) QUICK FACTS: Mindanao II Geothermal Partnership requested refund or issuance of TCC for sake of generated power and delivery of electricity to NPC and in behalf of PNOC-EDC, which is VAT zero-rated; but, failed to substantiate/ comply with the requirements of input VAT, hence, disallowed by the court. FACTS:

for and in behalf of PNOC-EDC is VAT zero-rated, under Section 108 (B) of the NIRC of 1997, as amended by RA 9337. The sale is its lone revenue generating activity. On February 8, 2008, Mindanao II filed with the BIR Revenue District Office No. 108Kidapawan City an administrative claim for refund or issuance of tax credit certificate in the amount of P7,842,632.34 for the four quarters of taxable year 2006. However, the CIR failed to act on said claim for refund or issuance of tax credit certificate In her Answer, the CIR alleged by way of special and affirmative defenses that Mindanao II's claim for refund or issuance of TCC is subject to administrative investigation/examination by the BIR; taxes collected are presumed to be in accordance with laws and regulations; Mindanao II must comply with the following requisites: (1) that it is a VAT registered taxpayer, (2) the invoicing and accounting requirements, (3) submission of complete documents in support of its administrative claim for refund, pursuant to Section 112 (C) of the NIRC of 1997, as amended, (4) the input tax was paid by the claimant, attributable to its zero-rated or effectively zero-rated sales and such input tax should not been applied against any output tax; Mindanao II's claim for refund or issuance of TCC of unutilized input tax was filed within the two-year period under Section 112 (A) of the NIRC of 1997, as amended; in an action for tax refund/credit, the burden of proof rests upon the taxpayer; and basic is the rule that tax refunds are in the nature of tax exemptions and are construed strictissimi juris against the entity claiming the same. Mindanao II contends that it presented as proof of its input tax payments both the invoices issued by its customers showing the amount of the tax as a separate item and the official receipts also issued by said customers as proof of petitioner's payments of said invoices Issue: WON Mindanao II should be granted refund or issuance of TCC representing Mindanao IIs input taxes Held: No Decision:

Mindanao II Geothermal Partnership (hereinafter "Mindanao II") is a partnership duly registered with the Securities and Exchange Commission and existing under the laws of the Philippines. Mindanao II executed a Build-Operate-Transfer ("BOT") contract with the Philippine National Oil Corporation-Energy Development Corporation ("PNOC-EDC") to finance, construct, design, test, operate, maintain and repair a 48.25-megawatt geothermal power plant in Kidapawan, North Cotabato, provided PNOC-EDC would supply and deliver steam to Mindanao II at no cost Mindanao II claims that as an accredited power generation company utilizing geothermal energy, its sale of generated power and delivery of electricity to NPC

Section 113 of the NIRC of 1997, as amended by RA 9337, provides: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. (A) Invoicing Requirements. A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.

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(B) Information Contained in the VAT Invoice or VAT Official Receipt. The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: (a) The amount of the tax shall be shown as a separate item in the invoice or receipt; xxx xxx xxx" (Emphasis supplied). Pursuant to the above provision, one of the invoicing and accounting requirements for VAT-Registered Persons is that the amount of the tax should be shown as a separate item in the invoice or receipt. The court denied input VAT on purchase of goods supported by invoice, as the amount of the tax is not shown as a separate item in the invoice, and P5,539,461.04 as input VAT on purchases of services supported by invoice and official receipt, as the amount of the tax is not shown as a separate item in the receipt, or the total amount of P6,016,192.37. The aforementioned Section 113 (A) expressly provides that for the sale of goods or properties, VAT invoice shall be issued; while for the sale of services, VAT official receipt shall be issued. It is clear that input tax credits incurred from purchases of goods and properties must be substantiated by invoices showing the information required in Sections 113 and 237 of the NIRC of 1997, as amended by RA 9337; while input tax credits incurred from purchases of services must be substantiated by official receipts showing the information required under Sections 113 and 237 of the same Code. (11) CIR v. TEAM ENERGY Topic: VAT Unutilized Input Substantiation Requirements Ponente: Castaeda, Jr. Date: 8 April 2011 DOCTRINE: Although it is true that the Court of Tax Appeals (CTA) is not strictly governed by technical rules of evidence, the invoicing and substantiation requirements must, nevertheless, be followed because it is the only way to determine the veracity of ones claims. QUICK FACTS: Team Energy Corporation (TEC) is claiming for a refund of unutilized input VAT attributable to zero-rated sales.

FACTS: Tax: Unutilized input VAT attributable to zero-rated sales. On December 17, 2004, TEC filed an administrative claim for refund of unutilized input VAT with the Revenue District Office No. 60 at Lucena City in the total amount of P83,465,353.50. On April 22, 2005, receiving no favorable response from the Commissioner of Internal Revenue (CIR), petitioner filed a Petition for Review before this Court, docketed as CTA Case No. 7229, claiming for the refund of the amount of P15,085,320.31 corresponding to the firstst quarter VAT claim for the calendar year 2003. On July 22, 2005 petitioner filed CTA Case No. 7298 for its corresponding judicial VAT refund claims for the second to fourth quarters of 2003 summing up to P63,380,033.19. Both cases were then consolidated. On October 5, 2009, the Court of Tax Appeals First Division rendered a Decision partially granting TECs Petition and ordered the CIR to refund or issue a tax credit certificate to TEC in the amount of P70,700,533.01. Its Motion for Reconsideration denied, the CIR filed the present case before the CTA en banc. TECs Contention: TEC failed to comply with the jurisdictional period within which to file its judicial claim for refund of its unutilized input VAT as provided under Section 112 of the 1997 NIRC. Respondents Contention: The thirty 30-day period prescribed under Section 112(c) of the 1997 NIRC, as amended, is not mandatory but rather directory for the use of the word "may" operates to confer discretion. TC CA N/A N/A

ISSUE: WoN TEC complied with the jurisdictional period within which to file its judicial claim for refund of its unutilized input VAT. HELD: Yes, but only insofar as the claim for the first quarter of 2003 is concerned. RATIO: Only the claim for refund for the first quarter of 2003 was filed on time. However, aside from timeliness, TEC, to be entitled to a refund, must have also complied with four other requisites, namely: (1) there must be zero-rated or effectively zero-rated sales; (2) that input taxes were incurred or paid; (3) that such input taxes are attributable to zero-rated or effectively zero-rated sales; and (4) that the input taxes were not applied against any output VAT liability. As to the first

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requisite, the TEC's zero-rated sales for the first quarter amounting to P3,170,914,604.24 were fully substantiated and that no output VAT liability for the first quarter of 2003 was declared in its First Quarter VAT Return. As to the fourth requisite, the subject claim was neither applied against any output tax nor carried over to the succeeding quarter. As to the third and fourth requisites, TEC, in the First Quarter VAT Return, declared an input VAT of P15,085,320.31. However, not all the input VAT declared for the first quarter will be refunded since there were disallowances due to non-observance of substantiation requirements under Sections 110 and 113 of the 1997 NIRC, as implemented by Sections 4.104-1, 4.1045 and 4.108-1 of Revenue Regulations No. 7-95. Although it is true that the CTA is not strictly governed by technical rules of evidence, the invoicing and substantiation requirements must, nevertheless, be followed because it is the only way to determine the veracity of ones claims. Thus, because of the disallowances, the total refundable input VAT for the first quarter amounts to only P11,161,392.67.

e. Frozen Bangus Hot & Spicy milkfish washed, gutted, deboned, soaked in chilli solution f. Smoked Deboned Bangus milkfish washed, gutted, deboned, soaked in brine solution g. Frozen Bangus Relleno ISSUE: WON said product is exempt from VAT pursuant to Sec. 109 of the NIRC, as amended. HELD: No. Under said Section, sale or importation of agricultural and marine food products in their original state shall be exempt from VAT. Under Section 4.109-1(B)(1)(a) of RR 16-2005, these products shall be considered in their original state even if they have undergone simple processes of preparation or preservation for the market such as freezing, drying, salting, broiling, roasting, smoking, or stripping. However, laws granting exemption from tax are construed strictly against the taxpayer. Exemption from payment of tax must be clearly stated in the language of the law. The bangus products which have been marinated and/or mixed with other ingredients can no longer be considered in its original state.

ISSUANCES
BIR RULING NO. 348-11 | September 28, 2011 DOCTRINE: Sale of marinated fish is not exempt from VAT FACTS: Century Canning Corp is a domestic corporation primarily organized to buy and sell on wholesale basis, process, preserve, can, pack, manufacture, produce, import and export and deal in all kinds of food products, cattle, hog, and other animals and animal products, fruits, vegetables and other agricultural crops and produce land, among others. Currently, apart from its canned tuna operations, its also engaged in the growing, production and sale of marinated, frozen, vacuum packed boneless milkfish (bangus) and uses only simple ingredient to maintain the natural state of the fish. Said products are being marketed as follows: a. 1pc and 2pcs marinated deboned bangus milkfish washed, gutted, deboned, soaked in marinade b. Bangus Belly/Marinated milkfish washed, gutted, deboned, soaked in marinade c. Bangus Belly Unseasoned milkfish washed, gutted, deboned, drip-dried, cut out belly section d. Frozen Deboned Tocino Milkfish Sliced milkfish split open to remove orgnas, deboned, cutting out the belly portion, meat trimmings prepared in marinating tocino solution

BIR RULING NO. 137-12 | February 27, 2012 DOCTRINE: Even if a common carrier opts to be a VAT-registered person, it will still be subject to the 3% percentage tax on its gross receipts from transport of passengers. FACTS: Hafti Transport, Inc. is a domestic common carrier engaged in transporting passengers by land, incorporated to construct, equip, maintain and wok motor buses or other vehicle appropriate for the carriage of passengers or goods and to carry on the business of motor bus proprietors and carriers of passengers and goods ISSUE: WON it may opt to be VAT-registered under Section 109(2) of the NIRC, as amended, and may issue receipts without being held subsequently liable for percentage tax under Section 117 of the same Tax Code

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DECISION: No. Under Sec. 117 of the Tax Code, common carriers or transportation contractors are explicitly subjected to the 3% percentage tax, and therefore exempt from VAT under Section 109(1)(E) of the same Tax Code. Haftis primary purpose includes carriage of passengers and goods, hence, subject to percentage tax only on its gross receipts from transport of passengers under Sec. 117 of the Tax Code and subject to VAT on its gross receipts from transport of goods or cargoes. The option granted in Section 109(2) of the Tax Code, as amended, which allows a VAT-registered person to elect that it not be VAT exempt does not apply to services subject to percentage tax under Title V of the NIRC since such services are explicitly subjected to percentage tax. Common carriers by land with respect to their gross receipts from the transport of passengers including operators of taxicabs, utility cars for rent or hire driven by lessees (rent-a-car companies), and tourist buses used for the transport of passengers shall be subject to percentage tax under Section 117 of the Tax Code, but shall not be liable for VAT. Hence, if Hafti Transport availed of the option under Section 109(2) of the NTax Code, it is still subject even to the 3% percentage tax as a transportation contractor for the transport of passengers.

Under the terms of the merger, GRC shall survive and shall continue unaffected and unimpaired. Its AOI and BL shall continue in full force and effect. MCC shall transfer to GRC all its assets and liabilities. GRC shall issue its shares as a consequence of the merger. It shall issue 94,538 shares with par value of P9,453,800.00 in favor of MCC shareholders, to be paid out of the net assets of MCC, with the excess of the net assets treated as additional paid-in capital in the book of GRC, as surviving corporation. ISSUE: WON said transfer of all assets and liabilities of MCC to GRC pursuant to the merger qualifies exemption from VAT under Sec. 4.106-8(b)(3) of RR 16-2005, as amended. DECISION: The transfer of goods or properties of MCC to GRC, which are originally intended for sale or for use in the course of business existing as of the effective date of merger will not be subject to output tax pursuant to Section 4.106-8(b)(3) of RR 16-2005, as amended by RR 4-2007 and RR 10-2011. Thus any unused input tax as of the effective date of merger will be absorbed by GRC, as the surviving corporation pursuant to said Section.

BIR RULING NO. 228-12 | March 29, 2012 BIR RULING NO. 214-12 | March 28, 2012 DOCTRINE: Transfer to the surviving/newly-created corporation of goods or properties originally intended for sale or use in the course of business existing as of effective date of mergers or consolidations are exempt from output tax. Likewise, unused input tax of dissolved corporation as of the effective date of merger or consolidation will be absorbed by the surviving/newly-created corporation. FACTS: Two corporations decided to merge with GRC as surviving corporation: Corporation Corporation is owned 60% by 40% by Greenstone Resources Corp (GRC) Surigao Holdings and Investment Corp (SHIC) Red5 Asia, Inc. (Red5) Merrill Crowe Corp (MCC) Surigao Holdings and Investment Corp (SHIC) Red5 Asia, Inc. (Red5) The assignors are also the registered owners of lands and improvements (1 condominium unit, 5 tracts of land, and 5 buildings, SILA NA). In 2009, they executed a Deed of Assignment in favor of Corbro, transferring the title and ownership of the abovementioned properties to the corporation as payment for their subscribed shares in the corporation, therby gaining control of Corbro by owning 98.21% of the total voting stocks of the said corporation. DOCTRINE: Under RR 10-2011 dated July 1, 2011, the exchange of goods or properties, including the real estate properties used in business or held for sale or for lease by the transferor for shares of stock, whether resulting in corporate control or not is subject to VAT. FACTS: Corbro Development Corporation (Corbro) was incorporated with the SEC in 2009, having an authorized capital stock of P40 million divided into 400,000 shares with par value of P100.00 each. Of these 400,000 shares, Zoilo Cortes Jr. and Editha Cortes (assignors) each subscribed to 49,600 paying P2,200,521.67 each.

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ISSUE: WON such transfer is exempt from VAT DECISION: No It is to be noted that under RR 10-2011 dated July 1, 2011, the exchange of goods or properties, including the real estate properties used in business or held for sale or for lease by the transferor for shares of stock, whether resulting in corporate control or not is subject to VAT. The transfer of the following properties in this case is subject to VAT because these are held by the assignors primarily for lease in the ordinary course of business: a piece of land with the commercial building and warehouse existing thereon, the restaurant building and apartment building.

Section 4.109-1(B)(r) of RR 16-2005 provides that the sale, importation, printing or publication of books and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements shall be exempt from VAT. Hence, there are four (4) activities that are exempt from the coverage of VAT, i.e., sale, importation, printing and publication of books, newspapers, magazines, reviews and bulletins. Moreover, the features of the said items, like magazine, should appear at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements. Therefore, its sale and publication of books printed in hard copy are exempt from the payment of VAT and from the 3% percentage tax under Section 116, in relation to Section 109(V) of the 1997 Tax Code. (BIR Ruling No. 007-11 dated January 19, 2011) However, its sale and publication of electronically printed materials, such as electronic books, doesnt fall within the exemption. Under BIR Ruling No. 340-2011 dated September 7, 2011, that the term "book" for purposes of the VAT law only applies to printed matters in hard copy. It does not, however, apply to electronic copy of any book or publication. An electronic copy of any publication does not come within the purview of the terms "books, newspapers, periodicals, magazine, review or bulletin" for the purpose of VAT exemption. The said terms only apply to printed matters in hard copy as expressly provided therein. The term "book" has been defined as "A literary composition which is printed; a printed composition bound in volume." (Scoville V Toland 21 Fed. Cas. 864 BLACK'S LAW DICTIONARY) As a result, its sale and publication of its electronic copies of books and other instructional materials, being outside the purview of the term books or any similar publication for purposes of Section 109(R) of the Tax Code, as amended, are subject to the 12% VAT. Thus, it is required to register its business as a VAT business entity and issue a separate VAT invoice/receipt therefor to record such transactions.

BIR RULING NO. 224-12 | March 29, 2012 DOCTRINE: There are four (4) activities that are exempt from the coverage of VAT, i.e., sale, importation, printing and publication of books, newspapers, magazines, reviews and bulletins. Moreover, the features of the said items, like magazine, should appear at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements. However, this exemption does not cover sale and publication of electronically printed materials, such as electronic books. FACTS: St. Matthew's Publishing Corporation is a domestic corporation engagde in the business of publishing, printing, distributing and selling of printed and electronic materials, including, but not limited to, instructional materials, textbooks, journals, magazines, periodicals, catalogues, pamphlets, reports, manuals; to engage in the business of publishing e-books, internet-based books, and other instructional materials in electronic media, and to obtain, purchase or otherwise acquire copyrights, trademarks, patents, inventions, and formula. ISSUE: WON its activities are exempt from VAT under Section 109(R) of the Tax Code, as amended DECISION: Section 109(R) of the Tax Code, as amended, provides that the sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin, which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements is exempt from the imposition of the VAT.

BIR RULING NO. 291-12 | April 25, 2012 DOCTRINE: Sale of assets used by a PEZA-registered enterprise in the conduct of its registered activities is subject to VAT. The in lieu of all taxes provision only applies to its registered activities.

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FACTS: STMicroelectronics, Inc. (STMI) and ST-Ericsson (ST-EPI) are domestic corporations engaged in the business of development, manufacture, production, processing and/or assembly for export and sale of electronic equipment, accessories, parts or components, including semiconductors, integrated circuits, micro-processors, printed circuit board assemblies, computer systems and sub systems and subsystems and accessories, parts and components. Both are PEZA-registered as an Ecozone Export Enterprise engaged in: a. manufacture of (1) integrated circuits and (2) micro leadframe package known as HVQFN b. assembly of Bluetooth system modules c. manufacture of assembly of integrated circuits; and d. importation of raw materials, machinery, equipment, tools, goods, wares, articles or merchandise directly used in its registered operations As part of a worldwide restructuring and transfer of business between the parent companies of STMI and ST-EPI, the former sold to the latter all assets related to all its PEZA-registered activities, including tangible fixed assets like buildings, machinery, and installations and production and commercial inventories used in the projects under the regime of 5% special tax incentive rate and income tax holiday. ISSUE: WON such transfer is subject to VAT DECISION: Yes Laws and statutes granting tax exemption are strictly construed against the taxpayer. STMIs transfer of fixed assets is not includes in its registered activity given certain preferential tax treatment, which only apply to its registered activities.

Kone and KPI entered into a Franchise Fee Agreement (Agreement) whereby Kone agreed to grant KPI a non-exclusive license (sub-license as the case may be) to use its technology, know-how, show-how, trade marks and IT systems for the conduct of KPIs business. KPI agreed to pay Kone a franchise fee, calculated under the Arms Length Principle as a percentage of KPIs net sales, benchmarked b y reference to analogous third party arrangements. ISSUE: WON the royalties paid by KPI to Kone are subject to the 25% preferential tax rate pursuant to the Convention Between the Philippines and Finland for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income (Philippines-Finland Tax Treaty) DECISION: Procedural RMO 72-2010 provided that filing of all tax treaty relief applications (TTRA) with the International Tax Affairs Division (ITAD) should always be made before the transaction, meaning before the occurrence of the first taxable event. Failure to do so within the period prescribed shall disqualify the TTRA. Thus, those royalties paid by KPI to Kone prior to the filing of the TTRA shall not be subject to the preferential rate and shall be subject to the 30% regular income tax rate. Re VAT The royalty payments shall be subject to VAT pursuant to Section 108(A)(1) of the Tax Code. KPI, being the resident withholding agent and payor in control of payment, shall be responsible for the withholding of the final VAT on such fees before making any payment to Kone. Proof of payment (BIR Form No. 1600) shall serve as documentary substantiation for the claim of input tax to be applied against the output tax that may be due from KPI if it is VAT-registered. If KPI is not VATregistered, the passed-on VAT withheld shall form part of the cost of service purchased and may treat such VAT as an expense or as an asset, whichever is applicable.

ITAD BIR RULING NO. 2-12 | January 10, 2012 DOCTRINE: The royalty payments shall be subject to VAT pursuant to Section 108(A)(1) of the Tax Code. FACTS: Kone Corporation (Kone) is a non-registered foreign (Finnish) corporation, not registered either as a corporation or as a partnership with the SEC. KPI Elevators (KPI), on the other hand, is a domestic corporation registered with the SEC.

II PERCENTAGE TAXES
See R.A. No. 10001

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CTA En Banc

Affirmed CTA 2nd Div

III EXCISE TAX

(1) DIAGEO PHILIPPINES V COMMISSIONER OF INTERNAL REVENUE Topic: Excise Tax Ponente: Perlas-Bernabe, J. Date: 12 November 2012 DOCTRINE: The phrase any excise tax paid thereon shall be credited or refunded requires that the claimant be the same person who paid the excise tax. AS held in Silkair v CIR, the proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. QUICK FACTS: Petitioner Diageos supplier of raw alcohol paid the corresponding excise tax on the raw alcohol. Within two years from such payment, Diageo filed with BIR applications for tax refund/issuance of tax credit certificates with respect to the excise taxes which its supplier paid but passed on to it as part of the purchase price of the subject raw alcohol. SC held that Diageo is not the real party in interest to file the claim. FACTS: Tax: Excise Tax Petitioner Diageo purchased raw alcohol from its supplier for use in the manufacture of its beverage and liquor products. The supplier imported the raw alcohol and paid the related excise taxes thereon before the same were sold to Petitioner Diageo. Subsequently, Diageo exported its locally manufactured liquor products and received the corresponding foreign currency proceeds of such export sales. Within two years from the time the supplier paid the subject excise taxes, Diageo filed with BIR applications for tax refund/issuance of tax credit certificates corresponding to the excise taxes which its supplier paid but passed on to it as part of the purchase price of the subject raw alcohol. CIR Failed to act upon Diageos claims

Petitioners Contention: Invoked Section 130(D) of the Tax Code ISSUE: WoN Petitioner Diageo has the legal personality to file a claim for refund or tax credit for the excise taxes paid by its supplier on the raw alcohol it purchased and used in the manufacture of its exported goods HELD: NO. The right to claim a refund or be credited with the excises taxes belongs to the statutory taxpayer, which is the supplier. DECISION: The phrase any excise tax paid thereon shall be credited or refunded requires that the claimant be the same person who paid the excise tax. AS held in Silkair v CIR, the proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. When the excises taxes paid by the supplier were passed on to Diageo, what was shifted is not the tax per se but additional cost of the goods sold. Thus, the supplier remains the statutory taxpayer even if Diageo, the purchaser, actually shoulders the burden of tax. Unlike the law on VAT which allows the subsequent purchaser under the tax credit method to refund or credit input taxes passed on to it by a supplier, no provision for excise taxes exists granting non-statutory taxpayer like Diageo to claim a refund or credit.

(2) CHEVRON PHL V CIR (CTA Case) Topic: Excise Tax Ponente: Fabon-Victironi, J. Date: August 30, 2012 DOCTRINE: The excise tax imposed on importation of petroleum products under Sec 131 is the direct liability of the importer who cannot invoke the exemption granted to its buyer who, by law, is legally exempted from payment of direct and indirect taxes.

CTA 2nd Div Dismissed the petition on the ground that Diageo is not the real party in interest to file the claim for refund.

QUICK FACTS: Chevron Phil filed a claim for tax refund or issuance of tax credit certificate in amount of P11M representing excise taxes paid in importation of

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petroleum products which was subsequently sold to Clark Development Corporation (CDC), an entity which enjoys exemption from payment of direct and indirect tax. FACTS: Chevron sold and delivered to Clark Development Corporation (CDC) imported petroleum products in 2008 and paid corresponding excise taxes. Since CDC enjoys exemption from payment of direct and indirect taxes under Sec 135(c) of the NIRC, Chevron did not pass on or shifted to CDC the excise taxes it paid on the imported petroleum products. Thereafer, Chevron filed with CIR an application for issuance of tax credit certificate or tax refund for paid excite taxes. Due to inaction of CIR, it filed this Petition for Review. Chevrons Contentions: Excise tax is an indirect tax, the burden of which can be passed on to consumers. But since CDC is exempt by law, it was precluded from shifting burden. It is then entitled to refund for excise taxes paid on CDC purchases. CIRs Contentions: Excise manufacturer/importer. tax on petroleum is direct liability of

(A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customshouse, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption .

As importer of petroleum product sold to CDC, Chevron is liable to pay the excise taxes. Also, citing Phil Acetylene v CIR, the tax exemption being enjoyed by buyer cannot be basis of calim for tax exemption by the manufacturer/importer of any goods for any tax due to it. The excise tax imposed on importation of petroleum products under Sec 131 is the direct liability of the importer who cannot thus invoke the excise tax exemption granted to its buyer who, by law, are legally exempted from payment of direct and indirect taxes. Finally, citing CIR v Pilipinas Shell Petroleum Corp, oil companies who sold their petroleum products to international carriers are not entitled to a refund of excise taxes previously paid on the petroleum products sold. NOTE: SC in some cited cases agree that the only claim for tax refund of excise taxes is the payment of excise taxes on exported goods as provided in Sec 130(d). Thus when good are locally produced, proof of actual exportation necessary before any refund can be granted.

ISSUE: WON Chevron is entitled to refund. (No)

HELD: Excise taxes refer to taxes imposed on certain specified goods or articles manufacture or prodiced in Philippine for domestic sales or consumption or for any other disposition and to things imported into the Philippines. These taxes are imposed in addition to VAT. Chevron is not among those entities exempted from excise tax for petroleum products in Sec 135 of NIRC. Also, this is a grant of exemption to purchasers not sellers. Sec 131 on the other hand identifies persons liable to pay excise tax. Sec 131(a) covers Chevron.

IV DOCUMENTARY STAMP TAX

(1) PHILACOR CREDIT CORPORATION v. CIR February 6, 2013 Brion, J. QUICK FACTS: Philacor, a business engaged in retail financing, is assessed deficiency DST on issuance and assignment of promissory notes. They contested on both accounts, saying it did not issue the said promissory notes, nor is the transaction of assignment of such taxable under Philippine law. DOCTRINE: 1) The persons primarily liable for the payment of the DST are the person (1) making; (2) signing; (3) issuing; (4) accepting; or (5) transferring the taxable

SEC. 131. Payment of Excise Taxes on Importer Articles. -

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documents, instruments or papers. Should these parties be exempted from paying tax, the other party who is not exempt would then be liable. 2) The transaction of assignment of promissory notes is not taxed under the law. Where the law did not specify that such transfer and/or assignment is to be taxed, there would be no basis to recognize an imposition. FACTS: Philacor is a domestic corporation engaged in the business of retail financing. Through retail financing, a prospective buyer of a home appliance-- with neither cash nor any credit card may purchase appliances on installment basis from an appliance dealer. After Philacor conducts a credit investigation and approves the buyers application, the buyer executes a unilateral promissory note in favor of the appliance dealer. The same promissory note is subsequently assigned by the appliance dealer to Philacor. Revenue Officer examined Philacors books of accounts for the fiscal year Aug ust 1992 July 1993. Computations of deficiency taxes for this year according to BIR: P20+M. Philacor protested and revised the assessments to P14+M. In 1996, Philacor then received Pre-Assessment Notices (PANs) covering the alleged deficiency income, percentage and DSTs. They also received demand letters in 1998 for P17+M assessment of deficiency taxes, including P3+M deficiency DST. Philacor protested, alleging that the assessed deficiency income tax was erroneously computed (reasons were stated, but I only put the arguments for DST). As for the deficiency DST, Philacor claims that the accredited appliance dealers were required by law to affix the documentary stamps on all promissory notes purchased until the enactment of RA 7660 (Act Rationalizing Further the Structure and Administration of DST, effective 1994). Philacor filed a petition for review before CTA. CTA: Philacor is liable for DST on issuance of promissory notes and their subsequent transfer or assignment. Noting that Philacor failed to prove that the DST on its promissory notes had been paid for these 2 transactions, the CTA held Philacor liable for deficiency DST of P60Ok. CTA en banc: reiterated that Philacor is liable for the DST due on 2 transactions: the issuance of promissory notes, and their subsequent assignment ifo Philacor. With respect to the issuance of the promissory notes, Philacor is liable as the transferee which accepted the promissory notes from the appliance dealer in accordance with Section 180 of Presidential Decree No. 1158, as amended (1986 Tax Code).

Further citing Section 4219 of Regulations No. 26, the CTA en banc held that a person using a promissory note is one of the persons who can be held liable to pay the DST. Since the subject promissory notes do not bear documentary stamps, Philacor can be held liable for DST. As for the assignment of the promissory notes, the CTA en banc held that each and every transaction involving promissory notes is subject to the DST under Section 173 of the 1986 Tax Code; Philacor is liable as the transferee and assignee of the promissory notes. ISSUE #1: W/N Philacor is liable for DST on the issuance of the promissory notes. HELD: NO. 1) Philacor did not make, sign, issue, accept or transfer the promissory notes. Section 173 of the 1997 National Internal Revenue Code ( 1997 NIRC) names those who are primarily liable for the DST and those who would be secondarily liable: Section 173. Stamp taxes upon documents, instruments, and papers. the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the same, and at the same time such act is done or transaction had: Provided, that wherever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax. [emphases supplied; underscores ours] The persons primarily liable for the payment of the DST are the person (1) making; (2) signing; (3) issuing; (4) accepting; or (5) transferring the taxable documents, instruments or papers. Should these parties be exempted from paying tax, the other party who is not exempt would then be liable. Philacor did not make, sign, issue, accept or transfer the promissory notes. The acts of making, signing, issuing and transferring are unambiguous. The buyers of the appliances made, signed and issued the documents subject to tax, while the appliance dealer transferred these documents to Philacor which likewise indisputably received or accepted them. Acceptance, however, is an act that is not even applicable to promissory notes, but only to bills of exchange. Under Section 132 of the Negotiable Instruments Law (which provides for how acceptance should be made), the act of acceptance refers solely to bills of exchange. Its object is to bind the drawee of a bill and make him an actual and bound party to the instrument.

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2) Philacor is not a party to the issuance of the promissory notes, but merely to their assignment. Revenue Regulations No. 9-2000 interprets the law more widely so that all parties to a transaction are primarily liable for the DST, and not only the person making, signing, issuing, accepting or transferring the same becomes liable as the law provides. It provides: SEC. 2. Nature of the Documentary Stamp Tax and Persons Liable for the Tax. (a) In General. - The documentary stamp taxes under Title VII of the Code is a tax on certain transactions. Any of the parties thereto shall be liable for the full amount of the tax due: Provided, however, that as between themselves, the said parties may agree on who shall be liable or how they may share on the cost of the tax. (b) Exception. - Whenever one of the parties to the taxable transaction is exempt from the tax imposed under Title VII of the Code, the other party thereto who is not exempt shall be the one directly liable for the tax. [emphasis ours] But even under these terms, the liability of Philacor is not a foregone conclusion as from the face of the promissory note itself, Philacor is not a party to the issuance of the promissory notes, but merely to their assignment. On the face of the documents, the parties to the issuance of the promissory notes would be the buyer of the appliance, as the maker, and the appliance dealer, as the payee. And the doctrine is that the liability for the DST and the amount due are determined from the document itself examined through its form and face and cannot be affected by proof of facts outside it. ISSUE #2: Who is liable to pay DST? HELD: In our view, it makes more sense to include persons who benefit from or have an interest in the taxable document, instrument or transaction. There appears no reason for distinguishing between the persons who make, sign, issue, transfer or accept these documents and the persons who have an interest in these and/or have caused them to be made, signed or issued. This also limits the opportunities for avoiding tax. Moreover, there are cases when making all relevant parties taxable could help our administrative officers collect tax more efficiently. In this case, the BIR could simply collect from the financing companies, rather than go after each and every appliance buyer or appliance seller. However, these are matters that are within the prerogatives of Congress so that any interference from the Court, no

matter how well-meaning, would constitute judicial legislation . At best, we can only air our views in the hope that Congress would take notice. ISSUE #3: W/N Philacor is liable for DST on the assignment of promissory notes HELD: NO. This transaction is not taxed under the law. Where the law did not specify that such transfer and/or assignment is to be taxed, there would be no basis to recognize an imposition. In BIR Ruling No. 139-97 issued on December 29, 1997, then CIR Liwayway VinzonsChato pronounced that the assignment of a loan that is not for a renewal or a continuance does not result in a liability for DST. Revenue Regulations No. 13-2004, issued on December 23, 2004, states that *t+he DST on all debt instruments shall be imposed only on every original issue and the tax shall be based on the issue price thereof. Hence, the sale of a debt instrument in the secondary market will not be subject to the DST. Included in the enumeration of debt instruments is a promissory note. The BIR Ruling and Revenue Regulation cited are still applicable to this case, even if they were issued after the transactions in question had already taken place. They apply because they are issuances interpreting the same rule imposing a DST on promissory notes. At the time BIR Ruling No. 139-97 was issued, the law in effect was the 1986 Tax Code; the 1997 NIRC took effect only on January 1, 1998. Moreover, the BIR Ruling referred to a transaction entered into in 1992, when the 1986 Tax Code had been in effect. On the other hand, the BIR issued Revenue Regulations No. 13-2004 when Section 180 of the 1986 Tax Code had already been amended. Nevertheless, the rule would still apply to this case because the pertinent part of Section 180 the part dealing with promissory notes remained the same; it imposed the DST on the promissory notes issuances and renewals, but not on their assignment or transfer.

(2) CIR V FILINVEST DEVELOPMENT CORPORATION Topic: Documentary Stamp Tax Ponente: Perez Date: July 19, 2011 DOCTRINE: DST shall apply to all loan agreements, whether made or signed in the Philippines, or abroad when the obligation or right arises from Philippine sources or the property or object of the contract is located or used in the Philippines.

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QUICK FACTS: CIR assessed Filinvest for deficiency documentary stamp taxes on documents evidencing Filinvests cash advances to its affiliates. FACTS: Tax: Documentary Stamp Tax Filinvest received from the BIR a Formal Notice of Demand to pay documentary stamp taxes based on the advances Filinvest extended to its affiliates. Filinvest filed a request for reconsideration/protest, on the ground that the documentary stamp taxes assessed by the BIR were bereft of factual and legal basis. Commissioner of Internal Revenue (CIR) failed to resolve their request for reconsideration/protest within the prescribed period, so Filinvest filed a petition for review with the Court of Tax Appeals (CTA) pursuant to Section 228 of the 1997 NIRC. Filinvests Contention: Not being promissory notes or certificates of obligations, the instructional letters as well as the cash and journal vouchers evidencing said cash advances were not subject to documentary stamp taxes. CIRs Contention: CIR argued that the BIR Ruling No. 116-98 was later modified in BIR Ruling No. 108-99 dated 15 July 1999, which opined that inter-office memos evidencing lendings or borrowings extended by a corporation to its affiliates are akin to promissory notes, hence, subject to documentary stamp taxes. CTA IFO Filinvest. The documents evidencing the cash advances Filinvest extended to its affiliates cannot be considered as loan agreements that are subject to documentary stamp tax. CA IFO Filinvest. The instructional letters as well as the cash and journal vouchers evidencing the advances Filinvest extended to its affiliates are not subject to documentary stamp taxes pursuant to BIR Ruling No. 116-98, dated 30 July 1998, since they do not partake the nature of loan agreements. Although BIR Ruling No. 116-98 had been subsequently modified by BIR Ruling No. 108-99, dated 15 July 1999, to the effect that documentary stamp taxes are imposable on inter-office memos evidencing cash advances similar to those extended by FDC, said latter ruling cannot be given retroactive application if to do so would be prejudicial to the taxpayer. ISSUE: WoN the letters of instruction or cash vouchers extended by FDC to its affiliates are subject to DST? HELD: Yes.

RATIO: Insofar as documentary stamp taxes on loan agreements and promissory notes are concerned, Sec. 180 of the NIRC, when read in conjunction with Section 173 of the 1993 NIRC, provides that DST concededly applies to "(a)ll loan agreements, whether made or signed in the Philippines, or abroad when the obligation or right arises from Philippine sources or the property or object of the contract is located or used in the Philippines." Correlatively, Section 3 (b) and Section 6 of Revenue Regulations No. 9-94 provide as follows: Section 3. Definition of Terms. For purposes of these Regulations, the following term shall mean: (b) 'Loan agreement' refers to a contract in writing where one of the parties delivers to another money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. The term shall include credit facilities, which may be evidenced by credit memo, advice or drawings. The terms 'Loan Agreement" under Section 180 and "Mortgage' under Section 195, both of the Tax Code, as amended, generally refer to distinct and separate instruments. A loan agreement shall be taxed under Section 180, while a deed of mortgage shall be taxed under Section 195." "Section 6. Stamp on all Loan Agreements. All loan agreements whether made or signed in the Philippines, or abroad when the obligation or right arises from Philippine sources or the property or object of the contract is located in the Philippines shall be subject to the documentary stamp tax of thirty centavos (P0.30) on each two hundred pesos, or fractional part thereof, of the face value of any such agreements, pursuant to Section 180 in relation to Section 173 of the Tax Code. In cases where no formal agreements or promissory notes have been executed to cover credit facilities, the documentary stamp tax shall be based on the amount of drawings or availment of the facilities, which may be evidenced by credit/debit memo, advice or drawings by any form of check or withdrawal slip, under Section 180 of the Tax Code. Applying the aforesaid provisions to the case at bench, we find that the instructional letters as well as the journal and cash vouchers evidencing the advances Filinvest extended to its affiliates in 1996 and 1997 qualified as loan agreements upon which documentary stamp taxes may be imposed. In keeping with the caveat attendant to every BIR Ruling to the effect that it is valid only if the facts claimed by the taxpayer are correct, we find that the CA reversibly erred in

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utilizing BIR Ruling No. 116-98, dated 30 July 1998 which, strictly speaking, could be invoked only by ASB Development Corporation, the taxpayer who sought the same. (3) PRUDENTIAL BANK V. CIR Rubby. (ORIGINAL IS WITH ME.)

CTA: IFO MBLIC holding that the DST on life insurance policies is imposed only once based on the amount insured at the time of actual issuance of such policies. The DST which is in the nature of an excise tax is imposed on the document as originally issued. Therefore, any subsequent increase in the insurance coverage resulting from policies which have been subjected to the DST at the time of their issuance, is no longer subject to the DST. CIR went to CA on a Petition for Review.

(4) CIR v. MANILA BANKERS LIFE INSURANCE CO Topic: DST Ponente: Leonardo-De Castro, J. Date: March 16, 2011 DOCTRINE: DST does not depend on the change or increase of premium payments or value assured but is levied on every document which establishes that insurance was made or renewed upon a life. QUICK FACTS: CIR issued a letter of demand against Manila Bankers Life Insurance Corporation (MBLIC) pertaining to DST on the policy premiums. CIR included in the computation the increases in the life insurance coverage or the sum assured by some of MBLICs life insurance plans. MBLIC contends that in the Lincoln case, it was held that DST should be based on the document as originally used therefore any subsequent increase in insurance coverage (in Money Plus Plan and Group Life insurance policy) resulting from policy already subjected to DST should no longer be imposed addl DST. FACTS: MBLIC is a duly organized domestic corporation primarily engaged in the life insurance business. On 14Dec1999, based on the findings of Revenue Officers (after examining the books of the bank), CIR issued a Preliminary Assessment Notice (PAN) against MBLIC for its deficiency internal revenue taxes for 1997. MBLIC agreed to all the assessments issued against it except to the amount of P24 million representing deficiency documentary stamp taxes on its policy premiums and penalties. This prompted CIR to issue a letter of demand pertaining to DST on the policy premiums. MBLIC filed a letter of protest with the BIR but was not acted upon by the BIR w/in the 180d period given under the NIRC. This prompted MBLIC to file a Petition for Review with the CTA for cancellation of the Assessment Notice. MBLICs contention: In the similar case of Lincoln Phil. Life Insurance Co v CIR, CTA held that the tax base to be used in computing the documentary stamp tax is the value at the time the instrument is issued because the documentary stamp tax is levied and paid only once, which is at the time the taxable document is issued.

CA: Affirmed CTA holding that the subject of the DST is the issuance of the instrument representing the creation, change or cessation of a legal relationship. Because the legal status or nature of the relationship embodied in the document has no bearing at all on the tax, the fulfillment of suspensive conditions incorporated in MBLICs policies, as claimed by the CIR, would still not give rise to new documentary stamp tax payments. CIRs contention: Based on the decision of SC on CIR v Lincoln Phil. Life Insurance Co (same case used by MBLIC to obtain favorable ruling), deficiency DST imposed on the increase in the sum insured is valid even though no new policy was issued because the increase, by reason of the "Automatic Increase Clause," was already definite at the time the policy was issued. Since Money Plus Plan is a 20-year term ordinary life insurance with a Guaranteed Continuity Clause wherein holder pay 4 succeeding premiums upon reaching a certain age and which increases sum assured. Since DST was imposed only on the st 1 premium paid, succeeding premium paid should also be subject to DST. Under the group life insurance, DST was only imposed on premiums of members existing at time document was executed. However, additional members can be included -> DST should be imposed on these additional members. CA on MR: Denied MR holding that Lincoln case was not applicable because the increase in the sum assured in Lincolns insurance policy was definite and determinable at the time such policy was issued as the automatic increase clause, which allowed for the increase, formed an integral part of the policy; whereas in MBLICs case, "the tax base of the disputed deficiency assessment was not a definite or determinable increase in the sum assured." ISSUE: WoN MBLIC is liable for deficiency DST on existing life insurance policies even w/o issuance of new policies? HELD: YES. Assessment for deficiency DST is being upheld not because the additional premium payments or an agreement to change the sum assured during

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the effectivity of an insurance plan are subject to DST, but because DST is levied on every document which establishes that insurance was made or renewed upon a life. As to the Money Plus Insurance Although the Automatic Increase Clause in Lincoln case is different from the Guaranteed Continuity Clause of MBLIC as the increase in the life insurance coverage was only corollary to the new premium rate imposed based upon the insureds age at the time the continuity clause was availed of, this gives rise to a new agreement between the MBLIC and the insured which is subject to DST. As to Group Life Insurance Whenever a master policy admits of another member, another life is insured and covered. This means that MBLIC, by approving the addition of another member to its existing master policy, is once more exercising its privilege to conduct the business of insurance, because it is yet again insuring a life. It does not matter that it did not issue another policy to effect this change, the fact remains that insurance on another life is made and the relationship of insurer and insured is created between MBLIC and the additional member of that master policy. Everytime MBLIC registers and attaches an Enrollment Card (document accomplished by new EEs as evidence of membership to the group insurance plan) to an existing master policy, it exercises its privilege to conduct its business of insurance and this is patently subject to DST as insurance made upon a life under Section 183.

FACTS: Tax: DST refund amounting to PhP 15M UST Hospital, Inc. (USTHI) is a non-stock, non-profit corporation. In 2007, USTHI, as "borrower", signed and executed an Omnibus Loan and Security Agreement (OLSA) with DBP, LBP, Philtrust, and DBP-Trust, as "lenders". The credit line/facility granted to USTHI amounted to PhP 3B. It paid the CIR PhP 15M as DST. However, the credit line/facility, as contained in the OLSA, was never implemented and/or availed of although the DST was already paid . In fact, respondent never made a "drawdown" on the same approved credit line/facility. Eventually, the approved credit line/facility was cancelled after discovering that there were irregularities in the application for the said credit line/facility as well as in its execution. USTHI filed an administrative claim for refund of the PhP 15M.Due to the inaction of the Commissioner, USTHI filed a Petition for Review with the CTA. CTA: ifo USTHI. CTA held that if there is no delivery of money or other consumable thing upon the condition that the same amount of the same kind and quality shall also be paid , there will be no DST to be imposed on the document evidencing such loan agreement, citing as legal bases Section 179 of the NIRC and Sections 3(b) and 6 of Revenue Regulations No. (RR) 9-94. The Commissioner filed an MR but it was denied. ISSUE: WON USTHI is entitled to the DST refund HELD: YES. The OLSA is a not a loan agreement, hence, not subject to DST. RATIO: Section 3(b) of RR 9-94 defines the term "loan agreement", to wit: "SECTION 3. Definition of Terms.- For purposes of these Regulations, the following terms shall mean: XXX XXX XXX (b) 'Loan Agreement' - refers to a contract in writing where one of the parties delivers to another money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. The term shall include credit facilities, which may be evidenced by credit memo, advice or drawings." Based on the foregoing , for a contract to be considered as a loan

(5) CIR V. UST HOSPITAL, INC. Topic: DST Ponente: Uy, J. Date: April 20, 2011 DOCTRINE: For a contract to be considered as a loan agreement for purpose of imposing the DST, the same must have the following characteristics, to wit: (1) it must be in writing (2) one of the parties to the contract delivers to the other money or other consumable thing, and (3) such delivery is upon the condition that the same amount of the same kind and quality shall be paid. QUICK FACTS: USTHI executed an Omnibus Loan and Security Agreement with some banks. It paid DST on the credit line/facility. However, the credit line/facility, as contained in the OLSA, was never implemented and the lenders did not deliver the money. CTA held that refund is proper.

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agreement for purpose of imposing the DST, the same must have the following characteristics, to wit: (4) it must be in writing (5) one of the parties to the contract delivers to the other money or other consumable thing, and (6) such delivery is upon the condition that the same amount of the same kind and quality shall be paid. The OLSA lacks the second characteristic. The lenders therein did not deliver to respondent money or other consumable th ing , as such delivery has yet to be made subsequently, subject to certain requirements or conditions. In fact, there was no conveyance or delivery of the loaned amount. Neither can the OLSA be treated as falling under the category of "credit facilities ", because the same is not evidenced by any credit memo, advice or drawings. (6) MANILA ELECTRIC CO. V. CIR Zoe. (ORIGINAL IS WITH ME.)