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April 2011 Philippine Supreme Court

Decisions on Tax Law


Posted on May 31, 2011 by Carina C. Laforteza Posted in Philippines - Cases, Philippines -
Law, Tax Law
Here are selected April 2011 rulings of the Supreme Court of the Philippines on tax law:
National Internal Revenue Code; irrevocability of option to carry-over excess income tax
payments. When the taxpayer opted to carry over its unutilized creditable withholding tax from
1997 to taxable year 1998, the carry-over could no longer be converted into a claim for tax
refund because of the irrevocability rule provided in Section 76 of the National Internal Revenue
Code of 1997. Thereby, the taxpayer became barred from claiming the refund. Commissioner of
Internal Revenue vs. PL Management International Philippines, Inc., G.R. No. 160949, April 4,
2011.
National Internal Revenue Code; carrying-over excess income tax payments; prescription. In
view of its irrevocable choice, taxpayer remained entitled to utilize that amount of excess
creditable withholding tax as tax credit in succeeding taxable years until fully exhausted. In this
regard, prescription did not bar it from applying the amount as tax credit considering that there
was no prescriptive period for the carrying over of the amount as tax credit in subsequent taxable
years. Commissioner of Internal Revenue vs. PL Management International Philippines, Inc.,
G.R. No. 160949, April 4, 2011.
National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added
tax; printing of zero-rated. Taxpayer insists that Sections 113 and 237 of the National Internal
Revenue Code (NIRC) and Section 4.108-1 of Revenue Regulations (RR) No. 7-95 do not
provide that failure to indicate the word zero-rated in the invoices or receipts would result in
the outright invalidation of these invoices or receipts and the disallowance of a claim for tax
credit or refund. Sections 113 (A) and 237 of the NIRC provide for the invoicing requirements
for value-added tax (VAT) registered persons. Related to these provisions, Section 4.108-1 of
RR No. 7-95 enumerates the information which must appear on the face of the official receipts or
invoices for every sale of goods by VAT-registered persons. At the time taxpayer filed its claim
for credit of VAT input tax, RR No. 7-95 was already in effect and it required, among others,
that the word zero-rated be imprinted on the invoice covering zero-rated sales. It also provided
that only VAT-registered persons are required to print their tax identification number followed
by the word VAT in their invoices or receipts and this shall be considered as a VAT invoice.
All purchases covered by invoices other than a VAT invoice shall not give rise to any input
tax. The invoicing requirements for VAT-registered taxpayer as provided in the NIRC and
revenue regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT
invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods
or services attributed to zero-rated sales. A VAT invoice is an invoice that meets the
requirements of Section 4.108-1 of RR No. 7-95. Contrary to taxpayers claim, RR No. 7-95
expressly states that purchases covered by invoices other than a VAT invoice shall not give rise
to any input tax. Taxpayers invoice, lacking the word zero-rated, is not a VAT invoice,
and this cannot give rise to any input tax. The subsequent enactment of Republic Act No. 9337
[amending the NIRC] on 1 November 2005 elevating provisions of RR No. 7-95 into law merely
codified into law administrative regulations that already had the force and effect of law. Such
codification does not mean that prior to the codification the administrative regulations were not
enforceable. Microsoft Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No.
180173, April 6, 2011.
National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added
tax; rationale for printing of zero-rated. As the Court has ruled in several cases, the printing of
the word zero-rated is required to be placed on VAT invoices or receipts covering zero-rated
sales in order to be entitled to claim for tax credit or refund. In Panasonic vs. Commissioner of
Internal Revenue, the Court held that the appearance of the word zero-rated on face of invoices
covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases
when no VAT is actually paid. Absent such word, the government may be refunding taxes it did
not collect. Microsoft Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 180173,
April 6, 2011.