VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George

Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

VAT ZERO-RELATED TRANSACTIONS

1. AMERICAN EXPRESS v. CIR - Cristobal
FORMAT:
DOCTRINE:
FACTS:
ISSUE:
HELD:

2. CIR v. PLACER DOME TECH - Castillo

CIR VS. PLACER DOME TECHNICAL SERVICES (PHILS.), INC.,

G.R. No. 164365
DOCTRINE:
The law neither makes a qualification nor adds a condition in
determining the tax situs of a zero-rated service. Under this
criterion, the place where the service is rendered determines
the jurisdiction to impose the VAT.
FACTS:
Sometime in 1996, at the San Antonio Mines in Marinduque owned
by Marcopper Mining Corporation (Marcopper), mine tailings
from the Taipan Pit started to escape through the Makulapnit
Tunnel and Boac Rivers, causing the cessation of mining and
milling operations, and causing potential environmental damage
to the rivers and the immediate area. To contain the damage
and prevent the further spread of the tailing leak, Placer
Dome, Inc. (PDI), the owner of 39.9% of Marcopper, undertook
to perform the clean-up and rehabilitation of the Makalupnit
and Boac Rivers, through a subsidiary. To accomplish this, PDI
engaged Placer Dome Technical Services Limited (PDTSL), a nonresident foreign corporation with office in Canada, to carry
out the project. In turn, PDTSL engaged the services of Placer
Dome Technical Services (Philippines), Inc. (respondent), a
domestic corporation and registered Value-Added Tax (VAT)
entity, to implement the project in the Philippines.
PDTSL and respondent entered into an Implementation Agreement.
The Agreement further stipulated that PDTSL was to pay
respondent an amount of money, in U.S. funds, equal to all
Costs incurred for Implementation Services performed under the
Agreement,[5] as well as a fee agreed to one percent (1%) of
such Costs.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

Later, respondent amended its quarterly VAT returns. In the

amended returns, respondent declared a total input VAT payment
of P43,015,461.98 for the said quarters, and P42,837,933.60 as
its total excess input VAT for the same period. Then
respondent filed an administrative claim for the refund of its
reported total input VAT payments in relation to the project
it had contracted from PDTSL, amounting to P43,015,461.98. In
support of this claim for refund, respondent argued that the
revenues it derived from services rendered to PDTSL, pursuant
to the Agreement, qualified as zero-rated sales under Section
102(b)(2) of the then Tax Code, since it was paid in foreign
currency inwardly remitted to the Philippines.
CIR did not act on this claim. Thus, respondent filed a
Petition for Review with the Court of Tax Appeals (CTA),
praying for the refund of its total reported excess input VAT
totaling P42,837,933.60.
ISSUE:
Whether respondent Placer is entitled to the refund as
the revenues qualified as zero rated sales.
HELD: YES.
Section 102(b) Transactions Subject to Zero Percent (0%) RateThe following services performed in the Philippines by VATregistered persons shall be subject to zero percent (0%) rate:
(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);(2) Services other than those mentioned in the
preceding subparagraph, the consideration for which is paid
for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the [BSP].
It is Section 102(b)(2) which finds special relevance to this
case. The VAT is a TAX on consumption expressed as a
percentage of the value added to goods or services purchased
by the producer or taxpayer. As an indirect tax on services,
its main object is the transaction itself or, more concretely,
the performance of all kinds of services conducted in the
course of trade or business in the Philippines. These services

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

must be regularly conducted in this country; undertaken in

pursuit of a commercial or an economic activity; for a
valuable consideration; and not exempt under the Tax Code,
other special laws, or any international agreement. Yet even
as services may be subject to VAT, our tax laws extend the
benefit of zero-rating the VAT due on certain services. Under
the last paragraph of Scetion 102 (b), services performed by
VAT-registered persons in the Philippines, when paid in
acceptable foreign currency and accounted for in accordance
with the rules and regulations of the BSP, are ZERO-RATED.
Petitioner invokes the destination principle, citing that
respondents
while
rendered
to
a
non-resident
foreign
corporation, are not destined to be consumed abroad. Hence,
the onus of taxation of the revenue arising therefrom, for VAT
purposes, is also within the Philippines. The Court in
American Express debunked this argument. As a general rule,
the VAT system uses the destination principle as a basis for
the jurisdictional reach of the tax. Goods and services are
taxed only in the country where they are consumed. Thus,
exports are zero-rated, while imports are taxed. Thus, exports
are zero-rated while imports are taxed.
Confusion in zero rating arises because petitioner equates the
performance of a particular type of service with the
consumption of its output abroad. In the present case, the
facilitation of the collection of receivables is different
from the utilization or consumption of the outcome of such
service. While the facilitation is done in the Philippines,
the consumption is not. Respondent renders assistance to its
foreign clients the ROCs outside the country by receiving the
bills of service establishments located here in the country
and forwarding them to the ROCs abroad. The consumption
contemplated by law, contrary to petitioner's administrative
interpretation, does not imply that the service be done abroad
in order to be zero-rated.
Consumption is "the use of a thing in a way that thereby
exhausts it." Applied to services, the term means the
performance or "successful completion of a contractual duty,
usually resulting in the performer's release from any past or
future liability x x x" The services rendered by respondent
are performed or successfully completed upon its sending to
its foreign client the drafts and bills it has gathered from

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

service establishments here. Its services, having been

performed in the Philippines, are therefore also consumed in
the Philippines.
Unlike goods, services cannot be physically used in or bound
for a specific place when their destination is determined.
Instead, there can only be a "predetermined end of a course"
when determining the service "location or position x x x for
legal purposes." Respondent's facilitation service has no
physical existence, yet takes place upon rendition, and
therefore upon consumption, in the Philippines. Under the
destination principle, as petitioner asserts, such service is
subject to VAT at the rate of 10 percent.
However, the law clearly provides for an exception to the
destination principle; that is, for a zero percent VAT rate
for services that are performed in the Philippines, "paid for
in acceptable foreign currency and accounted for in accordance
with the rules and regulations of the [BSP]." Thus, for the
supply of service to be zero-rated as an exception, the law
merely requires that first, the service be performed in the
Philippines; second, the service fall under any of the
categories in Section 102(b) of the Tax Code; and, third, it
be paid in acceptable foreign currency accounted for in
accordance with BSP rules and regulations.
The law neither makes a qualification nor adds a condition in
determining the tax situs of a zero-rated service. Under this
criterion, the place where the service is rendered determines
the jurisdiction to impose the VAT. Performed in the
Philippines, such service is necessarily subject to its
jurisdiction, for the State necessarily has to have "a
substantial connection" to it, in order to enforce a zero
rate. The place of payment is immaterial; much less is the
place where the output of the service will be further or
ultimately used.

3. CIR v. BURMEISTER - Arid

4. ACCENTURE INC v. CIR - Alba
DOCTRINE: FOR VAT ZERO-RATING OF SERVICES RENDERED TO NON-RESIDENT
FOREIGN CORPORATION UNDER SEC. 108 (B)(2) OF THE NIRC, IT IS NOT ENOUGH

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

THAT THE RECIPIENT OF SERVICES BE PROVEN TO BE A FOREIGN CORPORATION,

IT MUST BE PROVEN TO BE A NON-RESIDENT FOREIGN CORPORATION.
FACTS:
Accenture filed with the Department of FInance an administrative claim for the refund or the
issuance of a Tax Credit Certificate (TCC). The Dept. of Finance did not act on the claim of
accenture. Thus, Accenture filed a Petition for Review with the CTA praying for the issuance
of a TCC in its favor in the amount of P35,178,844.21. Accenture presented as evidence
Official Receipts, Intercompany Payment Requests,Billing Statements, Memo InvoicesReceivable, Memo-Invoices Payable, and Bank Statements. The CIR 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.
ISSUE: Is Accenture entitled to a refund or an issuance of a TCC in the amount of
P35,178,844.21?
HELD:
NO. The Court ruled that to come within the purview of Section 108(B)(2), it is not enough
that the recipient of the service be proved to be a foreign corporation; rather, it must be
specifically proven to be a non-resident foreign corporation. The documents presented by
Accenture merely substantiated the existence of sales, receipt of foreign currency payments,
and inward remittance of the proceeds of such sales duly accounted for in accordance with
BSP rules. All of these were devoid of any evidence that the clients were doing business
outside the Philippines.
5. CIR v. SEKISUI - Bustamante
6.
7. CIR v. SEAGATE - jaramillo

8. CIR v. TOSHIBA - torres

Doctrine: The present rule is that an ECOZONE enterprise is a VAT-exempt entity. Sales of goods, properties and services by
persons to Customs Territory to ECOZONE enterprise shall be subject to VAT at zero percent (0%).
FACTS:
Respondent Toshiba was organized and established as a domestic corporation, duly-registered with SEC with the primary
purpose of engaging in the business of manufacturing and exporting of electrical and mechanical machinery and equipment.
Toshiba also registered with PEZA as an ECOZONE Export Enterprise and with the BIR as a VAT taxpayer and a withholding
agent. It filed its VAT returns reporting input VAT for a total of 18M, alleging it is from purchases of capital goods and services
remaining unutilized since it has not yet engaged in any business or transaction for which it may be liable for output VAT. It filed
with
the
Department
of
Finance
applications
for
tax
credit/refund
of
its
unutilized
input
VAT.
ISSUE: whether Toshiba is entitled to the tax credit/refund of its input VAT on its purchases of capital goods and services.
RULING:

Yes.

Petitioner CIR argues: Although respondent Toshiba may be a VAT-registered taxpayer, it is not engaged in a VAT-taxable
business. According to CIR, Toshiba is actually VAT-exempt, invoking the following provision of the Tax Code of 1977, as
amended

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
SEC.
103.
Exempt
transactions.
The
following
shall
be
exempt
from
value-added
tax.
(q) Transactions which are exempt under special laws, except those granted under Presidential Decree No. 66, 529, 972, 1491,
and 1590, and non-electric cooperatives under Republic Act No. 6938, or international agreements to which the Philippines is a
signatory.
By virtue of RA No. 7916, otherwise known as The Special Economic Zone Act of 1995, Toshiba is VAT exempt since it is only
paying
the
5%
preferential
tax
rate,
in
lieu
of
all
taxes.
The Court disagreed with this contention because Sec 103 (q) does not apply to Toshiba. THe very same section provides that
those
falling
under
PD
66
are
not
VAT exempt.
PD
66
is
the
precursor
of
RA 7916.
But Toshiba is still VAT exempt under Sec 8 of RA 7916, (not Sec 24 which imposes 5% preferential tax rate) which established
the
fiction
that
ECOZONES
are
foreign
territory.
It is important to note herein that Toshiba is located within an ECOZONE. An ECOZONE or a Special Economic Zone has been
described
as
. . . [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist,
recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by
Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing
zones
(EPZs),
free
trade
zones
and
tourist/recreational
centers.
The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs
Territory. Section 8 of Rep. Act No. 7916 mandates that the PEZA shall manage and operate the ECOZONES as a separate
customs territory;
thus, creating the fiction that the ECOZONE is a foreign territory. As a result,
sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE are treated as an exportation from the
Customs
Territory.
sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory are treated as an importation into the
Customs
Territory.
The Philippine VAT system adheres to the Cross Border Doctrine (which means no VAT shall be imposed to form part of the
cost of goods destined for consumption outside of the territorial border of the taxing authority). Hence:
export
of
goods
and
services
free
of
VAT;
import
of
goods
and
services

subject
to
10%
VAT
(now
12%)
Applying

the

Cross

Border

Doctrine,

BIR

issued

RMC

No.

74-99,

on

15

October

1999.

SECTION 3. Tax Treatment Of Sales Made By a VAT Registered Supplier from The Customs Territory, To a PEZA Registered
Enterprise.
If the Buyer is a PEZA registered enterprise which is subject to the 5% special tax regime, in lieu of all taxes, except real
property
tax,
pursuant
to
R.A.
No.
7916,
as
amended:
Sale of goods (i.e., merchandise). This shall be treated as indirect export hence, considered subject to zero percent (0%) VAT
Sale of service. This shall be treated subject to zero percent (0%) VAT under the cross border doctrine of the VAT System
If Buyer is a PEZA registered enterprise which is not embraced by the 5% special tax regime, hence, subject to taxes under the
NIRC, e.g., Service Establishments which are subject to taxes under the NIRC rather than the 5% special tax regime:
Sale of goods (i.e., merchandise). This shall be treated as indirect export hence, considered subject to zero percent (0%) VAT,
pursuant to Sec. 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916 in relation to ART. 77(2) of the Omnibus Investments
Code.
Sale of Service. This shall be treated subject to zero percent (0%) VAT under the cross border doctrine of the VAT System,
pursuant
to
VAT
Ruling
No.
032-98
dated
Nov.
5,
1998.
In the final analysis, any sale of goods, property or services made by a VAT registered supplier from the Customs Territory to
any registered enterprise operating in the ecozone, regardless of the class or type of the latters PEZA registration, is actually
qualified and thus legally entitled to the zero percent (0%) VAT. Accordingly, all sales of goods or property to such enterprise
made by a VAT registered supplier from the Customs Territory shall be treated subject to 0% VAT, pursuant to Sec. 106(A)(2)(a)
(5), NIRC, in relation to ART. 77(2) of the Omnibus Investments Code, while all sales of services to the said enterprises, made
by VAT registered suppliers from the Customs Territory, shall be treated effectively subject to the 0% VAT, pursuant to Section
108(B)(3), NIRC, in relation to the provisions of R.A. No. 7916 and the Cross Border Doctrine of the VAT system.
Sales of goods, properties and services by a VAT-registered supplier from the Customs Territory to an ECOZONE enterprise
shall be treated as export sales. If such sales are made by a VAT-registered supplier, they shall be subject to VAT at zero
percent (0%). In zero-rated transactions, the VAT-registered supplier shall not pass on any output VAT to the ECOZONE
enterprise, and at the same time, shall be entitled to claim tax credit/refund of its input VAT attributable to such sales. Zero-

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
rating of export sales primarily intends to benefit the exporter (i.e., the supplier from the Customs Territory), who is directly and
legally liable for the VAT, making it internationally competitive by allowing it to credit/refund the input VAT attributable to its
export
sales.
But even if Toshiba is a VAT exempt entity that could not have engaged in VAT-taxable business, the Court still believes that it is
entitled
to
credit/refund
of
its
input
VAT.
CIR validly raised the question of whether any output VAT was actually passed on to respondent Toshiba which it could claim as
input VAT subject to credit/refund. If the VAT-registered supplier from the Customs Territory did not charge any output VAT to
respondent Toshiba believing that it is exempt from VAT or it is subject to zero-rated VAT, then respondent Toshiba did not pay
any input VAT on its purchase of capital goods and it could not claim any tax credit/refund thereof.
However, the rule on zero-based transactions, as imposed by RMC 74-99 only took effect on Oct. 15, 1999. Prior to the said
date, the old rule is that a PEZA-registered enterprise has the option to choose between two sets of fiscal incentives:
5% preferential tax rate on its gross income under RA 7916, as amended (the 5% tax on its gross income is in lieu of all taxes)
Income tax holiday provided under EO 226 (Omnibus Investment Code of 1987) income tax holiday in 6 or 4 year periods but
not
exempt
from
other
taxes,
such
as
VAT
In the case of Toshiba, the sale of capital goods by suppliers to Toshiba took place before the effectivity of RMC 74-99, when
the old rule was implemented by the BIR. Toshiba availed the income tax holiday and was deemed subject to 10% VAT. It was
very likely therefore that suppliers from the Custom territory had passed on output VAT to Toshiba, and the latter incurred input
VAT.

9. CIR v. CONTEX CORP - salto

INPUT VAT
10. ABAKADA GURO v. ERMITA (Sept. 1, 2005) - Samson
11. ABAKADA GURO v. ERMITA (Oct. 18, 2005) - Rosario
For resolution are different motions for reconsideration of the Courts Decision dated September 1, 2005 upholding the
constitutionality of Republic Act No. 9337 or the VAT Reform Act:
Grounds:
1.
Petitioners Escudero, et al., insist that the bicameral conference committee should not even have acted on the no
pass-on provisions since there is no disagreement between House Bill Nos. 3705 and 3555 on the one hand, and
Senate Bill No. 1950 on the other
SC: Such argument is flawed. Note that the rules of both houses of Congress provide that a conference committee shall settle
the "differences" in the respective bills of each house. Verily, the fact that a no pass-on provision is present in one version but
absent in the other, and one version intends two industries, i.e., power generation companies and petroleum sellers, to bear the
burden of the tax, while the other version intended only the industry of power generation, transmission and distribution to be
saddled with such burden, clearly shows that there are indeed differences between the bills coming from each house, which
differences should be acted upon by the bicameral conference committee as mandated by the rules of both houses of
Congress.
Moreover, the deletion of the no pass-on provision made the present VAT law more in consonance with the very nature of VAT
which, as stated in the Decision promulgated on September 1, 2005, is a tax on spending or consumption, thus, the burden
thereof is ultimately borne by the end-consumer.
2.
Escudero, et al., then claim that the Rules of the House of Representatives changed since the time of Tolentino vs.
Secretary of Finance to the effect that the House panel must report back to the House if there are substantial
differences in the House and Senate bills.
SC: Mere failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative body) when the
requisite number of members have agreed to a particular measure.
3. Escudero, et. al., also contend that RA 9337 violates the constitutional imperative on exclusive origination of revenue
bills under Section 24 of Article VI of the Constitution when the Senate introduced amendments not connected with
VAT.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
SC: The Court is not persuaded. Section 24 speaks of origination of certain bills from the House of Representatives which has
been interpreted in the Tolentino case as follows:
To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the
House of Representatives. To insist that a revenue statute must substantially be the same as the House bill would be to deny
the Senate's power not only to "concur with amendments" but also to " propose amendments." Indeed, what the Constitution
simply means is that the initiative for filing revenue, tariff, or tax bills, bills authorizing an increase of the public debt, private bills
and bills of local application must come from the House of Representatives on the theory that, elected as they are from the
districts, the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand,
the senators, who are elected at large, are expected to approach the same problems from the national perspective.
4.

Escudero, et al., also reiterate that R.A. No. 9337s stand- by authority to the Executive to increase the VAT rate,
especially on account of the recommendatory power granted to the Secretary of Finance, constitutes undue
delegation of legislative power. as policy making.
SC: There is no merit in this contention. The Court reiterates that in making his recommendation to the President on the
existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her
subordinate. He is acting as the agent of the legislative department, to determine and declare the event upon which its
expressed will is to take effect. Congress granted the Secretary of Finance the authority to ascertain the existence of a fact,
namely, whether by December 31, 2005, the value-added tax collection as a percentage of GDP of the previous year exceeds
two and four-fifth percent (2 4/5%) or the national government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1%). Congress does not abdicate its functions or unduly delegate power when it describes what job
must be done, who must do it, and what is the scope of his authority.
5.
Petitioners Association of Pilipinas Shell Dealers, Inc. reiterated their arguments that even if the right to credit the
input VAT is merely a statutory privilege, it has already evolved into a vested right that the State cannot remove.
SC: As the Court stated in its Decision, the right to credit the input tax is a mere creation of law. Prior to the enactment of multistage sales taxation, the sales taxes paid at every level of distribution are not recoverable from the taxes payable. With the
advent of Executive Order No. 273 imposing a 10% multi-stage tax on all sales, it was only then that the crediting of the input
tax paid on purchase or importation of goods and services by VAT-registered persons against the output tax was established.
This continued with the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of 1997 (R.A. No. 8424). The right to
credit input tax as against the output tax is clearly a privilege created by law, a privilege that also the law can limit. It should be
stressed that a person has no vested right in statutory privileges.
Rights are considered vested when the right to enjoyment is a present interest, absolute, unconditional, and perfect or fixed and
irrefutable. As adeptly stated by Associate Justice Minita V. Chico-Nazario in her Concurring Opinion
It should be remembered that prior to RA 9337, the petroleum dealers input VAT credits were inexistent they were
unrecognized and disallowed by law. The petroleum dealers had no such property called input VAT credits. It is only rational,
therefore, that they cannot acquire vested rights to the use of such input VAT credits when they were never entitled to such
credits in the first place, at least, not until RA 9337. Petroleum dealers right to use their input VAT as credit against their output
VAT unlimitedly has not vested, being a mere expectancy of a future benefit and being contingent on the continuance of Section
110 of the National Internal Revenue Code of 1997, prior to its amendment by Rep. Act No. 9337.
DENIED WITH FINALITY. The temporary restraining order issued by the Court is LIFTED.

12. CIR v. ACESITE - Radovan

Facts: (Super Short Case lang)
Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along United Nations Avenue in
Manila. It leases 6,768.53 square meters of the hotels premises to the Philippine Amusement and Gaming
Corporation [hereafter, PAGCOR] for casino operations. It also caters food and beverages to PAGCORs casino
patrons through the hotels restaurant outlets. Acesite incurred VAT amounting to P30,152,892.02 from its
rental income and sale of food and beverages to PAGCOR during said period. Acesite tried to shift the said
taxes to PAGCOR by incorporating it in the amount assessed to PAGCOR but the latter refused to pay the taxes
on account of its tax exempt status. Acesite paid the VAT. However, Acesite belatedly arrived at the conclusion
that its transaction with PAGCOR was subject to zero rate as it was rendered to a tax-exempt entity. Acesite
now files claim for refund
CTA ruling:
Acesite is subject to zero percent tax pursuant to Section 102 (b)(3) [now 106(A)(C)] insofar as its
gross income from rentals and sales to PAGCOR, a tax exempt entity by virtue of a special law.
Accordingly, the amounts of P21,413,026.78 and P8,739,865.24, representing the 10% EVAT on its
sales of food and services and gross rentals, respectively from PAGCOR shall, as a matter of course,
be refunded to the petitioner for having been inadvertently remitted to the respondent.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
ISSUES:
Whether PAGCORs tax exemption privilege includes the indirect tax of VAT to entitle Acesite to zero percent
(0%) VAT rate; --- YES
Whether the zero percent (0%) VAT rate under then Section 102 (b)(3) of the Tax Code (now Section 108 (B)
(3) of the Tax Code of 1997) legally applies to Acesite. --- YES
Held:
Petition DENIED.
Decision of lower court AFFIRMED
Ratio:PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the payment
of taxes. Section 13 of P.D. 1869 pertinently provides:
Sec. 13. Exemptions.
(2) Income and other taxes. (a) Franchise Holder: No tax of any kind or form, income or otherwise, as
well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and
collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in
any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross
revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due
and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or
assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or
national government authority.
(b) Others: The exemptions herein granted for earnings derived from the operations conducted
under the franchise specifically from the payment of any tax, income or otherwise, as well as any
form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s),
association(s), agency(ies), or individual(s) with whom the Corporation or operator has any
contractual relationship in connection with the operations of the casino(s) authorized to be
conducted under this Franchise and to those receiving compensation or other remuneration from the
Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the
Corporation or operator.
A close scrutiny of the above provisos clearly gives PAGCOR a blanket exemption to taxes with no distinction on
whether the taxes are direct or indirect. We are one with the CA ruling that PAGCOR is also exempt from
indirect taxes, like VAT,
The manner of charging VAT does not make PAGCOR liable to said tax
It is true that VAT can either be incorporated in the value of the goods, properties, or services sold or leased, in
which case it is computed as 1/11 of such value, or charged as an additional 10% to the value. Verily, the
seller or lesser has the option to follow either way in charging its client and customer. In the instant case,
Acesite followed the latter method, that is, charging an additional 10% of the gross sales and rentals. Be that
as it may, the use of either method, does not denigrate the fact that PAGCOR is exempt from indirect tax, like
VAT.
VAT EXEMPTION EXTENDS TO ACESITE
Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by Acesite, the latter is not liable for
the payment of it as it is exempt in this particular transaction by operation of law to pay the indirect tax. Such
exemption falls within the former Section 102 (b) (3) of the 1977 Tax Code, as amended (now, Sec. 108[b] [3]
of R.A. 8424), which provides:
Section 102. Value-added tax on sale of services (a) Rate and base of tax There shall be levied, assessed
and collected, a value-added tax equivalent to 10% of gross receipts derived by any person engaged in the
sale of services x x x; Provided, that the following services performed in the Philippines by VAT-registered
persons shall be subject to 0%.
3) Services rendered to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero
(0%) rate.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the extension of such
exemption to entities or individuals dealing with PAGCOR in casino operations are best elucidated from the
1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons, Inc., where the absolute tax
exemption of the World Health Organization (WHO) upon an international agreement was upheld. We held in
said case that the exemption of contractee WHO should be implemented to mean that the entity or person
exempt is the contractor itself who constructed the building owned by contractee WHO, and such does not
violate the rule that tax exemptions are personal because the manifest intention of the agreement is to
exempt the contractor so that no contractors tax may be shifted to the contractee WHO. Thus, the
proviso in P.D. 1869, extending the exemption to entities or individuals dealing with PAGCOR in casino
operations, is clearly to proscribe any indirect tax, like VAT, that may be shifted to PAGCOR.

13. CIR v. SONY - Pangilinan

Doctrine
Thus, there must be a sale, barter or exchange of goods or properties before any VAT may be levied.
Facts
The CIR issued Letter of Authority No. 000019734 authorizing certain revenue officers to examine Sony's books
of accounts and other accounting records regarding revenue taxes for "the period 1997 and unverified prior
years."
A preliminary assessment for 1997 deficiency taxes and penalties was issued by the CIR which Sony protested.
Sony filed a petition for review before the CTA. The CTA-First Division disallowed the deficiency VAT assessment
because the subsidized advertising expense paid by Sony which was duly covered by a VAT invoice resulted in
an input VAT credit.
The CIR filed before the Supreme Court a petition for review alleging that Sony should be liable for deficiency
VAT.
The CIR alleges that Sony's advertising expense could not be considered as an input VAT credit because the
same was eventually reimbursed by Sony International Singapore (SIS).
The CIR further argues that Sony itself admitted that the reimbursement from SIS was income and, thus, taxable.
In support of this, the CIR cited a portion of Sony's protest filed before it:
The fact that due to adverse economic conditions, Sony-Singapore Has granted to our client a
subsidy equivalent to the latter's advertising expenses will not affect the validity of the input taxes
from such expenses. Thus, at the most, this is an additional income of our client subject to
income tax. We submit further that our client is not subject to VAT on the subsidy income as this
was not derived from the sale of goods or services.
Issue
WON Sony should be liable for deficiency Value Added Tax.
Held
No. Insofar as the abovementioned subsidy may be considered as income and, therefore, subject to income tax,
the Court agrees. However, the Court does not agree that the same subsidy should be subject to the 10% VAT.
To begin with, the said subsidy termed by the CIR as reimbursement was not even exclusively earmarked for
Sony's advertising expense for it was but an assistance or aid in view of Sony's dire or adverse economic
conditions, and was only "equivalent to the latter's (Sony's) advertising expenses."
Section 106 of the Tax Code explains when VAT may be imposed or exacted. Thus:
SEC. 106. Value-added Tax on Sale of Goods or Properties.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

(A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the gross
selling price or gross value in money of the goods or properties sold, bartered or exchanged,
such tax to be paid by the seller or transferor.
Thus, there must be a sale, barter or exchange of goods or properties before any VAT may be levied. Certainly,
there was no such sale, barter or exchange in the subsidy given by SIS to Sony. It was but a dole out by SIS and
not in payment for goods or properties sold, bartered or exchanged by Sony.
The Court held that services rendered for a fee even on reimbursement-on-cost basis only and without realizing
profit are subject to VAT, which is inapplicable to this case. Sony did not render any service to SIS at all. The
services rendered by the advertising companies, paid for by Sony using SIS dole-out, were for Sony and not SIS.
SIS just gave assistance to Sony in the amount equivalent to the latter's advertising expense but never received
any goods, properties or service from Sony.

WITHHOLDING, PRESUMPTIVE, TRANSITIONAL INPUT VAT

14. FORT BONIFACIO v. CIR - Morales
15. LVM v. SANCHEZ - Marasigan
VAT REFUNDS
16. CIR v. MIRANT PAGBILAO - Gaite
Doctrines:
1. Failure to secure an approved application for zero-rating makes sales to
tax-exempt entities subject to 12% VAT.
2. When a zero-rated VAT taxpayer pays its input VAT a year after the pertinent
transaction, said taxpayer only has a year to file a claim for refund or tax credit of
the unutilized creditable input VAT. The reckoning frame would always be the
end of the quarter when the pertinent sales or transaction was made, regardless
when the input VAT was paid.
Facts:
CIR filed a Petition for Review on Certiorari under Rule 45 assailing and
seeking to set aside the Decision dated December 22, 2005 of the CA
(Thus the present case)
MPC, formerly Southern Energy Quezon, Inc., and also formerly known as Hopewell (Phil.) Corporation, is a
domestic firm engaged in the generation of power which it sells to the National Power Corporation (NPC). Input VAT
Refund stems from amount paid for the construction of the electrical and mechanical equipment portion of its
Pagbilao, Quezon plant, which appears to have been undertaken from 1993 to 1996, MPC secured the services of
Mitsubishi Corporation (Mitsubishi) of Japan.
Under its charter, NPC is exempt from all taxes both direct and indirect as ruled in Maceda v. Macaraig.
MPCs CONTENTION:
MPC, believes that its sale of power generation services to NPC is, pursuant to Sec. 108(B)(3) of the Tax Code, zerorated for VAT purposes. It therefore filed on December 1, 1997 with Revenue District Office (RDO) No. 60 in Lucena
City an Application for Effective Zero Rating. The application covered the construction and operation of its Pagbilao
power station under a Build, Operate, and Transfer scheme.
WHAT MADE THE ISSUE:

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
Consistent with its belief to be zero-rated, MPC opted not to pay the VAT component of the progress billings from
Mitsubishi for the period covering April 1993 to September 1996for the E & M Equipment Erection Portion of MPCs
contract with Mitsubishi. This prompted Mitsubishi to advance the VAT component as this serves as its output VAT
which is essential for the determination of its VAT payment. Apparently, it was only on April 14, 1998 that MPC paid
Mitsubishi the VAT component for the progress billings from April 1993 to September 1996, and for which Mitsubishi
issued Official Receipt (OR) No. 0189 in the aggregate amount of PhP 135,993,570.
MPC, while awaiting approval of its application, MPC filed its quarterly VAT return for the second quarter of 1998
where it reflected an input VAT of PhP 148,003,047.62, which included PhP 135,993,570 supported by OR No. 0189.
Pursuant to the procedure prescribed in Revenue Regulations No. 7-95, MPC filed on December 20, 1999 an
administrative claim for refund of unutilized input VAT in the amount of PhP 148,003,047.62.
WHAT HAPPENED NEXT:
BIR failed to act on MPCs claim for refund and the case was elevated to CTA
CTA partially granted input VAT Refund for MPC disallowing items
not substantiated with receipts.
CTA commissioned SGV in verifying and analyzing documents and figures and entries to determine whether MPC
has unapplied or unutilized creditable input VAT for the 2nd quarter of 1998 attributable to zero-rated sales to NPC, if
creditable input VAT of MPC for said period is substantiated and if unutilized creditable input VAT for said quarter, if
any, was applied against any of the VAT output tax of MPC in the subsequent quarter.
CA rendered its assailed decision modifying that of the CTA decision by granting most of MPCs claims for tax
refund or credit. CA ordered to refund or issue a tax credit certificate in favor of petitioner Mirant Pagbilao Corporation
its unutilized input VAT payments directly attributable to its effectively zero-rated sales for the second quarter of 1998
in the total amount of P146,760,509.48.
CA agreed on:
(1) a zero-rating for VAT purposes for its sales and services to tax-exempt NPC; and
(2) a refund or tax credit for its unutilized input VAT for the second quarter of 1998, with only a disagreement on
evidentiary value of OR No. 0189.
Issue:
1. WON MPC is entitled to the refund of its input VAT payments made from 1993 to 1996 amounting to [PhP]
146,760,509.48?
Held:
PARTLY. THERE ARE ITEMS WHICH HAVE BEEN PRESCRIBED.
Verily, a claim for tax refund may be based on a statute granting tax exemption, or, as Commissioner of Internal
Revenue v. Fortune Tobacco Corporation would have it, the result of legislative grace. In such case, the claim is to be
construed strictissimi juris against the taxpayer, meaning that the claim cannot be made to rest on vague inference.
Where the rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes of the nature
of an exemption, the claimant must show that he clearly falls under the exempting statute. On the other hand, a tax
refund may be, as usually it is, predicated on tax refund provisions allowing a refund of erroneous or excess payment
of tax. The return of what was erroneously paid is founded on the principle of solutio indebiti, a basic postulate that
no one should unjustly enrich himself at the expense of another. The caveat against unjust enrichment covers the
government. And as decisional law teaches, a claim for tax refund proper, as here, necessitates only the
preponderance-of-evidence threshold like in any ordinary civil case.
SC notes that the BIR Commissioner, while making reference to the figure PhP 146,760,509.48, joins the CA and
the CTA on their disposition on the propriety of the refund of or the issuance of a TCC for the amount of PhP
10,766,939.48. In fine, the BIR Commissioner trains his sight and focuses his arguments on the core issue of
whether or not MPC is entitled to a refund for PhP 135,993,570 (PhP 146,760,509.48 - PhP 10,766,939.48 = PhP
135,993,570) it allegedly paid as creditable input VAT for services and goods purchased from Mitsubishi during the
1993 to 1996 stretch.
Belated payment by MPC of its obligation for creditable input VAT it is no less found by the CTA, citing the SGVs
report, the payments covered by OR No. 0189 were for goods and service purchases made by MPC through the
progress billings from Mitsubishi for the period covering April 1993 to September 1996for the E & M Equipment
Erection Portion of MPCs contract with Mitsubishi. In net effect, MPC did not, for the VATable MPC-Mitsubishi 1993
to 1996 transactions adverted to, immediately pay the corresponding input VAT. OR No. 0189 issued on April 14,
1998 clearly reflects the belated payment of input VAT corresponding to the payment of the progress billings from
Mitsubishi for the period covering April 7, 1993 to September 6, 1996. SGV found that OR No. 0189 in the amount of
PhP 135,993,570 (USD 5,190,000) was duly supported by bank statement evidencing payment to Mitsubishi (Japan).
Undoubtedly, OR No. 0189 proves payment by MPC of its creditable input VAT relative to its purchases from
Mitsubishi.
OR No. 0189 by itself sufficiently proves payment of VAT (however it has prescribed its status for refund)
Section 110. Tax Credits.
A. Creditable Input Tax.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the
following transactions shall be creditable against the output tax:
(a) Purchase or importation of goods:
xxx
(b) Purchase of services on which a value-added tax has been actually
paid.
xxx
The law considers a duly-executed VAT invoice or OR referred to in the above provision as sufficient evidence to
support a claim for input tax credit. And any doubt as to what OR No. 0189 was for or tended to prove should
reasonably be put to rest by the SGV report on which the CTA notably placed much reliance. The SGV report stated
that [OR] No. 0189 dated April 14, 1998 is for the payment of the VAT on the progress billings from Mitsubishi Japan
for the period April 7, 1993 to September 6, 1996 for the E & M Equipment Erection Portion of the
Companys contract with Mitsubishi Corporation (Japan).
Therefore, VAT is presumably paid on April 14, 1998 for OR 0189 when MPC paid to Mitsubishi
The claim for refund or tax credit for the creditable input VAT payment made by MPC embodied in
OR No. 0189 was filed beyond the period provided by law for such claim. Sec. 112(A) of the NIRC
pertinently reads:
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT registered person, whose sales are zerorated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax
due or paid attributable to such sales, except transitional input tax, to the extent that such input tax
has not been applied against output tax: x x x.
Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said
taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT.
The reckoning frame would always be the end of the quarter when the pertinent sales or transaction
was made, regardless when the input VAT was paid. Be that as it may, and given that the last
creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third
quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or
tax credit for said quarter prescribed two years after September 30, 1996 or, to be precise, on
September 30, 1998. Consequently, MPCs claim for refund or tax credit filed on December 10, 1999
had already prescribed. (See Sec. 204(C) and 229 which SC decided will not apply for MPC for
prescription issue)
MPCs creditable input VAT not erroneously paid. MPCs sale of electricity to NPC is not zero-rated for
its failure to secure an approved application for zero-rating.
Under Sec. 105 of the NIRC, creditable input VAT is an indirect tax which can be shifted or passed on
to the buyer, transferee, or lessee of the goods, properties, or services of the taxpayer. The fact that
the subsequent sale or transaction involves a wholly-tax exempt client, resulting in a zero-rated or
effectively zero-rated transaction, does not, standing alone, deprive the taxpayer of its right to a
refund for any unutilized creditable input VAT, albeit the erroneous, illegal, or wrongful payment angle
does not enter the equation.
In Commissioner of Internal Revenue v. Seagate Technology (Philippines), the Court explained the
nature of the VAT and the entitlement to tax refund or credit of a zero-rated taxpayer:
Viewed broadly, the VAT is a uniform tax x x x levied on every importation of goods, whether or not in
the course of trade or business, or imposed on each sale, barter, exchange or lease of goods or
properties or on each rendition of services in the course of trade or business as they pass along the
production and distribution chain, the tax being limited only to the value added to such goods,
properties or services by the seller, transferor or lessor. It is an indirect tax that may be shifted or
passed on to the buyer, transferee or lessee of the goods, properties or services. As such, it should be
understood not in the context of the person or entity that is primarily, directly and legally liable for its
payment, but in terms of its nature as a tax on consumption. In either case, though, the same
conclusion is arrived at.
The Court wishes to remind the BIR and other tax agencies of their duty to treat claims for refunds
and tax credits with proper attention and urgency. Had RDO No. 60 and, later, the BIR proper acted,
instead of sitting, on MPCs underlying application for effective zero rating, the matter of addressing
MPCs right, or lack of it, to tax credit or refund could have plausibly been addressed at their level and
perchance freed the taxpayer and the government from the rigors of a tedious litigation. The all too
familiar complaint is that the government acts with dispatch when it comes to tax collection, but pays
little, if any, attention to tax claims for refund or exemption. It is high time our tax collectors prove
the cynics wrong.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated December 22, 2005 and the
Resolution dated March 31, 2006 of the CA in CA-G.R. SP No. 78280 are AFFIRMED with the

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres
MODIFICATION that the claim of respondent MPC for tax refund or credit to the extent of PhP
135,993,570, representing its input VAT payments for service purchases from Mitsubishi Corporation
of Japan for the construction of a portion of its Pagbilao, Quezon power station, is DENIED on the
ground that the claim had prescribed. Accordingly, petitioner Commissioner of Internal Revenue is
ordered to refund or, in the alternative, issue a tax credit certificate in favor of MPC, its unutilized
input VAT payments directly attributable to its effectively zero-rated sales for the second quarter in
the total amount of PhP 10,766,939.48.
17. CIR v. AICHI - Espiritu

DOCTRINE: In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within
thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred
twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.

Facts: Respondent Aichi Forging Company of Asia, Inc, is engaged in the manufacturing, producing, and
processing of steel and its by-products. It is registered with the Bureau of Internal Revenue (BIR) as a ValueAdded Tax (VAT) entity and its products, "close impression die steel forgings" and "tool and dies," are registered
with the Board of Investments (BOI) as a pioneer status.
Respondent filed a claim for refund/credit of input VAT for the period July 1, 2002 to September 30, 2002 in the
total 2 with the CIR, through the Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center.
Petitioner, maintains that respondents administrative and judicial claims for tax refund/credit were filed in
violation of Sections 112(A) and 229 of the NIRC. He posits that pursuant to Article 13 of the Civil Code, since the
year 2004 was a leap year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the
two-year period, which expired on September 29, 2004. Respondent claims that it is entitled to a refund/credit of
its unutilized input VAT for the period July 1, 2002 to September 30, 2002 as a matter of right because it has
substantially complied with all the requirements provided by law
ISSUE: Whether respondents judicial and administrative claims for tax refund/credit were filed within the twoyear prescriptive period provided in Sections 112(A) and 229 of the NIRC.
HELD:
1. Administrative claim was TIMELY filed.
Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs
the computation of legal periods, the two-year prescriptive period (reckoned from the time respondent filed its
final adjusted return on April 14, 1998) consisted of 24 calendar months. Respondent's petition (filed on April 14,
2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return.
Hence, it was filed within the reglementary period.
Applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July 1,
2002 to September 30, 2002 expired on September 30, 2004. Hence, respondents administrative claim was
timely filed.

2. The filing of the judicial claim was PREMATURE

Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date of the submission
of the complete documents in support of the application [for tax refund/credit]," within which to grant or deny the
claim. In case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the CTA within
30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the
application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30
days.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason,
we find the filing of the judicial claim with the CTA premature.
* In fine, the premature filing of respondents claim for refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired by the CTA.

18. WESTERN MINDANAO v. CIR - Erandio

Doctrine:
(1) In a claim for tax refund or tax credit, the applicant must not only prove entitlement under substantive law,
but it must also show satisfaction to the documentary and evidentiary requirements under the law.
(2) Under RR 7-95 the subsequent incorporation of RA 9337 actually confirmed the imprinting requirement on VAT
invoices or receipts on a case falling under the principle of legislative approval or administrative interpretation
by reenactment.
Facts
WMPC is a domestic corporation engaged in the production and sale of electricity, it is duly registered
with BIR as a VAT taxpayer, during the taxable years of 2000 to 2001, it alleges that it has only sold to the
National Power Corporation, hence it is exempt from paying all forms of taxes, duties, fees and imposts
pursuant to Section 108(B)(3) stating that their power generation service is Zero-Rated
On June 20, 2000 and June 13, 2001 WMPC filed for the tax credit certification and during the
following months, as the CIR had not acted upon its applications, they file a petition for review in order to
decide the case wherein they sought to refund 9.2m
The CIR filed a comment stating that they are not entitled pursuant to Section 4.108-1 or RR 7-95
which states:
Invoicing Requirements: xxx. For every sale or lease of goods or property and service, issue invoices
or receipts which must xxx 5. Show the Zero Rated Imrinted on the invoice covering Zero Rated
Sales

1.
2.

Contentions of the WMPC

That the invoicing requirements were merely compliance requirements and only substantial compliance was
enough;
Zero rated sale imprint requirement cannot be applied retroactively considering it only took effect on July 2005
(or 4 years after the application)
Issue
WON the CTA En Banc erred in dismissing the case on the ground that receipts did not contain Zero-Rated
Held
No, Tax exemption is strictly construed in favor of the authority and against the person claiming the exemption.
In a claim for tax refund or tax credit, the applicant must not onbly prove entitlement under substantive law, it
must also show satisfaction to the documentary and evidentiary requirements of the law.
Under the NIRC, a creditable input tax should be evidenced by a VAT invoice or official
receipt, which may only be considered as such when it complies with the requirements of RR
7-95, particularly Section 4.108-1. This section requires, among others, that (i)f the sale is
subject to zero percent (0%) value-added tax, the term zero-rated sale shall be written or
printed prominently on the invoice or receipt.

Under RR 7-95 the subsequent incorporation of RA 9337 actually confirmed the validity of the imprinting
requirement on vat invoices or Original Receipts on a case falling under the principle of legislative approval of
the administrative interpretation by reenactment.

VAT ZERO-RELATED TRANSACTIONS - VAT REFUNDS

CONTRIBUTORS: Alba,Arid,Bustamante,Castillo,Cristobal,De Castro,Boy George
Erandio,Espiritu,Gaite,Jaramillo,Marasigan,Morales,Pangilinan,Radovan,Rosario,Samson,
Salto,Torres

19. CIR v. SAN ROQUE - De Castro

20. NIPPON v. CIR - Cristobal
21. BONIFACIO WATER v. CIR - Castillo
22. CIR v. GST - Arid
23. CIR v. MINDANAO - Alba