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MANILA MINING CORPORATION 468 For a judicial claim for refund to prosper, however, MMC must not only prove that
SCRA 571 (2005) it is a VAT registered entity and that it filed its claims within the prescriptive period.
It must substantiate the input VAT paid by purchase invoices or official receipts. It is
For a judicial claim for refund to prosper, the party must not only prove that it is a required that a photocopy of the purchase invoice or receipt evidencing the value
VAT registered entity, it must substantiate the input VAT paid by added tax paid shall be submitted together with the application. This MMC failed to
purchase invoices or official receipts. do.
ISSUE: Whether or not MMC adduced sufficient evidence to prove its claim for
refund of its input VAT for taxable year 1991.
HELD: As export sales, the sale of gold to the Central Bank is zero-rated, hence,
no tax is chargeable to it as purchaser. Zero rating is primarily intended to be
enjoyed by the seller – MMC, which charges no output VAT but can claim a refund
of or a tax credit certificate for the input VAT previously charged to it by suppliers.
NORTHERN MINDANAO POWER CORPORATION, Petitioner VS. COMMISSIONER OF invoices found in Section 113 of the 1997 Tax Code by providing for the additional
INTERNAL REVENUE, Respondent (G.R. No. 185115, February 18, 2015) requirement of the imprinting of the terms “zero-rated” is constitutional?
FACTS: RULING:
Petitioner is engaged in the production sale of electricity as an independent The CTA did not acquire jurisdiction over the claim for a refund of input VAT
power producer and sells electricity to National Power Corporation (NPC). It covering the 3rd and the 4th quarters of taxable year 1999 and taxable year 2000.
allegedly incurred input value-added tax (VAT) on its domestic purchases of goods
and services that were used in its production and sale of electricity to NPC. For the Pursuant to Section 112(D) of the NIRC of 1997, CIR had 120 days from the date of
3rd and the 4th quarters of taxable year 1999, petitioner’s input VAT totaled to submission of complete documents in support of the application within which to
P2,490,960.29, while that incurred for all the quarters of taxable year 2000 decide on the administrative claim. The burden of proving entitlement to a tax
amounted to P3,920,932.55. refund is on the taxpayer. Absent any evidence to the contrary, it is presumed that
in order to discharge its burden, petitioner attached to its applications complete
Petitioner filed an administrative claim for a refund on 20 June 2000 for the 3rd supporting documents necessary to prove its entitlement to a refund. Thus, the
and the 4th quarters of taxable year 1999, and on 25 July 2001 for taxable year 120-day period for the CIR to act on the administrative claim commenced on 20
2000 in the sum of P6,411,892.84. June 2000 and 25 July 2001.
Alleging inaction of respondent on these administrative claims, petitioner filed a Both judicial claims must be disallowed.
Petition with the CTA on 28 September 2001. The CTA First Division denied the
* Claim for a refund of input VAT covering the 3rd and the 4th quarters of taxable
Petition and the subsequent Motion for Reconsideration for lack of merit. The Court
year 1999: Counting 120 days from 20 June 2000, the CIR had until 18 October 2000
in Division found that the term "zero-rated" was not imprinted on the receipts or
within which to decide on the claim of petitioner for the period covering the 3rd
invoices presented by petitioner in violation of Section 4.108-1 of Revenue
and the 4th quarters of taxable year 1999. If after the expiration of that period
Regulations No. 7-95. Petitioner failed to substantiate its claim for a refund and to
respondent still failed to act on the administrative claim, petitioner could elevate
strictly comply with the invoicing requirements of the law and tax regulations.
the matter to the court within 30 days or until 17 November 2000.
On appeal to the CTA En Banc, the Petition was likewise denied. The court ruled
Petitioner belatedly filed its judicial claim with the CTA on 28 September 2001.
that for every sale of services, VAT shall be computed on the basis of gross receipts
Petitioner’s claim for the 3rd and the 4th quarters of taxable year 1999 was filed
indicated on the official receipt. Official receipts are proofs of sale of services and
319 days after the expiration of the 30-day period. It already lost its right to claim a
cannot be interchanged with sales invoices as the latter are used for the sale of
refund or credit of its alleged excess input VAT attributable to zero-rated or
goods.
effectively zero-rated sales for the 3rd and the 4th quarters of taxable year 1999 by
ISSUE: virtue of its own failure to observe the prescriptive periods.
1.) Whether or not the CTA acquired jurisdiction over the claim for a refund of input * Claim for the refund of input VAT covering all quarters of taxable year 2000:
VAT covering the 3rd and the 4th quarters of taxable year 1999 and on 25 July 2001
For the year 2000, records show that petitioner filed its Petition with the CTA on 28
covering all the quarters of taxable year 2000?
September 2001 without waiting for the expiration of the 120-day period. Barely 64
2.) Whether or not Section 4.108-1 of Revenue Regulations (RR) No. 7- 95 which days had lapsed when the judicial claim was filed with the CTA. On 28 September
expanded the statutory requirements for the issuance of official receipts and 2001
– the date on which petitioner filed its judicial claim for the period covering taxable
year 2000 - the 120+30 day mandatory period was already in the law and BIR Ruling
No. DA-489-03 had not yet been issued. Considering this fact, petitioner did not
have an excuse for not observing the 120+30 day period. The judicial claim was thus
prematurely filed for failure of petitioner to observe the 120- day waiting period.
Revenue Regulations (RR) No. 7-95 is constitutional. In fact, this Court has
consistently held as fatal the failure to print the word "zero-rated" on the VAT
invoices or official receipts in claims for a refund or credit of input VAT on zero-
rated sales, even if the claims were made prior to the effectivity of R.A. 9337.
Clearly then, the present Petition must be denied.
A VAT invoice is the seller's best proof of the sale of goods or services to the buyer,
while a VAT receipt is the buyer's best evidence of the payment of goods or services
received from the seller. A VAT invoice and a VAT receipt should not be confused
and made to refer to one and the same thing. Certainly, neither does the law intend
the two to be used alternatively.
QUESTIONS:
a.) What are the information(s) contained in the VAT invoice or VAT official receipt?
Cite your legal basis.
b.) If in case, the taxpayer claiming refund failed to print the needed information in
the VAT invoice or VAT official receipt, will it cause dismissal of the claim? Explain
your answer.
Contex Corporation vs Commissioner of Internal Revenue favor of the government. Otherwise stated, any exemption from the payment of a
tax must be clearly stated in the language of the Law, it cannot be merely implied
(G.R. No.151135, July 2, 2004) therefrom. In the case of the VAT, Section 109, RA 8424, clearly enumerates the
transactions exempted from VAT. The services rendered by COMASERCO do not fall
FACTS: Petitioner Contex Corporation (CONTEX) is a domestic corporation engaged
within the exemptions.
in the business manufacturing hospital textiles and garments and other hospital
supplies for export. Petitioner’s place of business is at the Subic Bay Freeport Zone
(SBFZ). It is duly registered with the Subic Bay Metropolitan Authority (SBMA) as a
Subic Freeport Enterprise, pursuant to the provisions of RA 7227. As an SBMA-
registered firm, petitioner is except from all local and national international
revenue taxes except for the 5% preferential tax provided in RA 7227. Petitioner
also registered with the BIR as a The Court of Appeals reversed the CTA’s ruling,
hence, this petition.
Issues: Was COMASERCO engaged in the sale of services, and thus, liable to pay
VAT?
HELD: Yes. Section 99 of the National Internal Revenue Code of 1986 provides
that: “any person who, in the course of trade or business sells, barters or
exchanges goods, renders services, or engages in similar transactions and any
person, who, imports goods shall be subject to VAT imposed in Sections 100 to 102
of this Code. The Higher Court clarified the meaning of the term “in the course of
trade or business” by citing Section 105 of RA 8424 which took effect on January 1,
1998.
The phrase “in the course of trade or business” means the regular conduct or
pursuit of a commercial or an economic activity, including transactions incidental
thereto, by any person regardless of whether or not the person engaged therein is
a non-stock non-profit organization (irrespective of the disposition of its net income
and whether or not it sells exclusively to members or their guests) or government
entity.
Secondly, it is a rule that business taxes are the lifeblood of the nation, statutes
that allow exemptions are construed strictly against the grantee and liberally in
a special economic zone, respondent is entitled
GR No. 153866 CIR to the fiscal incentives and benefit provided
for in either PD 66 or EO 226. It shall,
vs. Seagate moreover, enjoy all privileges, benefits,
advantages or exemptions under both Republic
Act Nos. (RA) 7227 and 7844.
ISSUE:
Whether or not respondent is entitled to the refund or issuance of Tax Credit
Certificate in the amount of P12,122,922.66 representing alleged unutilized
input VAT paid on capital goods purchased for the period April 1, 1998 to
June 30, 1999
HELD:
The Petition is unmeritorious. As a PEZA-registered enterprise within a
special economic zone, respondent is entitled to the fiscal incentives and
benefit provided for in either PD 66 or EO 226. It shall, moreover, enjoy all
privileges, benefits, advantages or exemptions under both Republic Act Nos.
(RA) 7227 and 7844. Respondent as an entity is exempt from internal
revenue laws and regulations. This exemption covers both direct and indirect
taxes, stemming from the very nature of the VAT as a tax on consumption,
for which the direct liability is imposed on one person but the
indirect burden is passed on to another. Respondent, as an exempt entity,
can neither be directly charged for the VAT on its sales nor indirectly made to
bear, as added cost to such sales, the equivalent VAT on its purchases. The
exemption is both express and pervasive, among other reasons, since RA
7916 states that “no taxes, local and national, shall be imposed on business
establishments operating within the ecozone”. Even though the VAT is not
CIR vs Seagate Technology
imposed on the entity but on the transaction, it may still be passed on and,
therefore, indirectly imposed on the same entity -- a patent circumvention of
Issue:
Ruling:
HELD:
YES. The original exemption of PAGCOR from corporate income tax was
not made pursuant to a valid classification based on substantial
distinctions so that the law may operate only on some and not on all.
Instead, the same was merely granted due to the acquiescence of the
House Committee on Ways and Means to the request of PAGCOR.
The argument that the withdrawal of the exemption also violates the non-
impairment clause will not hold since any franchise is subject to
amendment, alteration or repeal by Congress.
However, the Court made it clear that PAGCOR remains exempt from
payment of indirect taxes and as such its purchases remain not subject to
VAT, reiterating the rule laid down in the Acesite case.
PHILIPPINE
AMUSEMENT AND
GAMING
CORPORATION VS.
BUREAU OF
INTERNAL REVENUE
the franchisees subject to 10% VAT imposed under Section 108 of
the National Internal Revenue Code of 1997, as amended by R.A.
No. 9337.
Furthermore, according to the OSG,... public respondent BIR
exceeded its statutory authority when it enacted RR No. 16-2005,
because the latter's provisions are contrary to the mandates of
P.D. No. 1869 in relation to R.A. No. 9337.
Issues:
whether or not PAGCOR is still exempt... hether or not PAGCOR is
still exempt... t from
VAT with the enactment of R.A. No. 9337.
Ruling:
PHILIPPINE AMUSEMENT v. BIR, GR No. 172087, 2011-03-15 Anent the validity of RR No. 16-2005, the Court holds that the
provision subjecting PAGCOR to 10% VAT is invalid for being
Facts: contrary to R.A. No. 9337. Nowhere in R.A. No. 9337 is it provided
Petitioner further seeks to prohibit the implementation of Bureau of that petitioner can be subjected to VAT. R.A. No. 9337 is clear
Internal Revenue (BIR) Revenue Regulations No. 16-2005 for only as to... the removal of petitioner's exemption from the
being contrary to law. payment of corporate income tax, which was already addressed
above by this Court.
With the enactment of R.A. No. 9337[10] on May 24, 2005, certain
sections of the National Internal Revenue Code of 1997 were As pointed out by the OSG, R.A. No. 9337 itself exempts petitioner
amended. from VAT pursuant to Section 7 (k) thereof... the following
transactions shall be exempt from the value-added tax:
Different groups came to this Court via petitions for certiorari and
prohibition[11] assailing the validity and constitutionality of R.A. No. Transactions which are exempt under international agreements to
9337 which the Philippines is a signatory or under special laws
10% Value Added Tax (VAT) on sale of goods and properties Petitioner is exempt from the payment of VAT, because
PAGCOR's charter, P.D. No. 1869, is a special law that grants
10% VAT on importation of goods petitioner exemption from taxes.
10% VAT on sale of services and use or lease of properties... the Moreover, the exemption of PAGCOR from VAT is supported by
Court dismissed all the petitions and upheld the constitutionality of Section 6 of R.A. No. 9337
R.A. No. 9337.
The following services performed in the Philippines by VAT-
On the same date, respondent BIR issued Revenue Regulations registered persons shall be subject to zero percent (0%) rate;
(RR) No. 16-2005,[13] specifically identifying PAGCOR as one of
Services rendered to persons or entities whose exemption under
special laws... subjects the supply of such services to zero percent
(0%) rate... although R.A. No. 9337 introduced amendments to
Section 108 of R.A. No. 8424 by imposing VAT on other services
not previously covered, it did not amend the portion of Section 108
(B) (3) that subjects to zero percent rate services performed by
VAT-registered persons 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 0% rate.
Issue:
W/N AMEX Phils is entitled to refund
(2) The service fall under any of the categories in Section 102B of the
Tax Code
‘Section 110. Tax Credits. – ‘Section 106. Refunds or tax credits of input tax. –
xxxxxxxxx
(A) Zero-rated or effectively Zero-rated Sales. – Any VAT-registered
‘(B) Excess Output or Input Tax. – If at the end of any taxable quarter the person, except those covered by paragraph (a) above, whose sales are
output tax exceeds the input tax, the excess shall be paid by the VAT- zero-rated or are effectively zero-rated, may, within two (2) years after the
registered person. If the input tax exceeds the output tax, the excess close of the taxable quarter when such sales were made, apply for the
shall be carried over to the succeeding quarter or quarters. Any input tax issuance of tax credit certificate or refund of the input taxes due or
attributable to the purchase of capital goods or to zero-rated sales by a attributable to such sales, to the extent that such input tax has not been
applied against output tax. x x x. [Section 106(a) of the Tax Code]’
ISSUE: W/N petitioner is entitled to a refund “processing, manufacturing or repacking of goods” and should, therefore,
HELD: YES. Section 102 of the Tax Code provides: be zero-rated. In reply to a query of respondent, the BIR opined in VAT
“(b) Transactions subject to zero percent (0%) rate. — The following Ruling No. 080-89 that the income respondent earned from its parent
services performed in the Philippines by VAT-registered persons shall be company’s regional operating centers (ROCs) was automatically zero-
subject to zero percent (0%) rate[:] rated effective January 1, 1988.
‘(1) Processing, manufacturing or repacking goods for other persons In sum, having resolved that transactions of respondent are zero-rated,
doing business outside the Philippines which goods are subsequently the Court upholds the former’s entitlement to the refund as determined by
exported, where the services are paid for in acceptable foreign currency the appellate court. Moreover, there is no conflict between the decisions
and accounted for in accordance with the rules and regulations of the of the CTA and CA. This Court respects the findings and conclusions of a
Bangko Sentral ng Pilipinas (BSP); specialized court like the CTA “which, by the nature of its functions, is
dedicated exclusively to the study and consideration of tax cases and has
‘(2) Services other than those mentioned in the preceding subparagraph, necessarily developed an expertise on the subject.”93
the consideration for which is paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the [BSP];’” Furthermore, under a zero-rating scheme, the sale or exchange of a
particular service is completely freed from the VAT, because the seller is
xxxxxxxxx entitled to recover, by way of a refund or as an input tax credit, the tax
that is included in the cost of purchases attributable to the sale
Under the last paragraph quoted above, services performed by VAT- or exchange.94“[T]he tax paid or withheld is not deducted from the tax
registered persons in the Philippines (other than the processing, base.” Having been applied for within the reglementary period,96
manufacturing or repacking of goods for persons doing business outside respondent’s refund is in order.
the Philippines), when paid in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the BSP, are zero-
rated.
Facts
In the assailed Decision, the CTA En Banc reversed Hence, the instant petition raising the following issues:
and set aside the ruling of the CTA Division. Citing the
case of Commissioner of Internal Revenue x x x WHETHER OR NOT THE AICHI
v. Aichi Forging Company of Asia, Inc.[18] (Aichi), the RULING PROMULGATED ON OCTOBER 6, 2010
CTA En Banc ruled that the 120-day period for the CIR MAY BE APPLIED RETROACTIVELY TO THE
to act on the administrative claim for refund or tax INSTANT CLAIM FOR REFUND OF INPUT VAT
credit, under Section 112(D) of the NIRC of 1997, as INCURRED IN 2004.
amended, is mandatory and jurisdictional. Considering
that Sitel filed its judicial claim for VAT refund or x x x WHETHER OR NOT THE CTA EN BANC CAN
credit without waiting for the lapse of the 120-day VALIDLY WITHDRAW AND REVOKE THE PORTION
period for the CIR to act on its administrative claim, OF THE REFUND CLAIM ALREADY GRANTED TO
the CTA did not acquire jurisdiction as there was no PETITIONER IN THE AMOUNT OF P11,155,276.59
decision or inaction to speak of.[19] Thus, the CTA En AFTER TRIAL ON THE MERITS,
Banc denied Sitel's entire refund claim on the ground NOTWITHSTANDING THAT SUCH PORTION OF
of prematurity. The dispositive portion of the CTA En THE DECISION HAD NOT BEEN APPEALED.
Banc's Decision reads as follows:
x x x WHETHER OR NOT PETITIONER IS ENTITLED
WHEREFORE, on the basis of the foregoing TO A REFUND OR TAX CREDIT OF ITS
considerations, the Petition for Review En UNUTILIZED INPUT VAT ARISING FROM
Banc is DISMISSED. Accordingly, the Decision of the PURCHASES OF GOODS AND SERVICES
CTA First Division dated October 21, 2009 and the ATTRIBUTABLE TO ZERO-RATED SALES AND
PURCHASES/IMPORTATIONS OF CAPITAL GOODS
FOR THE 1ST, 2ND, 3RD, [AND] 4TH QUARTERS OF In the instant petition, Sitel claims that its judicial
TAXABLE YEAR 2004 IN THE AGGREGATE claim for refund was timely filed following the Court's
AMOUNT OF P20,994,405.16.[23] pronouncements in San Roque; thus, it was erroneous
In the Resolution[24] dated July 4, 2012, the CIR was for the CTA En Banc to reverse the ruling of the CTA
required to comment on the instant petition. In Division and to dismiss its petition on the ground of
compliance thereto, the CIR filed its Comment[25] on prematurity. Sitel further argues that the previously
November 14, 2012. granted amount for refund of P11,155,276.59 should be
reinstated and declared final and executory, the same
On January 16, 2013, the Court issued a not being the subject of Sitel's partial appeal before the
Resolution[26] denying Sitel's petition for failure to CTA En Banc, nor of any appeal from the CIR.
sufficiently show that the CTA En Banccommitted
reversible error in denying its refund claim on the Finally, Sitel contends that insofar as the denied
ground of prematurity based on prevailing portion of the claim is concerned, which the CTA En
jurisprudence. Banc failed to pass upon with the dismissal of its
appeal, speedy justice demands that the Court resolved
Soon thereafter, however, or on February 12, 2013, the the same on the merits and Sitel be declared entitled to
Court En Banc decided the consolidated cases an additional refund in the amount of P9,839,128.57.
of Commissioner of Internal Revenue v. San Roque
Power Corporation, Taganito Mining Corporation v.
Commissioner of Internal Revenue, and Philex Mining The Court's Ruling
Corporation v. Commissioner of Internal
Revenue[27] (San Roque). In that case, the Court The Court finds the petition partly meritorious.
recognized BIR Ruling No. DA-489-03 as an exception
to the mandatory and jurisdictional nature of the 120- Site/'s Judicial Claim for VAT Refund was
day waiting period. deemed timely filed pursuant to the Court's
pronouncement in San Roque.
Invoking San Roque, Sitel filed a Motion for
Reconsideration.[28] Section 112(C) of the NIRC, as amended, provides:
In the Resolution[29] dated June 17, 2013, the Court SEC. 112. Refunds or Tax Credits of Input Tax. -
granted Sitel's motion and reinstated the instant
petition. xxxx
filing of the administrative claim with the BIR; while
(C) Period within which Refund or Tax Credit of Input the judicial claim may be filed with the CTA within
Taxes shall be Made. - In proper cases, the thirty (30) days from the receipt of the decision of the
Commissioner shall grant a refund or issue the tax CIR or the expiration of the 120-day period of the CIR
credit certificate for creditable input taxes within one to act on the claim. Thus:
hundred twenty (120) days from the date of
submission of complete documents in support Section 112 (D) of the NIRC clearly provides that the
of the application filed in accordance with CIR has "120 days, from the date of the submission of
Subsection (A) hereof. the complete documents in support of the application
[for tax refund/credit]," within which to grant or deny
In case of full or partial denial of the claim for tax the claim. In case of full or partial denial by the CIR,
refund or tax credit, or the failure on the part of the the taxpayer's recourse is to file an appeal before the
Commissioner to act on the application within the CTA within 30 days from receipt of the decision of the
period prescribed above, the taxpayer affected may, CIR. However, if after the 120-day period the CIR fails
within thirty (30) days from the receipt of the decision to act on the application for tax refund/credit, the
denying the claim or after the expiration of the one remedy of the taxpayer is to appeal the inaction of the
hundred twenty day-period, appeal the decision or the CIR to CTA within 30 days.
unacted claim with the Court of Tax Appeals.
(Emphasis supplied) In this case, the administrative and the judicial claims
Based on the plain language of the foregoing provision, were simultaneously filed on September 30, 2004.
the CIR is given 120 days within which to grant or deny Obviously, respondent did not wait for the decision of
a claim for refund. Upon receipt of CIR's decision or the CIR or the lapse of the 120-day period. For this
ruling denying the said claim, or upon the expiration of reason, we find the filing of the judicial claim with the
the 120-day period without action from the CIR, the CTA premature.
taxpayer has thirty (30) days within which to file a
petition for review with the CTA. Respondent's assertion that the non-observance of the
120-day period is not fatal to the filing of a judicial
In Aichi, the Court ruled that the 120-day period claim as long as both the administrative and the
granted to the CIR was mandatory and jurisdictional, judicial claims are filed within the two-year
the non-observance of which was fatal to the filing of a prescriptive period has no legal basis.
judicial claim with the CTA. The Court further
explained that the two (2)-year prescriptive period There is nothing in Section 112 of the NIRC to support
under Section 112(A) of the NIRC pertained only to the respondent's view. Subsection (A) of the said provision
states that "any VAT-registered person, whose sales are refund/credit of input VAT before the CTA warrants a
zero-rated or effectively zero-rated may, within two dismissal inasmuch as no jurisdiction was acquired by
years after the close of the taxable quarter when the the CTA.[30]
sales were made, apply for the issuance of a tax However, in San Roque, the Court clarified that the
credit certificate or refund of creditable input tax 120-day period does not apply to claims for refund
due or paid attributable to such sales." The phrase that were prematurely filed during the period from the
"within two (2) years x x x apply for the issuance of a issuance of BIR Ruling No. DA-489-03, on December
tax credit certificate or refund" refers to applications 10, 2003, until October 6, 2010, when Aichi was
for refund/credit filed with the CIR and not to appeals promulgated. The Court explained that BIR Ruling No.
made to the CTA. This is apparent in the first DA-489-03, which expressly allowed the filing of
paragraph of subsection (D) of the same provision, judicial claims with the CTA even before the lapse of
which states that the CIR has "120 days from the the 120-day period, provided for a valid claim of
submission of complete documents in support of equitable estoppel because the CIR had misled
the application filed in accordance taxpayers into prematurely filing their judicial claims
with Subsections (A) and (B)" within which to before the CTA:
decide on the claim.
There is no dispute that the 120-day period is
In fact, applying the two-year period to judicial claims mandatory and jurisdictional, and that the CTA does
would render nugatory Section 112(D) of the NIRC, not acquire jurisdiction over a judicial claim that is
which already provides for a specific period within filed before the expiration of the 120-day period. There
which a taxpayer should appeal the decision or are, however, two exceptions to this rule. The first
inaction of the CIR. The second paragraph of Section exception is if the Commissioner, through a specific
112(D) of the NIRC envisions two scenarios: (1) when a ruling, misleads a particular taxpayer to prematurely
decision is issued by the CIR before the lapse of the file a judicial claim with the CTA. Such specific ruling
120-day period; and (2) when no decision is made after is applicable only to such particular taxpayer. The
the 120-day period. In both instances, the taxpayer has second exception is where the
30 days within which to file an appeal with the CTA. As Commissioner, through a general
we see it then, the 120-day period is crucial in filing an interpretative rule issued under Section 4 of
appeal with the CTA. the Tax Code, misleads all taxpayers into filing
prematurely judicial claims with the CTA. In
xxxx these cases, the Commissioner cannot be
allowed to later on question the CTA's
In fine, the premature filing of respondent's claim for assumption of jurisdiction over such claim
since equitable estoppel has set in as expressly in San Roque, to wit:
authorized under Section 246 of the Tax Code.
For clarity and guidance, the Court deems it proper to
xxxx outline the rules laid down in San Roque with regard to
claims for refund or tax credit ofunutilized creditable
BIR Ruling No. DA-489-03 is a general interpretative input VAT. They are as follows:
rule because it was a response to a query made, not by
a particular taxpayer, but by a government agency 1. When to file an administrative claim with the CIR:
tasked with processing tax refunds and credits, that is,
the One Stop Shop Inter-Agency Tax Credit and
Drawback Center of the Department of Finance. This a. General rule- Section 112(A) and Mirant
government agency is also the addressee, or the entity
responded to, in BIR Ruling No. DA-489-03. Thus, Within 2 years from the close of the taxable
while this government agency mentions in its query to quarter when the sales were made.
the Commissioner the administrative claim of Lazi Bay
Resources Development, Inc., the agency was in fact b. Exception - Atlas
asking the Commissioner what to do in cases like the
tax claim of Lazi Bay Resources Development, Inc., Within 2 years from the date of payment of the
where the taxpayer did not wait for the lapse of the output VAT, if the administrative claim was filed
120-day period. from June 8, 2007 (promulgation of Atlas) to
September 12, 2008 (promulgation of Mirant).
Clearly, BIR Ruling No. DA-489-03 is a general
interpretative rule. Thus, all taxpayers can rely 2. When to file a judicial claim with the CTA:
on BIR Ruling No. DA-489-03 from the time of
its issuance on 10 December 2003 up to its
reversal by this Court in Aichi on 6 October a. General rule-Section 112(D); not Section
2010, where this Court held that the 120+30 229
day periods are mandatory and
jurisdictional.[31] (Emphasis supplied).
In Visayas Geothermal Power Company v.
Commissioner of Internal Revenue,[32] the Court came
up with an outline summarizing the pronouncements i. Within 30 days from the full or
partial denial of the administrative
claim by the CIR; or CTA Division partially granting Sitel's judicial claim for
refund in the reduced amount of P11,155,276.59, which
ii. Within 30 days from the expiration is not subject of the instant appeal, should be
of the 120-day period provided to the reinstated. In this regard, since the CIR did not appeal
CIR to decide on the claim. This is said decision to the CTA En Banc, the same is now
mandatory and jurisdictional considered final and beyond this Court's review.
beginning January 1, 1998 (effectivity
of 1997 NIRC). Sitel now questions the following portions of its refund
claim which the CTA Division denied: (1)
P7,170,276.02, representing unutilized input VAT on
purchases of goods and services attributable to zero-
b. Exception - BIR Ruling No. DA-489-03 rated sales, which was denied because Sitel failed to
prove that the call services it rendered for the year
The judicial claim need not await the 2004 were made to non-resident foreign clients doing
expiration of the 120-day period, if such business outside the Philippines; and (2)
was filed from December 10, 2003 P2,668,852.55 representing input VAT on purchases of
(issuance of BIR Ruling No. DA-489-03) to capital goods, because these are supported by invoices
October 6, 2010 (promulgation and official receipts with pre-printed TIN-V instead of
of Aichi).[33](Emphasis and underscoring TIN-VAT, as required under Section 4.108-1 of RR 7-
supplied). 95.
In this case, records show that Sitel filed its Sitel claims that testimonial and documentary evidence
administrative and judicial claim for refund on March sufficiently established that its clients were non-
28, 2006 and March 30, 2006, respectively, or after resident foreign corporations not doing business in
the issuance of BIR Ruling No. DA-489-03, but before Philippines. It also asserts that the input VAT on its
the date when Aichi was promulgated. Thus, even purchases of capital goods were duly substantiated
though Sitel filed its judicial claim prematurely, i.e., because the supporting official receipts substantially
without waiting for the expiration of the 120-day complied with the invoicing requirements provided by
mandatory period, the CTA may still take cognizance of the rules.
the case because the claim was filed within the
excepted period stated in San Roque. In other words, In other words, Sitel wants the Court to review factual
Sitel's judicial claim was deemed timely filed and findings of the CTA Division, reexamine the evidence
should have not been dismissed by the CTA En Banc. and determine on the basis thereof whether it should
Consequently, the October 21, 2009 Decision[34] of the
be refunded the additional amount of P9,839,128.57.
This, however, cannot be done in the instant case for Sitel's claim for refund is anchored on Section
settled is the rule that this Court is not a trier of facts 112(A)[40] of the NIRC, which allows the refund or
and does not normally embark in the evaluation of credit of input VAT attributable to zero-rated or
evidence adduced during trial.[35] It is not this Court's effectively zero-rated sales. In relation thereto, Sitel
function to analyze or weigh all over again the evidence points to Section 108(B)(2) of the NIRC [formerly
already considered in the proceedings below, the Section 102(b)(2) of the NIRC of 1977, as amended] as
Court's jurisdiction being limited to reviewing only legal basis for treating its sale of services as zero-rated
errors of law that may have been committed by the or effectively zero-rated. Section 108(B)(2) reads:
lower court.[36]
SEC. 108. Value-added Tax on Sale of Services and
Furthermore, the Court accords findings and Use or Lease of Properties. -
conclusions of the CTA with the highest respect.[37] As a
specialized court dedicated exclusively to the xxxx
resolution of tax problems, the CTA has accordingly
developed an expertise on the subject of (B) Transactions Subject to Zero Percent (0%) Rate. -
taxation.[38] Thus, its decisions are presumed valid in The following services performed in the Philippines by
every aspect and will not be overturned on appeal, VAT-registered persons shall be subject to zero percent
unless the Court finds that the questioned decision is (0%) rate:
not supported by substantial evidence or there has
been an abuse or improvident exercise of authority on xxxx
the part of the tax court.[39]
(2) Services other than those mentioned in the
Upon careful review of the instant case, and directly preceding paragraph rendered to a person
addressing the issues raised by Sitel, the Court finds no engaged in business conducted outside the
cogent reason to reverse or modify the findings of the Philippines or to a nonresident person not
CTA Division. engaged in business who is outside the
Philippines when the services are performed,
The Court expounds. the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with
Sitel failed to prove that the recipients of its the rules and regulations of the Bangko Sentral ng
call services are foreign corporations doing Pilipinas (BSP); (Emphasis supplied)
business outside the Philippines.
In Burmeister, the Court clarified that an essential
condition to qualify for zero-rating under the xxxx
aforequoted provision is that the service-recipient
must be doing business outside the Philippines, to wit: Thus, when Section 102(b)(2) speaks of "[s]ervices
other than those mentioned in the preceding
The Tax Code not only requires that the services be subparagraph," the legislative intent is that only the
other than "processing, manufacturing or repacking of services are different between subparagraphs 1 and 2.
goods" and that payment for such services be in The requirements for zero-rating, including the
acceptable foreign currency accounted for in essential condition that the recipient of services is
accordance with BSP rules. Another essential condition doing business outside the Philippines, remain the
for qualification to zero-rating under Section 102(b)(2) same under both subparagraphs.
is that the recipient of such services is doing
business outside the Philippines. x x x Significantly, the amended Section 108(b) [previously
Section 102 (b)] of the present Tax Code clarifies this
This can only be the logical interpretation of Section legislative intent. Expressly included among the
102(b)(2). If the provider and recipient of the "other transactions subject to 0% VAT are "[s]ervices other
services" are both doing business in the Philippines, than those mentioned in the [first] paragraph [of
the payment of foreign currency is irrelevant. Section 108(b)] rendered to a person engaged in
Otherwise, those subject to the regular VAT under business conducted outside the Philippines or
Section 102(a) can avoid paying the VAT by simply to a nonresident person not engaged in
stipulating payment in foreign currency inwardly business who is outside the Philippines when the
remitted by the recipient of services. To interpret services are performed, the consideration for which is
Section 102(b)(2) to apply to a payer-recipient of paid for in acceptable foreign currency and accounted
services doing business in the Philippines is to make for in accordance with the rules and regulations of the
the payment of the regular VAT under Section 102(a) BSP."[41]
dependent on the generosity of the taxpayer. The Foilowing Burmeister, the Court, in Accenture, Inc. v.
provider of services can choose to pay the regular VAT Commissioner of Internal Revenue,[42] (Accenture),
or avoid it by stipulating payment in foreign currency emphasized that a taxpayer claiming for a VAT refund
inwardly remitted by the payer-recipient. Such or credit under Section 108(B) has the burden to prove
interpretation removes Section 102(a) as a tax measure not only that the recipient of the service is a foreign
in the Tax Code, an interpretation this Court cannot corporation, but also that said corporation is doing
sanction. A tax is a mandatory exaction, not a business outside the Philippines. For failure to
voluntary contribution. discharge this burden, the Court denied Accenture's
claim for refund. specifically proven to be a nonresident foreign
corporation.
We rule that the recipient of the service must be doing
business outside the Philippines for the transaction to There is no specific criterion as to what constitutes
qualify for zero-rating under Section 108(B) of the Tax "doing" or "engaging in" or "transacting" business. We
Code. ruled thus in Commissioner of Internal Revenue v.
British Overseas Airways Corporation:
xxxx
x x x. There is no specific criterion as to what
The evidence presented by Accenture may have constitutes "doing" or "engaging in" or "transacting"
established that its clients are foreign. This fact does business. Each case must be judged in the light of its
not automatically mean, however, that these clients peculiar environmental circumstances. The term
were doing business outside the Philippines. After all, implies a continuity of commercial dealings and
the Tax Code itself has provisions for a foreign arrangements, and contemplates, to that extent, the
corporation engaged in business within the Philippines performance of acts or works or the exercise of some of
and vice versa, to wit: the functions normally incident to, and in progressive
prosecution of commercial gain or for the purpose and
SEC. 22. Definitions. - When used in this Title: object of the business organization. "In order that a
foreign corporation may be regarded as doing
xxxx business within a State, there must be
continuity of conduct and intention to establish
(H) The term "resident foreign corporation" applies to a continuous business, such as the
a foreign corporation engaged in trade or business appointment of a local agent, and not one of a
within the Philippines. temporary character."
A taxpayer claiming a tax credit or refund has the
(I) The term 'nonresident foreign corporation' applies burden of proof to establish the factual basis of that
to a foreign corporation not engaged in trade or claim. Tax refunds, like tax exemptions, are construed
business within the Philippines. (Emphasis in the strictly against the taxpayer.
original)
Consequently, to come within the purview of Accenture failed to discharge this burden. It alleged
Section 108(B)(2), it is not enough that the and presented evidence to prove only that its
recipient of the service be proven to be a clients were foreign entities. However, as
foreign corporation; rather, it must be found by both the CTA Division and the CTA En
Banc, no evidence was presented by Accenture zero-rated sales.
to prove the fact that the foreign clients to
whom petitioner rendered its services were Sitel failed to strictly comply with invoicing
clients doing business outside the Philippines. requirements for VAT refund.
As ruled by the CTA En Banc, the Official Receipts, The CTA Division also did not err when it denied the
Intercompany Payment Requests, Billing Statements, amount of P2,668,852.55, allegedly representing input
Memo Invoices-Receivable, Memo Invoices-Payable, taxes claimed on Sitel's domestic purchases of goods
and Bank Statements presented by Accenture merely and services which are supported by invoices/receipts
substantiated the existence of sales, receipt of foreign with pre-printed TIN-V. In Western Mindanao Power
currency payments, and inward remittance of the Corp. v. Commissioner of Internal Revenue,[44] the
proceeds of such sales duly accounted for in Court ruled that in a claim for tax refund or tax credit,
accordance with BSP rules, all of these were devoid of the applicant must prove not only entitlement to the
any evidence that the clients were doing business grant of the claim under substantive law, he must also
outside of the Philippines.[43] (Emphasis supplied; show satisfaction of all the documentary and
citations omitted) evidentiary requirements for an administrative claim
In the same vein, Sitel fell short of proving that the for a refund or tax credit and compliance with the
recipients of its call services were foreign corporations invoicing and accounting requirements mandated by
doing business outside the Philippines. As correctly the NIRC, as well as by revenue regulations
pointed out by the CTA Division, while Sitel's implementing them. The NIRC requires that the
documentary evidence, which includes Certifications creditable input VAT should be evidenced by a VAT
issued by the Securities and Exchange Commission and invoice or official receipt,[45] which may only be
Agreements between Sitel and its foreign clients, may considered as such when the TIN-VAT is printed
have established that Sitel rendered services to foreign thereon, as required by Section 4.108-1 of RR 7-95.
corporations in 2004 and received payments therefor
through inward remittances, said documents failed to The Court's pronouncement in Kepco Philippines
specifically prove that such foreign clients were doing Corp. v. Commissioner of Internal Revenue[46] is
business outside the Philippines or have a continuity of instructive:
commercial dealings outside the Philippines.
Furthermore, Kepco insists that Section 4.108-1 of
Thus, the Court finds no reason to reverse the ruling of Revenue Regulation 07-95 does not require the word
the CTA Division denying the refund of P7,170,276.02, "TIN-VAT" to be imprinted on a VAT-registered
allegedly representing Sitel's input VAT attributable to person's supporting invoices and official receipts and
so there is no reason for the denial of its P4,720,725.63 refunds or tax credits just like tax exemptions are
claim of input tax. strictly construed against taxpayers, the latter having
the burden to prove strict compliance with the
In this regard, Internal Revenue Regulation 7-95 conditions for the grant of the tax refund or credit."[48]
(Consolidated Value-Added Tax Regulations) is clear.
Section 4.108-1 thereof reads: WHEREFORE, premises considered, the instant
petition for review is GRANTED IN PART. The
Only VAT registered persons are required to print their Decision dated November 11, 2011 and Resolution
TIN followed by the word "VAT" in their invoice or dated March 28, 2012 of the CTA En Banc in CTA EB
receipts and this shall be considered as a "VAT" No. 644 are hereby REVERSED and SET ASIDE.
Invoice. All purchases covered by invoices other than Accordingly, the October 21, 2009 Decision of the CTA
'VAT Invoice' shall not give rise to any input tax. First Division in CTA Case No. 7423 is
Contrary to Kepco's allegation, the regulation hereby REINSTATED.
specifically requires the VAT registered person to
imprint TIN-VAT on its invoices or receipts. Thus, the Respondent is hereby ORDERED TO REFUND or,
Court agrees with the CTA when it wrote: "[T]o be in the alternative, TO ISSUE A TAX CREDIT
considered a 'VAT invoice,' the TIN-VAT must be CERTIFICATE, in favor of the petitioner in the
printed, and not merely stamped. Consequently, amount of P11,155,276.59, representing unutilized
purchases supported by invoices or official receipts, input VAT arising from purchases/importations of
wherein the TIN-VAT is not printed thereon, shall not capital goods for taxable year 2004.
give rise to any input VAT. Likewise, input VAT on
purchases supported by invoices or official receipts SO ORDERED.
which are NON-VAT are disallowed because these
invoices or official receipts are not considered as 'VAT
Invoices."[47]
In the same vein, considering that the subject
invoice/official receipts are not imprinted with the
taxpayer's TIN followed by the word VAT, these would
not be considered as VAT invoices/official receipts and
would not give rise to any creditable input VAT in favor
of Sitel.
The CTA Division held that the determination of 1. Is the absence of the Letter of Authority fatal?
deficiency VAT is not limited to the issuance of Letter 2. Should the amounts that MEDICARD earmarked and
of Authority (LOA) alone and that in lieu of an LOA, eventually paid to the medical service providers still
an LN was issued to MEDICARD informing it if the form part of its gross receipts for VAT purposes?
discrepancies between its ITRs and VAT Returns and
this procedure is authorized under Revenue RULING:
Memorandum Order (RMO) No. 30-2003 and 42-
2003. Also, the amounts that MEDICARD earmarked 1. Yes. The absence of the LOA violated MEDICARD’s
and eventually paid to doctors, hospitals and clinics right to due process. An LOA is the authority given to
cannot be excluded from the computation of its gross the appropriate revenue officer assigned to perform
receipts because the act of earmarking or allocation is assessment functions. Under the NLRC, unless
by itself an act of ownership and management over the authorized by the CIR himself or by his duly
funds by MEDICARD which is beyond the authorized representative, through an LOA, an
contemplation of RR No. 4-2007. Furthermore, examination of the taxpayer cannot ordinarily be
MEDICARD’s earnings from its clinics and laboratory undertaken. An LOA is premised on the fact that the
facilities cannot be excluded from its gross receipts examination of a taxpayer who has already filed his
tax returns is a power that statutorily belongs only to
the CIR himself or his duly authorized representatives.
In this case, there is no dispute that no LOA was
issued prior to the issuance of a PAN and FAN against
MEDICARD. Therefore, no LOA was also served on
MEDICARD.
2. No. The VAT is a tax on the value added by the
performance of the service by the taxpayer. It is, thus,
this service and the value charged thereof by the
taxpayer that is taxable under the NLRC.
CIR vs. Magsaysay Lines, Inc. , et. al G.R. 146984, 28 July 2006
Facts:
Issue:
Ruling:
No, the sale of the vessels is not subject to VAT since it was not in the ordina
ry course of trade or business of NDC. “Course of business” is what is usually
done in the management of trade or business. It connotes regularity. In the
case at bar, the sale was an isolated transaction. The sale which was involun
tary and made pursuant to the declared policy of government for privatizati
on could no longer be repeated or carried on with regularity. It should be e
mphasized that the normal VAT
registered activity of NDC is leasing personal property. Any sale, barter, or e
xchange of goods or services not in the course of trade or business is not su
bject to tax.