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No. The CIR further argues that Sony (“the subsidiary”) itself admitted that the
reimbursement from SIS (“parent company”) 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.”
(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%) [now 12%] 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.
In the case of CIR v. Court of Appeals (CA), the Court had the occasion to rule that services
rendered for a fee even on reimbursement-on-cost basis only and without realizing profit
are also subject to VAT. The case, however, is not applicable to the present case. In that
case, COMASERCO rendered service to its affiliates and, in turn, the affiliates paid the
former reimbursement-on-cost which means that it was paid the cost or expense that it
incurred although without profit. This is not true in the present 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. (CIR vs. Sony Philippines, Inc., GR No. 178697 dated
November 17, 2010)
Value-added Tax
Mandatory VAT Registration:
a) Gross sales or receipts for the past twelve (12) months,
other than those that are exempt under Sec. 109 (1)(A)
to (V) of the Tax Code, have exceeded PhP1,919,500.00;
or
b) There are reasonable grounds to believe that taxpayer’s
gross sales or receipts for the next 12 months, other
than those that are exempt under Sec. 109 (1)(A) to (V)
of the Tax Code, will exceed PhP1,919,500.00; or
c) Franchise grantees of radio and television broadcasting,
whose gross annual receipts for the preceding calendar
year exceeded PhP10,000,000.00.
Value-added Tax
Formula:
Any person who elects to register under (a) and (b) above shall not be
allowed to cancel his registration for the next three (3) years.
Value-added Tax
Sale of goods:
1. Requisites:
a) There is an actual or deemed sale, barter or exchange of goods or
properties for a valuable consideration;
b) The sale is undertaken in the course of trade or business or exercise of
profession in the Philippines;
c) The goods or properties are located within the Philippines and are for use
or consumption therein; and,
d) The sale is not exempt from VAT under Sec. 109 of the Tax Code, special
law, or international agreement binding upon the government of the
Philippines.
2. Tax base – Generally, gross selling price.
3. Real property - primarily for sale to customers or held for
lease in the ordinary course of trade or business of the seller.
Exp. if the real property is used in business. (incidental
transaction)
Value-added Tax
Sale of Real Property Exempt from VAT:
a) Sale of idle real property (one which is not used in business);
b) Sale of real properties utilized for low-cost housing as defined by RA No. 7279,
otherwise known as the "Urban Development and Housing Act of 1992" and other
related laws, such as RA No. 7835 and RA No. 8763;
c) Sale of real properties utilized for socialized housing as defined under RA No. 7279,
and other related laws, such as RA No. 7835 and RA No. 8763, wherein the price
ceiling per unit is PhP225,000.00 or as may from time to time be determined by the
HUDCC and the NEDA and other related laws.
d) Sale of residential lot valued at PhP1,919,500.00 and below, or house & lot and
other residential dwellings valued at PhP3,199,200.00 and below;
If two or more adjacent residential lots are sold or disposed in favor of one buyer, for
the purpose of utilizing the lots as one residential lot, the sale shall be exempt from
VAT only if the aggregate value of the lots do not exceed P1,919,500.00. Adjacent
residential lots, although covered by separate titles and/or separate tax declarations,
when sold or disposed to one and the same buyer, whether covered by one or
separate Deed of Conveyance, shall be presumed as a sale of one residential lot.
Value-added Tax
Transactions deemed sale:
a) Transfer, use or consumption not in the course of
business of goods or properties originally intended for sale
or for use in the course of business. Transfer of goods or
properties not in the course of business can take place
when VAT-registered person withdraws goods from his
business for his personal use;
b) Distribution or transfer to: (i) Shareholders or investors
share in the profits of VAT-registered person; (ii) Creditors
in payment of debt or obligation.
c) Consignment of goods if actual sale is not made within
60 days following the date such goods were consigned.
Consigned goods returned by the consignee within the 60-
day period are not deemed sold;
Value-added Tax
d) Retirement from or cessation of business with respect to
all goods on hand, whether capital goods, stock-in-trade,
supplies or materials as of the date of such retirement or
cessation, whether or not the business is continued by the
new owner or successor. The following circumstances shall,
among others, give rise to transactions "deemed sale":
The VAT provided for in Sec. 106 of the Tax Code shall apply to goods
or properties originally intended for sale or use in business, and
capital goods which are existing as of the occurrence of the following:
The VAT shall not apply to goods or properties which are originally
intended for sale or for use in the course of business existing as of the
occurrence of the following:
Consequently, VAT on tollway operations is not really a tax on the tollway user, but
on the tollway operator. Under Section 105 of the Code, VAT is imposed on any
person who, in the course of trade or business, sells or renders services for a fee. In
other words, the seller of services, who in this case is the tollway operator, is the
person liable for VAT. The latter merely shifts the burden of VAT to the tollway user
as part of the toll fees.
For this reason, VAT on tollway operations cannot be a tax on tax even if toll fees
were deemed as a "user’s tax." VAT is assessed against the tollway operator’s gross
receipts and not necessarily on the toll fees. Although the tollway operator may
shift the VAT burden to the tollway user, it will not make the latter directly liable for
the VAT. The shifted VAT burden simply becomes part of the toll fees that one has to
pay in order to use the tollways. (Diaz vs. the SOF and the CIR, GR No. 193007 dated
July 19, 2011)
Value-added Tax
Kinds of Franchise Grantees:
1. Radio and /or television broadcasting – PhP10M
threshold – VAT/3% percentage tax;
2. Gas and Water utilities – 2% percentage tax;
3. Others – PhP1,919,500 threshold/ 3% percentage
tax;
Value-added Tax
Rule on lease of residential units:
1. As a general rule, lease of real property is subject to VAT.
However, Lease of residential units with a monthly rental per
unit not exceeding PhP12,800.00, regardless of the amount of
aggregate rentals received by the lessor during the year are
exempt from VAT.
2.Residential unit - The term “residential units” shall refer to
apartments and houses & lots used for residential purposes, and
buildings or parts or units thereof used solely as dwelling places
(e.g., dormitories, rooms and bed spaces) except motels, motel
rooms, hotels, hotel rooms, lodging houses, inns and pension
houses. The term “unit” shall mean an apartment unit in the
case of apartments, house in the case of residential houses; per
person in the case of dormitories, boarding houses and bed
spaces; and per room in case of rooms for rent.
Value-added Tax
3. Lease of residential units where the monthly rental per unit exceeds
PhP12,800.00 but the aggregate of such rentals of the lessor during the year
do not exceed PhP1,919,500.00 shall likewise be exempt from VAT, however,
the same shall be subjected to 3% percentage tax.
4. In cases where a lessor has several residential units for lease, some are
leased out for a monthly rental per unit of not exceeding P12,800.00 while
others are leased out for more than P12,800.00 per unit, his tax liability will
be as follows:
a) The gross receipts from rentals not exceeding P12,800.00 per month per
unit shall be exempt from VAT regardless of the aggregate annual gross
receipts.
b) The gross receipts from rentals exceeding P12,800.00 per month per unit
shall be subject to VAT if the aggregate annual gross receipts from said
units only (not including the gross receipts from units leased for not more
than P12,800.00) exceeds P1,919,500.00. Otherwise, the gross receipts
will be subject to the 3% tax imposed under Section 116 of the Tax Code.
Value-added Tax
Rule on Common Carriers:
a) Common carriers by land with respect to their gross receipts
from the transport of passengers including operators of
taxicabs, utility cars for rent or hire driven by the lessees
(rent-a-car companies), and tourist buses used for the
transport of passengers shall be subject to the percentage
tax imposed under Sec. 117 of the Tax Code, but shall not be
liable for VAT;
b) Common carriers by land with respect to their gross receipts
from the transport of goods are subject to VAT;
c) Domestic common carriers by air and sea are subject to 12%
VAT on their gross receipts from their transport of
passengers, goods or cargoes from one place in the
Philippines to another place in the Philippines;
Value-added Tax
Rule on Common Carriers:
d) Transport of passengers and cargo by domestic air or
sea carriers from the Philippines to a foreign country
are subject to 0% VAT;
e) Gross receipts derived from transport of cargo from the
Philippines to another country by international air
carriers doing business in the Philippines and
international shipping carriers doing business in the
Philippines are liable to the 3% percentage tax under
Sec. 118 of the Tax Code (amended by RA 10378)
f) Transport of passengers by international carriers shall
be exempt from VAT [109(S) of the Tax Code as amended
by RA 10378]
Value-added Tax
Rules on some important services:
1. Sale of electricity by generation, transmission, and
distribution companies shall be subject to 12% VAT on
their gross receipts; Provided, That sale of power or fuel
generated through renewable sources of energy such as,
but not limited to, biomass, solar, wind, hydropower,
geothermal, ocean energy, and other emerging energy
sources using technologies such as fuel cells and hydrogen
fuels shall be subject to 0% VAT;
2. Dealers in securities and lending investors shall be subject
to VAT on the basis of their gross receipts. However, for
Dealer in Securities, the term "gross receipts" means gross
selling price less cost of the securities sold.
3. PAGCOR is exempt from VAT by virtue of its charter, PD
1869 in relation to Sec. 109 (k);
Value-added Tax
4. Services rendered by Health Maintenance
Organizations (HMOs). HMOs are entities, organized
in accordance with the provisions of the Corporation
Code of the Philippines and licensed by the
appropriate government agency, which arranges for
coverage or designated managed care services
needed by plan holders/members for fixed prepaid
membership fees and for a specified period of time.
5. Director’s fees are not subject to VAT. Fees and
allowances being given to a director of a corporation
are not derived from an economic or commercial
activity pursued in the course of trade or business.
Rather, these are paid in the exercise of the right of an
owner in the management of a corporation. (RMC No.
77-2008 dated November 24, 2008)
Value-added Tax
"(a) Export Sales. - The term 'export sales' means:
"(1) The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed upon
which may influence or determine the transfer of ownership of the goods so
exported and paid for in acceptable foreign currency or its equivalent in
goods or services, and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas,(BSP);
"(2) Sale of raw materials or packaging materials to a nonresident buyer for
delivery to a resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the said
buyer's goods and paid for in acceptable foreign currency and accounted for
in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP):
"(3) Sale of raw materials or packaging materials to export-oriented
enterprise whose export sales exceed seventy percent (70%) of total annual
production;
"(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
"(5) Those considered export sales under Executive Order No. 226, otherwise
known as the Omnibus Investment Code of 1987, and other special laws; and
"(6) The sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations.
Value-added Tax
"(b) Foreign Currency Denominated Sale. - The
phrase 'foreign currency denominated sale' means
sale to a nonresident of goods, except those
mentioned in Sections 149 and 150, assembled or
manufactured in the Philippines for delivery to a
resident in the Philippines, paid for in acceptable
foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP).
Formula:
We have ruled in several cases that the printing of the word “zero-
rated” is required to be placed on VAT invoices or receipts covering
zero-rated sales in order to be entitled to claim for tax credit or refund.
In Panasonic v. Commissioner of Internal Revenue, we held that the
appearance of the word “zero-rated” on the face of invoices covering
zero-rated sales prevents buyers from falsely claiming input VAT from
their purchases when no VAT is actually paid. Absent such word, the
government may be refunding taxes it did not collect.
Value-added Tax
Administrative Claim for refund Judicial Claim for refund
After the taxpayer has filed its
administrative claim for refund with
a) Zero-rated - within 2 the BIR above, the taxpayer has the
duty to submit all supporting
years after the close of documents. Within 120 days from
the taxable quarter when the complete submission of
documents, the CIR shall decide on
the zero-rated sales are the refund.
made.
The taxpayer must appeal to the CTA:
b) Cancellation of VAT-
registration - 2 years (1) In case the CIR acted on the claim
for refund, within 30 days from the
from the date of denial of the claim for refund; or,
cancellation. (2) In case of inaction, within 30 days
from the lapse of the 120 day period.
[Sec. 112(C)]
Value-added Tax
The above proviso clearly provides in no
uncertain terms that unutilized input VAT
payments not otherwise used for any internal
revenue tax due the taxpayer must be claimed
within two years reckoned from the close of the
taxable quarter when the relevant sales were
made pertaining to the input VAT regardless of
whether said tax was paid or not. (CIR vs.
Mirant Pagbilao)
Value-added Tax
For the 1st Quarter of 2013, X a VAT-registered
person purchased PhP10,000 (VAT exclusive) worth
of goods from Z, also a VAT-registered person and
subsequently sold the same for PhP30,000 to the
Asian Development Bank (VAT exclusive).
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 taxpayer's 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.
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.
Value-added Tax
Respondent's assertion that the non-observance of the 120-day period is not fatal to the
filing of a judicial claim as long as both the administrative and the judicial claims are filed
within the two-year prescriptive period has no legal basis.
There is nothing in Section 112 of the NIRC to support respondent's view. Subsection (A)
of the said provision states that "any VAT-registered person, whose sales are zero-rated
or effectively zero-rated may, within two 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." The phrase "within two (2)
years . . . apply for the issuance of a tax credit certificate or refund" refers to applications
for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent
in the first paragraph of subsection (D) of the same provision, which states that the CIR
has "120 days from the submission of complete documents in support of the application
filed in accordance with Subsections (A) and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112
(D) of the NIRC, which already provides for a specific period within which a taxpayer
should appeal the decision or inaction of the CIR. The second paragraph of Section 112
(D) of the NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the
lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In
both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we
see it then, the 120-day period is crucial in filing an appeal with the CTA. (CIR vs. Aichi
Forging Asia, GR No. 184823 dated October 6, 2010)
Value-added Tax
Summary of rules:
1. An administrative claim must be filed with the CIR
within 2 years after the close of the taxable quarter
when the zero-rated or effectively zero-rated sale
were made.
2. The CIR has 120 days from the date of submission of
complete documents in support of the administrative
claim within which to decide whether to grant a
refund or issue a tax credit certificate. The 120-day
period may extend beyond the 2-year period from the
filing of the administrative claim if the claim is filed in
the later part of the 2-year period. If the 120-day
period expires without any decision from the CIR,
then administrative claim may be considered to be
denied by inaction.
Value-added Tax
3. A judicial claim must be filed with the CTA
within 30 days from the receipt of the CIR’s
decision denying the administrative claim or
from the expiration of he 120-day period
without action from the CIR.
Value-added Tax
Refund shall be made upon warrants drawn by
the Commissioner of Internal Revenue or by his
duly authorized representative without the
necessity of being countersigned by the
Chairman, Commission on Audit (COA), the
provision of the Revised Administrative Code to
the contrary notwithstanding; Provided, that
refunds under this paragraph shall be subject to
post audit by the COA.
Value-added Tax
Issuance of a VAT Invoice or VAT Receipt by a non-VAT
person. — If a person who is not VAT-registered issues an
invoice or receipt showing his TIN, followed by the word
"VAT", the erroneous issuance shall result to the following:
• The five percent (5%) final VAT withholding rate shall represent the net
VAT payable of the seller. The remaining seven percent (7%) effectively
accounts for the standard input VAT for sales of goods or services to
government or any of its political subdivisions, instrumentalities or
agencies including GOCCs in lieu of the actual input VAT directly
attributable or ratably apportioned to such sales. Should actual input VAT
attributable to sale to government exceeds seven percent (7%) of gross
payments, the excess may form part of the sellers' expense or cost. On the
other hand, if actual input VAT attributable to sale to government is less
than seven percent (7%) of gross payment, the difference must be closed
to expense or cost.
Value-added Tax
Withholding VAT:
• The five percent (5%) final VAT withholding rate shall represent the net
VAT payable of the seller. The remaining seven percent (7%) effectively
accounts for the standard input VAT for sales of goods or services to
government or any of its political subdivisions, instrumentalities or
agencies including GOCCs in lieu of the actual input VAT directly
attributable or ratably apportioned to such sales. Should actual input VAT
attributable to sale to government exceeds seven percent (7%) of gross
payments, the excess may form part of the sellers' expense or cost. On the
other hand, if actual input VAT attributable to sale to government is less
than seven percent (7%) of gross payment, the difference must be closed
to expense or cost.
Value-added Tax
Suspension or Closure of business:
In addition to other administrative and penal sanctions
provided for in the Tax Code and implementing regulations,
the Commissioner of Internal Revenue or his duly authorized
representative may order suspension or closure of a business
establishment for a period of not less than five (5) days for
any of the following violations: