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Taxation Law Review Questions and Answers

1. What are the requisites for claiming unutilized/excess input VAT?

The requisites for claiming unutilized/excess input VAT are the

following: 1.) taxpayer-claimant is VAT-registered; 2.) taxpayer-
claimant is engaged in zero-rated or effectively zero-rated sales; 3.)
there are creditable input taxes due or paid attributable to the zero-
rated sales; 4.) the input tax has not been applied against the
output tax; and 4.) the application and the claim for a refund have
been filed within the prescribed period.

2. On June 27, 2003, Company A filed administrative claim for the period of
April 1, 2001 to February 28, 2003. Then on June 30, 2003, it filed a
judicial claim before the CTA. Was the judicial claim timely filed?

No. The judicial claim was filed before the CTA ON June 30,
2003 or before the period when BIR Ruling No.DA-489-03 was in
effect. As such, it was incumbent upon Company A to wait for the
lapse of the 120-day period before seeking relief with the CTA, and
considering that its judicial claim was filed only after 3 days later, it
can be correctly dismissed for being prematurely filed.

3. On May 31, 2005, administrative claim was filed by X Co. for period of
March 1, 2003 to August 1, 2004. And on the same date, it filed petition
for review before the CTA. Should the petition be dismissed?

No. The administrative and judicial claims were both filed on

May 31, 2005 or during the period of effectivity of the BIR Ruling
DA-489-03(Dec 10, 2003- Oct 6, 2010) and thus within the
exemption that taxpayer need not wait for the expiration of the 120-
day period before seeking judicial relief.

4. CTA en banc affirmed the decision of CTA in Division that J. Company failed
to comply with the substantiation requirements, so it dismissed the
petition. CTA explained that sales invoices, transfer slips, and credit
memos did not comply with the substantiation requirements considering
that J.Companys sales are sales of services.
Is VAT official receipt necessary to prove excess and unutilized input
VAT to be granted refund or tax credit?

Yes. A VAT official receipt is necessary for every lease of

goods or properties, and every sale, barter or exchange of services
while a VAT invoice is necessary for every sale, barter or exchange
of goods or properties.
In other words, VAT invoice is sellers best proof of the sale of
the goods or services to the buyer while VAT receipt is the buyers
best evidence of the payment of goods or services received from
the seller. (Nippon Express vs. CIR, 4 Feb 2015)

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Taxation Law Review Questions and Answers

5. Y Corporation filed on September 24, 2001 applications for tax credit or

refund. Then, on April 24, 2002 it filed petition for review before the CTA.
Was the petition for review timely filed by Y Corporation with the CTA?

No. the judicial claim was filed beyond the 30-day period. The
administrative claim was filed on September 24, 2001, the last day
of the 120-day period is on January 22, 2001, and the last day of
the 30-day period to judicially appeal inaction is on February 21,
2002. However, Y Corporation filed its petition for review only on
April 24, 2002. (Nippon Express vs. CIR, 4 Feb 2015)

6. Can the Supreme Court decide on issue on whether a taxpayer has

presented sufficient proof of its claim for excess and unutilized input VAT?

As a general rule, no. the Court is not a trier of facts and does
not normally undertake the re-examination of the evidence
presented by contending parties during the trial of the case
considering that the findings of facts of the CTA are conclusive and
binding on the Court, more so when affirmed by the CTA En Banc.
However, Supreme Court had recognized several exceptions
to this rule, including when the appellate court manifestly
overlooked relevant facts not disputed by the parties, which, if
properly considered, would probably justify a different conclusion.
(Nippon Express vs. CIR, 4 Feb 2015)

7. On April 14, 2003, Corporation C filed a claim for refund for its excess final
withholding taxes allegedly erroneously withheld and collected for the
years 2001 and 2002 with the BIR. It claimed that the interest income
derived by Foreign Bank from which it borrowed money is subject only to a
preferential rate of 10% under relevant tax treaty. A rate lower than the
rates of withheld final taxes.

CTA First Division disallow the refund on the ground that Corporation C
failed to obtain an International Tax Affairs Division(ITAD) ruling with
respect to its transactions with Foreign Bank.

a.) Should the refund for the excess final withholding tax erroneously
withheld and collected be granted considering that Corporation C failed
to obtain an ITAD Ruling?

Yes. The underlying principle of prior application with the BIR

becomes moot in refund cases where the very basis of the claim is
erroneous or there is excessive payment arising from the non-
availment of a tax treaty relief at the first instance. CBK
Power[Corporation C] could not have applied for a tax treaty relief
15 days prior to its payment of the final withholding tax on the
interest paid to its lenders precisely because it erroneously paid
said tax on the basis of the regular rate as prescribed by the NIRC,

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Taxation Law Review Questions and Answers

and not on the preferential tax rate provided under the tax treaty.
Prior application requirement under RMO No. 1-2000 then becomes
illogical.(CBK Power Company vs. CIR, 14 Jan 2015)

b.) May the BIR add a requirement, like prior application for an ITAD Ruling
that is not found in the income tax treaties signed by the Philippines,
before a taxpayer can avail of the preferential tax rates under said

No. The BIR should not impose additional requirements that

would negate the availment of the reliefs provided for under
international agreements, especially since said tax treaties do not
provide for any prerequisite at all for the availment of the benefits
under said agreement. The application for a tax treaty relief from
the BIR should merely operate to confirm the entitlement of the
taxpayer to the relief (CBK Power Company vs. CIR, 14 Jan 2015)

8. AB Power filed with the BIR on March 4, 2005 a refund of excess final
withholding taxes covering taxable year 2003. Then on March 9, 2005, it
filed before the CTA a petition for review. The Commissioner argued that
the failure on the part of AB Power to give him a reasonable time to act on
said claim is violative of the doctrine of exhaustion of administrative
remedies. Rule.

The case should be decided in favor of AB Power. According

to Section 229 of the NIRC, the suit for recovery of any internal
revenue tax alleged to have been erroneously or illegally assessed
or collected must be filed within 2 years from the date of payment.
But, the same can be maintained only if there is prior administrative
claim with the Commissioner.
In the case at hand, the fact that the judicial claim was filed 5
days after the filing administrative claim is of no moment. What is
only required by the law is that an administrative claim be filed
before the judicial claim.
According to CBK Power Company Limited vs. CIR, 14 January
2015, Section 229 of the NIRC does not imply that the
Commissioner must first act upon the taxpayers claim, and that the
taxpayer shall not go to court before he is notified of the
Commissioners action. The claim with the Commissioner was
intended primarily as a notice of warning that unless a tax or
penalty alleged to have been collected erroneously or illegally is
refunded, the court action will follow.

9. X Assurance Company issued customs bonds to its clients in favor of the

BOC. These bonds secure the release of imported goods in order that the

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Taxation Law Review Questions and Answers

goods may be released from the BOC without prior payment of the
corresponding customs duties and taxes. BOC filed for collection of money
against XAC with the RTC. RTC then decided in favor of BOC. XAC appealed
the decision to the Court of Appeals. But the CA dismissed the same for
lack of jurisdiction. According to the CA, the suit is one for collection of
taxes and should have been appealed to the Court of Tax Appeals.

Was the CA correct in dismissing the case?

No. In the instant case, the original complaint filed with the
trial court was in the nature of a collection case, purportedly to
collect on the obligation of petitioner by virtue of the bonds
executed by it in favor of respondent, essentially a contractual
obligation. An action to collect on a bond used to secure the
payment of taxes is not a tax collection case, but rather a simple
case for enforcement of a contractual liability.

As soon as the bond was executed, the taxpayer assumed a

second and entirely distinct obligation, and became subject to a
new and entirely different kind of liability. The new liability was
voluntary and contractual. It was in form of direct and primary
obligation, not to pay a tax, but to pay the sum defeasible only
upon payment by the taxpayer of a certain amount to be fixed by
subsequent action of the Commissioner. (Philippine British
Assurance Company vs. RP, 2 Feb 2010)

a.) When is a taxpayer required to pay VAT?
It is when his output taxes exceed his input taxes that he has to
pay the excess.

b.) When it is that no payment is required of him?

It is if at the end of a taxable quarter the seller charges output
taxes equal to the input taxes that his suppliers passed on to him ,
no payment is required on him.

c.) What if the input taxes exceed the output taxes?

The excess payment shall be carried over to the succeeding quarter
or quarters.

d.) What if the input taxes result from zero-rated or effectively zero-rated
If the input taxes result from zero-rated or effectively zero-
rated transactions or from the acquisition of capital goods, any
excess over the output taxes shall instead be refunded to the

e.) What is zero-rated transaction?

The tax rate in this case is zero. When applied to the tax base
or the selling price of the goods or services sold, such zero-rate

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Taxation Law Review Questions and Answers

results in no tax chargeable against the foreign buyer or customer.

But, although the seller in such transactions charges no output tax,
he can claim a refund of the VAT that his suppliers charged him.

f.) What are required in effective zero-rating?

For effective zero-rating, the taxpayer has to be VAT-
registered and must comply with invoicing requirements.

11.Should the taxpayers claim for refund of the VAT it paid as a zero-rated
taxpayer be denied on the ground that its sales invoices did not state on
their faces that its sales were zero rated?

Yes. The word zero-rated must be printed on the invoice.

The appearance of this word on the face of invoices covering zero-
rated sales prevents buyers from falsely claiming input VAT from
their purchase when no VAT was actually paid. Further, this helps
segregate sales that are subject to 12% VAT from sales that are
zero-rated. Unable to submit the proper invoices, taxpayer has been
unable to substantiate its claim for refund. (Panasonic
Communications vs. CIR, 8 Feb 2010)

12.What is the meaning of exception?

An exception is that which would otherwise be included in the

provision from which it is excepted. It is a clause which exempts
something from the operation of a statute by express words.
Further, an exception need not be introduced by the words except
or unless. An exception will be construed as such if it removes
something from the operation of a provision of law. (South African
Airways vs. CIR, 16 Feb 2010)

13.Give the distinction between tax and debt.

Debts are due to the Government in its corporate capacity,

while taxes are due to the Government in its sovereign capacity.
(South African Airways vs. CIR, 16 Feb 2010)

14. In what cases may tax refund be set off from tax accrued deficiency?

As a rule, taxes cannot be subject to compensation for the

simple reason that the government and the taxpayer are not
creditors and debtors of each other.
However, offsetting of a tax refund with a tax deficiency can
be granted. First, to grant refund without the determination of the
proper assessment and the tax due would inevitably result in
multiplicity of proceedings or suits. Second, the grant of refund is

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Taxation Law Review Questions and Answers

founded on the assumption that the tax return is valid, that is, the
facts stated therein are true and correct. The deficiency
assessment, although not yet final, created a doubt as to and
constitutes a challenge against the truth and accuracy of the facts
stated in said return which, by itself and without unquestionable
evidence, cannot be the basis for the grant of the refund. (South
African Airways vs. CIR, 16 Feb 2010)

15.BIR issued a Preliminary Assessment Notice(PAN) to Bank A for deficiency

Documentary Stamp Tax (DST). Bank A received the PAN and filed a
protest. Then, BIR wrote a Formal Letter of Demand with Assessment
Notices to Bank A. The formal letter contained This is our final decision
based on investigation. If you disagree, you may appeal this final decision
within 30 days from receipt hereof, otherwise said deficiency tax
assessment shall become final, executory and demandable

Bank A did not protest the final assessment notices. Instead, it filed a
Petition for Review with the CTA. The CTA dismissed the same holding that
it is neither the assessment nor the formal demand itself that is
appealable to the CTA, but the decision of the CIR.

Is the dismissal proper?

No. This case is an exception to the rule on exhaustion of

administrative remediesestoppel on the part of the administrative
agency concerned.The formal letter of demand with assessment
notices which was not administratively protested by the petitioner
can be considered a final decision of the CIR appealable to the CTA
because the words used, specifically the words final decision and
appeal, taken together led petitioner to believe that the formal
letter of demand was in fact the final decision of the CIR on the
letter protest it filed and that the available remedy was to appeal
the same to the CTA. (Allied Banking Corporation vs CIR, 5 Feb

a.) Are pawnshops subject to VAT?
No, but it is liable for percentage tax on gross receipts from 0% to

b.) How should pawnshops be classified for purposes of VAT and

percentage taxes? Pawnshops are classified by RA 9238 as Other
Non-Bank Financial Intermediaries.

c.) What is the nature of pawnshop ticket?

Pawn ticket is neither a security nor a printed evidence of
indebtedness but a proof of an exercise of a taxable privilege of
concluding a contract of pledge. This is subject to documentary
stamp tax.

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Taxation Law Review Questions and Answers

d.) Give the definition of documentary stamp tax.

Documentary stamp tax is an excise tax on the exercise of a

right or privilege to transfer obligations, rights, or properties
incident thereto.

e.) When may a taxpayer not be liable to surcharges and delinquent tax in
not paying documentary stamp taxes?

When the taxpayer relied on the rulings of the CIR and the
CTA that pawn tickets are not subject to documentary stamp taxes.
(Tambunting Pawnshop vs. CIR, 2 January 2010)

17.In 1996, PS Petroleum Corporation imported and the crude oil before the
effectivity of RA 8180 reducing the tariff duty on imported crude oil from
10% to 3%. It was unloaded on April 10, 1996. It then filed the Import
Entry and Internal Revenue Declaration and paid the import duty of the
shipment of crude oil on May 23, 1996 (after the effectivity of said law),
so, at the rate of 3%.

In 2000 or after more than 4 years, it received a demand letter from BOC
assessing deficiency customs duties due from the crude oil importation,
representing the difference between the amount allegedly due at the old
rate of 10% and the actual amount paid.

In 2001 or five years after PS Petroleum Corp paid the alleged deficient
import duty, it received from the Commissioner of Customs a demand
letter for the payment of the amount representing the dutiable value of its
1996 crude oil importation which had been allegedly abandoned in favor
of the government by operation of law. COC stated that this is because
IEIRD covering the said importation had been irregularly filed and
accepted beyond the 30-day period prescribed by law.

a.) Should PS Petroleum Corp be still held liable?

No, PS Petroleum Corp should not be held liable to pay the

assessed deficiency customs duties. This is because the claim of the
Commissioner of Customs against PS Petroleum Corp has already
In the absence of fraud, the entry and corresponding
payment of duties made by the importer becomes final and
conclusive upon parties after 1 year from the date of the payment
of duties.
In the present case, it was only more than 4 years later that
PS Petroleum received a demand letter for the alleged unpaid duties
covering the shipment of crude oil. There being no evidence of
fraud in belatedly filing the import entry, the right of the COC to
question the propriety thereof and to collect the amount of the

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Taxation Law Review Questions and Answers

alleged deficiency customs duties have already prescribed.

( Pilipinas Shell Petroleum Corporation vs. Commissioner of
Customs, 5 Dec 2016 )

b.) Should PS Petroleum Corp be considered to have impliedly abandoned

the crude oil?

An imported article is deemed abandoned if the owner,

consignee, importer fails to file an entry within a non-extendible 30
days from the date of discharge of the last package from the vessel.

However, this provision is limited by the finality on

liquidation. Thus, if there is already finality of liquidation, as in the
case at hand, there can be no implied abandonment. ( Pilipinas
Shell Petroleum Corporation vs. Commissioner of Customs, 5 Dec
2016 )



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