Fort Bonifacio vs CIR (2013)

Petitioner was a real estate developer that bought from the national government a parcel of land that used to be the Fort
Bonifacio military reservation. At the time of the said sale there was as yet no VAT imposed so Petitioner did not pay any VAT
on its purchase. Subsequently, Petitioner sold two parcels of land to Metro Pacific Corp. In reporting the said sale for VAT
purposes (because the VAT had already been imposed in the interim), Petitioner claimed transitional input VAT corresponding
to its inventory of land. The BIR disallowed the claim of presumptive input VAT and thereby assessed Petitioner for deficiency
VAT.

ISSUE:
Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its nature as a real estate dealer and
if so (i) is the transitional input VAT applied only to the improvements on the real property or is it applied on the value of the
entire real property and (ii) should there have been a previous tax payment for the transitional input VAT to be creditable?

HELD:
YES. Petitioner is entitled to claim transitional input VAT based on the value of not only the improvements but on the value of
the entire real property and regardless of whether there was in fact actual payment on the purchase of the real property or
not.

The amendments to the VAT law do not show any intention to make those in the real estate business subject to a different
treatment from those engaged in the sale of other goods or properties or in any other commercial trade or business. On the
scope of the basis for determining the available transitional input VAT, the CIR has no power to limit the meaning and coverage
of the term "goods" in Section 105 of the Tax Code without statutory authority or basis. The transitional input tax credit
operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisition of their
beginning inventory of goods, materials and supplies.

Taxation; Transitional input tax credit; Prior payment of taxes is not a prerequisite before a taxpayer could avail of the
transitional input tax credit. To reiterate, prior payment of taxes is not necessary before a taxpayer could avail of the 8%
transitional input tax credit. This position is solidly supported by law and jurisprudence, viz:

First. Section 105 of the old National Internal Revenue Code (NIRC) clearly provides that for a taxpayer to avail of the 8%
transitional input tax credit, all that is required from the taxpayer is to file a beginning inventory with the Bureau of Internal
Revenue (BIR). It was never mentioned in Section 105 that prior payment of taxes is a requirement.

Second. Since the law (Section 105 of the NIRC) does not provide for prior payment of taxes, to require it now would be
tantamount to judicial legislation which, to state the obvious, is not allowed.

Third. A transitional input tax credit is not a tax refund per se but a tax credit. Logically, prior payment of taxes is not required
before a taxpayer could avail of transitional input tax credit. As we have declared in our September 4, 2012 Decision, “[t]ax
credit is not synonymous to tax refund. Tax refund is defined as the money that a taxpayer overpaid and is thus returned by
the taxing authority. Tax credit, on the other hand, is an amount subtracted directly from one’s total tax liability. It is any
amount given to a taxpayer as a subsidy, a refund, or an incentive to encourage investment.”

CIR vs Ironcon Builders (2010)

CIR vs Seagate Technology (2005)

FACTS:
Respondent is a resident foreign corporation duly registered with the Securities and Exchange Commission to do business in
the Philippines and is registered with the Philippine Export Zone Authority (PEZA). The respondent is Value Added Tax-
registered entity and filed for the VAT returns. An administrative claim for refund of VAT input taxes in the amount of
P28,369,226.38 with supporting documents (inclusive of the P12,267,981.04 VAT input taxes subject of this Petition for
Review), was filed on 4 October 1999 and no final action has been received by the respondent from the petitioner on the claim
for VAT refund. Hence, petitioner is sued in his official capacity. The Tax Court rendered a decision granting the claim for
refund and CTA affirmed the decision. Hence, the present petition for certiorari.

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 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 the law. That no VAT shall be imposed directly upon
business establishments operating within the ecozone under RA 7916 also means that no VAT may be passed on and imposed
indirectly. Quando aliquid prohibetur ex directo prohibetur et per obliquum. When anything is prohibited directly, it is also
prohibited indirectly. Special laws expressly grant preferential tax treatment to business establishments registered and
operating within an ecozone, which by law is considered as a separate customs territory. As such, respondent is exempt from
all internal revenue taxes, including the VAT, and regulations pertaining thereto. Thus, the petition is denied and the decision
of lower courts affirmed.