Professional Documents
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ISSUE:
Whether COMASERCO is liable to pay VAT?
RULING:
Yes.
Value Added Tax (VAT)
VAT is a tax on transactions, imposed at every stage of the distribution process on
the sale, barter, exchange of oods or property, and on the performance of services,
even in the absence of profit attributable thereto.
Non-stock, non-profit orrganization or government entity is liable to pay VAT for
the sale of goods and services.
Sales of Services
It is the performance of all kinds of services for others for a fee, remuneration or
consideration.
It includes supply of technical advice, assistance with technical management, as in
this case.
As long as the entity provides service for a fee, remuneration, or consideration,
then the services rendered is subject to VAT.
Any exemption from the tax must be clearly stated in the language of the law.
Ratio: Lifeblood Doctrine.
Thus, construed strictly against the grantee.
2. American Express vs. Commissioner
COMMISSIONER OF INTERNAL REVENUE - versus - AMERICAN
EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH),
G.R. No. 152609
Held: YES. Section 102 of the Tax Code provides for the VAT on sale of services and
use or lease of properties. Section 102B particularly provides for the services or
transactions subject to 0% rate:
(1) Processing, manufacturing or repacking goods for other persons doing business
outside the Philippines which goods are subsequently exported, where the services are
paid for in acceptable foreign currency and accounted for in accordance with the rules
and regulations of the BSP;
(2) Services other than those mentioned in the preceding subparagraph, e.g. those
rendered by hotels and other service establishments, the consideration for which is paid
for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the BSP.
Under subparagraph 2, services performed by VAT-registered persons in the Philippines
(other than the processing, manufacturing or repackaging of goods for persons doing
business outside the Philippines), when paid in acceptable foreign currency and
accounted for in accordance with the R&R of BSP, are zero-rated. Respondent renders
service falling under the category of zero rating. As a general rule, the VAT system uses
the destination principle as a basis for the jurisdictional reach of the tax. Goods and
services are taxed only in the country where they are consumed. Thus, exports are zero-
rated, while imports are taxed. In the present case, the facilitation of the collection of
receivables is different from the utilization of consumption of the outcome of such
service. While the facilitation is done in the Philippines, the consumption is not. The
services rendered by respondent are performed upon its sending to its foreign client the
drafts and bulls it has gathered from service establishments here, and are therefore,
services also consumed in the Philippines. Under the destination principle, such service is
subject to 10% VAT. However, the law clearly provides for an exception to the
destination principle; that is 0% VAT rate for services that are performed in the
Philippines, “paid for in acceptable foreign currency and accounted for in accordance
with the R&R of BSP.” The respondent meets the following requirements for exemption,
and thus should be zero-rated:
Facts: Petitioner Silicon Philippines, Inc. is a corporation duly organized and existing
under the laws of the Philippines. It is registered with the BIR das a VAT-taxpayer and
with the BOI as a preferred pioneer enterprise. On May, 1999, Silicon filed with the
CIR an application for credit/refund of unutilized input VAT for the period of Oct. 1,
1998 to Dec. 31, 1998.Due to the inaction of the CIR, it, filed a Petition for Review
with the CTA Division. Silicon alleged that the 4th quarter of 1998, it generated and
recorded zero-rated export sales paid to Silicon in acceptable foreign currency and that
for the said period, Silicon paid input VAT in the total amount which have not been
applied to any output VAT.
The Respondent on the other hand, raised the defenses that Petitioner did not show that
it complied with the provisions of Sec. 229 of the Tax Code; that claims for refund are
construed strictly against the claimant similar to the nature of exemption from taxes;
and that Silicon failed to prove that is entitled for refund.
The CTA Division granted Silicon’s claim for refund of unutilized input VAT on
capital goods. However, it denied Silicon’s claim for credit/refund of input VAT
attributable to its zero-rated export sales for the reason that it failed to present an
Authority to Print (ATP) from the BIR and it did not also it print on its export sales
invoices the ATP and the word zero-rated.
Issue: Whether or not a claimant for unutilized input VAT on zero-rated sales is
required to present proof that it has secured an ATP from the BIR prior to the printing
of its invoices or receipts.
Held: YES. The Court held that since ATP is not indicated in the invoices or receipts,
the only way to verify whether the invoices or receipts are duly registered is by
requiring the claimant to present its ATP from the BIR. Without which, the invoices
would have no probative value for the purpose of refund. Failure to print the word
“zero-rated” on the sales invoices is fatal to a claim for refund of input VAT. In
compliance with Sec. 4.108-1 of RR 7-95, requiring the printing of the word “zero-
rated” on the invoice covering zero-rate sales is essential as this regulation proceeds
from the rulemaking authority of the Secretary of Finance under Sec. 244of the NIRC.
In the present case, Silicon Philippines, Inc., failed to present its ATP and to print the
word “zero-rated” on its export sales invoices. Thus, the claim for credit/refund of
input VAT attributable to its zero-rated sales must be denied.
NAPOCOR paid capacity and energy fees to the Consortium in a mixture of currencies
(Mark, Yen, and Peso). The freely convertible non-Peso component is deposited directly
to the Consortium’s bank accounts in Denmark and Japan, while the Peso-denominated
component is deposited in a separate and special designated bank account in the
Philippines. On the other hand, the Consortium pays [respondent] in foreign currency
inwardly remitted to the Philippines through the banking system.
Respondent chose to register as a VAT taxpayer and availed of the Voluntary Assessment
Program (VAP) of the BIR. Thereafter, it paid the amount of P6,994,659.67 through
BIR’s collecting agent, PCIBank, as its output tax liability for the year 1996. On April
22,1999, filed a claim for the issuance of a tax credit certificate with Revenue District
No. 113 of the BIR. Respondent believed that it erroneously paid the output VAT for
1996 due to its availment of the Voluntary Assessment Program (VAP) of the BIR.
HELD: The Tax Code not only requires that the services be other than "processing,
manufacturing or repacking of goods" and that payment for such services be in
acceptable foreign currency accounted for in accordance with BSP rules. Another
essential condition for qualification to zero-rating under Section 102(b)(2) is that the
recipient of such services is doing business outside the Philippines. If the provider and
recipient of the "other services" are both doing business in the Philippines, the payment
of foreign currency is irrelevant. Otherwise, those subject to the regular VAT under
Section 102(a) can avoid paying the VAT by simply stipulating payment in foreign
currency inwardly remitted by the recipient of services.
Facts:
National Development Company (NDC) decided to sell its National Marine
Corporation (NMC)’s shares and five of its vessels through a public bidding. The sale
comes with an agreement that the winning bidder will have to pay 10% VAT on the
value of the vessels.
They entered into a contract of sale with the respondent company, Magsaysay Lines.
As per arrangement, an irrevocable confirmed Letter of Credit previously filed as
bidder’s bond was accepted by NDC as security for the payment of VAT, if any.
Meanwhile, Magsaysay filed a formal request for a ruling on whether or not the sale
of the vessels was subject to VAT.
BIR ruled that the sale of the vessels was subject to 10% VAT since NDC was a
VAT-registered enterprise and thus, its transactions incident to its normal VAT
registered activities are subject to such tax. Magsaysay filed an MR but was denied by
the BIR. Hence, NDC drew on the letter of credit.
Magsaysay then filed for an appeal and petition for refund before the CTA. CTA
granted the petition ruling that the sale was an isolated transaction not done in the
ordinary course of business or trade. CA, after its reversal of its earlier decision,
affirmed such ruling of the CTA. Hence, this petition.
Issue:
Whether or not the sale by NDC of its vessels to Magsaysay Lines was subject to
VAT
Ruling:
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, but no final action has been received by the respondent from the
petitioner on the claim for VAT refund. CIR asserts that by virtue of the PEZA
registration alone of respondent, the latter is not subject to the VAT. Consequently, the
capital goods and services respondent has purchased are not considered used in the VAT
business, and no VAT refund or credit is due.
Respondent, which as an entity is exempt, is different from its transactions which are not
exempt. The end result, however, is that it is not subject to the VAT. The non-taxability
of transactions that are otherwise taxable is merely a necessary incident to the tax
exemption conferred by law upon it as an entity, not upon the transactions themselves.
The petitioner’s assertion that the capital goods and services respondent has purchased
are not considered used in the VAT business, and thus no VAT refund or credit is due is
non sequitur. On this matter, the SC held that by the VAT’s very nature as a tax on
consumption, the capital goods and services respondent has purchased are subject to the
VAT, although at zero rate.
Seagate has complied with all the requisites for VAT refund or credit. First, respondent is
a VAT-registered entity. Second, the input taxes paid on the capital goods of respondent
are duly supported by VAT invoices and have not been offset against any output taxes.
Having determined that respondent’s purchase transactions are subject to a zero VAT
rate, the SC has determined that tax refund or credit is in order.
Facts:
Petitioner Microsoft Philippines, Inc. (Microsoft) is a value-added tax (VAT) taxpayer
duly registered with the Bureau of Internal Revenue (BIR). It renders marketing services
to Microsoft Operations Pte Ltd. (MOP) and Microsoft Licensing, Inc. (MLI), both
affiliated non-resident foreign corporations. The services are paid for in acceptable
foreign currency and qualify as zero-rated sales for VAT purposes under Section 108(B)
(2) of the National Internal Revenue Code (NIRC) of 1997, as amended. Section 108(B)
(2) states:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties.
(B) Transactions Subject to Zero Percent (0%) Rate. The following services performed in
the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate:
(1) Processing, manufacturing or repacking goods for other persons doing business
outside the Philippines which goods are subsequently exported x x x;
(2) Services other than those mentioned in the preceding paragraph, the consideration for
which is paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas(BSP); x x x
On December 27, 2002, Microsoft filed an administrative claim for tax credit of VAT
input taxes in the amount of P11,449,814.99 with the BIR. The administrative claim for
tax credit was filed within two years from the close of the taxable quarters when the zero-
rated sales were made. Subsequently on April 23, 2003, due to the BIR's inaction,
Microsoft filed a petition for review with the CTA. Microsoft claimed to be entitled to a
refund of unutilized input VAT attributable to its zero-rated sales and prayed that
judgment be rendered directing the claim for tax credit or refund of VAT input taxes for
taxable year 2001. However, on 16 June 2003, respondent Commissioner of Internal
Revenue (CIR) filed his answer and prayed for the dismissal of the petition for review.
The CTA Second Division, in a Decision dated August 31, 2006, denied the claim for tax
credit of VAT input taxes. The CTA explained that Microsoft failed to comply with the
invoicing requirements of Sections 113 and 237 of the NIRC as well as Section 4.108-1
of Revenue Regulations No. 7-95 (RR 7-95). The CTA stated that Microsoft's official
receipts do not bear the imprinted word zero-rated on its face, thus, the official receipts
cannot be considered as valid evidence to prove zero-rated sales for VAT purposes.
Microsoft filed a motion for reconsideration which was denied by the CTA Second
Division in a Resolution dated 8 January 2007.
A petition for review was then filed with the CTA En Banc but on October 24, 2007, the
CTA En Banc denied the petition for review and affirmed in toto the Decision of the
CTA Second Division. Hence, this petition.
Issue:
Whether or not Microsoft is entitled to a claim for a tax credit or refund of VAT input
taxes on domestic purchases of goods or services attributable to zero-rated sales for the
year 2001 even if the word zero-rated is not imprinted on Microsoft's official receipts.
Ruling:
The Court found the petition lack of merit. The Court sees no reason to disturb the CTA's
findings since Microsoft failed to comply with the invoicing requirements of the NIRC
and its implementing revenue regulation to claim a tax credit or refund of VAT input tax
for taxable year 2001.
A tax credit or refund, like tax exemption, is strictly construed against the taxpayer. The
taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to
the refund or credit, in this case VAT input tax, by submitting evidence that he has
complied with the requirements laid down in the tax code and the BIR's revenue
regulations under which such privilege of credit or refund is accorded.
Sections 113(A) and 237 of the NIRC which provide for the invoicing requirements for
VAT-registered persons state:
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.
(A) Invoicing Requirements. A VAT-registered person shall, for every sale, issue an
invoice or receipt. In addition to the information required under Section 237, the
following information shall be indicated in the invoice or receipt:
(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's
identification number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the value-added tax. x x x
SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. All persons subject to
an internal revenue tax shall, for each sale or transfer of merchandise or for services
rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or
sales or commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature of service:
Provided, however, That in the case of sales, receipts or transfers in the amount of One
hundred pesos (P100.00) or more, or regardless of the amount, where the sale or transfer
is made by a person liable to value-added tax to another person also liable to value-added
tax; or where the receipt is issued to cover payment made as rentals, commissions,
compensations or fees, receipts or invoices shall be issued which shall show the name,
business style, if any, and address of the purchaser, customer or client: Provided, further,
That where the purchaser is a VAT-registered person, in addition to the information
herein required, the invoice or receipt shall further show the Taxpayer Identification
Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser, customer or client
at the time the transaction is effected, who, if engaged in business or in the exercise of
profession, shall keep and preserve the same in his place of business for a period of three
(3) years from the close of the taxable year in which such invoice or receipt was issued,
while the duplicate shall be kept and preserved by the issuer, also in his place of business,
for a like period.
The Commissioner may, in meritorious cases, exempt any person subject to internal
revenue tax from compliance with the provisions of this Section.
Related to these provisions, Section 4.108-1 of RR 7-95 enumerates the information
which must appear on the face of the official receipts or invoices for every sale of goods
by VAT-registered persons. At the time Microsoft filed its claim for credit of VAT input
tax, RR 7-95 was already in effect. The provision states:
Sec. 4.108-1. Invoicing Requirements. All VAT-registered persons shall, for every sale or
lease of goods or properties or services, issue duly registered receipts or sales or
commercial invoices which must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4. the name, TIN, business style, if any, and address of the VAT-registered purchaser,
customer or client;
5. the word zero-rated imprinted on the invoice covering zero-rated sales; and
6. the invoice value or consideration.
xxx
Only VAT-registered persons are required to print their TIN followed by the word VAT
in their invoices or receipts and this shall be considered as a VAT invoice. All purchases
covered by invoices other than a VAT invoice shall not give rise to any input tax.
(Emphasis supplied)
The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and
revenue regulations are clear. A VAT-registered taxpayer is required to comply with all
the VAT invoicing requirements to be able to file a claim for input taxes on domestic
purchases for goods or services attributable to zero-rated sales. A VAT invoice is an
invoice that meets the requirements of Section 4.108-1 of RR 7-95. Contrary to
Microsoft's claim, RR 7-95 expressly states that all purchases covered by invoices other
than a VAT invoice shall not give rise to any input tax. Microsoft's invoice, lacking the
word zero-rated, is not a VAT invoice, and thus cannot give rise to any input tax.
The petition was denied and the Decision of the Court of Tax Appeals En Banc in CTA
EB No. 258 was affirmed
6. CIR vs. Sony Phils.
FACTS:
IN NOVEMBER 1998, THE COMMISIONER OF INTERNAL REVENUE ISSUED A
LETTER OF AUTHORITY NUMBERED 19734 (LOA 19734) WHICH
AUTHORIZED CERTAIN REVENUE EXAMINERS TO EXAMINE SONY
PHILIPPINES ‘ BOOKS OF ACCOUNTS REGARDING REVENUE TAXES FOR
“THE PERIOD 1997 AND UNVERIFIED PRIOR YEARS.”
AFTER THE EXAMINATION OF SAID BOOKS, THE CIR FOUND OUT, AMONG
OTHERS, THAT SONY PHILIPPINES IS LIABLE FOR DEFICIENCY TAXES AND
PENALTIES FOR VALUE ADDED TAX AMOUNTING TO ₱11,141,014.41.
EVENTUALLY THE CASE REACHED THE COURT OF TAX APPEALS AND THE
CTA DECIDED AGREED WITH SONY PHILIPPINES ON THIS ONE. SO DID THE
CTA EN BANC.
ISSUES:
1. IS PETITIONER LIABLE FOR DEFICIENCY VALUE ADDED TAX?
2. WAS THE INVESTIGATION OF ITS 1998 FINAL WITHHOLDING TAX
RETURN VALID?
HELD:
1. NO. SONY PHILIPPINES DID AN FACT INCUR EXPENSES SUPPORTED
BY VALID VAT INVOICES WHEN IT PAID FOR CERTAIN ADVERTISING
COSTS. THIS IS SUFFICIENT TO ACCORD IT THE BENEFIT OF INPUT VAT
CREDITS AND WHERE THE MONEY CAME FROM TO SATISFY SAID
ADVERTISING BILLINGS IS ANOTHER MATTER BUT DOES NOT ALTER THE
VAT EFFECT. IN THE SAME WAY, SONY PHILIPPINES CAN NOT BE DEEMED
TO HAVE RECEIVED THE REIMBURSABLE AS A FEE FOR A VAT-TAXABLE
ACTIVITY. THE REIMBURSABLE WAS COUCHED AS AN AID FOR SONY
PHILIPPINES BY SIS IN VIEW OF THE COMPANY’S “DIRE OR ADVERSE
ECONOMIC CONDITIONS” . MORE IMPORTANTLY, THE ABSENCE OF A SALE,
BARTER OR EXCHANGE OF GOODS OR PROPERTIES SUPPORTS THE NON-
VAT NATURE OF THE REIMBURSEMENT. THIS WAS DISTINGUISHED FROM
THE COMASERCO CASE WHERE EVEN IF THERE WAS SIMILARITY A
REIMBURSEMENT-ON-COST ARRANGEMENT BETWEEN AFFILIATES, THERE
WAS IN FACT AN UNDERLYING SERVICE. HERE, THE ADVERTISING
SERVICES WERE RENDERED IN FAVOR OF SONY PHILIPPINES NOT SIS.
2. NO. A LETTER OF AUTHORITY SHOULD COVER A TAXABLE PERIOD
NOT EXCEEDING ONE YEAR AND TO INDICATE THAT IT COVERS
‘UNVERIFIED PRIOR YEARS’ SHOULD BE ENOUGH TO INVALIDATE IT. IN
ADDITION , EVEN IF THE FINAL WITHHOLDING TAX WAS COVERED BY
SONY PHILIPPINES’ FISCAL YEAR ENDING MARCH 1998, THE SAME FELL
OUTSIDE OF ‘THE PERIOD 1997’ AND WAS THUS NOT VALIDLY COVERED
BY THE LETTER OF AUTHORITY.
ISSUE:
Whether or not petitioner is entitled to the claim for refund on the disallowed portion
RULING:
No. The requirement that the Tax Identification Number (TIN) be imprinted and not
merely stamped is a reasonable requirement imposed by the Bureau of Internal
Revenue (BIR). More importantly, the requirement of the appearance of the words
“zero-rated” on the face of the invoice prevents buyers from falsely claiming input
VAT from their purchases when no VAT was actually paid. The failure to adhere to
the said rules will not only expose the taxpayer to penalties but should also serve to
disallow the claim. Finally, the Court disagreed with the portion that invoices and
receipts are interchangeable since the former clearly refer to sale of goods while the
latter to services.
For the calendar year 2002, petitioner incurred input VAT when it generated and
recorded zero-rated sales in connection with its Service Agreements in the peso
equivalent of P56,898,744.05. Petitioner also incurred input VAT from purchases of
capital goods and other taxable goods and services, and importation of capital goods.
Despite the application of petitioner’s input VAT against its output VAT, an excess of
unutilized input VAT in the amount of P2,050,736.69 remained. Petitioner then filed with
the Commissioner of Internal Revenue (respondent) an application for tax refund and/or
tax credit of its excess/unutilized input VAT from zero-rated sales. However it ruled:
“considering that the subject revenues pertain to gross receipts from services rendered by
petitioner, valid VAT official receipts and not mere sales invoices should have been
submitted in support thereof. Without proper VAT official receipts, the foreign currency
payments received by petitioner from services rendered for the four (4) quarters of
taxable year 2002 in the sum of US$1,102,315.48 with the peso equivalent of
P56,898,744.05 cannot qualify for zero-rating for VAT purposes.
ISSUE: Whether official receipt must be presented, and not sales invoice, to claim the
zero-rated sales.
HELD: Section 113 of the Tax Code does not create a distinction between a sales invoice
and an official receipt.
Section 110. Tax Credits – A. Creditable Input Tax. – (1) Any input tax evidenced by a
VAT invoice or official receipt issued in accordance with Section 113 hereof on the
following transactions shall be creditable against the output tax: (b) Purchase of services
on which a value-added tax has actually been paid.
Issue:
May toll fees collected by tollway operators be subjected to VAT (Are tollway
operations a franchise and/or a service that is subject to VAT)?
Ruling:
When a tollway operator takes a toll fee from a motorist, the fee is in effect for the
latter's use of the tollway facilities over which the operator enjoys private proprietary
rights that its contract and the law recognize. In this sense, the tollway operator is no
different from the service providers under Section 108 who allow others to use their
properties or facilities for a fee.
Tollway operators are franchise grantees and they do not belong to exceptions that
Section 119 spares from the payment of VAT. The word "franchise" broadly covers
government grants of a special right to do an act or series of acts of public concern.
Tollway operators are, owing to the nature and object of their business, "franchise
grantees." The construction, operation, and maintenance of toll facilities on public
improvements are activities of public consequence that necessarily require a special
grant of authority from the state.
A tax is imposed under the taxing power of the government principally for the
purpose of raising revenues to fund public expenditures. Toll fees, on the other hand,
are collected by private tollway operators as reimbursement for the costs and expenses
incurred in the construction, maintenance and operation of the tollways, as well as to
assure them a reasonable margin of income. Although toll fees are charged for the use
of public facilities, therefore, they are not government exactions that can be properly
treated as a tax. Taxes may be imposed only by the government under its sovereign
authority, toll fees may be demanded by either the government or private individuals
or entities, as an attribute of ownership.
ISSUE:
Whether or not PAGCOR should be subjected to income taxation.
HELD:
Yes. Section 1 of R.A. 9337 is constitutional. It was the express intent of Congress to
exclude PAGCOR from the exempt GOCCs hence PAGCOR is now subject to
income taxation.
PAGCOR’s contention that the law violated the constitution is not tenable. The equal
protection clause provides that all persons or things similarly situated should be
treated alike, both as to rights conferred and responsibilities imposed.
When the Supreme Court looked into the records of the deliberations of the
lawmakers when R.A. 8424 was being drafted, the SC found out that PAGCOR’s
exemption was not really based on substantial distinctions. In fact, the lawmakers
merely exempted PAGCOR from income taxation upon the request of PAGCOR
itself. This was changed however when R.A. 9337 was passed and now PAGCOR is
already subject to income taxation.
Anent the issue of the imposition of the 10% VAT against PAGCOR, the BIR had
overstepped its authority. Nowhere in R.A. 9337 does it state that PAGCOR is subject
to VAT. Therefore, that portion of the IRR issued by the BIR is void. In fact, Section
109 of R.A. 9337 expressly exempts PAGCOR from VAT. Further, PAGCOR’s
charter exempts it from VAT.
To recapitulate, PAGCOR is subject to income taxation but not to VAT.
Issue:
WON Aichi's claim for tax refund or credit were filed within two year prescriptive
period provided in the NIRC.
Ruling:
The SC reversed the decision of CTA En Banc on the grounds that the unutilized
input VAT must be claimed within two years. It is clear that Sec. 112 (A) of the NIRC
providing a two-year prescriptive period reckoned from the close of the taxable
quarter when the relevant sales or transactions were made pertaining to the creditable
input VAT, applies to the instant case, and not to the other actions which refer to
erroneous payment of taxes.
CTA En Banc erroneously apllied Secs. 114 (A) and 229 of the NIRC in computing
the two-year prescriptive period for claiming refund or credit of unutilized input
VAT. Thus, the two year period should be reckoned from the close of the taxable
quarter when the sales were made.
13. Fort Bonifacio Development Corp. Vs. CIR
Facts:
Petitioner Fort Bonifacio Development Corporation (FBDC) is engaged in the
development and sale of real property. In 1995, Fort Bonifacio Development
Corporation purchased from the national government a portion of the Fort Bonifacio
reservation. On January 1, 1996, the enactment of RA 7716 extended the coverage of
VAT to real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business. Thus, FBDC sought to register by submitting to
BIR an inventory of all its real properties, the book value of which aggregated to
about P71 B.
In October 1996, FBDC started selling Global City lots to interested buyers. For
the first quarter of 1997, it paid the output VAT by making cash payments to the BIR
and credited its unutilized input tax credit on purchases of goods and services.
Realizing that its 8% transitional input tax credit was not applied in computing its
output VAT for the first quarter of 1997, FBDC filed with the BIR a claim for refund
of the amount erroneously paid as output VAT for the said period.
The CTA denied refund on the ground that “the benefit of transitional input tax
credit comes with the condition that business taxes should have been paid first.” It
contends that since FBDC acquired the Global City property under a VAT-free sale
transaction, it cannot avail of the transitional input tax credit. The CTA likewise
pointed out that under RR 7-95, implementing Section 105 of the old NIRC, the 8%
transitional input tax credit should be based on the value of the improvements on land
such as buildings, roads, drainage system and other similar structures, constructed on
or after January 1, 1998, and not on the book value of the real property.
Issues:
1. WON prior payment of taxes is required in availing of the transitional input tax
credit
2. WON the transitional input tax credit applies only to the value of improvements
Held:
1. No. First, nothing in Sec 105 of the NIRC indicates that prior payment of taxes is
necessary to avail of the transitional input tax credit. Clearly, all it requires is for the
taxpayer to file a beginning inventory with the BIR. Courts cannot limit the
application or coverage of a law nor can it impose conditions not provided therein
because to do so constitutes judicial legislation.
Second, prior payment of taxes is not required to avail of the transitional input tax
credit because it is not a tax refund per se but a tax credit.
Tax 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. Thus, unlike a tax refund, prior payment of taxes is not a prerequisite to
avail of a tax credit.
2. No. Section 4.105-1 of RR 7-95, insofar as it limits the transitional input tax credit
to the value of the improvement of the real properties, is a nullity. The 8% transitional
input tax credit should not be limited to the value of the improvements on the real
properties but should include the value of the real properties as well.
It is apparent that 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. During that period of transition
from non-VAT to VAT status, the transitional input tax credit serves to alleviate the
impact of the VAT on the taxpayer. At the very beginning, the VAT-registered
taxpayer is obliged to remit a significant portion of the income it derived from its
sales as output VAT. The transitional input tax credit mitigates this initial diminution
of the taxpayers income by affording the opportunity to offset the losses incurred
through the remittance of the output VAT at a stage when the person is yet unable to
credit input VAT payments.
Hence, since FBDC is entitled to the 8% transitional input tax credit which is more
than sufficient to cover its output tax for the first taxable quarter, the amount of VAT
output taxes erroneously paid must be refunded.
ISSUE:
Whether on not insurance companies are subject to 3% percentage tax as lending
investors under sec. 182 (A)(3)(DD) and 195-A, respectively in relation to sec.
194(U) all of the NIRC
HELD:
No. SC ruled that respondents are not liable to the 3% percentage tax. The definition
of lending investors under CA No. 466 does not include insurance companies. The
court also said that when a company is taxed on its main business, it is no longer
taxable further for engaging in an activity or work which is merely a part of,
incidental to and is necessary to its main business.
CA No. 466 do not require companies to pay double percentage and fixed taxes.
They merely tax lending investors and not the lending activities. It is against the
doctrine of strict implementation of tax impositions