Professional Documents
Culture Documents
TAX LEGAL CONSULTING
The obligation of the payor/employer to deduct and
withhold the related withholding tax arises at the
time the income was paid or accrued or recorded
as expense in the payor’s/employer’s books,
whichever comes first
TAX LEGAL CONSULTING
§ One of the issues is whether ING Bank is liable for deficiency
withholding tax on accrued bonuses for the taxable years 1996
and 1997.
§ The accrued bonuses were recorded in ING Bank’s books as
expenses for taxable years 1996 and 1997, although no
withholding of tax was effected.
§ ING Bank asserts that the liability of the employer to withhold
the tax does not arise until such bonus is actually distributed.
Since the supposed bonuses were not distributed to the
officers and employees in 1996 and 1997 but were distributed
in the succeeding year when the amounts of the bonuses were
finally determined, ING Bank asserts that its duty as employer
to withhold the tax during these taxable years did not arise.
TAX LEGAL CONSULTING
§ PNB offered as evidence the Income Tax to show that the
excess withholding tax payments were not used to settle its tax
liabilities.
§ The CTA denied the Motion for Reconsideration and insisted
that, to sufficiently prove that there was no utilization of the
creditable taxes withheld, PNB should have likewise presented
the Certificate of Creditable Tax Withheld at Source (BIR
Forms No. 2307)
§ Supreme Court ruled that PNB’s submitted evidence
sufficiently showed the non-utilization of the taxes withheld
subject of the refund.
§ In claims for excess and unutilized creditable withholding tax,
the submission of BIR Forms 2307 is to prove the fact of
withholding of the excess creditable withholding tax being
claimed for refund.
TAX LEGAL CONSULTING
Rules on the determination of the
prescriptive period for filing a tax refund or
credit of unutilized input VAT
TAX LEGAL CONSULTING
1. An administrative claim must be filed with the CIR within
two years after the close of the taxable quarter when
the zero-rated or effectively zero-rated sales 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 two-year period from the filing of the
administrative claim if the claim is filed in the later part of
the two-year period. If the 120-day period expires without
any decision from the CIR, then the administrative claim
may be considered to be denied by inaction.
TAX LEGAL CONSULTING
§ Taxpayer filed its administrative claim for the refund of excess
and unused input VAT for the 2nd quarter of taxable year 2008
on 28 December 2009. Counting 120+30 days, the taxpayer
should have elevated the same to the CTA on 27 May 2010.
The judicial claim was belatedly filed on 6 July 2010.
§ Taxpayer argues that it filed its complete documents on 20
September 2010 and thus the 120-day period should be then
counted from the date.
§ The Supreme Court disagreed. To allow petitioner’s allegations
to prevail would set a dangerous precedent, as the reckoning
period for the 120 days would be at the mercy of taxpayers.
They will then submit complete supporting documents even
after the two-year prescriptive period for filing an administrative
claim has lapsed. This is obviously not the intention of the law.
TAX LEGAL CONSULTING
§ The burden of proving en2tlement to a tax refund is on the
taxpayer. It is logical to assume that in order to discharge this
burden, the law intends the filing of an applica2on for a refund to
necessarily include the filing of complete suppor2ng documents to
prove en2tlement for the refund. Otherwise, the mere filing of an
applica2on without any suppor2ng document would be as good as
filing a mere scrap of paper.
§ Peculiar to this case is that prior to the alleged comple2on of its
suppor2ng documents, the taxpayer had already filed its judicial
claim with the CTA.
§ Assuming arguendo that the 120-day period should commence to
run only upon receipt of the complete documents or from 20
September 2010, the judicial claim must s2ll fail. 2me, the period for
filing an administra2ve applica2on for a refund would have already
prescribed on 30 June 2010. (Hedcor, Inc. v. Commissioner of Internal
Revenue, G.R. No. 207575, July 15, 2015)
TAX LEGAL CONSULTING
In claims for VAT refund that were filed before June
14, 2014, the 120 day period shall be counted not
from the filing of the administrative claim but from
the submission of complete documents as
determined by the taxpayer
1. The CIR has 120 days from the date of submission of
complete documents to decide a claim for tax credit or
refund. Citing RMC No. 49-2003, from the date an
administrative claim for excess unutilized VAT is filed, a
taxpayer has 30 days within which to submit the
documentary requirements sufficient to support his claim.
2. If in the course of the investigation and processing of the
claim, additional documents are required for the proper
determination of the legitimacy of the claim, the taxpayer-
claimants shall submit such documents within thirty (30)
days from request of the investigating/processing office.
Notice, by way of a request from the tax collection
authority to produce the complete documents in these
cases, is essential.
TAX LEGAL CONSULTING
3. Then, upon filing by the taxpayer of his complete
documents to support his application, or expiration of the
period given, the BIR has 120 days within which to decide
the claim for tax credit or refund.
4. Should the taxpayer, on the date of filing, manifest that he
no longer wishes to submit any other additional
documents to complete his administrative claim, the 120-
day period allowed to the BIR begins to run from the date
of filing.
5. In all cases, whatever documents a taxpayer intends to
file to support his claim must be completed within the 2-
year period under Section 112(A) of the NIRC.
6. The 30-day period from denial of the claim or from the
expiration of the 120-day period within which to appeal
the denial or inaction of the BIR to the CTA must be
respected.
TAX LEGAL CONSULTING
A distinction must, thus, be made between
administrative cases appealed due to
inaction and those dismissed at the
administrative level due to the failure of the
taxpayer to submit supporting documents
TAX LEGAL CONSULTING
If the administrative claim If the judicial claim is an If the judicial claim is an
was dismissed by the CIR appeal of an unsuccessful appeal due to inaction of
due to the taxpayer’s administrative claim the BIR
failure to submit complete
documents despite notice/
request
The judicial claim before the The taxpayer has to The CTA may give credence
CTA would be dismissible, convince the CTA that the to all evidence presented by
not for lack of jurisdiction, but CIR had no reason to deny the taxpayer, including those
for the taxpayer’s failure to its claim. It, thus, becomes that may not have been
substantiate the claim at the imperative for the taxpayer to submitted to the CIR as the
administrative level. show the CTA that not only is
he entitled under substantive
case is being essentially
decided in the first instance.
law to his claim for refund or
tax credit, but also that he
The taxpayer must prove
every minute aspect of its
satisfied all the documentary
and evidentiary requirements
case by presenting and
formally offering its evidence
for an administrative claim. to the CTA, which must
necessarily include whatever
is required for the
administrative
TAX LEGAL claim
CONSULTING
§ Thus, in case of claims dismissed at the administrative level
due to the failure of the taxpayer to submit supporting
documents, it is, thus, crucial for a taxpayer in a judicial claim
for refund or tax credit to show that its administrative claim
should have been granted in the first place.
§ Consequently, a taxpayer cannot cure its failure to submit a
document requested by the BIR at the administrative level by
filing the said document before the CTA. (Pilipinas Total Gas v.
Commissioner of Internal Revenue, G.R. No. 207112, December 8, 2015)
TAX LEGAL CONSULTING
The absence and non-printing of the word
“zero-rated” in the taxpayer’s invoices is
fatal to the claim for refund or tax credit of
unutilized input VAT
TAX LEGAL CONSULTING
§ An applicant for a claim for tax refund or tax credit must
not only prove entitlement to the claim but also
compliance with all the documentary and evidentiary
requirements
TAX LEGAL CONSULTING
The transfer of real property to a surviving
corporation pursuant to a merger is not
subject to Documentary Stamp Tax (DST)
TAX LEGAL CONSULTING
§ The BIR argues that DST is levied on the exercise of the privilege to
convey real property regardless of the manner of conveyance .
§ The Supreme Court ruled that the taxpayer is not liable for DST as
the transfer of real properties from the absorbed corporations to
respondent was pursuant to a merger.
§ Section 196 of the NIRC does not include the transfer of real
property from one corporation to another pursuant to a merger. It
pertains only to sale transactions where real property is conveyed to
a purchaser for a consideration. The phrase “granted, assigned,
transferred or otherwise conveyed” is qualified by the word “sold”
which means that documentary stamp tax under Section 196 is
imposed on the transfer of realty by way of sale and does not apply
to all conveyances of real property.
TAX LEGAL CONSULTING
Petroleum companies are entitled to refund
or credit of excise taxes erroneously paid
on its purchase of petroleum products sold
to ecozone enterprises
TAX LEGAL CONSULTING
§ Chevron sold and delivered petroleum products to Clark
Development Corporation (CDC). Chevron did not pass on to CDC
the excise taxes paid on the importation of petroleum products.
Hence, it filed a claim for tax refund.
§ CDC has been exempt from paying direct and indirect taxes
pursuant to the Special Economic Zone Act of 1995.
§ It is the statutory taxpayer, not the party who only bears the
economic burden, who is entitled to claim the tax refund or tax
credit. However, this rule does not apply where the law grants the
party (to whom the economic burden of the tax is shifted) an
exemption from both direct and indirect taxes. Such party may
claim the refund or tax credit even if it is not the statutory taxpayer.
The general rule applied in the case because Chevron did not pass
on the excise taxes. (Chevron Philippines v. Commissioner of Internal Revenue, G.R.
No. 210836, September 1, 2015)
TAX LEGAL CONSULTING
§ Pilipinas Shell sold and delivered petroleum products to various
international carriers and Philippines or foreign registry for their use
outside the Philippines, net of excise tax. Hence, it filed claims for
the refund or credit of the excise taxes paid.
§ The Supreme Court granted Shell’s claim as its petroleum products
are exempt from excise tax under Section 135(a) of the NIRC.
§ The Court applied its ruling in Commissioner of Internal Revenue v.
Pilipinas Shell Petroleum Corporation, G.R. No. 188497, February
19, 2014 (which reversed the earlier April 25, 2012 decision)
§ Section 135(a) of the NIRC provides that petroleum products sold to
“international carriers of Philippine or foreign registry on their use or
consumption outside the Philippines” are exempt from excise tax.
(Commissioner of Internal Revenue v. Pilipinas Shell, G.R. No. 180402, February
10, 2016)
TAX LEGAL CONSULTING
A waiver of the statute of limitations that
does not comply with the requisites for its
validity specified under RMO No. 20-90 and
RDAO 01-05 is generally invalid, but may
still be valid due to peculiar circumstances
TAX LEGAL CONSULTING
§ Taxpayer’s sale of electricity was found to be not zero-rated for
failure to present the Certificate of Compliance from the ERC.
§ The BIR sought to have the Supreme Court impose the
deficiency VAT on said sales.
§ The Supreme Court ruled, citing the recent case of SMI-ED
Philippines v. Commissioner of Internal Revenue, G.R. No.
175410, November 12, 2014, offsetting is allowed if there is a
need for the court to determine if a taxpayer claiming refund of
erroneously paid taxes is more properly liable for taxes other
than that paid. The determination of the proper category of tax
that should have been paid is not an assessment but is an
incidental issue that must be resolved in order to determine
whether there should be a refund.
§ While offsetting is allowed, the BIR can no longer assess the
taxpayer for deficiency taxes in excess of the amount claimed
for refund if prescription has already set in.
§ In this case, the taxpayer filed a claim for tax refund or credit
under Section 112 of the NIRC, where the issue to be resolved
is whether TPC is entitled to a refund or credit of its unutilized
input VAT for the taxable year 2002. And since it is not a claim
for refund under Section 229 of the NIRC, the correctness of
TPC’s VAT returns is not an issue. Thus, there is no need for
the court to determine whether TPC is liable for deficiency VAT.
(Commissioner of Internal Revenue v. Toledo Power Company, G.R. No.
196415 & 196451, December 2, 2015)
TAX LEGAL CONSULTING
LOCAL TAXATION
TAX LEGAL CONSULTING
LGUs do not have the power to impose taxes on
persons or entities engaged in the business of
manufacturing and distribution of petroleum
products
TAX LEGAL CONSULTING
§ The Batangas City Government denied Shell’s protest
and declared that the City Government has the power to
withhold the issuance of the Mayor’s permit for failure of
Shell to pay business tax.
§ Among the common limitations on the taxing powers of
LGUs provided under Section 133 of the LGC: “Excise
taxes on articles enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or
charges on petroleum products”
§ The prohibition with respect to petroleum products
extends not only to excise taxes thereon, but all “taxes,
fees or charges.”
TAX LEGAL CONSULTING
§ On January 15, 2007, CBC protested, thru a Letter, the imposition of
business tax under Section 21 of the Manila Revenue Code on the
ground that it constitutes double taxation. The City Treasurer
acknowledged receipt of the letter but said the she will await the
formal protest. On March 27, 2007, CBC wrote a letter-reply
reiterating that CBC already protested. On April 17, 2007, CBC filed
a Petition for Review with RTC. On appeal, the CTA ruled that CBC
belatedly filed its petition with RTC by 1 day.
§ CBC countered it timely filed now claiming that reckoning point
should be from March 27, 2007
§ The Supreme Court ruled that the period within which the City
Treasurer must act on the protest, and the consequent period to
appeal a “denial due to inaction,” should be reckoned from January
15, 2007, the date CBC filed its protest, and not March 27, 2007.
TAX LEGAL CONSULTING
Distinction between “unlawful importation” under
Section 3601 of the Tariff and Customs Code
(TCCP) and “various fraudulent practices against
customs revenue” under Section 3602 of the TCCP
TAX LEGAL CONSULTING
Unlawful Importation (Outright Fraudulent Practices
smuggling) (Technical Smuggling)
Goods and articles of commerce are Goods and articles are brought into the
brought into the country without the country through fraudulent, falsified or
required importation documents, or are erroneous declarations, to substantially
disposed of in the local market without reduce, if not totally avoid, the payment
having been cleared by the BOC or other of correct taxes, duties and other
authorized government agencies, to charges. Such goods and articles pass
evade the payment of correct taxes, through the BOC, but the processing and
duties and other charges. Such goods clearing procedures are attended by
and articles do not undergo the fraudulent acts in order to evade the
processing and clearing procedures at payment of correct taxes, duties, and
the BOC, and are not declared through other charges. Often committed by
submission of import documents, such means of misclassification of the nature,
as the import entry and internal revenue quality or value of goods and articles,
declaration. undervaluation in terms of their price,
quality or weight, and misdeclaration of
their kind.
(Bureau of Customs v. Hon. Devanadera, G.R. No. 193253,
TAX LEGAL CONSULTING
September 8, 2015)
JUDICIAL REMEDIES AND CTA
JURISDICTION
TAX LEGAL CONSULTING
The proper remedy to assail a Revenue Regulation
is a special civil action for declaratory relief under
Rule 63 of the Rules of Court filed with the
Regional Trial Court, not a special civil action for
certiorari under Rule 65
TAX LEGAL CONSULTING
§ Taxpayer filed with the Supreme Court a petition for certiorari
assailing RR No. 2-2012, which imposes VAT and excise tax on the
importation of petroleum products from abroad into the Freeport or
economic zones.
§ The Supreme Court dismissed the petition for being an improper
remedy.
§ A petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure, as amended, is a special civil action that may be invoked
only against a tribunal,board, or officer exercising judicial or quasi-
judicial functions.
§ RR 2-2012 was issued in the exercise of the quasi-legislative or
rule-making powers of the Secretary of Finance, and not judicial or
quasi-judicial functions. Being quasi-legislative in nature, RR 2-2012
is outside the scope of a petition for certiorari.
TAX LEGAL CONSULTING
INCOME TAX
TAX LEGAL CONSULTING
The costs deducBble to PEZA-registered enBBes
are not limited to those enumerated in the PEZA
Rules and RegulaBons.
TAX LEGAL CONSULTING
The fact of withholding of VAT on payments for
the use or lease of properBes or property rights to
nonresident foreign persons is an indicaBon of
‘doing business’ in the Philippines
TAX LEGAL CONSULTING
Liability to pay donor's tax is with the donor
and not with the donee.
TAX LEGAL CONSULTING
Deficiency Interest may be imposed only on
income tax, donor’s tax and estate tax
(B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in
this Code, shall be subject to the interest prescribed in Subsection (A) hereof,
which interest shall be assessed and collected from the date prescribed for its
payment until the full payment thereof.
TAX LEGAL CONSULTING
A holding company is not subject to local
business tax on dividend income.
TAX LEGAL CONSULTING
The CTA has no jurisdiction over cases
decided by the RTC involving petitions for
injunction to restrain the collection of
national internal revenue taxes.
§ The BIR argued that there is no assessment in this case and the
issue is the BIR’s Oplan Kandado pursuant to Section 115 "Power of
the Commissioner to Suspend the Business Operations of a
Taxpayer" as implemented by RMO No. 3-2009, which is purely an
administrative enforcement measure. Furthermore, BIR argues that
what can be elevated before the Court is the decision, ruling or
inaction of the CIR on disputed assessments.
TAX LEGAL CONSULTING
§ The CTA ruled that its jurisdiction is not limited to a decision, ruling
or inaction of the CIR on disputed assessment.
§ The CTA’s jurisdiction is provided under Section 7(a)(1) of Republic
Act (RA) No. 1125, as amended by RA No. 928218, which provides
that the Court shall exercise exclusive appellate jurisdiction to
review by appeal decisions of the CIR in cases involving –
1. disputed assessments;
2. refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto; or
3. other matters arising under the NIRC or other laws
administered by the Bureau of Internal Revenue.