Emiliano Paupahan is engaged in the business of leasing out several residential

apartment units he owns. The monthly rental for each unit ranges from P8,000.00
to PI0,000.00. His gross rental income for one year is PI,650,000.00. He consults
you on whether it is necessary for him to register as a VAT taxpayer. What legal
advice will you give him, and why? (4%)

SUGGESTED ANSWER:

I will advise Emiliano ttyat he is not required to register as a VAT taxpayer. His
transactions of leasing residential units for an amount not exceeding P10,000.00 per
unit per month are exempt from VAT irrespective of the aggregate amount of rentals
received annually (Section 109(1X0,b NIRC). (BAR 2009)

16. Input tax and output tax, defined

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17. Sources of input tax

er as
a. Purchase or importation of goods

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b. Purchase of real properties for which a VAT has actually been paid
c. Purchase of services in which VAT has actually been paid

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d. Transactions deemed sale
e. Presumptive input rs e
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f. Transitional input
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18. Persons who can avail of input tax credit

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Claim for tax credit or refund of excess input tax is available only to: (2012 BAR)
a) A VAT-registered person whose sales are made to embassies of foreign
governments and United Nations agencies located in the Philippines without
the BIR approval of the application for zero-rating;
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b) Any person who has excess input tax arising from local purchases of taxable
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goods and services;

c) A VAT-registered person whose sales are made to clients in the Philippines;
d) A VAT-registered person whose sales are made to customers outside the
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Philippines and who issued VAT invoices or receipts with the words "ZERO
RATED SALES" imprinted on the sales invoices or receipts.
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SUGGESTED ANSWER:
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d) A VAT-registered person whose sales are made to customers outside the Philippines
and who issued VAT invoices or receipts with the words "ZERO RATED SALES"
imprinted on the sales invoices or receipts. (KepcoPhils. Corp. v. CIR, G.R. No. 179961,
January 31, 2011.)

19. Determination of output/input tax; VAT payable; excess input tax credits
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 a. Determination of output tax
b. Determination of input tax creditable
c. Allocation of input tax on mixed transactions
d. Determination of the output tax and VAT payable and computation of VAT
payable or excess tax credits

20. Substantiation of input tax credits

Input tax is available to a VAT-registered buyer, provided that: (2012 BAR) a)

The seller is a VAT-registered person;
b) The seller issues a VAT invoice or official receipt, which separately indicates
the VAT component;
c) The goods or service is subject to or exempt from VAT, but the sale is covered
by a VAT invoice or receipt issued by VAT-registered person;
d) The name and TIN of the buyer is not stated or shown in the VAT invoice or

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receiptWhich statement shown above is NOT correct?

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SUGGESTED ANSWER:

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b) The seller issues a VAT invoice or official receipt, which separately indicates the VAT
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component
Section 113(B), NIRC.
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For 2012, input tax is not available as a credit against the output tax of the buyer
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of taxable goods or services during the quarter, if:

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a) The VAT invoice or receipt of the seller is registered with the BIR;
b) The VAT invoice or receipt of the seller does not separately indicate the gross
selling price or gross receipts and the VAT component therein;
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c) The VAT invoice or receipt is issued in the name of the VAT-registered buyer
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and his TIN is shown in said invoice or receipt;

d) The VAT invoice or receipt issued by the seller shows the Taxpayer
Identification Number plus the word "VAT" or "VAT registered person".
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SUGGESTED ANSWER:
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b) The VAT invoice or receipt of the seller does not separately indicate the gross selling
price or gross receipts and the VAT component therein Section 113, NIRC.
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21. Refund or tax credit of excess input tax

a. Who may claim for refund/apply for issuance of tax credit certificate

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 Wreck Corporation is a domestic corporation engaged in the business of
importing, refining and selling petroleum products. During the period from
September 1, 2014 to December 31, 2014, Wreck Corporation imported 225 million
liters of Jet A-1 aviation fuel and paid the excise taxes thereon. Seventy-five
percent (75%) of the total volume of aviation fuel imported were actually sold to
international carriers of Philippine and foreign registries for their use or
consumption outside of the Philippines in the period from November 1, 2014, to
December 31, 2014. Wreck Corporation did not pass on to the international
carriers the excise taxes it paid on the importation of petroleum products.

On June 25, 2015, Wreck Corporation filed an administrative claim for refund or
issuance of tax credit certificate amounting to the excise taxes it had paid on the
importation of 225 million liters of Jet A-1 aviation fuel.

If you were the Commissioner of Internal Revenue, will you grant Wreck

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Corporation’s administrative claim for refund or issuance of tax credit certificate?

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Explain your answer. (6%) (2017 BAR)

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SUGGESTED ANSWER:

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Yes, but only the excise tax which corresponds to the 75% of the total volume of aviation
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fuel imported that were actually sold to the international carriers. Wreck Corporation, as
the statutory taxpayer who is directly liable to pay the excise tax on its petroleum
products, is entitled to a refund or credit of the excise taxes it paid for petroleum
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products sold to international carriers, the latter having been granted exemption from
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the payment of said excise tax under Sec. 135 (a) of the NIRC. (CIR v. Pilipinas Shell
vi y re

Petroleum Corporation, G.R. No. 188497, February 19, 2014)

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Soaring Eagle paid its excise tax liabilities with Tax Credit Certificates (TCCs)
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which it purchased through the One Stop Shop Inter-Agency Tax Credit Center
(Center) of the Department of Finance. The Center is a composite body of the
DOF, BIR, BOC and the BOI. The TCCs were accepted by the BIR as payments. A
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year after, the BIR demanded the payment of alleged deficiency excise taxes on
the ground that Soaring Eagle is not a qualified transferee of the TCCs it
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purchased from other BOI-registered companies. The BIR argued that the TCCs
are subject to post-audit as a suspensive condition. On the other hand, Soaring
Eagle countered that it is a buyer in good faith and for value who merely relied on
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the Center's representation of the genuineness and validity of the TCCs. If it is

ordered to pay the deficiency, Soaring Eagle claims the same is confiscatory and
a violation of due process. Is the assessment against Soaring Eagle valid?
Explain. (5%) (2016 BAR)

SUGGESTED ANSWER:
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 No. The assessment is invalid because the TCCs used by Soaring Eagle are valid and
effective. A TCC is an undertaking by the government through the BIR or DOF,
acknowledging that a taxpayer is entitled to a certain amount of tax credit from either an
overpayment of income taxes, a direct benefit granted by law or other sources and
instances granted by law such as on specific unused input taxes and excise taxes on
certain goods. As such, tax credit is transferable in accordance with pertinent laws,
rules, and regulations. (Pilipinas Shell Petroleum Corp. v. Commissioner of Internal
Revenue, G.R. No.172598, December 21, 2007, 541 SCRA 316).

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