6. CIR V AMERICAN EXPRESS INTERNATIONAL, INC. (Phil.

 Branch)

Facts:
Respondent, a VAT taxpayer, is the Philippine Branch of AMEX USA and was tasked
with servicing a unit of AMEX-Hongkong Branch and facilitating the collections of AMEX-HK
receivables from card members situated in the Philippines and payment to service
establishments in the Philippines.
It filed with BIR a letter-request for the refund of its 1997 excess input taxes, citing as basis
Section 110B of the 1997 Tax Code, which held that “xxx Any input tax attributable to the
purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option
be refunded or credited against other internal revenue taxes, subject to the provisions of Section
112.”
In addition, respondent relied on VAT Ruling No. 080-89, which read, “In Reply, please
be informed that, as a VAT registered entity whose service is paid for in acceptable foreign
currency which is remitted inwardly to the Philippine and accounted for in accordance with the
rules and regulations of the Central Bank of the Philippines, your service income is
automatically zero rated xxx” Petitioner claimed, among others, that the claim for refund should
be construed strictly against the claimant as they partake of the nature of tax exemption. CTA
rendered a decision in favor of respondent, holding that its services are subject to zero-rate
rules and regulations of BSP.

Issue:
W/N AMEX Phils is entitled to refund

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
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:
(1)    Service be performed in the Philippines
(2)    The service fall under any of the categories in Section 102B of the Tax Code
(3)    It be paid in acceptable foreign currency accounted for in accordance with BSP R&R
7. CONTEX CORPORATION v. CIR, GR No. 151135, 2004-07-02

Facts:
Court of Appeals reversed and set aside the decision CTA ordered CIR to refund the
sum of P683, 061.90 to petitioner as erroneously paid input value-added tax (VAT) or in the
alternative, to issue a tax credit certificate for said amount. Petitioner is a domestic corporation
engaged in. Manufacturing hospital textiles and garments for export place of business is at the
Subic Bay Freeport Zone (SBFZ).
Metropolitan Authority (SBMA) as a Subic Bay Freeport Enterprise is exempt from all
local and national internal revenue taxes except for the preferential tax provided for in Section
12 of Rep. Act No. 7227. Petitioner also registered with the Bureau of Internal Revenue (BIR) as
a non-VAT taxpayer petitioner purchased various supplies necessary in the conduct of its
manufacturing business. The suppliers of these goods shifted unto petitioner the 10% VAT...
which led the petitioner to... pay input taxes... on the belief that it was exempt... petitioner filed
two applications for tax refund or tax credit of the VAT it paid.
Petitioner stressed that Section 112(A) if read in relation to Section 106(A)(2)(a) national
Internal Revenue Code as amended and Section 12(b) and (c) of Rep. Act No. 7227 would
show that it was not liable in any way for any value-added tax. In opposing the claim BIR asked
the CTA to apply the rule that claims for refund are strictly construed against the taxpayer
petitioner failed to establish both its right to a tax refund or tax credit its claim should be denied
CTA decided partial refund.
Court of Appeals held that the exemption from duties and taxes on the importation of raw
materials, capital, and equipment of SBFZ-registered enterprises under Rep. Act No. 7227 and
its implementing rules covers only "the VAT imposable under Section 107... of the [Tax Code],
which is a direct liability of the importer, and in no way includes the value-added tax of the
seller-exporter the burden of which was passed on to the importer as an additional costs of the
goods."

Issues:
The correctness of the finding of the Court of Appeals that the VAT exemption embodied
in Rep. Act No. 7227 does not apply to petitioner as a purchaser; and (2) the entitlement of the
petitioner to a tax refund... on its purchases of supplies and raw materials for 1997 and 1998.

Ruling:
First issue, petitioner on tends that the provisions clearly and unambiguously mandate
that no local and national taxes shall be imposed upon SBFZ-registered firms respondent
oppose such grant is not all-encompassing but is limited only to those taxes for which a SBFZ-
registered business may be directly liable. It must be stressed that the VAT is an indirect tax. 
As such, the amount of tax paid on the goods, properties or services bought, transferred, or
leased may be shifted or passed on by the seller, transferor, or lessor to the buyer, transferee or
lessee.
Unlike a direct tax, such as the income tax, which primarily taxes an individual's ability to
pay based on his income or net wealth, an indirect tax, such as the VAT, is a tax on
consumption of goods, services, or certain transactions involving the same. The VAT thus,
forms a substantial portion of consumer expenditures in indirect taxation; there is a need to
distinguish between the liability for the tax and the burden of the tax.
As earlier pointed out, the amount of tax paid may be shifted or passed on by the seller
to the buyer. What is transferred in such instances is not the liability for the tax, but the tax
burden.  In adding or including the VAT due to the selling price, the seller remains the person
primarily and legally liable for the payment of the tax.  What is shifted only to the intermediate
buyer and ultimately to the final purchaser is the burden of the tax. A seller who is directly and
legally liable for payment of an indirect tax, such as the VAT on goods or services is not
necessarily the person who ultimately bears the burden of the same tax.

8. CIR vs. CA, G.R. No. 125355, March 30, 2000

FACTS: 

Commonwealth Management and Services Corp. (COMASERCO) is a corporation duly

organized and existing under the laws of the Philippines. It is an affiliate of Philippine American
Life Insurance Co. (Philamlife), organized by the latter to perform collection, consultative and
other technical services, including functioning as an internal auditor, of Philamlife and its other
affiliates.

2. On January 24, 1992, the BIR issued an assessment to Commonwealth Management and
Services Corp. (COMASERCO) for deficiency value-added tax (VAT) amounting to
P351,851.01, for taxable year 1988

3. On February 10, 1992, COMASERCO filed with the BIR, a letter-protest objecting to the
latter's finding of deficiency VAT. On August 20, 1992, the Commissioner of Internal Revenue
sent a collection letter to COMASERCO demanding payment of the deficiency VAT.

4. On September 29,1992, COMASERCO filed with the CTA a petition for review contesting the
Commissioner's assessment. Its arguments are as follows:
The services it rendered to Philamlife and its affiliates, relating to collections, consultative and
other technical assistance, including functioning as an internal auditor, were on a "no-profit,
reimbursement-of-cost-only" basis;
That it was not engaged in the business of providing services to Philamlife and its affiliates and
that it was established to ensure operational orderliness and administrative efficiency of
Philamlife and its affiliates, and not in the sale of services; and 
That it was not profit-motivated, thus not engaged in business. In fact, it did not generate profit
but suffered a net loss in taxable year 1988. Since it was not engaged in business, it was not
liable to pay VAT.

ISSUE:

Whether COMASERCO was engaged in the sale of services, and thus liable to pay VAT
theron.

Held:
Petition granted, granted. Reversed CA rling, Reinsisted CTA ruling, COMserco,
comaserco ordered to pay definciency VAT as per the assessment issued by the Commisioner
for the taxable year 1988

1. Who are the persons liable for VAT?

“Section 99, NIRC Person liable- Ant persons who, in the course of trade or business,
sells, barters or exchanges goods, renders services; or angages in similar transactions and any
preson who imports goods shall be subject to the value-added tax imposed in Secition 100 to
102 of this code.
2. What does “in the course or business” mean?
COMASERCO: The term “in the course of trade or business” requires that the “business
is carried on with a view to profit or livelihood. In other words. The activities of the entit must be
profit-oriened.

9. COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS and

COMMONWEALTH MANAGEMENT AND SERVICES CORPORATION
FACTS:
Commonwealth Management and Services Corporation (COMASERCO, for brevity), is a
corporation duly organized and existing under the laws of the Philippines. It is an affiliate of
Philippine American Life Insurance Co. (Philamlife), organized by the latter to perform collection,
consultative and other technical services, including functioning as an internal auditor, of
Philamlife and its other affiliates.
Petitioner, Commissioner of the Bureau of Internal Revenue (BIR) issued an assessment
to private respondent COMASERCO for deficiency value-added tax (VAT) amounting to
P351,851.01, for taxable year 1988.
With this, COMASERCO filed with the BIR, a letter-protest objecting to the latter’s finding of
deficiency VAT. In lieu however, the Commissioner of Internal Revenue sent a collection letter
to COMASERCO demanding payment of the deficiency VAT.
As a result, COMASERCO filed with the Court of Tax Appeals a petition for review
contesting the Commissioner’s assessment asserting that the services it rendered to Philamlife
and its affiliates, relating to collections, consultative and other technical assistance, including
functioning as an internal auditor, were on a “no-profit, reimbursement-of-cost-only” basis. It
averred that it was not engaged in the business of providing services to Philamlife and its
affiliates. COMASERCO stressed that it was not profit-motivated, thus not engaged in business.
In fact, it did not generate profit but suffered a net loss in taxable year 1988, hence not liable to
pay VAT.
The Court of Tax Appeals rendered decision in favor of the Commissioner of Internal Revenue.

ISSUE: Whether or not COMASERCO was engaged in the sale of services, and thus liable to
pay VAT thereon?

RULING:
YES. The Court agreed with the Petitioner that to “engage in business” and to “engage
in the sale of services” are two different things. Petitioner maintains that the services rendered
by COMASERCO to Philamlife and its affiliates, for a fee or consideration, are subject to VAT.
VAT is a tax on the value added by the performance of the service. It is immaterial whether
profit is derived from rendering the service.
Pursuant to Republic Act No. 7716, the Expanded VAT Law (EVAT), amending among
other sections, Section 99 of the Tax Code, it is provided that:
Sec. 105. Persons Liable. — Any person who, in the course of trade or business, sells, barters,
exchanges, leases goods or properties, renders services, and any person who imports
goods shall be subject to the value-added tax (VAT) imposed in Sections 106 and 108 of this
Code. The value-added tax is an indirect tax and the amount of tax may be shifted or passed on
to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise
apply to existing sale or lease of goods, properties or services at the time of the effectivity of
Republic Act No. 7716.
The rule of regularity, to the contrary notwithstanding, services as defined in this Code
rendered in the Philippines by nonresident foreign persons shall be considered as being
rendered in the course of trade or business.
10. Intel Technology Phils vs. CIR

Facts:
A domestic corporation engaged primarily in the business of designing, developing,
manufacturing and exporting advanced and large- scale integrated circuit components,
registered with the BIR as VAT entity and a registered with PEZA. As a VAT-registered entity,
Intel file its monthly VAT declarations and quarterly VAT return during the 2Q of 1998, Intel
declared zero-rated export sales of 2.5Mn and VAT input taxes from domestic purchases of
goods and services of 11.7Mn Zero-rated export sales were paid in acceptable foreign currency
and were inwardly remitted
On 1999, a claim for tax refund/credit of VAT input taxes was filed by Intel, prior to the
lapse of 2-year prescriptive prd and due to inaction by the CIR, a petition for review was filed
with the CTA and prayed for the issuance of a tax credit certificate amtg to 11.7Mn
For the period covering April 01, 1998 to June 30, 1998, having generated zero-rated sales and
paid VAT input taxes in the course of its trade or business, which VAT input taxes are
attributable to the zero-rated sales and have not been applied to any VAT output tax liability for
said period or any succeeding quarter or quarters nor has been issued any tax credit certificate,
it follows that it is entitled to the issuance of a tax credit certificate for VAT input taxes in the
amount of PhP11,770,181.70

Issue: W/N Intel is not entitled to a tax refund/credit for failure to comply with the invoicing
requirements?

Ruling:
A taxpayer engaged in zero-rated or effectively zero-rated transactions may apply for a
refund or issuance of a tax credit certificate for input taxes paid attributable to such sales upon
complying with the following requisites: (1) the taxpayer is engaged in sales which are zero-
rated (like export sales) or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the
claim must be filed within two years after the close of the taxable quarter when such sales were
made; (4) the creditable input tax due or paid must be attributable to such sales, except the
transitional input tax, to the extent that such input tax has not been applied against the output
tax; and (5) in case of zero-rated sales under Section 106(A)(2)(a)(1) and (2), Section 106(B),
and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had
been duly accounted for in accordance with BSP rules and regulations.

Therefore, Intel’s evidence, juxtaposed with the requirements of Sections 106 (A)(2)(a)
(1) and 112(A) of the Tax Code, as enumerated earlier, sufficiently establish that it is entitled to
a claim for refund or issuance of a tax credit certificate for creditable input taxes.