PANASONIC COMMUNICATIONS v.

CIR
G.R. No. 178090, February 8, 2010

passed and invoices received is the tax paid to the

government. In case the tax on invoices received exceeds
that on invoices passed, a tax refund may be claimed.

FACTS:

Under the 1997 NIRC, if at the end of a taxable

quarter the seller charges output taxes equal to the input
taxes that his suppliers passed on to him, no payment is
required of him. It is when his output taxes exceed his input
taxes that he has to pay the excess to the BIR. If the input
taxes exceed the output taxes, however, the excess payment
shall be carried over to the succeeding quarter or
quarters. Should the input taxes result from zero-rated or
effectively zero-rated transactions or from the acquisition of
capital goods, any excess over the output taxes shall instead
be refunded to the taxpayer.

Petitioner Panasonic Communications Imaging

Corporation of the Philippines (Panasonic) produces and
exports plain paper copiers and their sub-assemblies, parts,
and components. It is registered with the Board of
Investments as a preferred pioneer enterprise under the
Omnibus Investments Code of 1987. It is also a registered
value-added tax (VAT) enterprise.
From April 1 to September 30, 1998 and
from October 1, 1998 to March 31, 1999, petitioner
Panasonic generated export sales amounting to
US$12,819,475.15 and US$11,859,489.78, respectively, for a
total of US$24,678,964.93. Believing that these export sales
were zero-rated for VAT under Section 106(A)(2)(a)(1) of the
1997 National Internal Revenue Code as amended
by Republic Act (R.A.) 8424 (1997 NIRC), Panasonic paid input
VAT of P4,980,254.26 and P4,388,228.14 for the two periods
or a total of P9,368,482.40 attributable to its zero-rated sales.
Claiming that the input VAT it paid remained
unutilized or unapplied, on March 12, 1999 and July 20, 1999
petitioner Panasonic filed with the Bureau of Internal
Revenue (BIR) two separate applications for refund or tax
credit of what it paid. When the BIR did not act on the
same, Panasonic filed on December 16, 1999 a petition for
review
with
the
CTA, averring
the inaction of the respondent Commissioner of Internal
Revenue (CIR) on its applications.
After trial or on August 22, 2006 the CTAs First
Division rendered judgment, denying the petition for lack of
merit. The First Division said that, while petitioner
Panasonics export sales were subject to 0% VAT under
Section 106(A)(2)(a)(1) of the 1997 NIRC, the same did not
qualify for zero-rating because the word zero-rated was not
printed on Panasonics export invoices. This omission, said
the First Division, violates the invoicing requirements of
Section 4.108-1 of Revenue Regulations
(RR) 7-95.
Its motion for reconsideration having been denied,
on January 5, 2007 petitioner Panasonic appealed the First
Divisions decision to the CTA en banc. On May 23, 2007 the
CTA en banc upheld the First Divisions decision and
resolution and dismissed the petition. Panasonic filed a
motion for reconsideration of the en banc decision but this
was denied. Thus, petitioner filed the present petition in
accordance with R.A. 9282
ISSUE: WON the CTA en banc correctly denied petitioner
Panasonics claim for refund of the VAT it paid as a zero-rated
taxpayer on the ground that its sales invoices did not state on
their faces that its sales were zero-rated.
RULING:
The VAT is a tax on consumption, an indirect tax that
the provider of goods or services may pass on to his
customers. Under the VAT method of taxation, which is
invoice-based, an entity can subtract from the VAT charged
on its sales or outputs the VAT it paid on its purchases, inputs
and imports. For example, when a seller charges VAT on its
sale, it issues an invoice to the buyer, indicating the amount
of VAT he charged. For his part, if the buyer is also a seller
subjected to the payment of VAT on his sales, he can use the
invoice issued to him by his supplier to get a reduction of his
own VAT liability. The difference in tax shown on invoices

Zero-rated transactions generally refer to the export

sale of goods and services. The tax rate in this case is set at
zero. When applied to the tax base or the selling price of the
goods or services sold, such zero rate results in no tax
chargeable against the foreign buyer or customer. But,
although the seller in such transactions charges no output
tax, he can claim a refund of the VAT that his suppliers
charged him. The seller thus enjoys automatic zero rating,
which allows him to recover the input taxes he paid relating
to the export sales, making him internationally competitive.
For the effective zero rating of such transactions,
however, the taxpayer has to be VAT-registered and must
comply with invoicing requirements. Interpreting these
requirements, respondent CIR ruled that under Revenue
Memorandum Circular (RMC) 42-2003, the taxpayers failure
to comply with invoicing requirements will result in the
disallowance of his claim for refund. RMC 42-2003 provides:
A-13. Failure by the supplier to comply with the invoicing
requirements on the documents supporting the sale of
goods and services will result to the disallowance of the
claim for input tax by the purchaser-claimant.
If the claim for refund/TCC is based on the existence of
zero-rated sales by the taxpayer but it fails to comply with
the invoicing requirements in the issuance of sales invoices
(e.g., failure to indicate the TIN), its claim for tax
credit/refund of VAT on its purchases shall be denied
considering that the invoice it is issuing to its customers
does not depict its being a VAT-registered taxpayer whose
sales are classified as zero-rated sales. Nonetheless, this
treatment is without prejudice to the right of the taxpayer
to charge the input taxes to the appropriate expense
account or asset account subject to depreciation,
whichever is applicable. Moreover, the case shall be
referred by the processing office to the concerned BIR
office for verification of other tax liabilities of the taxpayer.
Petitioner Panasonic points out, however, that in
requiring the printing on its sales invoices of the word zerorated, the Secretary of Finance unduly expanded, amended,
and modified by a mere regulation (Section 4.108-1 of RR 795) the letter and spirit of Sections 113 and 237 of the 1997
NIRC, prior to their amendment by R.A. 9337. Panasonic
argues that the 1997 NIRC, which applied to its payments
specifically Sections 113 and 237required the VATregistered taxpayers receipts or invoices to indicate only the
following information:
(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;

(3)
The date of transaction, quantity, unit cost
and description of the goods or properties or nature of the
service; and
(4)
The name, business style, if any, address and
taxpayers identification number (TIN) of the purchaser,
customer or client.
Petitioner Panasonic points out that Sections 113
and 237 did not require the inclusion of the word zerorated for zero-rated sales covered by its receipts or
invoices. The BIR incorporated this requirement only after the
enactment of R.A. 9337 on November 1, 2005, a law that did
not yet exist at the time it issued its invoices.
But when petitioner Panasonic made the export
sales subject of this case, i.e., from April 1998 to March 1999,
the rule that applied was Section 4.108-1 of RR 7-95,
otherwise known as the Consolidated Value-Added Tax
Regulations, which the Secretary of Finance issued on
December 9, 1995 and took effect on January 1, 1996. It
already required the printing of the word zero-rated on the
invoices covering zero-rated sales. When R.A. 9337 amended
the 1997 NIRC on November 1, 2005, it made this particular
revenue regulation a part of the tax code. This conversion
from regulation to law did not diminish the binding force of
such regulation with respect to acts committed prior to the
enactment of that law.
Section 4.108-1 of RR 7-95 proceeds from the rulemaking authority granted to the Secretary of Finance under
Section 245 of the 1977 NIRC (Presidential Decree 1158) for
the efficient enforcement of the tax code and of course its
amendments. The requirement is reasonable and is in accord
with the efficient collection of VAT from the covered sales of
goods and services. As aptly explained by the CTAs First
Division, the appearance of the word zero-rated on the face
of invoices covering zero-rated sales prevents buyers from
falsely claiming input VAT from their purchases when no VAT
was actually paid. If, absent such word, a successful claim for
input VAT is made, the government would be refunding
money it did not collect.
Further, the printing of the word zero-rated on the
invoice helps segregate sales that are subject to 10% (now
12%) VAT from those sales that are zero-rated. Unable to
submit the proper invoices, petitioner Panasonic has been
unable to substantiate its claim for refund.
HITACHI V. CIR
G.R. No. 174212 October 20, 2010
FACTS:
Hitachi is a domestic corporation engaged in the
business of manufacturing and exporting computer
products. Hitachi is registered with the Bureau of Internal
Revenue (BIR) as a Value-added Tax (VAT) taxpa(1)
A
statement that the seller is a VAT-registered person,
followed by his taxpayer's identification number (TIN);
yer, evidenced by Certificate of Registration No. 94-570000298 and Taxpayer Identification No. 003-877-830 (VAT)
issued on 28 June 1994. Hitachi is also registered with the
Export Processing Zone Authority as an Ecozone Export
Enterprise.
On 4 August 2000, Hitachi filed an administrative claim
for refund or issuance of a tax credit certificate before the
BIR. The claim involved P25,023,471.84 representing excess

input VAT attributable to Hitachis zero-rated export sales for

the four taxable quarters of 1999.
On 2 July 2001, due to the BIRs inaction, Hitachi filed a
petition for review with the CTA. On 9 March 2004, the CTA
First Division rendered a decision, denying the petitioners
claim for refund or issuance of a tax credit certificate in the
amount of P25,023,471.84 representing excess input valueadded tax (VAT) payments that are attributable to zero-rated
export sales for the four taxable quarters of 1999.
Hitachi filed a motion for reconsideration. In its 9
December 2004 Resolution, the CTA First Division denied
Hitachis motion.
On 26 January 2005, Hitachi filed a petition for review
with the CTA En Banc. In its 22 March 2006 Decision, the
CTA En Banc affirmed the 9 March 2004 Decision and 9
December 2004 Resolution of the CTA First Division.
Hitachi filed a motion for reconsideration. In its 14
August 2006 Resolution, the CTA En Banc denied Hitachis
motion.
ISSUE: WON Hitachis failure to comply with the
requirements prescribed under Section 4.108-1 of RR 7-95 is
sufficient to invalidate Hitachis claim for VAT refund for
taxable year 1999
RULING:
Hitachi argues that Section 4.108-1 of RR 7-95 cannot
expand the invoicing requirements prescribed by Section
113(A) of the NIRC, in relation to Sections 237 and
[12]
106(A)(2)(a)(1), by imposing the additional requirement of
printing the word zero-rated on the invoices of a VAT
registered taxpayer. Hitachi also submits that the nonobservance of the requirements of (1) printing zero-rated;
(2) BIR authority to print; (3) BIR permit number; and (4)
registration of such receipts with the BIR cannot result in the
outright invalidation of its claim for refund. We already
settled the issue of printing the word zero-rated on the
sales invoices in Panasonic v. Commissioner of Internal
[13]
Revenue.
In that case, we denied Panasonics claim for
refund of the VAT it paid as a zero-rated taxpayer on the
ground that its sales invoices did not state on their face that
its sales were zero-rated. We said:
But when petitioner Panasonic made the export sales
subject of this case, i.e., from April 1998 to March 1999, the
rule that applied was Section 4.108-1 of RR 7-95, otherwise
known as the Consolidated Value-Added Tax Regulations,
which the Secretary of Finance issued on December 9, 1995
and took effect on January 1, 1996. It already required the
printing of the word zero-rated on invoices covering zerorated sales. When R.A. 9337 amended the 1997 NIRC on
November 1, 2005, it made this particular revenue regulation
a part of the tax code. This conversion from regulation to law
did not diminish the binding force of such regulation with
respect to acts committed prior to the enactment of that law.
Section 4.108-1 of RR 7-95 proceeds from the rulemaking authority granted to the Secretary of Finance under
Section 245 of the 1997 NIRC (Presidential Decree 1158) for
the efficient enforcement of the tax code and of course its
amendments. The requirement is reasonable and is in accord
with the efficient collection of VAT from the covered sales of
goods and services. As aptly explained by the CTAs First
Division, the appearance of the word zero-rated on the face
of the invoices covering zero-rated sales prevents buyers
from falsely claiming input VAT from their purchases when no
VAT was actually paid. If absent such word, a successful claim

for input VAT is made, the government would be refunding

money it did not collect. (Emphasis supplied)
Likewise, in this case, when Hitachi filed its claim
for refund or tax credit, RR 7-95 was already in force. Section
4.108-1 of RR 7-95 specifically required the following to be
reflected in the invoice:
Sec.4.108-1. Invoicing Requirements. - All VATregistered 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.
xxxx
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.

COMMISSIONER OF INTERNAL REVENUE, v MANILA

MINING CORPORATION,
G.R. No. 153204 August 31, 2005
FACTS:
1.Respondent, a mining corporation duly organized
and existing under Philippines laws, is registered with
the Bureau of Internal Revenue (BIR) as a VAT-registered
enterprise2 . I n 1 9 9 1 , r e s p o n d e n t s s a l e s o f g o l d
to the Central Bank (now Bangko Sentral ng
P i l i p i n a s ) a m o u n t e d t o P200,832,364.70. On April
22, 1991, July 23, 1991, October 21, 1991 and January
rd
20, 1992, it filed its VAT Returns for the 1st, 2nd, 3 and
th
4 quarters of 1991, respectively, with the BIR.3.Under Sec.
2 of E.O. 581 as amended, gold sold to the Central
Bank is considered an export sale which under Section
100(a)(1) of the NIRC, as amended by E.O. 273, is subject to
zero-rated if such sale is made by a VAT-registered person,
filed with the Commissioner of Internal Revenue (CIR),
through the BIR-VAT Division an application for tax
refund/credit of the input VAT it paid from July 1 December 31, 1999 in the amount
of P8,173,789.60.4 . P e t i t i o n e r s u b s e q u e n t l y
filed another application for tax refund/credit of
i n p u t V A T i t p a i d t h e a m o u n t o f P5,683,035.04 from
January 1 June 30, 1991.5.As the CIR failed to act upon
respondents application within sixty (60) days from
the dates of filing, it filed on March 22, 1993 a Petition
for Review against the CIR before the CTA6.CTA- DENIED
RESPONDENTS CLAIM FOR REFUND although said
sales are not subject to 10% output VAT. Failure to
prove that it paid the amounts claimed as such for the
year 1991, no sales invoices, receipts or other
documents as required under Section 2(c)(1) of Revenue
Regulations No. 3-88 having been presented. The CTA
explained that a mere listing of VAT invoices and receipts,
even if certified to have been previously examined by an
independent certified public accountant, would not suffice to
establish the truthfulness and accuracy of the contents of

such invoices and receipts unless offered and actually verified

by it (CTA) in accordance with CTA Circular No. 1-95,
as amended by CTA Circular No. 10-97,which requires that
photocopies of invoices, receipts and other documents
covering said accounts of payments be pre-marked by the party
concerned and submitted to the court. 7 . C A - R e v e r s e d t h e
decision of CTA and granted the claim.the
appellate court held that there was no need for
respondent to present the photocopies of
t h e purchase invoices or receipts evidencing the VAT
paid in view of Rule 26, Section 2 of the RevisedRules
of Court and the Resolutions of the CTA holding that
the matters requested in respondentsRequest for
Admissions in CTA No. 4968 were deemed admitted by the
CIR in light of its failure to filea verified reply
thereto8.Petitioner argued that the documents
required to be submitted to the BIR under Revenue
Regulation No. 388s h o u l d l i k e w i s e b e p r e s e n t e d t o t h e C T A
to prove entitlement to input tax
c r e d i t . A c e r t i f i c a t i o n b y a n independent Certified
Public Accountant (CPA) as provided under CTA
Circulars 1-95 and 10-97 does not relieve respondent of
the onus of adducing in evidence the invoices, receipts and
other documents to show the input VAT paid on its purchase
of goods and services.
ISSUE: whether respondent adduced sufficient evidence
to prove its claim for refund of its input VAT for taxable
year 1991 in the amounts of P5,683,035.04 and
P8,173,789.60.
RULING:
NO. Respondent failed to do so. As export sales, the
sale of gold to the Central Bank is zero -rated, hence,
no tax is chargeable to it as purchaser. Zero rating is
primarily intended to be enjoyed by the seller respondent
herein, which charges no output VAT but can claim a refund
of or a tax credit certificate for the input VAT previously
charged to it by suppliers. For a judicial claim for refund to
prosper, however, respondent must not only prove that it is a
VAT registered entity and that it filed its claims within the
prescriptive period. It must substantiate the input VAT
paid by purchase invoices or official receipts
The CTA is described as a court of record. As cases
filed before it are litigated de novo, party litigants should
prove every minute aspect of their cases. No evidentiary
value can be given the purchase invoices or receipts
submitted to the BIR as the rules on documentary evidence
require that these documents must be formally offered
before the CTA As the CTA stated: [S]ale of gold to the
Central Bank should not be subject to the 10% VAToutput tax but this does not ipso facto mean that [the
seller] is entitled to the amount of refund sought as it is
required by law to present evidence showing the input
taxes it paid during the year in question. What is
being claimed in the instant petition is the refund of the
input taxes paid by the herein petitioner on its purchase of
goods and services. Hence, it is necessary for the Petitioner to
show proof that it had indeed paid the said input taxes during
the year 1991.In the case at bar, Petitioner failed to discharge
this duty. It did not adduce in evidence the sales invoice,
receipts or other documents showing the input value
added tax on the purchase of goods and services.
PHILIPPINE AMUSEMENT AND GAMING CORPORATION VS.
BUREAU OF INTERNAL REVENUE
FACTS:

PAGCOR was created pursuant to Presidential Decree (P.D.)

2
No. 1067-A on January 1, 1977. Simultaneous to its creation,
3
P.D. No. 1067-B (supplementing P.D. No. 1067-A) was issued
exempting PAGCOR from the payment of any type of tax,
except a franchise tax of five percent (5%) of the gross
4
revenue. Thereafter, on June 2, 1978, P.D. No. 1399 was
issued expanding the scope of PAGCOR's exemption.
PAGCOR's tax exemption was removed in June 1984 through
P.D. No. 1931, but it was later restored by Letter of
Instruction No. 1430, which was issued in September 1984.
8
On January 1, 1998, R.A. No. 8424, otherwise known as
the National Internal Revenue Code of 1997, took effect.
Section 27 (c) of R.A. No. 8424 provides that governmentowned and controlled corporations (GOCCs) shall pay
corporate income tax, except petitioner PAGCOR, the
Government Service and Insurance Corporation, the Social
Security System, the Philippine Health Insurance Corporation,
and the Philippine Charity Sweepstakes Office,
10
With the enactment of R.A. No. 9337 on May 24, 2005,
certain sections of the National Internal Revenue Code of
1997 were amended. The particular amendment that is at
issue in this case is Section 1 of R.A. No. 9337, which
amended Section 27 (c) of the National Internal Revenue
Code of 1997 by excluding PAGCOR from the enumeration of
GOCCs that are exempt from payment of corporate income
tax, Different groups came to this Court via petitions
for certiorari and prohibition assailing the validity and
constitutionality of R.A. No. 9337,
On September 1, 2005, the Court dismissed all the petitions
12
and upheld the constitutionality of R.A. No. 9337.
On the same date, respondent BIR issued Revenue
13
Regulations (RR) No. 16-2005, specifically identifying
PAGCOR as one of the franchisees subject to 10% VAT
imposed under Section 108 of the National Internal Revenue
Code of 1997, as amended by R.A. No. 9337. The said revenue
regulation, in part, reads:
Sec. 4. 108-3. Definitions and Specific Rules on Selected
Services.
xxxx
(h) x x x
Gross Receipts of all other franchisees, other than those
covered by Sec. 119 of the Tax Code, regardless of how their
franchisees may have been granted, shall be subject to the
10% VAT imposed under Sec.108 of the Tax Code. This
includes, among others, the Philippine Amusement and
Gaming Corporation (PAGCOR), and its licensees or
franchisees.
Hence, the present petition for certiorari.
PAGCOR raises the following issues:
ISSUE:
Is Republic Act 9337 constitutional insofar as it excluded
PAGCOR from the enumeration of GOCCs exempt from the
payment of corporate income tax?
HELD:
YES. The original exemption of PAGCOR from corporate
income tax was not made pursuant to a valid classification
based on substantial distinctions so that the law may operate
only on some and not on all. Instead, the same was merely
granted due to the acquiescence of the House Committee on
Ways and Means to the request of PAGCOR.
The argument that the withdrawal of the exemption also
violates the non-impairment clause will not hold since any
franchise is subject to amendment, alteration or repeal by
Congress.
However, the Court made it clear that PAGCOR remains
exempt from payment of indirect taxes and as such its

purchases remain not subject to VAT, reiterating the rule laid

down in the Acesite case.
ACCENTURE, INC. vs. COMMISSIONER OF INTERNAL REVENU
E G.R. No. 190102 July 11, 2012
FACTS:
Petitioner Accenture, a VAT registered entity, is a
corporation engaged in the business of providing
management consulting, business strategies development,
and selling and/or licensing of software. The monthly and
quarterly VAT returns of Accenture show that,
notwithstanding its application of the input VAT credits
earned from its zero-rated transactions against its output VAT
liabilities, it still had excess or unutilized input VAT credits in
the amount of P37,038,269.18. Thus, Accenture filed with the
Department of Finance (DoF) an administrative claim for the
refund or the issuance of a Tax Credit Certificate (TCC). When
the DoF did not act on the claim, Accenture filed a Petition for
Review with CTA praying for the issuance of a TCC in
its favour. The CIR answered that the sale by Accenture
of goods and services to its clients are not zero -rated
transactions and that Accenture has failed to prove that
it is entitled to a refund, because its claim has not been
fully substantiated or documented. Ruling that Accentures
services would qualify for zero-rating under the 1997
National Internal Revenue Code of the Philippines (Tax
Code)only if the recipient of the services was doing business
outside of the Philippines, the Division of the CTA ruled that
since Accenture had failed to present evidence to prove
that the foreign clients to which the former rendered
services did business outside the Philippines, it was not
entitled to refund. On appeal before the CTA en banc,
Accenture argued that because the case pertained to the
third and the fourth quarters of taxable year 2002, the
applicable law was the 1997 Tax Code, and not R.A. 9337 and
that prior to the amendment introduced by (R.A.)9337, there
was no requirement that the services must be rendered to a
person engaged in business conducted outside the
Philippines to qualify for zero-rating. Nevertheless, the
CTA en banc affirmed the decision of the division. Hence this
present petition for review before the SC.
ISSUES:
1. Should the recipient of the services be "doing
business outside the Philippines" for the transaction
to be zero-rated under Section 108(B)(2) of the 1997 Tax
Code?
2.Has Accenture successfully proven that its clients
are entities doing business outside the Philippines?
3.Is Accenture entitled to tax refund?
HELD:
1. Recipient of services must be doing business outside
the Philippines for the transactions to qualify as zerorated. Accenture anchors its refund claim on Section 112(A)
of the 1997 Tax Code, which allows the refund of unutilized
input VAT earned from zero-rated or effectively zero-rated
sales. The provision reads:
SEC. 112. Refunds or Tax Credits of Input Tax. -(A) Zero-Rated
or Effectively Zero-Rated Sales. - Any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may,
within two (2) years after the close of the taxable quarter
when the sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against
output tax: Provided, however, That in the case of zero-rated
sales under Section 106(A)(2)(a)(1), (2) and (B) and Section
108 (B)(1) and (2), the acceptable foreign currency exchange
proceeds thereof had been duly accounted for in accordance

with the rules and regulations of the Bangko Sentral ng

Pilipinas (BSP): Provided, further, That where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and also
in taxable or exempt sale of goods of properties or services,
and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions,
it shall be allocated proportionately on the basis of the
volume of sales. Section 108(B) referred to in the foregoing
provision was first seen when Presidential Decree No. (P.D.)
199431amended Title IV of P.D. 1158 which is also known as
the National Internal Revenue Code of 1977. Several
Decisions have referred to this as the 1986 Tax Code, even
though it merely amended Title IV of the 1977 Tax Code. Two
years thereafter, or on 1 January 1988, Executive Order No.
(E.O.) 27333 further amended provisions of Title IV. E.O. 273
by transferring the old Title IV provisions to Title VI and filling
in the former title with new provisions that imposed a VAT.
The VAT system introduced in E.O. 273 was restructured
through Republic Act No. (R.A.) 7716. This law, which was
approved on 5May 1994, widened the tax base. Section 3
thereof reads:
SECTION 3. Section 102 of the National Internal Revenue
Code, as amended, is hereby further amended to read as
follows:"SEC. 102. Value-added tax on sale of services and use
or lease of properties. x x xx x x x x x x x x"(b) Transactions
subject to zero-rate. The following services performed in
the Philippines by VAT-registered persons shall be subject to
0%.

CIR V. ACESITE (PHILIPPINES) HOTEL CORPORATION,

GR No. 147295, 16 Feb. 2007
FACTS:
Acesite was the operator of Holiday Inn Manila Pavilion
Hotel. It leased a portion of its premises to PAGCOR for
casino operations. It also catered food and beverages to
PAGCORs casino patrons.
ISSUE: WON Acesite could refund the VAT it paid on its
rental income and sale of food and beverages to PAGCOR.
RULING:
The Supreme Court, pursuant to PAGCORs charter (PD No.
1869 and all amendments thereto), found that Acesites sale
of services to PAGCOR was zero-rated under Section
108(B)(3) of the 1997 Tax Code.
COMMISSIONER OF INTERNAL REVENUE, V. MAGSAYSAY LINES
FACTS:
Pursuant to a government program of privatization, The NDC decided to
sell in one lot its NMC shares and five (5) of its ships, which are 3,700
DWT Tween-Decker, "Kloeckner" type vessels. The vessels were
constructed for the NDC between 1981and 1984, then initially leased to
Luzon Stevedoring Company, also its wholly-owned subsidiary.
Subsequently, the vessels were transferred and leased, on a bareboat
basis, to the NMC.
The NMC shares and the vessels were offered for public bidding. Among
the stipulated terms and conditions for the public auction was that the
winning bidder was to pay "a value-added tax of 10% on the value of the
vessels."
On 3 June 1988, private respondent Magsaysay Lines, Inc. (Magsaysay
Lines) offered to buy the shares and the vessels for P168,000,000.00.
The bid was made by Magsaysay Lines, purportedly for a new company
still to be formed composed of itself and was approved by the
Committee on Privatization, and a Notice of Award dated 1 July 1988
was issued to Magsaysay Lines who in turn was assessed of VAT
through VAT Ruling No.568-88 dated 14 December 1988 from the BIR,
holding that the sale of the vessels was subject to the 10% VAT. The
ruling cited the fact that NDC was a VAT-registered enterprise, and thus

its "transactions incident to its normal VAT registered activity of leasing

out personal property including sale of its own assets that are movable,
tangible objects which are appropriable or transferable are subject to
the 10% [VAT].CTA ruled that the sale of a vessel was an "isolated
transaction," not done in the ordinary course of NDCs business, and
was thus not subject to VAT, which under Section 99 of the Tax Code,
was applied only to sales in the course of trade or business. The CTA
further held that - the sale of the vessels could not be "deemed sale,"
and thus subject to VAT, as the transaction did not fall under the
enumeration of transactions deemed sale as listed either in Section
100(b) of the Tax Code, or Section 4 of R.R. No. 5-87.Finally, the CTA
ruled that any case of doubt should be resolved in favor of private
respondents since Section 99 of the Tax Code which implemented VAT
is not an exemption provision, but a classification provision which
warranted the resolution of doubts in favor of the taxpayer. Hence CIR
appealed the CTA Decision.
ISSUE: WON the sale by the National Development Company (NDC) of
five (5) of its vessels to the private respondents is subject to value-added
tax (VAT) under the National Internal Revenue Code of 1986 (Tax Code)
HELD:
NOT SUBJECT TO VAT.
VAT is ultimately a tax on consumption, even though it is assessed on
many levels of transactions on the basis of a fixed percentage.
It is the end user of consumer goods or services which ultimately
shoulders the tax, as the liability therefrom is passed on to the end users
by the providers of these goods or services who in turn may credit their
own VAT liability (or input VAT)from the VAT payments they receive
from the final consumer (or output VAT).
The final purchase by the end consumer represents the final link in a
production chain that itself involves several transactions and several acts
of consumption. The VAT system assures fiscal adequacy through the
collection of taxes on every level of consumption, yet assuages the
manufacturers or providers of goods and services by enabling them to
pass on their respective VAT liabilities to the next link of the chain until
finally the end consumer shoulders the entire tax liability. Yet VAT is not
a singular-minded tax on every transactional level. Its assessment bears
direct relevance to the taxpayer's role or link in the production chain.
Hence, as affirmed by Section 99 of the Tax Code and its subsequent
incarnations, the tax is levied only on the sale, barter or exchange of
goods or services by persons who engage in such activities, in the course
of trade or business.
COMMISSIONER OF INTERNAL REVENUE, vs.PLACER DOME
TECHNICALSERVICES (PHILS.), INC.,
G.R. No. 164365 June 8, 2007
FACTS:
At the San Antonio Mines in Marinduque owned by
Marcopper Mining Corporation Marcopper), mine tailings
from the Taipan Pit started to escape through the Makulapnit
Tunneland Boac Rivers, causing the cessation of mining and
milling operations, and causing potential environmental
damage. To contain the damage and prevent the further
spread of the tailing leak , Placer Dome, Inc. (PDI), the owner
of 39.9% of Marcopper, undertook to perform the clean-up
and rehabilitation of the Makalupnit and Boac Rivers, through
a subsidiary. To accomplish this, PDI engaged Placer Dome
Technical Services Limited (PDTSL), a non-resident foreign
corporation with office in Canada, to carry out the project. In
turn, PDTSL engaged the services of Placer Dome Technical
Services (Philippines), Inc. (respondent), a domestic
corporation and registered Value-Added Tax (VAT) entity, to
implement the project in the Philippines. PDTSL and
respondent thus entered into an Implementation Agreement.
Due to the urgency and potentially significant damage to the
environment, respondent had agreed to immediately
implement the project, and the Implementation Agreement
stipulated that all implementation services rendered by

respondent even prior to the agreements signing shall be

deemed to have been provided pursuant to the said
Agreement. The Agreement further stipulated that PDTSL
was to pay respondent "an amount of money, in U.S. funds,
equal to all Costs incurred for Implementation Services as
well as a fee agreed to one percent (1%) of such
Costs."Respondent amended its quarterly VAT returns. In the
amended returns, respondent declared a total input VAT
payment of P43,015,461.98 for the said quarters, and
P42,837,933.60 as its total excess input VAT for the same
period. Then respondent filed an administrative claim for the
refund of its reported total input VAT payments in relation to
the project it had contracted from PDTSL, amounting to
P43,015,461.98. Respondent argued that the revenues it
derived from services rendered to PDTSL, pursuant to the
Agreement, qualified as zero-rated sales under Section
102(b)(2) of the then Tax Code, since it was paid in foreign
currency inwardly remitted to the Philippines. When the CIR
did not act on this claim, respondent duly filed a Petition
for Review with the CTA, praying for the refund. CIR merely
invoked the presumption that taxes are collected in
accordance with law, and that claims for refund of taxes are
construed strictly againstclaimants.CTA ruled in favor of
respondent but only the resulting input VAT of
P17,178,373.12 could be refunded. The rulings of the CTA
were elevated by petitioner to the CA on Petition for Review.
CA affirmed the CTA ruling.
ISSUE: Whether Placer is entitled to the refund as the
revenues qualified as zero-rated sales
HELD: Yes
Petitioner presently invokes the "destination principle,"
citing that *r+espondents services, while rendered to a nonresident foreign corporation, are not destined to be
consumed abroad. Hence, the onus of taxation of the
revenue arising therefrom, for VAT purposes, is also within
the Philippines. Yet the Court in American Express debunked
this argument when it rebutted the theoretical
underpinnings of VAT Ruling No. 040-98, particularly its
reliance on the "destination principle" in taxation:
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.
Confusion in zero rating arises because petitioner equates
the performance of a particular type of service with the
consumption of its output abroad. In the present case, the
facilitation of the collection of receivables is different from
the utilization or consumption of the outcome of such
service. While the facilitation is done in the Philippines, the
consumption is not. Respondent renders assistance to its
foreign clients the ROCs outside the country by
receiving the bills of service establishments located here in
the country and forwarding them to the ROCs abroad. The
consumption contemplated by law, contrary to petitioner's
administrative interpretation, does not imply that the
service be done abroad in order to be zero-rated.
Consumption is "the use of a thing in a way that thereby
exhausts it." Applied to services, the term means the
performance or "successful completion of a contractual
duty, usually resulting in the performer's release from any
past or future liability x x x"
The services rendered by respondent are performed or
successfully completed upon its sending to its foreign client
the drafts and bills it has gathered from service
establishments here.

Its services, having been performed in the Philippines, are

therefore also consumed in the Philippines.
Unlike goods, services cannot be physically used in or bound
for a specific place when their destination is determined.
Instead, there can only be a "predetermined end of a
course" when determining the service "location or position
x x x for legal purposes."
Respondent's facilitation service has no physical existence,
yet takes place upon rendition, and therefore upon
consumption, in the Philippines. Under the destination
principle, as petitioner asserts, such service is subject to VAT
at the rate of 10 percent.
xxxx
Two years ago, the Court in Commissioner of Internal
Revenue v. American Express International, Inc. (Philippine
1
Branch) definitively ruled that under the National Internal
2
Revenue Code of 1986, as amended, "services performed
by VAT-registered persons in the Philippines (other than
the processing, manufacturing or repacking of goods for
persons doing business outside the Philippines), when paid
in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the [Bangko
3
Sentral ng Pilipinas], are zero-rated." The grant of the
present petition entails the extreme step of
rejecting American Express as precedent, a recourse which
the Court is unwilling to take.
It is indubitable that petitioners arguments cannot
withstand the Courts ruling in American Express, a
precedent warranting stare decisis application and one
which, in any event, we are disinclined to revisit at this
juncture.

CIR V. AMERICAN EXPRESS PHIL BRANCH

G.R. No. 1526-0, June 29, 2005
FACTS: Respondent] is a Philippine branch of American
Express International, Inc., a corporation duly organized and
existing under and by virtue of the laws of the State of
Delaware, U.S.A. It is a servicing unit of American Express
International, Inc. Hongkong Branch (Amex-HK) and is
engaged primarily to facilitate the collections of Amex-HK
receivables from card members situated in the Philippines
and payment to service establishments in the Philippines.
Amex Philippines registered itself with the Bureau of Internal
Revenue (BIR), as a value-added tax (VAT) taxpayer effective
March 1988.
On April 1999 respondent filed with the BIR a letter-request
for the refund of its 1997 excess input taxes citing as basis
therefor, Section 110 (B) of the 1997 Tax Code to wit:
Section 110. Tax Credits. xxxxxxxxx
(B) Excess Output or Input Tax. If at the end of any taxable
quarter the output tax exceeds the input tax, the excess shall
be paid by the VAT-registered person. If the input tax exceeds
the output tax, the excess shall be carried over to the
succeeding quarter or quarters. Any input tax attributable to
the purchase of capital goods or to zero-rated sales by a VATregistered person may at his option be refunded or credited
against other internal revenue taxes, subject to the provisions
of Section 112.
There being no immediate action on the part of the
*petitioner+, *respondents+ petition was filed on April 15,
1999.

In addition, [respondent] relied on VAT Ruling No. 080-89,

dated April 3, 1989, the pertinent portion of which reads as
follows:
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 Philippines and accounted for in
accordance with the rules and regulations of the Central
[B]ank of the Philippines, your service income is automatically
zero rated effective January 1, 1998. [Section 102(a)(2) of the
Tax Code as amended]
B. Input taxes on domestic purchases of taxable goods and
services related to zero-rated revenues are available as tax
refund in accordance with Section 106 (now Section 112) of
the [Tax Code] and Section 8(a) of [Revenue] Regulations
[(RR)] No. 5-87, to state:
Section 106. Refunds or tax credits of input tax. (A) Zero-rated or effectively Zero-rated Sales. Any VATregistered person, except those covered by paragraph (a)
above, whose sales are zero-rated or are effectively zerorated, may, within two (2) years after the close of the taxable
quarter when such sales were made, apply for the issuance of
tax credit certificate or refund of the input taxes due or
attributable to such sales, to the extent that such input tax
has not been applied against output tax. x x x. [Section 106(a)
of the Tax Code]
ISSUE: W/N petitioner is entitled to a refund
HELD: YES. Section 102 of the Tax Code provides:
(b) Transactions subject to zero percent (0%) rate. The
following services performed in the Philippines by VATregistered 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, where the services are paid for in
acceptable foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
(2) Services other than those mentioned in the preceding
subparagraph, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance
with the rules and regulations of the *BSP+;
xxxxxxxxx
Under the last paragraph quoted above, services performed
by VAT-registered persons in the Philippines (other than the
processing, manufacturing or repacking of goods for persons
doing business outside the Philippines), when paid in
acceptable foreign currency and accounted for in accordance
with the rules and regulations of the BSP, are zero-rated.
Respondent is a VAT-registered person that facilitates the
collection and payment of receivables belonging to its nonresident foreign client, for which it gets paid in acceptable
foreign currency inwardly remitted and accounted for in
conformity with BSP rules and regulations. Certainly, the
service it renders in the Philippines is not in the same
category as processing, manufacturing or repacking of
goods and should, therefore, be zero-rated. In reply to a
query of respondent, the BIR opined in VAT Ruling No. 080-89
that the income respondent earned from its parent
companys regional operating centers (ROCs) was
automatically zero-rated effective January 1, 1988.
In sum, having resolved that transactions of respondent are
zero-rated, the Court upholds the formers entitlement to the
refund as determined by the appellate court. Moreover,
there is no conflict between the decisions of the CTA and CA.
This Court respects the findings and conclusions of a
specialized court like the CTA which, by the nature of its
functions, is dedicated exclusively to the study and
consideration of tax cases and has necessarily developed an
expertise on the subject.93

Furthermore, under a zero-rating scheme, the sale or

exchange of a particular service is completely freed from the
VAT, because the seller is entitled to recover, by way of a
refund or as an input tax credit, the tax that is included in the
cost of purchases attributable to the sale or exchange.94
*T+he tax paid or withheld is not deducted from the tax
base. Having been applied for within the reglementary
period,96 respondents refund is in order.