Taxation; Due Process; While taxes are the lifeblood of the revenue taxes, fees, and charges, and
d charges, and the enforcement of all
government and should be collected without unnecessary
hindrance, such collection should be made in accordance with law
as any arbitrariness will negate the very reason for government
itself.—It has been repeatedly observed, and not without merit,
that the enforcement of tax laws and the collection of taxes, is of
paramount importance for the sustenance of government. Taxes
are the lifeblood of the government and should be collected without
unnecessary hindrance. However, such collection should be made
in accordance with law as any arbitrariness will negate the very
reason for government itself. It is therefore necessary to reconcile
the apparently conflicting interests of the authorities and the
taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
Same; Courts; Probate Courts; Jurisdiction; The authority of the
Regional Trial Court, sitting, albeit with limited jurisdiction, as a
probate court over the estate of a deceased individual, is not a
trifling thing, but the court’s jurisdiction, once invoked, and made
effective, cannot be treated with indifference nor should it be
ignored with impunity by the very parties invoking its authority.—
Concededly, the authority of the Regional Trial Court, sitting, albeit
with limited jurisdiction, as a probate court over estate of deceased
individual, is not a trifling thing. The court’s jurisdiction, once
invoked, and made effective, cannot be treated with indifference
nor should it be ignored with impunity by the very parties invoking
its authority. In testament to this, it has been held that it is within
the jurisdiction of the probate court to approve the sale of
properties of a deceased person by his prospective heirs before
final adjudication; to determine who are the heirs of the decedent;
the recognition of a natural child; the status of a woman claiming
to be the legal wife of the decedent; the legality of disinheritance
of an heir by the testator; and to pass upon the validity of a waiver
of hereditary rights.
Same; Same; Same; Same; Separation of Powers; In the
Philippine experience, the enforcement and collection of estate tax
is executive in nature.—In the Philippine experience, the
enforcement and collection of estate tax, is executive in character,
as the legislature has seen it fit to ascribe this task to the Bureau
of Internal Revenue. Section 3 of the National Internal Revenue
Code attests to this: “Sec. 3. Powers and duties of the Bureau.—
The powers and duties of the Bureau of Internal Revenue shall
comprehend the assessment and collection of all national internal
forfeitures, penalties, and fines connected therewith, including the
execution of judgments in all cases decided in its favor by the
Court of Tax Appeals and the ordinary courts. Said Bureau shall
also give effect to and administer the supervisory and police power
conferred to it by this Code or other laws.”
Same; Same; Same; Same; The approval of the court, sitting in
probate, or as a settlement tribunal over the deceased is not a
mandatory requirement in the collection of estate taxes.—From the
foregoing, it is discernible that the approval of the court, sitting in
probate, or as a settlement tribunal over the deceased is not a
mandatory requirement in the collection of estate taxes. It cannot
therefore be argued that the Tax Bureau erred in proceeding with
the levying and sale of the properties allegedly owned by the late
President, on the ground that it was required to seek first the
probate court’s sanction. There is nothing in the Tax Code, and in
the pertinent remedial laws that implies the necessity of the
probate or estate settlement court’s approval of the state’s claim
for estate taxes, before the same can be enforced and collected.
Same; The deficiency tax assessment, if it has already become
final, executory, and demandable, may be collected through the
summary remedy of distraint or levy pursuant to Section 205 of
the NIRC.—We hold otherwise. The Notices of Levy upon real
property were issued within the prescriptive period and in
accordance with the provisions of the present Tax Code. The
deficiency tax assessment, having already become final, executory,
and demandable, the same can now be collected through the
summary remedy of distraint or levy pursuant to Section 205 of
the NIRC.
Same; Estates Taxes; The omission to file an estate tax return,
and the subsequent failure to contest or appeal the assessment
made by the BIR is fatal, as under Section 223 of the NIRC, in case
of failure to file a return, the tax may be assessed at any time
within ten years after the omission, and any tax so assessed may
be collected by levy upon real property within three years following
the assessment of the tax.—The omission to file an estate tax
return, and the subsequent failure to contest or appeal the
assessment made by the BIR is fatal to the petitioner’s cause, as
under the above-cited provision, in case of failure to file a return,
the tax may be assessed at any time within ten years after the
omission, and any tax so assessed may be collected by levy upon
real property within three years following the assessment of the
tax. Since the estate tax assessment had become final and
unappealable by the petitioner’s default as regards protesting the
validity of the said assessment, there is now no reason why the
BIR cannot continue with the collection of the said tax. Any
objection against the assessment should have been pursued
following the avenue paved in Section 229 of the NIRC on protests
on assessments of internal revenue taxes.
Same; Same; Ill-Gotten Wealth; The mere fact that the decedent
has pending cases involving ill-gotten wealth does not affect the
enforcement of tax assessments over the properties indubitably
included in his estate.—Petitioner further argues that “the
numerous pending court cases questioning the late president’s
ownership or interests in several properties (both real and
personal) make the total value of his estate, and the consequent
estate tax due, incapable of exact pecuniary determination at this
time. Thus, respondents’ assessment of the estate tax and their
issuance of the Notices of Levy and sale are premature and
oppressive.” He points out the pendency of Sandiganbayan Civil
Case Nos. 0001-0034 and 0141, which were filed by the
government to question the ownership and interests of the late
President in real and personal properties located within and outside
the Philippines. Petitioner, however, omits to allege whether the
properties levied upon by the BIR in the collection of estate taxes
upon the decedent’s estate were among those involved in the said
cases pending in the Sandiganbayan. Indeed, the court is at a loss
as to how these cases are relevant to the matter at issue. The
mere fact that the decedent has pending cases involving ill-gotten
wealth does not affect the enforcement of tax assessments over
the properties indubitably included in his estate.
Same; Same; It is not the Department of Justice which is the
government agency tasked to determine the amount of taxes due
upon the estate but the Bureau of Internal Revenue, whose
determinations and assessments are presumed correct and made
in good faith.—It is not the Department of Justice which is the
government agency tasked to determine the amount of taxes due
upon the subject estate, but the Bureau of Internal Revenue,
whose determinations and assessments are presumed correct and
made in good faith. The taxpayer has the duty of proving
otherwise. In the absence of proof of any irregularities in the
performance of official duties, an assessment will not be disturbed.
Same; Same; Even an assessment based on estimates is prima
facie valid and lawful where it does not appear to have been
arrived at arbitrarily or capriciously.—Even an assessment based
on estimates is prima facie valid and lawful where it does not
appear to have been arrived at arbitrarily or capriciously. The
burden of proof is upon the complaining party to show clearly that
the assessment is erroneous. Failure to present proof of error in
the assessment will justify the judicial affirmance of said
assessment. In this instance, petitioner has not pointed out one
single provision in the Memorandum of the Special Audit Team
which gave rise to the questioned assessment, which bears a trace
of falsity. Indeed, the petitioner’s attack on the assessment bears
mainly on the alleged improbable and unconscionable amount of
the taxes charged. But mere rhetoric cannot supply the basis for
the charge of impropriety of the assessments made.
Same; Same; Actions; Certiorari; Objections to assessments
should be raised by means of the ample remedies afforded the
taxpayer by the Tax Code, with the Bureau of Internal Revenue
and the Court of Tax Appeals, and not via a Petition for Certiorari,
under the pretext of grave abuse of discretion.—Moreover, these
objections to the assessments should have been raised,
considering the ample remedies afforded the taxpayer by the Tax
Code, with the Bureau of Internal Revenue and the Court of Tax
Appeals, as described earlier, and cannot be raised now via Petition
for Certiorari, under the pretext of grave abuse of discretion. The
course of action taken by the petitioner reflects his disregard or
even repugnance of the established institutions for governance in
the scheme of a well-ordered society. The subject tax assessments
having become final, executory and enforceable, the same can no
longer be contested by means of a disguised protest. In the main,
Certiorari may not be used as a substitute for a lost appeal or
remedy. This judicial policy becomes more pronounced in view of
the absence of sufficient attack against the actuations of
government.
Same; Same; Parties; In the case of notices of levy issued to
satisfy the delinquent estate tax, the delinquent taxpayer is the
Estate of the decedent, and not necessarily, and exclusively, the
heirs of the deceased.—We do not agree. In the case of notices of
levy issued to satisfy the delinquent estate tax, the delinquent
taxpayer is the Estate of the decedent, and not necessarily, and
exclusively, the petitioner as heir of the deceased. In the same
vein, in the matter of income tax delinquency of the late president
and his spouse, petitioner is not the taxpayer liable. Thus, it
follows that service of notices of levy in satisfaction of these tax
delinquencies upon the petitioner is not required by law, as under
Section 213 of the NIRC, which pertinently states: “x x x . . . Levy
shall be effected by writing upon said certificate a description of
the property upon which levy is made. At the same time, written
notice of the levy shall be mailed to or served upon the Register of
Deeds of the province or city where the property is located and
upon the delinquent taxpayer, or if he be absent from the
Philippines, to his agent or the manager of the business in respect
to which the liability arose, or if there be none, to the occupant of
the property in question. x x x” Marcos II vs. Court of Appeals,
273 SCRA 47, G.R. No. 120880 June 5, 1997
Taxation; Estate Tax; Bank Deposits; Estate tax may also serve as
guard against the release of deposits to persons who have no
sufficient and valid claim over the deposits.—Taxes are created
primarily to generate revenues for the maintenance of the
government. However, this particular tax may also serve as guard
against the release of deposits to persons who have no sufficient
and valid claim over the deposits. Based on the assumption that
only those with sufficient and valid claim to the deposit will pay the
taxes for it, requiring the certificate from the BIR increases the
chance that the deposit will be released only to them. Philippine
National Bank vs. Santos, 744 SCRA 664, G.R. No. 208295
December 10, 2014
Civil Law; Donations; Elements of a Donation.—Donation has the
following elements: (a) the reduction of the patrimony of the
donor; (b) the increase in the patrimony of the donee; and, (c) the
intent to do an act of liberality or animus donandi.
Same; Same; Same; Petitioners’ contribution of money without
any material consideration evinces animus donandi; The fact that
their purpose for donating was to aid in the election of the donee
does not negate the presence of donative intent.—Since animus
donandi or the intention to do an act of liberality is an essential
element of a donation, petitioners argue that it is important to look
into the intention of the giver to determine if a political contribution
is a gift. Petitioners’ argument is not tenable. First of all, donative
intent is a creature of the mind. It cannot be perceived except by
the material and tangible acts which manifest its presence. This
being the case, donative intent is presumed present when one
gives a part of one’s patrimony to another without consideration.
Second, donative intent is not negated when the person donating
has other intentions, motives or purposes which do not contradict
donative intent. This Court is not convinced that since the purpose
of the contribution was to help elect a candidate, there was no
donative intent. Petitioners’ contribution of money without any
material consideration evinces animus donandi. The fact that their
purpose for donating was to aid in the election of the donee does
not negate the presence of donative intent.
Same; Same; Same; Donative intent is not negated by the
presence of other intentions, motives or purposes which do not
contradict donative intent.—Since the purpose of an electoral
contribution is to influence the results of the election, petitioners
again claim that donative intent is not present. Petitioners attempt
to place the barrier of mutual exclusivity between donative intent
and the purpose of political contributions. This Court reiterates that
donative intent is not negated by the presence of other intentions,
motives or purposes which do not contradict donative intent.
Abello vs. Commissioner of Internal Revenue, 452 SCRA
162, G.R. No. 120721 February 23, 2005
Taxation; Gift tax; Donation out of gratitude for past services
taxable.—A donation made by a corporation to the heirs of a
deceased officer out of gratitude for his past services is subject to
the donees’ gift tax.
Same; Same; Same; No deduction for value of past services.—A
donation made out of gratitude for past services is not subject to
deduction for the value of said services which do not constitute a
recoverable debt.
Same; Same; Same; Gratitude not consideration under tax code.—
Gratitude has no economic value and is not “consideration” in the
sense that the word is used under Section 311 of the Tax Code.
Same; Same; Collection of interest and surcharge for delay in
payment of tax mandatory.—Section 119, paragraph (b)(1) and (c)
of the Tax Code does not confer on the Commissioner of Internal
Revenue or on the courts any power and discretion not to impose
the 1% interest monthly and the 5% surcharge for delay in
payment of the gift tax already assessed. Pirovano vs.
Commissioner of Internal Revenue, 14 SCRA 832, No. L-
19865 July 31, 1965
Taxation; Expenditure Method; The government is allowed to
resort to all evidence or resources available to determine a
taxpayer’s income and to use methods to reconstruct his income. A
method commonly used by the government is the expenditure
method, which is a method of reconstructing a taxpayer’s income
by deducting the aggregate yearly expenditures from the declared
yearly income.—In the case of income, for it to be taxable, there
must be a gain realized or received by the taxpayer, which is not
excluded by law or treaty from taxation. The government is
allowed to resort to all evidence or resources available to
determine a taxpayer’s income and to use methods to reconstruct
his income. A method commonly used by the government is the
expenditure method, which is a method of reconstructing a
taxpayer’s income by deducting the aggregate yearly expenditures
from the declared yearly income. The theory of this method is that
when the amount of the money that a taxpayer spends during a
given year exceeds his reported or declared income and the source
of such money is unexplained, it may be inferred that such
expenditures represent unreported or undeclared income.
Same; It is a basic concept in taxation that income denotes a flow
of wealth during a definite period of time, while capital is a fund or
property existing at one distinct point in time.—Respondent
spouses’ defense that they had sufficient savings to purchase the
properties remains self-serving at this point since they have not
yet presented any evidence to support this. And since there is no
evidence yet to suggest that the money they used to buy the
properties was from an existing fund, it is safe to assume that that
money is income or a flow of wealth other than a mere return on
capital. It is a basic concept in taxation that income denotes a flow
of wealth during a definite period of time, while capital is a fund or
property existing at one distinct point in time. Moreover, by just
looking at the tables presented by petitioner, there is a manifest
showing that respondent spouses had underdeclared their income.
The huge disparity between respondent Antonio’s reported or
declared annual income for the past several years and respondent
spouses’ cash acquisitions for the years 2000, 2001, and 2003
cannot be ignored. In fact, it makes us wonder how they were able
to purchase the properties in cash given respondent Antonio’s
meager income. Bureau of Internal Revenue vs. Court of
Appeals, 741 SCRA 536, G.R. No. 197590 November 24,
2014
Court of Tax Appeals; Appeals; To leave undetermined the mode of
appeal from the Secretary of Finance would be an injustice to
taxpayers prejudiced by his adverse rulings. To remedy this
situation, the Supreme Court (SC) implies from the purpose of
Republic Act (RA) No. 1125 and its amendatory laws that the Court
of Tax Appeals (CTA) is the proper forum with which to institute
the appeal.—To leave undetermined the mode of appeal from the
Secretary of Finance would be an injustice to taxpayers prejudiced
by his adverse rulings. To remedy this situation, We imply from the
purpose of RA 1125 and its amendatory laws that the CTA is the
proper forum with which to institute the appeal. This is not, and
should not, in any way, be taken as a derogation of the power of
the Office of President but merely as recognition that matters
calling for technical knowledge should be handled by the agency or
quasi-judicial body with specialization over the controversy. As the
specialized quasi-judicial agency mandated to adjudicate tax,
customs, and assessment cases, there can be no other court of
appellate jurisdiction that can decide the issues raised in the CA
petition, which involves the tax treatment of the shares of stocks
sold.
Same; Same; Certiorari; In the recent case of City of Manila v.
Grecia-Cuerdo, 715 SCRA 182 (2014), the Supreme Court (SC) En
Banc has ruled that the Court of Tax Appeals (CTA) now has the
power of certiorari in cases within its appellate jurisdiction.—In the
recent case of City of Manila v. Grecia-Cuerdo, 715 SCRA 182
(2014), the Court En Banc has ruled that the CTA now has the
power of certiorari in cases within its appellate jurisdiction.
Taxation; Donor’s Tax; The absence of donative intent, if that be
the case, does not exempt the sales of stock transaction from
donor’s tax since Sec. 100 of the National Internal Revenue Code
(NIRC) categorically states that the amount by which the fair
market value of the property exceeded the value of the
consideration shall be deemed a gift.—Petitioner’s substantive
arguments are unavailing. The absence of donative intent, if that
be the case, does not exempt the sales of stock transaction from
donor’s tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded
the value of the consideration shall be deemed a gift. Thus, even if
there is no actual donation, the difference in price is considered a
donation by fiction of law. Moreover, Sec. 7(c.2.2) of RR 06-08
does not alter Sec. 100 of the NIRC but merely sets the
parameters for determining the “fair market value” of a sale of
stocks. Such issuance was made pursuant to the Commissioner’s
power to interpret tax laws and to promulgate rules and
regulations for their implementation. Philippine American Life
and General Insurance Company vs. Secretary of Finance,
741 SCRA 578, G.R. No. 210987 November 24, 2014
Taxation; Tax Exemptions; Bureau of Internal Revenue; Revenue
Regulation (RR) No. 2-2012 is invalid and unconstitutional
because: a) it illegally imposes taxes upon Freeport Economic Zone
(FEZ) enterprises, which, by law, enjoy tax-exempt status, and b)
it effectively amends the law and thereby encroaches upon the
legislative authority reserved exclusively by the Constitution for
Congress.—On the merits of the case, we rule that RR 2-2012 is
invalid and unconstitutional because: a) it illegally imposes taxes
upon FEZ enterprises, which, by law, enjoy tax-exempt status, and
b) it effectively amends the law (i.e., RA 7227, as amended by RA
9400) and thereby encroaches upon the legislative authority
reserved exclusively by the Constitution for Congress.
Same; Same; The tax exemption enjoyed by Freeport Economic
Zone (FEZ) enterprises covers internal revenue taxes imposed on
goods brought into the FEZ, including the Clark FEZ, such as value-
added tax (VAT) and excise tax.—In line with this comprehensive
interpretation, we rule that the tax exemption enjoyed by FEZ
enterprises covers internal revenue taxes imposed on goods
brought into the FEZ, including the Clark FEZ, such as VAT and
excise tax.
Same; Same; Since the tax exemptions enjoyed by Freeport
Economic Zone (FEZ) enterprises under the law extend even to
value-added tax (VAT) and excise tax, it follows that the taxes
imposed by Section 3 of Revenue Regulation (RR) No. 2-2012
directly contravene these exemptions.—Since the tax exemptions
enjoyed by FEZ enterprises under the law extend even to VAT and
excise tax, as we discussed above, it follows and we accordingly
rule that the taxes imposed by Section 3 of Revenue Regulation
(RR) No. 2-2012 directly contravene these exemptions. First, the
regulation erroneously considers petroleum and petroleum
products brought into a FEZ as taxable importations. Second, it
unreasonably burdens FEZ enterprises by making them pay the
corresponding taxes — an obligation from which the law specifically
exempts them — even if there is a subsequent opportunity to
refund the payments made.
Same; Same; When goods (e.g., petroleum and petroleum
products) are brought into a Freeport Economic Zone (FEZ), the
goods remain to be in foreign territory and are not therefore goods
introduced into Philippine customs territory subject to Philippine
customs and tax laws.—We find it clear from all these that when
goods (e.g., petroleum and petroleum products) are brought into
an FEZ, the goods remain to be in foreign territory and are not
therefore goods introduced into Philippine customs territory subject
to Philippine customs and tax laws.
Same; Same; Goods brought into and traded within a Freeport
Economic Zone (FEZ) are generally beyond the reach of national
internal revenue taxes and customs duties enforced in the
Philippine customs territory.—Stated differently, goods brought into
and traded within an FEZ are generally beyond the reach of
national internal revenue taxes and customs duties enforced in the
Philippine customs territory. This is consistent with the incentive
granted to FEZs exempting the importation itself from taxes and
duties.
Same; Same; The act of bringing the goods into a Freeport
Economic Zone (FEZ) is not a taxable importation. As long as the
goods remain in the FEZ or reexported to another foreign
jurisdiction, they shall continue to be tax-free.—Therefore, the act
of bringing the goods into an FEZ is not a taxable importation. As
long as the goods remain (e.g., sale and/or consumption of the
article within the FEZ) in the FEZ or reexported to another foreign
jurisdiction, they shall continue to be tax-free. However, once the
goods are introduced into the Philippine customs territory, it ceases
to enjoy the tax privileges accorded to FEZs. It shall then be
considered as an importation subject to all applicable national
internal revenue taxes and customs duties.
Same; Same; The exemption from taxes and duties under Republic
Act (RA) No. 9400 are granted not only to importations into the
Freeport Economic Zone (FEZ), but also specifically to each FEZ
enterprise.—FEZ enterprises bringing goods into the FEZ should
not be considered as importers subject to tax in the same manner
that the very act of bringing goods into these special territories
does not make them taxable importations. We emphasize that the
exemption from taxes and duties under RA 9400 are granted not
only to importations into the FEZ, but also specifically to each FEZ
enterprise.
Same; Same; When the law speaks of a tax exemption, it should
be understood as freedom from the imposition and payment of a
particular tax.—The essence of a tax exemption is the immunity or
freedom from a charge or burden to which others are subjected. It
is a waiver of the government’s right to collect the amounts that
would have been collectible under our tax laws. Thus, when the law
speaks of a tax exemption, it should be understood as freedom
from the imposition and payment of a particular tax.
Same; Same; To limit the tax-free importation privilege of Freeport
Economic Zone (FEZ) enterprises by requiring them to pay subject
to a refund clearly runs counter to the Legislature’s intent to create
a free port where the “free flow of goods or capital within, into, and
out of the zones” is ensured.—Tax exemptions are granted for
specific public interests that the Legislature considers sufficient to
offset the monetary loss in the grant of exemptions. To limit the
tax-free importation privilege of FEZ enterprises by requiring them
to pay subject to a refund clearly runs counter to the Legislature’s
intent to create a free port where the “free flow of goods or capital
within, into, and out of the zones” is ensured.
Same; Same; The power to tax includes the power to grant tax
exemptions.—Finally, the State’s inherent power to tax is vested
exclusively in the Legislature. We have since ruled that the power
to tax includes the power to grant tax exemptions. Thus, the
imposition of taxes, as well as the grant and withdrawal of tax
exemptions, shall only be valid pursuant to a legislative enactment.
Purisima vs. Lazatin, 811 SCRA 205, G.R. No. 210588
November 29, 2016
Taxation; Value-Added Tax; 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.—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.
Same; Same; Services rendered by respondent in the Philippines is
not in the same category as “processing, manufacturing or
repacking of goods” and should be zero-rated.—Respondent is a
VAT-registered person that facilitates the collection and payment of
receivables belonging to its non-resident 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 company’s regional
operating centers (ROCs) was automatically zero-rated effective
January 1, 1988.
Same; Same; The VAT is a tax on consumption “expressed as a
percentage of the value added to goods or services” purchased by
the producer or taxpayer.—The VAT is a tax on consumption
“expressed as a percentage of the value added to goods or
services” purchased by the producer or taxpayer. As an indirect tax
on services, its main object is the transaction itself or, more
concretely, the performance of all kinds of services conducted in
the course of trade or business in the Philippines. These services
must be regularly conducted in this country; undertaken in “pursuit
of a commercial or an economic activity;” for a valuable
consideration; and not exempt under the Tax Code, other special
laws, or any international agreement.
Same; Same; As a general rule, the VAT system uses the
destination principle as a basis for the jurisdictional reach of the
tax.—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.
Same; Same; The law clearly provides for an exception to the
destination principle.—The law clearly provides for an exception to
the destination principle; that is, for a zero percent VAT rate for
services that are performed in the Philippines, “paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the [BSP].” Thus, for the supply of
service to be zero-rated as an exception, the law merely requires
that first, the service be performed in the Philippines; second, the
service fall under any of the categories in Section 102(b) of the Tax
Code; and, third,it be paid in acceptable foreign currency
accounted for in accordance with BSP rules and regulations.

Same; Same; The place where the service is rendered determines
the jurisdiction to impose the VAT; The place of payment is
immaterial; much less is the place where the output of the service
will be further or ultimately used.—The law neither makes a
qualification nor adds a condition in determining the tax situs of a
zero-rated service. Under this criterion, the place where the service
is rendered determines the jurisdiction to impose the VAT.
Performed in the Philippines, such service is necessarily subject to
its jurisdiction, for the State necessarily has to have “a substantial
connection” to it, in order to enforce a zero rate. The place of
payment is immaterial; much less is the place where the output of
the service will be further or ultimately used. Commissioner of
Internal Revenue vs. American Express International, Inc.
(Philippine Branch), 462 SCRA 197, G.R. No. 152609 June
29, 2005
Taxation; Tax Exemption; Value Added Tax (VAT); Petitioner is not
subject to internal revenue laws and regulations and is even
entitled to tax credits.—From the above-cited laws, it is
immediately clear that petitioner enjoys preferential tax treatment.
It is not subject to internal revenue laws and regulations and is
even entitled to tax credits. The VAT on capital goods is an internal
revenue tax from which petitioner as an entity is exempt. Although
the transactions involving such tax are not exempt, petitioner as a
VAT-registered person, however, is entitled to their credits.
Same; Same; Same; The VAT is an indirect tax that may be shifted
or passed on to the buyer, transferee or lessee of the goods,
properties or services.—Viewed broadly, the VAT is a uniform tax
ranging, at present, from 0 percent to 10 percent levied on every
importation of goods, whether or not in the course of trade or
business, or imposed on each sale, barter, exchange or lease of
goods or properties or on each rendition of services in the course
of trade or business as they pass along the production and
distribution chain, the tax being limited only to the value added to
such goods, properties or services by the seller, transferor or
lessor. It is an indirect tax that may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties or services. As
such, it should be understood not in the context of the person or
entity that is primarily, directly and legally liable for its payment,
but in terms of its nature as a tax on consumption. In either case,
though, the same conclusion is arrived at.
Same; Same; Same; Zero-rated transactions generally refer to the
export sale of goods and supply of services.—Zero-rated
transactions generally refer to the export sale of goods and supply
of services. The tax rate is set at zero. When applied to the tax
base, such rate obviously results in no tax chargeable against the
purchaser. The seller of such transactions charges no output tax,
but can claim a refund of or a tax credit certificate for the VAT
previously charged by suppliers.
Same; Same; Same; Respondent as an exempt entity, can neither
be directly charged for the VAT on its sales nor indirectly made to
bear as added cost to such sales, the equivalent VAT on its
purchases.—Applying the special laws we have earlier discussed,
respondent as an entity is exempt from internal revenue laws and
regulations. This exemption covers both direct and indirect taxes,
stemming from the very nature of the VAT as a tax on
consumption, for which the direct liability is imposed on one person
but the indirect burden is passed on to another. Respondent, as an
exempt entity, can neither be directly charged for the VAT on its
sales nor indirectly made to bear, as added cost to such sales, the
equivalent VAT on its purchases. Ubi lex non distinguit, nec nos
distinguere debemus. Where the law does not distinguish, we
ought not to distinguish.
Same; Same; Same; Tax Refunds; Claimants of tax refunds bear
the burden of proving the factual basis of their claims; and of
showing, by words too plain to be mistaken, that the legislature
intended to exempt them.—Tax refunds are in the nature of such
exemptions. Accordingly, the claimants of those refunds bear the
burden of proving the factual basis of their claims; and of showing,
by words too plain to be mistaken, that the legislature intended to
exempt them. In the present case, all the cited legal provisions are
teeming with life with respect to the grant of tax exemptions too
vivid to pass unnoticed. In addition, respondent easily meets the
challenge. Commissioner of Internal Revenue vs. Seagate
Technology (Philippines), 451 SCRA 132, G.R. No. 153866
February 11, 2005
Taxation; Tax Refund; Tax Credit; As pronounced in Silicon
Philippines, Inc. v. Commissioner of Internal Revenue, 754 SCRA
279 (2015), the exception to the mandatory and jurisdictional
compliance with the 120+30-day period is when the claim for the
tax refund or credit was filed in the period between December 10,
2003 and October 5, 2010 during which Bureau of Intenal Revenue
(BIR) Ruling No. DA-489-03 was still in effect.—As pronounced in
Silicon Philippines, Inc. v. Commissioner of Internal Revenue, 754
SCRA 279 (2015), the exception to the mandatory and
jurisdictional compliance with the 120+30-day period is when the
claim for the tax refund or credit was filed in the period between
December 10, 2003 and October 5, 2010 during which BIR Ruling
No. DA-489-03 was still in effect. Accordingly, the premature filing
of the judicial claim was allowed, giving to the CTA jurisdiction over
the appeal.
Same; Cross Border Doctrine; Destination Principle; With the
issuance of Revenue Memorandum Circular (RMC) No. 74-99, the
distinction under the old rule was disregarded and the new circular
took into consideration the two (2) important principles of the
Philippine Value-Added Tax (VAT) system: the Cross Border
Doctrine and the Destination Principle.—With the issuance of RMC
74-99, the distinction under the old rule was disregarded and the
new circular took into consideration the two important principles of
the Philippine VAT system: the Cross Border Doctrine and the
Destination Principle.
Same; Value-Added Tax; No Value-Added Tax (VAT) shall be
imposed to form part of the cost of goods destined for consumption
outside of the territorial border of the taxing authority.—Section 8
of Republic Act No. 7916 mandates that PEZA shall manage and
operate the ECOZONE as a separate customs territory. The
provision thereby establishes the fiction that an ECOZONE is a
foreign territory separate and distinct from the customs territory.
Accordingly, the sales made by suppliers from a customs territory
to a purchaser located within an ECOZONE will be considered as
exportations. Following the Philippine VAT system’s adherence to
the Cross Border Doctrine and Destination Principle, the VAT
implications are that “no VAT shall be imposed to form part of the
cost of goods destined for consumption outside of the territorial
border of the taxing authority.”
Same; Tax Refund; Tax Credit; A claim for tax refund or credit is
similar to a tax exemption and should be strictly construed against
the taxpayer.—We should also take into consideration the nature of
VAT as an indirect tax. Although the seller is statutorily liable for
the payment of VAT, the amount of the tax is allowed to be shifted
or passed on to the buyer. However, reporting and remittance of
the VAT paid to the BIR remained to be the seller/supplier’s
obligation. Hence, the proper party to seek the tax refund or credit
should be the suppliers, not the petitioner. In view of the foregoing
considerations, the Court must uphold the rejection of the appeal
of the petitioner. This Court has repeatedly pointed out that a claim
for tax refund or credit is similar to a tax exemption and should be
strictly construed against the taxpayer. The burden of proof to
show that he is ultimately entitled to the grant of such tax refund
or credit rests on the taxpayer. Sadly, the petitioner has not
discharged its burden. Coral Bay Nickel Corporation vs.
Commissioner of Internal Revenue, 793 SCRA 190, G.R. No.
190506 June 13, 2016
Taxation; Value-Added Tax; Tax Credits; Tax Refunds; 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.—In determining whether the
administrative claims of Mindanao I and Mindanao II for 2003 have
prescribed, we see no need to rely on either Atlas or Mirant.
Section 112(A) of the 1997 Tax Code is clear: “[A]ny 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 x x x.”
Same; Same; Same; Same; In case of full or partial denial of the
claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days from the
receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals.—In determining
whether the claims for the second, third and fourth quarters of
2003 have been properly appealed, we still see no need to refer to
either Atlas or Mirant, or even to Section 229 of the 1997 Tax
Code. The second paragraph of Section 112(C) of the 1997 Tax
Code is clear: “In case of full or partial denial of the claim for tax
refund or tax credit, or the failure on the part of the Commissioner
to act on the application within the period prescribed above, the
taxpayer affected may, within thirty (30) days from the receipt of
the decision denying the claim or after the expiration of the one
hundred twenty day-period, appeal the decision or the unacted
claim with the Court of Tax Appeals.”

Same; Court of Tax Appeals; The taxpayer cannot simply file a
petition with the Court of Tax Appeals without waiting for the
Commissioner’s decision within the 120-day mandatory and
jurisdictional period.—In the consolidated cases of San Roque, the
Court En Banc examined and ruled on the different claims for tax
refund or credit of three different companies. In San Roque, we
reiterated that “[f]ollowing the verba legis doctrine, [Section
112(C)] must be applied exactly as worded since it is clear, plain,
and unequivocal. The taxpayer cannot simply file a petition with
the CTA without waiting for the Commissioner’s decision within the
120-day mandatory and jurisdictional period. The CTA will have no
jurisdiction because there will be no ‘decision’ or ‘deemed a denial
decision’ of the Commissioner for the CTA to review.”
Same; Summary of the Rules on the Determination of the
Prescriptive Period for Filing a Tax Refund or Credit of Unutilized
Input Value Added Tax (VAT) as Provided in Section 112 of the
1997 Tax Code.—We summarize the rules on the determination of
the prescriptive period for filing a tax refund or credit of unutilized
input VAT as provided in Section 112 of the 1997 Tax Code, as
follows: (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. (3) A judicial claim must be
filed with the CTA within 30 days from the receipt of the CIR’s
decision denying the administrative claim or from the expiration of
the 120-day period without any action from the CIR. (4) All
taxpayers, however, can rely on BIR Ruling No. DA-489-03 from
the time of its issuance on 10 December 2003 up to its reversal by
this Court in Aichi on 6 October 2010, as an exception to the
mandatory and jurisdictional 120+30 day periods.
Same; A reading of Section 105 of the 1997 Tax Code would show
that a transaction “in the course of trade or business” includes
“transactions incidental thereto.”—Mindanao II’s sale of the Nissan
Patrol is said to be an isolated transaction. However, it does not
follow that an isolated transaction cannot be an incidental
transaction for purposes of VAT liability. Indeed, a reading of
Section 105 of the 1997 Tax Code would show that a transaction
“in the course of trade or business” includes “transactions
incidental thereto.” Mindanao II’s business is to convert the steam
supplied to it by PNOC-EDC into electricity and to deliver the
electricity to NPC. In the course of its business, Mindanao II bought
and eventually sold a Nissan Patrol. Prior to the sale, the Nissan
Patrol was part of Mindanao II’s property, plant, and equipment.
Therefore, the sale of the Nissan Patrol is an incidental transaction
made in the course of Mindanao II’s business which should be
liable for VAT. Mindanao II Geothermal Partnership vs.
Commissioner of Internal Revenue, 693 SCRA 49, G.R. No.
193301 March 11, 2013
Taxation; Value Added Tax is a tax on transactions, imposed at
every stage of the distribution process on the sale, barter,
exchange of goods or property, and on the performance of
services, even in the absence of profit attributable thereto.—
Contrary to COMASERCO’s contention the above provision clarifies
that even a non-stock, nonprofit, organization or government
entity, is liable to pay VAT on the sale of goods or services. VAT is
a tax on transactions, imposed at every stage of the distribution
process on the sale, barter, exchange of goods or property, and on
the performance of services, even in the absence of profit
attributable thereto. The term “in the course of trade or business”
requires the regular conduct or pursuit of a commercial or an
economic activity, regardless of whether or not the entity is profit-
oriented.
Same; Even a nonstock, nonprofit organization or government
entity is liable to pay Value Added Tax for the sale of goods and
services.—The definition of the term “in the course of trade or
business” incorporated in the present law applies to all transactions
even to those made prior to its enactment. Executive Order No.
273 stated that any person who, in the course of trade or business,
sells, barters or exchanges goods and services, was already liable
to pay VAT. The present law merely stresses that even a nonstock,
nonprofit organization or government entity is liable to pay VAT for
the sale of goods and services.
Same; Definition of the phrase “sale of services.”—Section 108 of
the National Internal Revenue Code of 1997 defines the phrase
“sale of services” as the “performance of all kinds of services for
others for a fee, remuneration or consideration.” It includes “the
supply of technical advice, assistance or services rendered in
connection with technical management or administration of any
scientific, industrial or commercial undertaking or project.”
Same; Even if such corporation was organized without any
intention of realizing pro fit, any income or profit generated by the
entity in the conduct of its activities was subject to income tax.—
On February 5, 1998, the Commissioner of Internal Revenue issued
BIR Ruling No. 010-98 emphasizing that a domestic corporation
that provided technical, research, management and technical
assistance to its affiliated companies and received payments on a
reimbursement-of-cost basis, without any intention of realizing
profit, was subject to VAT on services rendered. In fact, even if
such corporation was organized without any intention of realizing
profit, any income or profit generated by the entity in the conduct
of its activities was subject to income tax.
Same; As long as the entity provides service for a fee,
remuneration or consideration, then the service rendered is subject
to Value Added Tax.—It is immaterial whether the primary purpose
of a corporation indicates that it receives payments for services
rendered to its affiliates on a reimbursement-on-cost basis only,
without realizing profit, for purposes of determining liability for VAT
on services rendered. As long as the entity provides service for a
fee, remuneration or consideration, then the service rendered is
subject to VAT.
Same; Any exemption from the payment of a tax must be clearly
stated in the language of the law.—It is a rule that because taxes
are the lifeblood of the nation, statutes that allow exemptions are
construed strictly against the grantee and liberally in favor of the
government. Otherwise stated, any exemption from the payment
of a tax must be clearly stated in the language of the law; it cannot
be merely implied therefrom. In the case of VAT, Section 109,
Republic Act 8424 clearly enumerates the transactions exempted
from VAT. The services rendered by COMASERCO do not fall within
the exemptions.
Same; Opinion of the Commissioner of Internal Revenue entitled to
great weight in the absence of any showing that it is plainly
wrong.—Both the Commissioner of Internal Revenue and the Court
of Tax Appeals correctly ruled that the services rendered by
COMASERCO to Philamlife and its affiliates are subject to VAT. As
pointed out by the Commissioner, the performance of all kinds of
services for others for a fee, remuneration or consideration is
considered as sale of services subject to VAT. As the government
agency charged with the enforcement of the law, the opinion of the
Commissioner of Internal Revenue, in the absence of any showing
that it is plainly wrong, is entitled to great weight. Commissioner
of Internal Revenue vs. Court of Appeals, 329 SCRA 237,
G.R. No. 125355 March 30, 2000
Taxation; Assessment; Letter of Authority (LOA); A Letter of
Authority or (LOA) is the authority given to the appropriate
revenue officer assigned to perform assessment functions.—Based
on Section 13 of the Tax Code, a Letter of Authority or LOA is the
authority given to the appropriate revenue officer assigned to
perform assessment functions. It empowers or enables said
revenue officer to examine the books of account and other
accounting records of a taxpayer for the purpose of collecting the
correct amount of tax. The very provision of the Tax Code that the
CIR relies on is unequivocal with regard to its power to grant
authority to examine and assess a taxpayer.
Same; Same; Same; In the absence of such an authority, the
assessment or examination is a nullity.—There must be a grant of
authority before any revenue officer can conduct an examination or
assessment. Equally important is that the revenue officer so
authorized must not go beyond the authority given. In the absence
of such an authority, the assessment or examination is a nullity.
Same; Same; It is evident under Section 110 of the 1997 Tax Code
that an advertising expense duly covered by a Value Added Tax
(VAT) invoice is a legitimate business expense.—The Court is not
persuaded. As aptly found by the CTA-First Division and later
affirmed by the CTA-EB, Sony’s deficiency VAT assessment
stemmed from the CIR’s disallowance of the input VAT credits that
should have been realized from the advertising expense of the
latter. It is evident under Section 110 of the 1997 Tax Code that an
advertising expense duly covered by a VAT invoice is a legitimate
business expense. This is confirmed by no less than CIR’s own
witness, Revenue Officer Antonio Aluquin. There is also no denying
that Sony incurred advertising expense. Aluquin testified that
advertising companies issued invoices in the name of Sony and the
latter paid for the same. Indubitably, Sony incurred and paid for
advertising expense/
services. Where the money came from is another matter all
together but will definitely not change said fact.
Same; Same; Value Added Tax (VAT); Services rendered for a fee
even on reimbursement-on-cost basis only and without realizing
profit are also subject to Value Added Tax (VAT).—In the case of
CIR v. Court of Appeals (CA), 329 SCRA 237 (2000), the Court had
the occasion to rule that services rendered for a fee even on
reimbursement-on-cost basis only and without realizing profit are
also subject to VAT. The case, however, is not applicable to the
present case. In that case, COMASERCO rendered service to its
affiliates and, in turn, the affiliates paid the former reimbursement-
on-cost which means that it was paid the cost or expense that it
incurred although without profit. This is not true in the present
case. Sony did not render any service to SIS at all. The services
rendered by the advertising companies, paid for by Sony using SIS
dole-out, were for Sony and not SIS. SIS just gave assistance to
Sony in the amount equivalent to the latter’s advertising expense
but never received any goods, properties or service from Sony.
Commissioner of Internal Revenue vs. Sony Philippines,
Inc., 635 SCRA 234, G.R. No. 178697 November 17, 2010
Taxation; Value-Added Tax (VAT); Under the fiscal incentives
granted to PEZA-registered enterprises under Sec. 23 of R.A. No.
7916, the taxpayer had two options with respect to its tax
burden—it could avail of an income tax holiday pursuant to
provisions of E.O. No. 226, thus exempt it from income taxes for a
number of years but not from other internal revenue taxes such as
VAT, or it could avail of the tax exemptions on all taxes, including
VAT under P.D. No. 66 and pay only the preferential tax rate of 5%
under R.A. No. 7916.—Petitioner’s contention that respondent is
not entitled to refund for being exempt from VAT is untenable. This
argument turns a blind eye to the fiscal incentives granted to
PEZA-registered enterprises under Section 23 of Rep. Act No.
7916. Note that under said statute, the respondent had two
options with respect to its tax burden. It could avail of an income
tax holiday pursuant to provisions of E.O. No. 226, thus exempt it
from income taxes for a number of years but not from other
internal revenue taxes such as VAT; or it could avail of the tax
exemptions on all taxes, including VAT under P.D. No. 66 and pay
only the preferential tax rate of 5% under Rep. Act No. 7916. Both
the Court of Appeals and the Court of Tax Appeals found that
respondent availed of the income tax holiday for four (4) years
starting from August 7, 1995, as clearly reflected in its 1996 and
1997 Annual Corporate Income Tax Returns, where respondent
specified that it was availing of the tax relief under E.O. No. 226.
Hence, respondent is not exempt from VAT and it correctly
registered itself as a VAT taxpayer. In fine, it is engaged in taxable
rather than exempt transactions.
Same; Same; Words and Phrases; Taxable transactions are those
transactions which are subject to value-added tax either at the rate
of 10% or 0%, and the seller shall be entitled to tax credit for the
value-added tax paid on purchases and leases of goods, properties
or services; An exemption means that the sale of goods, properties
or services and the use or lease of properties is not subject to VAT
(output tax) and the seller is not allowed any tax credit on VAT
(input tax) previously paid; A VAT-registered purchaser of goods,
properties or services that are VAT-exempt, is not entitled to any
input tax on such purchases despite the issuance of a VAT invoice
or receipt.—Taxable transactions are those transactions which are
subject to value-added tax either at the rate of ten percent (10%)
or zero percent (0%). In taxable transactions, the seller shall be
entitled to tax credit for the value-added tax paid on purchases and
leases of goods, properties or services. An exemption means that
the sale of goods, properties or services and the use or lease of
properties is not subject to VAT (output tax) and the seller is not
allowed any tax credit on VAT (input tax) previously paid. The
person making the exempt sale of goods, properties or services
shall not bill any output tax to his customers because the said
transaction is not subject to VAT. Thus, a VAT-registered purchaser
of goods, properties or services that are VAT-exempt, is not
entitled to any input tax on such purchases despite the issuance of
a VAT invoice or receipt.
Same; Same; Under the value-added tax system, a zero-rated sale
by a VAT-registered person, which is a taxable transaction for VAT
purposes, shall not result in any output tax, but the input tax on
his purchase of goods, properties or services related to such zero-
rated sale shall be available as tax credit or refund.—Now, having
determined that respondent is engaged in taxable transactions
subject to VAT, let us then proceed to determine whether it is
subject to 10% or zero (0%) rate of VAT. To begin with, it must be
recalled that generally, sale of goods and supply of services
performed in the Philippines are taxable at the rate of 10%.
However, export sales, or sales outside the Philippines, shall be
subject to value-added tax at 0% if made by a VAT-registered
person. Under the value-added tax system, a zero-rated sale by a
VAT-registered person, which is a taxable transaction for VAT
purposes, shall not result in any output tax. However, the input tax
on his purchase of goods, properties or services related to such
zero-rated sale shall be available as tax credit or refund.
Same; Same; In principle, the purpose of applying a zero percent
(0%) rate on a taxable transaction is to exempt the transaction
completely from VAT previously collected on inputs.—In principle,
the purpose of applying a zero percent (0%) rate on a taxable
transaction is to exempt the transaction completely from VAT
previously collected on inputs. It is thus the only true way to
ensure that goods are provided free of VAT. While the zero rating
and the exemption are computationally the same, they actually
differ in several aspects, to wit: (a) A zero-rated sale is a taxable
transaction but does not result in an output tax while an exempted
transaction is not subject to the output tax; (b) The input VAT on
the purchases of a VAT-registered person with zero-rated sales
may be allowed as tax credits or refunded while the seller in an
exempt transaction is not entitled to any input tax on his purchases
despite the issuance of a VAT invoice or receipt; (c) Persons
engaged in transactions which are zero-rated, being subject to
VAT, are required to register while registration is optional for VAT-
exempt persons.
Same; Same; Court of Tax Appeals; The Supreme Court will not
set aside lightly the conclusions reached by the Court of Tax
Appeals which, by the very nature of its functions, is dedicated
exclusively to the resolution of tax problems and has accordingly
developed an expertise on the subject, unless there has been an
abuse or improvident exercise of authority.—The Supreme Court
will not set aside lightly the conclusions reached by the Court of
Tax Appeals which, by the very nature of its functions, is dedicated
exclusively to the resolution of tax problems and has accordingly
developed an expertise on the subject, unless there has been an
abuse or improvident exercise of authority. In this case, we find no
cogent reason to deviate from this well-entrenched principle. Thus,
we are persuaded that indeed the Court of Appeals committed no
reversible error in affirming the assailed ruling of the Court of Tax
Appeals. Commissioner of Internal Revenue vs. Cebu Toyo
Corporation, 451 SCRA 447, G.R. No. 149073 February 16,
2005
Taxation; Tax Refunds; The Supreme Court (SC) has consistently
ruled that claims for tax refunds, when based on statutes granting
tax exemption, partake of the nature of an exemption.—We have
consistently ruled that claims for tax refunds, when based on
statutes granting tax exemption, partake of the nature of an
exemption. Tax refunds and exemptions are exceptions rather than
the rule and for this reason are highly disfavored. Hence, in
evaluating a claim for refund, the rule of strict interpretation
applies. This rule requires the claimant to prove not only his
entitlement to a refund, but also his due observance of the
reglementary periods within which he must file his administrative
and judicial claims for refund. Noncompliance with these
substantive and procedural due process requirements results in the
denial of the claim. It is then essential for us to discuss each
requirement and evaluate whether these have been duly complied
with in the present case.
Same; Same; Timeliness of the filing of the claim is mandatory and
jurisdictional. The court cannot take cognizance of a judicial claim
for refund filed either prematurely or out of time.—UCSFA-MPC’s
claim for refund — grounded as it is on payments of advance VAT
alleged to have been illegally and erroneously collected from
November 15, 2007 to February 13, 2009 — is governed by
Sections 204(C) and 229 of the NIRC. These provisions are clear:
within two years from the date of payment of tax, the claimant
must first file an administrative claim with the CIR before filing its
judicial claim with the courts of law. Both claims must be filed
within a two-year reglementary period. Timeliness of the filing of
the claim is mandatory and jurisdictional. The court cannot take
cognizance of a judicial claim for refund filed either prematurely or
out of time.
Same; Same; If the claimant asserts that he should be refunded
the amount of tax he has previously paid because he is exempted
from paying the tax, he must point to the specific legal provision of
law granting him the exemption.—As mentioned, the rule on strict
interpretation requires the claimant to sufficiently establish his
entitlement to a tax refund. If the claimant asserts that he should
be refunded the amount of tax he has previously paid because he
is exempted from paying the tax, he must point to the specific
legal provision of law granting him the exemption. His right cannot
be based on mere implication. In this case, the cooperative claims
that it is exempted — based on Section 61 of R.A. 6938 and
Section 109(l) of the NIRC — from paying advance VAT when it
withdraws refined sugar from the refinery/mill as required by RR
No. 6-2007. UCSFA-MPC thus alleges that the amounts of advance
VAT it paid under protest from November 15, 2007 to February 13,
2009, were illegally and erroneously collected.
Same; Value-Added Tax; Certain transactions are exempted from
the imposition of value-added tax (VAT). One exempted
transaction is the sale of agricultural food products in their original
state. Agricultural food products that have undergone simple
processes of preparation or preservation for the market are
nevertheless considered to be in their original state.—As a general
rule under the NIRC, a seller shall be liable for VAT on the sale of
goods or properties based on the gross selling price or gross value
in money of the thing sold. However, certain transactions are
exempted from the imposition of VAT. One exempted transaction is
the sale of agricultural food products in their original state.
Agricultural food products that have undergone simple processes of
preparation or preservation for the market are nevertheless
considered to be in their original state. Sugar is an agricultural food
product. Notably, tax regulations differentiate between raw sugar
and refined sugar.
Same; Same; For internal revenue purposes, the sale of raw cane
sugar is exempt from value-added tax (VAT) because it is
considered to be in its original state. On the other hand, refined
sugar is an agricultural product that can no longer be considered to
be in its original state because it has undergone the refining
process; its sale is thus subject to VAT.—For internal revenue
purposes, the sale of raw cane sugar is exempt from VAT because
it is considered to be in its original state. On the other hand,
refined sugar is an agricultural product that can no longer be
considered to be in its original state because it has undergone the
refining process; its sale is thus subject to VAT. Although the sale
of refined sugar is generally subject to VAT, such transaction may
nevertheless qualify as a VAT-exempt transaction if the sale is
made by a cooperative. Under Section 109(l) of the NIRC, sales by
agricultural cooperatives are exempt from VAT provided the
following conditions concur, viz.: First, the seller must be an
agricultural cooperative duly registered with the CDA. An
agricultural cooperative is “duly registered” when it has been
issued a certificate of registration by the CDA. This certificate is
conclusive evidence of its registration. Second, the cooperative
must sell either: 1) exclusively to its members; or 2) to both
members and nonmembers, its produce, whether in its original
state or processed form.
Same; Same; Sales Tax; Agricultural Cooperatives; The value-
added tax (VAT)-exempt nature of the sales made by agricultural
cooperatives under the National Internal Revenue Code (NIRC) is
consistent with the tax exemptions granted to qualified
cooperatives under the Cooperative Code which grants
cooperatives exemption from sales tax on transactions with
members and nonmembers.—With the UCSFA-MPC established as
a duly registered cooperative and the producer of sugar cane, its
sale of refined sugar is exempt from VAT, whether the sale is made
to members or to nonmembers. The VAT-exempt nature of the
sales made by agricultural cooperatives under the NIRC is
consistent with the tax exemptions granted to qualified
cooperatives under the Cooperative Code which grants
cooperatives exemption from sales tax on transactions with
members and nonmembers. These conclusions reduce the issue in
the case to whether the granted exemption also covers the
payment of advance VAT upon withdrawal of refined sugar from
the refinery or mill.
Same; Same; Same; Persons liable for value-added tax (VAT) on
the sale of goods shall pay the VAT due, in general, on a monthly
basis. VAT accruing from the sale of goods in the current month
shall be payable the following month. However, there are instances
where VAT is required to be paid in advance, such as in the sale of
refined sugar.—Persons liable for VAT on the sale of goods shall
pay the VAT due, in general, on a monthly basis. VAT accruing
from the sale of goods in the current month shall be payable the
following month. However, there are instances where VAT is
required to be paid in advance, such as in the sale of refined sugar.
To specifically address the policies and procedures governing the
advance payment of VAT on the sale of refined sugar, RR Nos. 6-
2007 and 13-2008 were issued.
Same; Same; Same; The transaction subject to value-added tax
(VAT) is still the sale of refined sugar. The withdrawal of sugar is
not a separate transaction subject to VAT. It is only the payment
thereof that is required to be made in advance.—The VAT
implications of the withdrawal of refined sugar from the sugar
refinery/mill and the actual sale of refined sugar are different.
While the sale is the actual transaction upon which VAT is imposed,
the withdrawal gives rise to the obligation to pay the VAT due,
albeit in advance. Therefore, the requirement for the advance
payment of VAT for refined sugar creates a special situation: While
the transaction giving rise to the imposition of VAT — the actual
sale of refined sugar — has not yet taken place, the VAT that would
be due from the subsequent sale is, nonetheless, already required
to be paid earlier, which is before the withdrawal of the goods from
the sugar refinery/mill. To be clear, the transaction subject to VAT
is still the sale of refined sugar. The withdrawal of sugar is not a
separate transaction subject to VAT. It is only the payment thereof
that is required to be made in advance.
Same; Same; Same; Tax Exemptions; The sale of refined sugar by
an agricultural cooperative duly registered with the Cooperative
Development Authority (CDA) is exempt from value-added tax
(VAT).—In sum, the sale of refined sugar by an agricultural
cooperative duly registered with the CDA is exempt from VAT. A
qualified cooperative also enjoys exemption from the requirement
of advance payment of VAT upon withdrawal from the refinery/mill.
The agricultural cooperative’s exemption from the requirement of
advance payment is a logical consequence of the exemption from
VAT of its sales of refined sugar.
Same; Same; Same; Same; Certificate of Tax Exemption; Words
and Phrases; Article 2(d) of the Cooperative Code defines a
certificate of tax exemption as “the ruling granting exemption to
the cooperative” issued by the Bureau of Internal Revenue (BIR).—
Article 2(d) of the Cooperative Code defines a certificate of tax
exemption as “the ruling granting exemption to the cooperative”
issued by the BIR. In turn, under RR No. 20-2001, the cooperative
shall file a letter-application for the issuance of certificate of tax
exemption, attaching thereto its certificates of registration and
good standing duly issued by the CDA. The certificate of tax
exemption shall remain valid so long as the cooperative is “in good
standing” as ascertained by the CDA.
Same; Same; Same; Same; Same; Once the cooperative has
sufficiently shown that it has satisfied the requirements under
Section 109(l) of the National Internal Revenue Code (NIRC) for
the exemption from value-added tax (VAT) on its sale of refined
sugar (i.e., that it is duly registered with the Cooperative
Development Authority [CDA] and it is the producer of the sugar
cane from which refined sugar is derived), its exemption from the
advance payment of VAT should automatically be granted and
recognized.—We must remember that regulations may not enlarge,
alter, or restrict the provisions of the law it administers; it cannot
engraft additional requirements not contemplated by the
legislature. A taxpayer-claimant should not be required to submit
additional documents beyond what is required by the law; the
taxpayer-claimant should enjoy the exemption it has, by law,
always been entitled to. Hence, once the cooperative has
sufficiently shown that it has satisfied the requirements under
Section 109(l) of the NIRC for the exemption from VAT on its sale
of refined sugar (i.e., that it is duly registered with the CDA and it
is the producer of the sugar cane from which refined sugar is
derived), its exemption from the advance payment of VAT should
automatically be granted and recognized.
Same; Same; Same; Same; The basic rule is that if any Bureau of
Internal Revenue (BIR) ruling or issuance promulgated by the
Commissioner of Internal Revenue (CIR) is subsequently revoked
or nullified by the CIR herself or by the court, the
revocation/nulli-fication cannot be applied retroactively to the
prejudice of the taxpayers.—The basic rule is that if any BIR ruling
or issuance promulgated by the CIR is subsequently revoked or
nullified by the CIR herself or by the court, the
revocation/nullification cannot be applied retroactively to the
prejudice of the taxpayers. Hence, even if we consider that the CIR
had revoked the rulings previously issued in favor of UCSFA-MPC
upon the filing of her answer, it cannot effectively deprive UCSFA-
MPC of its rights under the rulings prior to their revocation.
Commissioner of Internal Revenue vs. United Cadiz
Sugar<br/>Farmers Association Multi-Purpose Cooperative,
813 SCRA 345, G.R. No. 209776 December 7, 2016
Taxation; Value Added Tax (VAT); Republic Act No. 7716 clarifies
that it is the real properties “held primarily for sale to customers or
held for lease in the ordinary course of trade or business” that are
subject to the Value-Added Tax (VAT), and not when the real
estate transactions are engaged in by persons who do not sell or
lease properties in the ordinary course of trade or business.—Rep.
Act No. 7716 clarifies that it is the real properties “held primarily
for sale to customers or held for lease in the ordinary course of
trade or business” that are subject to the VAT, and not when the
real estate transactions are engaged in by persons who do not sell
or lease properties in the ordinary course of trade or business. It is
clear that those regularly engaged in the real estate business are
accorded the same treatment as the merchants of other goods or
properties available in the market. In the same way that a milliner
considers hats as his goods and a rancher considers cattle as his
goods, a real estate dealer holds real property, whether or not it
contains improvements, as his goods. Had Section 100 itself
supplied any differentiation between the treatment of real
properties or real estate dealers and the treatment of the
transactions involving other commercial goods, then such differing
treatment would have constituted the statutory basis for the CIR to
engage in such differentiation which said respondent did seek to
accomplish in this case through Section 4.105-1 of RR 7-95. Yet
the amendments introduced by Rep. Act No. 7716 to Section 100,
coupled with the fact that the said law left Section 105 intact,
reveal the lack of any legislative intention to make persons or
entities in the real estate business subject to a VAT treatment
different from those engaged in the sale of other goods or
properties or in any other commercial trade or business.
Same; Same; Transitional Input Tax Credit; If indeed the
transitional input tax credit is integrally related to previously paid
sales taxes, the purported causal link between those two would
have been nonetheless extinguished long ago, yet Congress has
reenacted the transitional input tax credit several times, which fact
simply belies the absence of any relationship between such tax
credit and the long-abolished sales taxes.—Section 25 of E.O. No.
273 perfectly remedies the problem assumed by the CTA as the
basis for the introduction of transitional input tax credit in 1987. If
the core purpose of the tax credit is only, as hinted by the CTA, to
allow for some mode of accreditation of previously-paid sales
taxes, then Section 25 alone would have sufficed. Yet E.O. No. 273
amended the Old NIRC itself by providing for the transitional input
tax credit under Section 105, thereby assuring that the tax credit
would endure long after the last goods made subject to sales tax
have been consumed. If indeed the transitional input tax credit is
integrally related to previously paid sales taxes, the purported
causal link between those two would have been nonetheless
extinguished long ago. Yet Congress has reenacted the transitional
input tax credit several times; that fact simply belies the absence
of any relationship between such tax credit and the long-abolished
sales taxes. Obviously then, the purpose behind the transitional
input tax credit is not confined to the transition from sales tax to
VAT.
Same; Same; Same; There is hardly any constricted definition of
“transitional” that will limit its possible meaning to the shift from
the sales tax regime to the Value-Added Tax (VAT) regime.—There
is hardly any constricted definition of “transitional” that will limit its
possible meaning to the shift from the sales tax regime to the VAT
regime. Indeed, it could also allude to the transition one undergoes
from not being a VAT-registered person to becoming a VAT-
registered person. Such transition does not take place merely by
operation of law, E.O. No. 273 or Rep. Act No. 7716 in particular. It
could also occur when one decides to start a business. Section 105
states that the transitional input tax credits become available
either to (1) a person who becomes liable to VAT; or (2) any
person who elects to be VAT-registered. The clear language of the
law entitles new trades or businesses to avail of the tax credit once
they become VAT-registered. The transitional input tax credit,
whether under the Old NIRC or the New NIRC, may be claimed by
a newly-VAT registered person such as when a business as it
commences operations. If we view the matter from the perspective
of a starting entrepreneur, greater clarity emerges on the
continued utility of the transitional input tax credit.
Same; Same; Same; It is apparent that the transitional input tax
credit operates to benefit newly Value-Added Tax (VAT)-registered
persons, whether or not they previously paid taxes in the
acquisition of their beginning inventory of goods, materials and
supplies.—The interpretation proffered by the CTA would exclude
goods and properties which are acquired through sale not in the
ordinary course of trade or business, donation or through
succession, from the beginning inventory on which the transitional
input tax credit is based. This prospect all but highlights the
ultimate absurdity of the respondents’ position. Again, nothing in
the Old NIRC (or even the New NIRC) speaks of such a possibility
or qualifies the previous payment of VAT or any other taxes on the
goods, materials and supplies as a pre-requisite for inclusion in the
beginning inventory. 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 taxpayer’s 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.
Same; Same; Same; All tax laws in general, are designed to
enforce uniform tax treatment to persons or classes of persons who
share minimum legislated standards.—The CTA harped on the
circumstance that FBDC was excused from paying any tax on the
purchase of its properties from the national government, even
claiming that to allow the transitional input tax credit is
“tantamount to giving an undeserved bonus to real estate dealers
similarly situated as [FBDC] which the Government cannot afford
to provide.” Yet the tax laws in question, and all tax laws in
general, are designed to enforce uniform tax treatment to persons
or classes of persons who share minimum legislated standards. The
common standard for the application of the transitional input tax
credit, as enacted by E.O. No. 273 and all subsequent tax laws
which reinforced or reintegrated the tax credit, is simply that the
taxpayer in question has become liable to VAT or has elected to be
a VAT-registered person. E.O. No. 273 and the subsequent tax
laws are all decidedly neutral and accommodating in ascertaining
who should be entitled to the tax credit, and it behooves the CIR
and the CTA to adopt a similarly judicious perspective.
Same; Same; Same; Words and Phrases; Goods, as commonly
understood in the business sense, refers to the product which the
Value-Added Tax (VAT)-registered person offers for sale to the
public, and with respect to real estate dealers, it is the real
properties themselves which constitute their “goods.”—Under
Section 105, the beginning inventory of “goods” forms part of the
valuation of the transitional input tax credit. Goods, as commonly
understood in the business sense, refers to the product which the
VAT-registered person offers for sale to the public. With respect to
real estate dealers, it is the real properties themselves which
constitute their “goods.” Such real properties are the operating
assets of the real estate dealer. Section 4.100-1 of RR No. 7-95
itself includes in its enumeration of “goods or properties” such “real
properties held primarily for sale to customers or held for lease in
the ordinary course of trade or business.” Said definition was taken
from the very statutory language of Section 100 of the Old NIRC.
By limiting the definition of goods to “improvements” in Section
4.105-1, the BIR not only contravened the definition of “goods” as
provided in the Old NIRC, but also the definition which the same
revenue regulation itself has provided.
Same; Same; Administrative Law; The authority to prescribe
regulations can pertain to more technical matters, such as how to
appraise the value of the inventory or what papers need to be filed
to properly itemize the contents of such inventory, but such
authority cannot go as far as to amend Section 105 itself.—The
Court of Tax Appeals claimed that under Section 105 of the Old
NIRC the basis for the inventory of goods, materials and supplies
upon which the transitional input VAT would be based “shall be left
to regulation by the appropriate administrative authority.” This is
based on the phrase “filing of an inventory as prescribed by
regulations” found in Section 105. Nonetheless, Section 105 does
include the particular properties to be included in the inventory,
namely goods, materials and supplies. It is questionable whether
the CIR has the power to actually redefine the concept of “goods,”
as she did when she excluded real properties from the class of
goods which real estate companies in the business of selling real
properties may include in their inventory. The authority to
prescribe regulations can pertain to more technical matters, such
as how to appraise the value of the inventory or what papers need
to be filed to properly itemize the contents of such inventory. But
such authority cannot go as far as to amend Section 105 itself,
which the Commissioner had unfortunately accomplished in this
case. It is of course axiomatic that a rule or regulation must bear
upon, and be consistent with, the provisions of the enabling statute
if such rule or regulation is to be valid. In case of conflict between
a statute and an administrative order, the former must prevail.
Indeed, the CIR has no power to limit the meaning and coverage of
the term “goods” in Section 105 of the Old NIRC absent statutory
authority or basis to make and justify such limitation. A contrary
conclusion would mean the CIR could very well moot the law or
arrogate legislative authority unto himself by retaining sole
discretion to provide the definition and scope of the term “goods.”
Same; Same; Transitional Input Tax Credit; Presumptive Input Tax
Credit; Legal Research; Words and Phrases; As with the
transitional input tax credit, the presumptive input tax credit is
creditable against the output Value-Added Tax (VAT), having come
into existence in our tax structure only after the introduction of the
Value-Added Tax (VAT); It was only in 1997, or eleven years after
the Value-Added Tax (VAT) was first introduced, that the
presumptive input tax credit was first incorporated in the National
Internal Revenue Code (NIRC), more particularly in Section 111(B)
of the New NIRC; Clearly, for more than a decade now, the term
“presumptive input tax credit” has contemplated a particularly
idiosyncratic tax credit far divorced from its original usage in the
transitory provisions of E.O. No. 273.—Let us clarify the distinction
between the presumptive input tax credit and the transitional input
tax credit. As with the transitional input tax credit, the presumptive
input tax credit is creditable against the output VAT. It necessarily
has come into existence in our tax structure only after the
introduction of the VAT. As quoted earlier, E.O. No. 273 provided
for a “presumptive input tax credit” as one of the transitory
measures in the shift from sales taxes to VAT, but such
presumptive input tax credit was never integrated in the NIRC
itself. It was only in 1997, or eleven years after the VAT was first
introduced, that the presumptive input tax credit was first
incorporated in the NIRC, more particularly in Section 111(B) of
the New NIRC. As borne out by the text of the provision, it is plain
that the presumptive input tax credit is highly limited in application
as it may be claimed only by “persons or firms engaged in the
processing of sardines, mackerel and milk, and in manufacturing
refined sugar and cooking oil;” and “public works contractors.”
Clearly, for more than a decade now, the term “presumptive input
tax credit” has contemplated a particularly idiosyncratic tax credit
far divorced from its original usage in the transitory provisions of
E.O. No. 273. There is utterly no sense then in latching on to the
term as having any significant meaning for the purpose of the
cases at bar. Fort Bonifacio Development Corporation vs.
Commissioner of Internal Revenue, 583 SCRA 168, G.R. No.
158885 April 2, 2009
Taxation; Value-Added Tax (VAT); Transitional Input Tax Credit;
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.—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. In
fact, in Commissioner of Internal Revenue v. Central Luzon Drug
Corp., 456 SCRA 414 (2005), we declared that prior payment of
taxes is not required in order to avail of a tax credit. Fort
Bonifacio Development Corp. vs. Commissioner of Internal
Revenue, 679 SCRA 566, G.R. No. 173425 September 4,
2012
Taxation; Assessment; Letter of Authority (LOA); A Letter of
Authority or (LOA) is the authority given to the appropriate
revenue officer assigned to perform assessment functions.—Based
on Section 13 of the Tax Code, a Letter of Authority or LOA is the
authority given to the appropriate revenue officer assigned to
perform assessment functions. It empowers or enables said
revenue officer to examine the books of account and other
accounting records of a taxpayer for the purpose of collecting the
correct amount of tax. The very provision of the Tax Code that the
CIR relies on is unequivocal with regard to its power to grant
authority to examine and assess a taxpayer.
Same; Same; Same; In the absence of such an authority, the
assessment or examination is a nullity.—There must be a grant of
authority before any revenue officer can conduct an examination or
assessment. Equally important is that the revenue officer so
authorized must not go beyond the authority given. In the absence
of such an authority, the assessment or examination is a nullity.
Same; Same; It is evident under Section 110 of the 1997 Tax Code
that an advertising expense duly covered by a Value Added Tax
(VAT) invoice is a legitimate business expense.—The Court is not
persuaded. As aptly found by the CTA-First Division and later
affirmed by the CTA-EB, Sony’s deficiency VAT assessment
stemmed from the CIR’s disallowance of the input VAT credits that
should have been realized from the advertising expense of the
latter. It is evident under Section 110 of the 1997 Tax Code that an
advertising expense duly covered by a VAT invoice is a legitimate
business expense. This is confirmed by no less than CIR’s own
witness, Revenue Officer Antonio Aluquin. There is also no denying
that Sony incurred advertising expense. Aluquin testified that
advertising companies issued invoices in the name of Sony and the
latter paid for the same. Indubitably, Sony incurred and paid for
advertising expense/
services. Where the money came from is another matter all
together but will definitely not change said fact.
Same; Same; Value Added Tax (VAT); Services rendered for a fee
even on reimbursement-on-cost basis only and without realizing
profit are also subject to Value Added Tax (VAT).—In the case of
CIR v. Court of Appeals (CA), 329 SCRA 237 (2000), the Court had
the occasion to rule that services rendered for a fee even on
reimbursement-on-cost basis only and without realizing profit are
also subject to VAT. The case, however, is not applicable to the
present case. In that case, COMASERCO rendered service to its
affiliates and, in turn, the affiliates paid the former reimbursement-
on-cost which means that it was paid the cost or expense that it
incurred although without profit. This is not true in the present
case. Sony did not render any service to SIS at all. The services
rendered by the advertising companies, paid for by Sony using SIS
dole-out, were for Sony and not SIS. SIS just gave assistance to
Sony in the amount equivalent to the latter’s advertising expense
but never received any goods, properties or service from Sony.
Commissioner of Internal Revenue vs. Sony Philippines,
Inc., 635 SCRA 234, G.R. No. 178697 November 17, 2010
Taxation; Value Added Tax; Failure to print words “zero-rated
sales” on receipts fatal to claim for refund of value-added tax
(VAT).—Section 4.108-1 of RR 7-95 proceeds from the rule-making
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 CTA’s 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.
Same; Same; Failure to print the word “zero-rated” on the
invoices/receipts is fatal to a claim for credit/refund of input value-
added tax (VAT) on zero-rated sales.—Consistent with the
foregoing jurisprudence, petitioner’s claim for credit/refund of input
VAT for the taxable quarters of 2000 must be denied. Failure to
print the word “zero-rated” on the invoices/receipts is fatal to a
claim for credit/refund of input VAT on zero-rated sales. J.R.A.
Philippines, Inc. vs. Commissioner of Internal Revenue, 632
SCRA 517, G.R. No. 177127 October 11, 2010
Taxation; Value Added Tax; There are two types of input Value
Added Tax (VAT) credits. One is a credit/refund of input VAT
attributable to zero-rated sales under Section 112 (A) of the
National Internal Revenue Code (NIRC), and the other is a
credit/refund of input Value Added Tax (VAT) on capital goods
pursuant to Section 112 (B) of the same Code.—Before us are two
types of input VAT credits. One is a credit/refund of input VAT
attributable to zero-rated sales under Section 112 (A) of the NIRC,
and the other is a credit/refund of input VAT on capital goods
pursuant to Section 112 (B) of the same Code. In a claim for
credit/refund of input VAT attributable to zero-rated sales, Section
112 (A) of the NIRC lays down four requisites, to wit: 1) the
taxpayer must be VAT-registered; 2) the taxpayer must be
engaged in sales which are zero-rated or effectively zero-rated; 3)
the claim must be filed within two years after the close of the
taxable quarter when such sales were made; and 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.
Same; Same; Failure to print the word “zero-rated” on the sales
invoices or receipts is fatal to a claim for credit/refund of input
Value Added Tax (VAT) on zero-rated sales.—All told, the non-
presentation of the ATP and the failure to indicate the word “zero-
rated” in the invoices or receipts are fatal to a claim for
credit/refund of input VAT on zero-rated sales. The failure to
indicate the ATP in the sales invoices or receipts, on the other
hand, is not. In this case, petitioner failed to present its ATP and to
print the word “zero-rated” on its export sales invoices. Thus, we
find no error on the part of the CTA in denying outright petitioner’s
claim for credit/refund of input VAT attributable to its zero-rated
sales.
Same; Same; Words and Phrases; “Capital goods or properties”
refer to goods or properties with estimated useful life greater that
one year and which are treated as depreciable assets.—To claim a
refund of input VAT on capital goods, Section 112 (B) of the NIRC
requires that: 1. the claimant must be a VAT registered person; 2.
the input taxes claimed must have been paid on capital goods; 3.
the input taxes must not have been applied against any output tax
liability; and 4. the administrative claim for refund must have been
filed within two (2) years after the close of the taxable quarter
when the importation or purchase was made. Corollarily, Section
4.106-1 (b) of RR No. 7-95 defines capital goods as follows:
“Capital goods or properties” refer to goods or properties with
estimated useful life greater that one year and which are treated as
depreciable assets under Section 29 (f), used directly or indirectly
in the production or sale of taxable goods or services. Silicon
Philippines, Inc. vs. Commissioner Internal Revenue, 639
SCRA 521, G.R. No. 172378 January 17, 2011
Taxation; Value Added Tax (VAT); Prescription; Tax Refunds;
Section 112(A) of the National Internal Revenue Code (NIRC) is the
applicable provision in determining the start of the two-year period
for claiming a refund/credit of unutilized input Value Added Tax
(VAT), and that Sections 204(C) and 229 of the NIRC are
inapplicable as “both provisions apply only to instances of
erroneous payment or illegal collection of internal revenue
taxes.”—The pivotal question of when to reckon the running of the
two-year prescriptive period, however, has already been resolved
in Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation, 565 SCRA 154 (2008), where we ruled that Section
112(A) of the NIRC is the applicable provision in determining the
start of the two-year period for claiming a refund/credit of
unutilized input VAT, and that Sections 204(C) and 229 of the NIRC
are inapplicable as “both provisions apply only to instances of
erroneous payment or illegal collection of internal revenue taxes.”
Same; Same; Same; Where the taxpayer did not wait for the
decision of the Commission of Internal Revenue or the lapse of the
120-day period, it having simultaneously filed the administrative
and the judicial claims, the filing of said judicial claim with the
Court of Tax Appeals is premature.—Section 112(D) of the NIRC
clearly provides that the CIR has “120 days, from the date of the
submission of the complete documents in support of the application
[for tax refund/credit],” within which to grant or deny the claim. In
case of full or partial denial by the CIR, the taxpayer’s recourse is
to file an appeal before the CTA within 30 days from receipt of the
decision of the CIR. However, if after the 120-day period the CIR
fails to act on the application for tax refund/credit, the remedy of
the taxpayer is to appeal the inaction of the CIR to CTA within 30
days. In this case, the administrative and the judicial claims were
simultaneously filed on September 30, 2004. Obviously,
respondent did not wait for the decision of the CIR or the lapse of
the 120-day period. For this reason, we find the filing of the judicial
claim with the CTA premature.
Same; Same; Same; Words and Phrases; The phrase “within two
(2) years x x x apply for the issuance of a tax credit certificate or
refund” in Section 112(A) of the National Internal Revenue Code
(NIRC) refers to applications for refund/credit filed with the
Commission of Internal Revenue (CIR) and not to appeals made to
the Court of Tax Appeals (CTA)—applying the two-year period to
judicial claims would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within which a taxpayer
should appeal the decision or inaction of the CIR.—There is nothing
in Section 112 of the NIRC to support respondent’s view.
Subsection (A) of the said provision states that “any VAT-
registered person, whose sales are zero-rated or effectively zero-
rated may, within two 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.” The phrase “within two (2) years x x x apply for the
issuance of a tax credit certificate or refund” refers to applications
for refund/credit filed with the CIR and not to appeals made to the
CTA. This is apparent in the first paragraph of subsection (D) of the
same provision, which states that the CIR has “120 days from the
submission of complete documents in support of the application
filed in accordance with Subsections (A) and (B)” within which to
decide on the claim. In fact, applying the two-year period to
judicial claims would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within which a taxpayer
should appeal the decision or inaction of the CIR. The second
paragraph of Section 112(D) of the NIRC envisions two scenarios:
(1) when a decision is issued by the CIR before the lapse of the
120-day period; and (2) when no decision is made after the 120-
day period. In both instances, the taxpayer has 30 days within
which to file an appeal with the CTA. As we see it then, the 120-
day period is crucial in filing an appeal with the CTA.
Commissioner of Internal Revenue vs. Aichi Forging
Company of Asia, Inc., 632 SCRA 422, G.R. No. 184823
October 6, 2010
Taxation; Tax Refund; Tax Credit; Waiting Period; It is indisputable
that compliance with the 120-day waiting period is mandatory and
jurisdictional. The waiting period, originally fixed at 60 days only,
was part of the provisions of the first Value-Added Tax (VAT) law,
Executive Order No. 273, which took effect on 1 January 1988. The
waiting period was extended to 120 days effective 1 January 1998
under RA 8424 or the Tax Reform Act of 1997.—Clearly, San Roque
failed to comply with the 120-day waiting period, the time
expressly given by law to the Commissioner to decide whether to
grant or deny San Roque’s application for tax refund or credit. It is
indisputable that compliance with the 120-day waiting period is
mandatory and jurisdictional. The waiting period, originally fixed at
60 days only, was part of the provisions of the first VAT law,
Executive Order No. 273, which took effect on 1 January 1988. The
waiting period was extended to 120 days effective 1 January 1998
under RA 8424 or the Tax Reform Act of 1997. Thus, the waiting
period has been in our statute books for more than fifteen (15)
years before San Roque filed its judicial claim. Failure to comply
with the 120-day waiting period violates a mandatory provision of
law. It violates the doctrine of exhaustion of administrative
remedies and renders the petition premature and thus without a
cause of action, with the effect that the CTA does not acquire
jurisdiction over the taxpayer’s petition. Philippine jurisprudence is
replete with cases upholding and reiterating these doctrinal
principles.
Same; Court of Tax Appeals; Jurisdiction; The charter of the Court
of Tax Appeals expressly provides that its jurisdiction is to review
on appeal decisions of the Commissioner of Internal Revenue in
cases involving refunds of internal revenue taxes.—The charter of
the CTA expressly provides that its jurisdiction is to review on
appeal “decisions of the Commissioner of Internal Revenue in cases
involving x x x refunds of internal revenue taxes.” When a taxpayer
prematurely files a judicial claim for tax refund or credit with the
CTA without waiting for the decision of the Commissioner, there is
no “decision” of the Commissioner to review and thus the CTA as a
court of special jurisdiction has no jurisdiction over the appeal. The
charter of the CTA also expressly provides that if the Commissioner
fails to decide within “a specific period” required by law, such
“inaction shall be deemed a denial” of the application for tax refund
or credit. It is the Commissioner’s decision, or inaction “deemed a
denial,” that the taxpayer can take to the CTA for review. Without
a decision or an “inaction x x x deemed a denial” of the
Commissioner, the CTA has no jurisdiction over a petition for
review.
Taxation; Tax Refund; Tax Credit; The Supreme Court should not
establish the precedent that non-compliance with mandatory and
jurisdictional conditions can be excused if the claim is otherwise
meritorious, particularly in claims for tax refunds or credit.—This
Court cannot disregard mandatory and jurisdictional conditions
mandated by law simply because the Commissioner chose not to
contest the numerical correctness of the claim for tax refund or
credit of the taxpayer. Non-compliance with mandatory periods,
non-observance of prescriptive periods, and non-adherence to
exhaustion of administrative remedies bar a taxpayer’s claim for
tax refund or credit, whether or not the Commissioner questions
the numerical correctness of the claim of the taxpayer. This Court
should not establish the precedent that non-compliance with
mandatory and jurisdictional conditions can be excused if the claim
is otherwise meritorious, particularly in claims for tax refunds or
credit. Such precedent will render meaningless compliance with
mandatory and jurisdictional requirements, for then every tax
refund case will have to be decided on the numerical correctness of
the amounts claimed, regardless of non-compliance with
mandatory and jurisdictional conditions.
Same; Appeals; The taxpayer may, if he wishes, appeal the
decision of the Commissioner to the Court of Tax Appeals within 30
days from receipt of the Commissioner’s decision, or if the
Commissioner does not act on the taxpayer’s claim within the 120-
day period, the taxpayer may appeal to the Court of Tax Appeals
within 30 days from the expiration of the 120-day period.—Section
112(C) also expressly grants the taxpayer a 30-day period to
appeal to the CTA the decision or inaction of the Commissioner,
thus: x x x the taxpayer affected may, within thirty (30) days from
the receipt of the decision denying the claim or after the expiration
of the one hundred twenty day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals. (Emphasis supplied)
This law is clear, plain, and unequivocal. Following the well-settled
verba legis doctrine, this law should be applied exactly as worded
since it is clear, plain, and unequivocal. As this law states, the
taxpayer may, if he wishes, appeal the decision of the
Commissioner to the CTA within 30 days from receipt of the
Commissioner’s decision, or if the Commissioner does not act on
the taxpayer’s claim within the 120-day period, the taxpayer may
appeal to the CTA within 30 days from the expiration of the 120-
day period.
Same; Tax Refund; Tax Credit; The taxpayer 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
the creditable input tax due or paid to such sales.—Section 112(A)
clearly, plainly, and unequivocally provides that the taxpayer “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 the creditable input tax due or paid to such sales.” In
short, the law states that the taxpayer may apply with the
Commissioner for a refund or credit “within two (2) years,” which
means at anytime within two years. Thus, the application for
refund or credit may be filed by the taxpayer with the
Commissioner on the last day of the two-year prescriptive period
and it will still strictly comply with the law. The two-year
prescriptive period is a grace period in favor of the taxpayer and he
can avail of the full period before his right to apply for a tax refund
or credit is barred by prescription.
Same; Same; Same; The two-year prescriptive period in Section
112(A) refers to the period within which the taxpayer can file an
administrative claim for tax refund or credit. Stated otherwise, the
two-year prescriptive period does not refer to the filing of the
judicial claim with the Court of Tax Appeals but to the filing of the
administrative claim with the Commissioner.—Section 112(C)
provides that the Commissioner shall decide the application for
refund or credit “within one hundred twenty (120) days from the
date of submission of complete documents in support of the
application filed in accordance with Subsection (A).” The reference
in Section 112(C) of the submission of documents “in support of
the application filed in accordance with Subsection A” means that
the application in Section 112(A) is the administrative claim that
the Commissioner must decide within the 120-day period. In short,
the two-year prescriptive period in Section 112(A) refers to the
period within which the taxpayer can file an administrative claim
for tax refund or credit. Stated otherwise, the two-year prescriptive
period does not refer to the filing of the judicial claim with the CTA
but to the filing of the administrative claim with the Commissioner.
As held in Aichi, the “phrase ‘within two years x x x apply for the
issuance of a tax credit or refund’ refers to applications for
refund/credit with the CIR and not to appeals made to the CTA.”
Same; Same; Same; If the 30-day period, or any part of it, is
required to fall within the two-year prescriptive period (equivalent
to 730 days), then the taxpayer must file his administrative claim
for refund or credit within the first 610 days of the two-year
prescriptive period.—If the 30-day period, or any part of it, is
required to fall within the two-year prescriptive period (equivalent
to 730 days), then the taxpayer must file his administrative claim
for refund or credit within the first 610 days of the two-year
prescriptive period. Otherwise, the filing of the administrative claim
beyond the first 610 days will result in the appeal to the CTA being
filed beyond the two-year prescriptive period. Thus, if the taxpayer
files his administrative claim on the 611th day, the Commissioner,
with his 120-day period, will have until the 731st day to decide the
claim. If the Commissioner decides only on the 731st day, or does
not decide at all, the taxpayer can no longer file his judicial claim
with the CTA because the two-year prescriptive period (equivalent
to 730 days) has lapsed. The 30-day period granted by law to the
taxpayer to file an appeal before the CTA becomes utterly useless,
even if the taxpayer complied with the law by filing his
administrative claim within the two-year prescriptive period.
Same; Value-Added Tax; Input Value-Added Tax (VAT); Words and
Phrases; The input Value-Added Tax (VAT) is a tax liability of, and
legally paid by, a VAT-registered seller of goods, properties or
services used as input by another VAT-registered person in the sale
of his own goods, properties, or services.—The input VAT is not
“excessively” collected as understood under Section 229 because
at the time the input VAT is collected the amount paid is correct
and proper. The input VAT is a tax liability of, and legally paid by, a
VAT-registered seller of goods, properties or services used as input
by another VAT-registered person in the sale of his own goods,
properties, or services. This tax liability is true even if the seller
passes on the input VAT to the buyer as part of the purchase price.
The second VAT-registered person, who is not legally liable for the
input VAT, is the one who applies the input VAT as credit for his
own output VAT. If the input VAT is in fact “excessively” collected
as understood under Section 229, then it is the first VAT-registered
person―the taxpayer who is legally liable and who is deemed to
have legally paid for the input VAT―who can ask for a tax refund
or credit under Section 229 as an ordinary refund or credit outside
of the VAT System. In such event, the second VAT-registered
taxpayer will have no input VAT to offset against his own output
VAT.
Same; Same; For simplicity and efficiency in tax collection, the
Value-Added Tax (VAT) is imposed not just on the value added by
the taxpayer, but on the entire selling price of his goods, properties
or services.—As its name implies, the Value-Added Tax system is a
tax on the value added by the taxpayer in the chain of
transactions. For simplicity and efficiency in tax collection, the VAT
is imposed not just on the value added by the taxpayer, but on the
entire selling price of his goods, properties or services. However,
the taxpayer is allowed a refund or credit on the VAT previously
paid by those who sold him the inputs for his goods, properties, or
services. The net effect is that the taxpayer pays the VAT only on
the value that he adds to the goods, properties, or services that he
actually sells.
Same; Same; Input Value-Added Tax (VAT); A taxpayer can apply
his input Value-Added Tax (VAT) only against his output VAT. The
only exception is when the taxpayer is expressly “zero-rated or
effectively zero-rated” under the law, like companies generating
power through renewable sources of energy.―Under Section
110(B), a taxpayer can apply his input VAT only against his output
VAT. The only exception is when the taxpayer is expressly “zero-
rated or effectively zero-rated” under the law, like companies
generating power through renewable sources of energy. Thus, a
non zero-rated VAT-registered taxpayer who has no output VAT
because he has no sales cannot claim a tax refund or credit of his
unused input VAT under the VAT System. Even if the taxpayer has
sales but his input VAT exceeds his output VAT, he cannot seek a
tax refund or credit of his “excess” input VAT under the VAT
System. He can only carry-over and apply his “excess” input VAT
against his future output VAT. If such “excess” input VAT is an
“excessively” collected tax, the taxpayer should be able to seek a
refund or credit for such “excess” input VAT whether or not he has
output VAT. The VAT System does not allow such refund or credit.
Such “excess” input VAT is not an “excessively” collected tax under
Section 229. The “excess” input VAT is a correctly and properly
collected tax. However, such “excess” input VAT can be applied
against the output VAT because the VAT is a tax imposed only on
the value added by the taxpayer. If the input VAT is in fact
“excessively” collected under Section 229, then it is the person
legally liable to pay the input VAT, not the person to whom the tax
was passed on as part of the purchase price and claiming credit for
the input VAT under the VAT System, who can file the judicial claim
under Section 229.
Same; Tax Refund; Tax Credit; It is clear that what can be
refunded or credited is a tax that is “erroneously, illegally,
excessively or in any manner wrongfully collected.”—From the plain
text of Section 229, it is clear that what can be refunded or
credited is a tax that is “erroneously, x x x illegally, x x x
excessively or in any manner wrongfully collected.” In short, there
must be a wrongful payment because what is paid, or part of it, is
not legally due. As the Court held in Mirant, Section 229 should
“apply only to instances of erroneous payment or illegal collection
of internal revenue taxes.” Erroneous or wrongful payment includes
excessive payment because they all refer to payment of taxes not
legally due. Under the VAT System, there is no claim or issue that
the “excess” input VAT is “excessively or in any manner wrongfully
collected.” In fact, if the “excess” input VAT is an “excessively”
collected tax under Section 229, then the taxpayer claiming to
apply such “excessively” collected input VAT to offset his output
VAT may have no legal basis to make such offsetting. The person
legally liable to pay the input VAT can claim a refund or credit for
such “excessively” collected tax, and thus there will no longer be
any “excess” input VAT. This will upend the present VAT System as
we know it.
Same; Same; Same; A claim for tax refund or credit, like a claim
for tax exemption, is construed strictly against the taxpayer.―A
claim for tax refund or credit, like a claim for tax exemption, is
construed strictly against the taxpayer. One of the conditions for a
judicial claim of refund or credit under the VAT System is
compliance with the 120+30 day mandatory and jurisdictional
periods. Thus, strict compliance with the 120+30 day periods is
necessary for such a claim to prosper, whether before, during, or
after the effectivity of the Atlas doctrine, except for the period from
the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to
6 October 2010 when the Aichi doctrine was adopted, which again
reinstated the 120+30 day periods as mandatory and jurisdictional.
Same; A reversal of a Bureau of Internal Revenue (BIR) regulation
or ruling cannot adversely prejudice a taxpayer who in good faith
relied on the BIR regulation or ruling prior to its reversal.— Since
the Commissioner has exclusive and original jurisdiction to
interpret tax laws, taxpayers acting in good faith should not be
made to suffer for adhering to general interpretative rules of the
Commissioner interpreting tax laws, should such interpretation
later turn out to be erroneous and be reversed by the
Commissioner or this Court. Indeed, Section 246 of the Tax Code
expressly provides that a reversal of a BIR regulation or ruling
cannot adversely prejudice a taxpayer who in good faith relied on
the BIR regulation or ruling prior to its reversal.
Same; Statutory Construction; Taxpayers should not be prejudiced
by an erroneous interpretation by the Commissioner, particularly
on a difficult question of law.—Taxpayers should not be prejudiced
by an erroneous interpretation by the Commissioner, particularly
on a difficult question of law. The abandonment of the Atlas
doctrine by Mirant and Aichi is proof that the reckoning of the
prescriptive periods for input VAT tax refund or credit is a difficult
question of law. The abandonment of the Atlas doctrine did not
result in Atlas, or other taxpayers similarly situated, being made to
return the tax refund or credit they received or could have received
under Atlas prior to its abandonment. This Court is applying Mirant
and Aichi prospectively. Absent fraud, bad faith or
misrepresentation, the reversal by this Court of a general
interpretative rule issued by the Commissioner, like the reversal of
a specific BIR ruling under Section 246, should also apply
prospectively.
Same; Judgments; Court of Tax Appeals decisions do not
constitute precedents, and do not bind the Supreme Court or the
public.—There is also the claim that there are numerous CTA
decisions allegedly supporting the argument that the filing dates of
the administrative and judicial claims are inconsequential, as long
as they are within the two-year prescriptive period. Suffice it to
state that CTA decisions do not constitute precedents, and do not
bind this Court or the public. That is why CTA decisions are
appealable to this Court, which may affirm, reverse or modify the
CTA decisions as the facts and the law may warrant. Only decisions
of this Court constitute binding precedents, forming part of the
Philippine legal system.
Same; Tax Refund; Tax Credit; Under the novel amendment
introduced by RA 7716, mere inaction by the Commissioner during
the 60-day period is deemed a denial of the claim. Thus, Section
4.106- 2(c) states that “if no action on the claim for tax
refund/credit has been taken by the Commissioner after the sixty
(60) day period,” the taxpayer “may” already file the judicial claim
even long before the lapse of the two-year prescriptive period.—
Under the novel amendment introduced by RA 7716, mere inaction
by the Commissioner during the 60-day period is deemed a denial
of the claim. Thus, Section 4.106-2(c) states that “if no action on
the claim for tax refund/credit has been taken by the
Commissioner after the sixty (60) day period,” the taxpayer “may”
already file the judicial claim even long before the lapse of the two-
year prescriptive period. Prior to the amendment by RA 7716, the
taxpayer had to wait until the two-year prescriptive period was
about to expire if the Commissioner did not act on the claim. With
the amendment by RA 7716, the taxpayer need not wait until the
two-year prescriptive period is about to expire before filing the
judicial claim because mere inaction by the Commissioner during
the 60-day period is deemed a denial of the claim. This is the
meaning of the phrase “but before the lapse of the two (2) year
period” in Section 4.106-2(c). As Section 4.106- 2(c) reiterates
that the judicial claim can be filed only “after the sixty (60) day
period,” this period remains mandatory and jurisdictional. Clearly,
Section 4.106-2(c) did not amend Section 106(d) but merely
faithfully implemented it.
Same; Taxes are the lifeblood of the nation.—Taxes are the
lifeblood of the nation. The Philippines has been struggling to
improve its tax efficiency collection for the longest time with
minimal success. Consequently, the Philippines has suffered the
economic adversities arising from poor tax collections, forcing the
government to continue borrowing to fund the budget deficits. This
Court cannot turn a blind eye to this economic malaise by being
unduly liberal to taxpayers who do not comply with statutory
requirements for tax refunds or credits. The tax refund claims in
the present cases are not a pittance. Many other companies stand
to gain if this Court were to rule otherwise. The dissenting opinions
will turn on its head the well-settled doctrine that tax refunds are
strictly construed against the taxpayer. Commissioner of
Internal Revenue vs. San Roque Power Corporation, 690
SCRA 336, G.R. No. 187485 February 12, 2013
Taxation; Tax Credit; Tax Refund; The Commissioner of Internal
Revenue (CIR) has one hundred twenty (120) days from the date
of submission of complete documents to decide a claim for tax
credit or refund of creditable input taxes. The taxpayer may, within
thirty (30) days from receipt of the denial of the claim or after the
expiration of the 120-day period, which is considered a “denial due
to inaction,” appeal the decision or unacted claim to the Court of
Tax Appeals (CTA).—It is apparent that the CIR has 120 days from
the date of submission of complete documents to decide a claim for
tax credit or refund of creditable input taxes. The taxpayer may,
within 30 days from receipt of the denial of the claim or after the
expiration of the 120-day period, which is considered a “denial due
to inaction,” appeal the decision or unacted claim to the CTA. To be
clear, Section 112(C) categorically provides that the 120-day
period is counted “from the date of submission of complete
documents in support of the application.” Contrary to this
mandate, the CTA En Banc counted the running of the period from
the date the application for refund was filed or May 15, 2008, and,
thus, ruled that the judicial claim was belatedly filed.
Same; Same; Same; The one hundred twenty (120)-day period
granted to the Commissioner of Internal Revenue (CIR) to decide
the administrative claim under the Section 112 is primarily
intended to benefit the taxpayer, to ensure that his claim is
decided judiciously and expeditiously.—Indeed, the 120-day period
granted to the CIR to decide the administrative claim under the
Section 112 is primarily intended to benefit the taxpayer, to ensure
that his claim is decided judiciously and expeditiously. After all, the
sooner the taxpayer successfully processes his refund, the sooner
can such resources be further reinvested to the business
translating to greater efficiencies and productivities that would
ultimately uplift the general welfare. To allow the CIR to determine
the completeness of the documents submitted and, thus, dictate
the running of the 120-day period, would undermine these
objectives, as it would provide the CIR the unbridled power to
indefinitely delay the administrative claim, which would ultimately
prevent the filing of a judicial claim with the CTA.
Same; Same; Same; For purposes of determining when the
supporting documents have been completed — it is the taxpayer
who ultimately determines when complete documents have been
submitted for the purpose of commencing and continuing the
running of the one hundred twenty (120)-day period.—With the
amendments only with respect to its place under Section 112, the
Court finds that RMC No. 49-2003 should still be observed. Thus,
taking the foregoing changes to the law altogether, it becomes
apparent that, for purposes of determining when the supporting
documents have been completed — it is the taxpayer who
ultimately determines when complete documents have been
submitted for the purpose of commencing and continuing the
running of the 120-day period. After all, he may have already
completed the necessary documents the moment he filed his
administrative claim, in which case, the 120-day period is reckoned
from the date of filing. The taxpayer may have also filed the
complete documents on the 30th day from filing of his application,
pursuant to RMC No. 49-2003. He may very well have filed his
supporting documents on the first day he was notified by the BIR
of the lack of the necessary documents. In such cases, the 120-day
period is computed from the date the taxpayer is able to submit
the complete documents in support of his application.
Same; Same; Same; In a claim for tax credit or refund, it is the
taxpayer who has the burden to prove his cause of action. As such,
he enjoys relative freedom to submit such evidence to prove his
claim.—Except in those instances where the BIR would require
additional documents in order to fully appreciate a claim for tax
credit or refund, in terms what additional document must be
presented in support of a claim for tax credit or refund — it is the
taxpayer who has that right and the burden of providing any and
all documents that would support his claim for tax credit or refund.
After all, in a claim for tax credit or refund, it is the taxpayer who
has the burden to prove his cause of action. As such, he enjoys
relative freedom to submit such evidence to prove his claim.
Same; Same; Same; Under Section 112(A) of the National Internal
Revenue Code (NIRC), as amended by Republic Act (RA) No. 9337,
a taxpayer has two (2) years, after the close of the taxable quarter
when the sales were made, to apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable
to such sales.—Under Section 112(A) of the NIRC, as amended by
R.A. No. 9337, a taxpayer has two (2) years, after the close of the
taxable quarter when the sales were made, to apply for the
issuance of a tax credit certificate or refund of creditable input tax
due or paid attributable to such sales. Thus, before the
administrative claim is barred by prescription, the taxpayer must
be able to submit his complete documents in support of the
application filed. This is because, it is upon the complete
submission of his documents in support of his application that it
can be said that the application was, “officially received” as
provided under RMC No. 49-2003.
Same; Same; Same; From the date an administrative claim for
excess unutilized value-added tax (VAT) is filed, a taxpayer has
thirty (30) days within which to submit the documentary
requirements sufficient to support his claim, unless given further
extension by the Commissioner of Internal Revenue (CIR).—To
summarize, for the just disposition of the subject controversy, the
rule is that from the date an administrative claim for excess
unutilized VAT is filed, a taxpayer has thirty (30) days within which
to submit the documentary requirements sufficient to support his
claim, unless given further extension by the CIR. Then, upon filing
by the taxpayer of his complete documents to support his
application, or expiration of the period given, the CIR has 120 days
within which to decide the claim for tax credit or refund. Should the
taxpayer, on the date of his filing, manifest that he no longer
wishes to submit any other addition documents to complete his
administrative claim, the 120-day period allowed to the CIR begins
to run from the date of filing.
Same; Same; Same; In all cases, whatever documents a taxpayer
intends to file to support his claim must be completed within the
two (2)-year period under Section 112(A) of the National Internal
Revenue Code (NIRC).—In all cases, whatever documents a
taxpayer intends to file to support his claim must be completed
within the two-year period under Section 112(A) of the NIRC. 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
CIR to the CTA must also be respected.
Same; Same; Same; Under the current rule, the reckoning of the
one hundred twenty (120)-day period has been withdrawn from
the taxpayer by Revenue Memorandum Circular (RMC) No. 54-
2014, since it requires him at the time he files his claim to
complete his supporting documents and attest that he will no
longer submit any other document to prove his claim.—Under the
current rule, the reckoning of the 120-day period has been
withdrawn from the taxpayer by RMC No. 54-2014, since it
requires him at the time he files his claim to complete his
supporting documents and attest that he will no longer submit any
other document to prove his claim. Further, the taxpayer is barred
from submitting additional documents after he has filed his
administrative claim. On this score, the Court finds that the
foregoing issuance cannot be applied retroactively to the case at
bar since it imposes new obligations upon taxpayers in order to
perfect their administrative claim, that is, [1] compliance with the
mandate to submit the “supporting documents” enumerated under
RMC No. 54-2014 under its “Annex A”; and [2] the filing of “a
statement under oath attesting to the completeness of the
submitted documents,” referred to in RMC No. 54-2014 as “Annex
B.” This should not prejudice taxpayers who have every right to
pursue their claims in the manner provided by existing regulations
at the time it was filed.
Same; Same; Same; Revenue Memorandum Order (RMO) No. 53-
98 is addressed to internal revenue officers and employees, for
purposes of equity and uniformity, to guide them as to what
documents they may require taxpayers to present upon audit of
their tax liabilities.—As can be gleaned from the above, RMO No.
53-98 is addressed to internal revenue officers and employees, for
purposes of equity and uniformity, to guide them as to what
documents they may require taxpayers to present upon audit of
their tax liabilities. Nothing stated in the issuance would show that
it was intended to be a benchmark in determining whether the
documents submitted by a taxpayer are actually complete to
support a claim for tax credit or refund of excess unutilized excess
VAT.
Same; Same; Same; A taxpayer’s failure with the requirements
listed under Revenue Memorandum Order (RMO) No. 53-98 is not
fatal to its claim for tax credit or refund of excess unutilized excess
value-added tax (VAT).—Indeed, a taxpayer’s failure with the
requirements listed under RMO No. 53-98 is not fatal to its claim
for tax credit or refund of excess unutilized excess VAT. This holds
especially true when the application for tax credit or refund of
excess unutilized excess VAT has arrived at the judicial level. After
all, in the judicial level or when the case is elevated to the Court,
the Rules of Court governs. Simply put, the question of whether
the evidence submitted by a party is sufficient to warrant the
granting of its prayer lies within the sound discretion and judgment
of the Court.
Same; Same; Same; While it is still true a taxpayer must prove not
only his entitlement to a refund but also his compliance with the
procedural due process — it is also true that when the law or rule
mandates that a party or authority must comply with a specific
obligation to perform an act for the benefit of another, the
noncompliance thereof by the former should not operate to
prejudice the latter, lest it render the nugatory the objective of the
rule.—While it is still true a taxpayer must prove not only his
entitlement to a refund but also his compliance with the procedural
due process — it is also true that when the law or rule mandates
that a party or authority must comply with a specific obligation to
perform an act for the benefit of another, the noncompliance
thereof by the former should not operate to prejudice the latter,
lest it render the nugatory the objective of the rule. Such is the
situation in case at bar.
Same; Same; Same; It is the taxpayer who determines when
complete documents have been submitted for the purpose of the
running of the one hundred twenty (120)-day period.—The alleged
failure of Total Gas to submit the complete documents at the
administrative level did not render its petition for review with the
CTA dismissible for lack of jurisdiction. First, the 120-day period
had commenced to run and the 120+30 day period was, in fact,
complied with. As already discussed, it is the taxpayer who
determines when complete documents have been submitted for the
purpose of the running of the 120-day period. It must again be
pointed out that this in no way precludes the CIR from requiring
additional documents necessary to decide the claim, or even
denying the claim if the taxpayer fails to submit the additional
documents requested.
Same; Same; Same; A distinction must 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.—A distinction must 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. If an administrative
claim was dismissed by the CIR due to the taxpayer’s failure to
submit complete documents despite notice/request, then the
judicial claim before the CTA would be dismissible, not for lack of
jurisdiction, but for the taxpayer’s failure to substantiate the claim
at the administrative level. When a judicial claim for refund or tax
credit in the CTA is an appeal of an unsuccessful administrative
claim, the taxpayer has to convince the CTA that the CIR had no
reason to deny its claim. It, thus, becomes imperative for the
taxpayer to show the CTA that not only is he entitled under
substantive law to his claim for refund or tax credit, but also that
he satisfied all the documentary and evidentiary requirements for
an administrative claim. 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, Inc. vs. Commissioner of
Internal Revenue, 776 SCRA 395, G.R. No. 207112
December 8, 2015
Taxation; Banks and Banking; Certificate of Deposit; Definition of a
Certificate of Deposit.—A certificate of deposit is defined as “a
written acknowledgment by a bank or banker of the receipt of a
sum of money on deposit which the bank or banker promises to
pay to the depositor, to the order of the depositor, or to some
other person or his order, whereby the relation of debtor and
creditor between the bank and the depositor is created.”
Same; Same; Same; A document to be considered a certificate of
deposit need not be in a specific form.—The fact that the SAP is
evidenced by a passbook likewise cannot remove its coverage from
Section 180 of the old NIRC, as amended. A document to be
considered a certificate of deposit need not be in a specific form.
Thus, a passbook issued by a bank qualifies as a certificate of
deposit drawing interest because it is considered a written
acknowledgement by a bank that it has accepted a deposit of a
sum of money from a depositor. Prudential Bank vs.
Commissioner of Internal Revenue, 654 SCRA 702, G.R. No.
180390 July 27, 2011
Remedial Law; Civil Procedure; Judgments; Stare Decisis; The
doctrine of stare decisis dictates that when a court has reached a
conclusion in one case, it should be applied to those that follow if
the facts are substantially the same, even though the parties may
be different.—Following the doctrine of stare decisis, which dictates
that when a court has reached a conclusion in one case, it should
be applied to those that follow if the facts are substantially the
same, even though the parties may be different, we find that
respondent is not liable for DST as the transfer of real properties
from the absorbed corporations to respondent was pursuant to a
merger. And having complied with the provisions of Sections
204(C) and 229 of the NIRC, we agree with the CTA that
respondent is entitled to a refund of the DST it erroneously paid on
various dates between October 31, 2001 to November 15, 2001 in
the total amount of P14,140,980.00.
Taxation; Tax laws must be construed strictly against the State and
liberally in favor of the taxpayer.—In closing, we must stress that
taxes must not be imposed beyond what the law expressly and
clearly declares as tax laws must be construed strictly against the
State and liberally in favor of the taxpayer. Commissioner of
Internal Revenue vs. La Tañeda Distillers, Inc. (LTDI [now
Ginebra San Miguel, 762 SCRA 636, G.R. No. 175188 July 15,
2015
Taxation; Excise Taxes; Under Section 129 of the National Internal
Revenue Code (NIRC), as amended, excise taxes are imposed on
two (2) kinds of goods, namely: (a) goods manufactured or
produced in the Philippines for domestic sales or consumption or
for any other disposition; and (b) things imported.—Under Section
129 of the NIRC, as amended, excise taxes are imposed on two
kinds of goods, namely: (a) goods manufactured or produced in
the Philippines for domestic sales or consumption or for any other
disposition; and (b) things imported. Undoubtedly, the excise tax
imposed under Section 129 of the NIRC is a tax on property. With
respect to imported things, Section 131 of the NIRC declares that
excise taxes on imported things shall be paid by the owner or
importer to the Customs officers, conformably with the regulations
of the Department of Finance and before the release of such
articles from the customs house, unless the imported things are
exempt from excise taxes and the person found to be in possession
of the same is other than those legally entitled to such tax
exemption. For this purpose, the statutory taxpayer is the importer
of the things subject to excise tax.
Same; Same; Petroleum Products; Pursuant to Section 135(c) of
the National Internal Revenue Code (NIRC), petroleum products
sold to entities that are by law exempt from direct and indirect
taxes are exempt from excise tax.—Pursuant to Section 135(c),
supra, petroleum products sold to entities that are by law exempt
from direct and indirect taxes are exempt from excise tax. The
phrase which are by law exempt from direct and indirect taxes
describes the entities to whom the petroleum products must be
sold in order to render the exemption operative. Section 135(c)
should thus be construed as an exemption in favor of the
petroleum products on which the excise tax was levied in the first
place. The exemption cannot be granted to the buyers — that is,
the entities that are by law exempt from direct and indirect taxes
— because they are not under any legal duty to pay the excise tax.
Same; Same; The statutory taxpayer may shift the economic
burden of the excise tax payment to another — usually the
buyer.—It is noteworthy that excise taxes are considered as a kind
of indirect tax, the liability for the payment of which may fall on a
person other than whoever actually bears the burden of the tax.
Simply put, the statutory taxpayer may shift the economic burden
of the excise tax payment to another — usually the buyer.
Same; Same; Petroleum Products; In cases involving excise tax
exemptions on petroleum products under Section 135 of the
National Internal Revenue Code (NIRC), the Supreme Court (SC)
has consistently held that 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.—In cases involving excise tax exemptions
on petroleum products under Section 135 of the NIRC, the Court
has consistently held that 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. But the Court has also made clear that this
rule does not apply where the law grants the party to whom the
economic burden of the tax is shifted by virtue of an exemption
from both direct and indirect taxes. In which case, such party must
be allowed to claim the tax refund or tax credit even if it is not
considered as the statutory taxpayer under the law. Chevron
Philippines, Inc. vs. Commissioner of Internal Revenue, 768
SCRA 414, G.R. No. 210836 September 1, 2015
DEL CASTILLO, J., Dissenting Opinion:
Taxation; Tax Refunds; View that tax refunds, just like tax
exemptions must not rest on vague, uncertain or indefinite
inference but should be granted only by a clear and unequivocal
provision of law on the basis of language too plain to be mistaken,
as taxes are the lifeblood of the government.—I cannot subscribe
to petitioner’s postulation that the denial of its claim would result in
serious adverse consequences on the supply of fuel to tax-exempt
entities under Section 135(c) of the NIRC as oil companies would
be unwilling to sell petroleum products to customers operating
within the special economic zone. This is not only unsubstantiated
but is also not a legal ground to grant petitioner’s claim for tax
refund or credit. It bears stressing that tax refunds, just like tax
exemptions must not rest on vague, uncertain or indefinite
inference but should be granted only by a clear and unequivocal
provision of law on the basis of language too plain to be mistaken,
as taxes are the lifeblood of the government. Thus, unless there is
a clear grant of tax exemption or refund in the law, the Court
cannot grant petitioner’s claim for tax refund or credit as this would
constitute judicial legislation, which is not allowed.
Same; Same; View that Section 135 of the National Internal
Revenue Code (NIRC) is not a refund provision as it does not
provide for a tax refund in favor of the buyers, i.e., international
carriers and tax-exempt entities, and the sellers of petroleum
products.—Notably, Section 135 of the NIRC is not a refund
provision as it does not provide for a tax refund in favor of the
buyers, i.e., international carriers and tax-exempt entities, and the
sellers of petroleum products. Thus, there is no legal basis to grant
petitioner’s claim for tax refund or credit. Besides, if the lawmakers
intended to allow manufacturers, sellers, and importers to claim a
refund of excise taxes paid on petroleum products sold to
international carriers and tax-exempt entities under Section 135 of
the NIRC, they would have expressly provided for it, just like in
Section 130(D) of the same Code, which categorically allows the
refund or credit of excise taxes paid on goods which are locally
produced or manufactured and subsequently exported. Obviously,
the absence of a tax refund provision in the NIRC in favor of these
manufacturers, sellers, and importers of petroleum products only
proves that the lawmakers never intended to grant such kind of
refund. In addition, since the excise taxes on the petroleum
products were paid pursuant to the NIRC, in this case, Section
131(A) of the NIRC, these cannot be considered as illegally or
erroneously collected taxes. Thus, a claim for tax refund under
Section 229 of the NIRC will also not prosper.
Same; Tax Exemption; View that neither can Section 135 of the
National Internal Revenue Code (NIRC) be construed as a tax
exemption in favor of manufacturers, sellers, and importers, which
would allow them to claim a refund or credit of the excise taxes
paid on the petroleum products sold to international carriers and
tax-exempt entities.—Neither can Section 135 of the NIRC be
construed as a tax exemption in favor of manufacturers, sellers,
and importers, which would allow them to claim a refund or credit
of the excise taxes paid on the petroleum products sold to
international carriers and tax-exempt entities. In fact, a simple
reading of the provision clearly shows that it is a tax exemption in
favor of the buyers, the international carriers and tax-exempt
entities under Section 135 of the NIRC. And as the Court in its April
25, 2012 Decision in Commissioner of Internal Revenue v. Pilipinas
Shell Petroleum Corporation, 671 SCRA 241, has previously said,
“the tax exemption being enjoyed by the buyer cannot be the basis
of a claim for exemption by the manufacturer, seller, or importer.”
Thus, petitioner cannot use this provision to claim an exemption
from the payment of excise tax.
Same; Same; Excise Taxes; Petroleum Products; View that
pursuant to Section 135 of the National Internal Revenue Code
(NIRC), manufacturers, sellers, and importers have no choice but
to shoulder the burden of the excise tax as their buyers, the
international carriers and the tax-exempt entities under the said
provision, are exempt from paying excise tax on petroleum
products.—While Section 135 of the NIRC is construed as a tax
exemption in favor of the buyers, we have consistently ruled that
they are not entitled to a refund or credit of the excise taxes paid
on the petroleum products because they are not the statutory
taxpayers. If so, how could the international carriers and the tax-
exempt entities under Section 135 of the NIRC, as buyers, benefit
from such exemption? The answer is simple. Section 135 of the
NIRC exempts them from paying excise taxes passed on by
manufacturers, sellers, and importers to buyers of petroleum
products. An excise tax, as we have often said, is an indirect tax
wherein the tax liability falls on one person but the burden thereof
can be shifted or passed on to another person, such as the
consumer. Thus, pursuant to Section 135 of the NIRC,
manufacturers, sellers, and importers have no choice but to
shoulder the burden of the excise tax as their buyers, the
international carriers and the tax-exempt entities under the said
provision, are exempt from paying excise tax on petroleum
products.
Same; Same; Same; Same; View that Section 135 of the National
Internal Revenue Code (NIRC) should simply be construed as
prohibition on the shifting or passing on of the burden of excise tax
to international carriers and tax-exempt entities, which purchase
petroleum products from manufacturers, sellers, and importers.—
As I see it then, Section 135 of the NIRC should simply be
construed as prohibition on the shifting or passing on of the burden
of excise tax to international carriers and tax-exempt entities,
which purchase petroleum products from manufacturers, sellers,
and importers. As aptly explained in the Decision dated April 25,
2012 in Pilipinas Shell, Section 135 of the NIRC merely allows
international carriers or, in this case, tax-exempt entities, to
purchase petroleum products without the excise tax component as
an added cost in the price fixed by the manufacturers, sellers, or
importers. In other words, while generally excise taxes paid by
manufacturers, sellers, and importers may be shifted or passed on
to their buyers, Section 135 of the NIRC provides for an exception
as it prohibits manufacturers, sellers, and importers from shifting
or passing on the excise taxes they paid on the petroleum products
sold to international carriers and tax-exempt entities under the
said provision.
Statutory Construction; View that interpretations placed upon a
statute by the executive officers, whose duty is to enforce it, are
not conclusive and will be ignored if judicially found to be
erroneous as the courts will not countenance administrative
issuances that override, instead of remaining consistent and in
harmony with, the law they seek to apply and implement.—As to
the RMO and BIR Rulings cited by petitioner, the Court is not
bound by these administrative interpretations or rulings. As we
have consistently ruled, interpretations placed upon a statute by
the executive officers, whose duty is to enforce it, are not
conclusive and will be ignored if judicially found to be erroneous as
the courts will not countenance administrative issuances that
override, instead of remaining consistent and in harmony with, the
law they seek to apply and implement.
Taxation; Excise Taxes; Tax Refunds; Tax Credit; Petroleum
Products; View that manufacturers, sellers, and importers are not
entitled to claim a refund or credit of excise taxes paid on
petroleum products sold to international carriers and tax-exempt
entities under Section 135 of the National Internal Revenue Code
(NIRC).—All told, I find that the CTA in this case, did not err in
denying petitioner’s claim for tax refund or credit. To be clear,
Section 135 of the NIRC, upon which petitioner anchors its claim, is
not a tax refund provision nor is it a tax exemption in favor of
manufacturers, sellers, and importers of petroleum products.
Rather, it is a tax exemption for excise tax on petroleum products
in favor of the international carriers and the tax-exempt entities
under the said provision. It is a prohibition preventing
manufacturers, sellers, and importers from shifting or passing on
the excise taxes paid on the petroleum products they sold to their
buyers, the entities enumerated in the said provision. In view of
the foregoing, I submit that the doctrine laid down in the
Resolution dated February 19, 2014 in Pilipinas Shell should be
abandoned. It is my opinion that manufacturers, sellers, and
importers are not entitled to claim a refund or credit of excise
taxes paid on petroleum products sold to international carriers and
tax-exempt entities under Section 135 of the NIRC. Chevron
Philippines, Inc. vs. Commissioner of Internal Revenue, 768
SCRA 414, G.R. No. 210836 September 1, 2015