10/26/2011

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TAX UPDATES
SEMINAR
Atty. Nelson M. Aspe
Deputy Commissioner, Operations Group
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I. COURTS CASE
DIGESTS
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1. PERIOD TO FILE REFUND OF UNUTILIZED
INPUT VAT (ADMINISTRATIVE AND
JUDICIAL); RECKONING OF THE TWO-YEAR
PERIOD; COMPUTATION OF LEGAL PERIOD
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Reckoning of the Two-Year Prescriptive
Period (Section 112 of 1997 NIRC)
* Atlas Ruling
* Mirant Ruling
* Aichi Ruling
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ATLAS RULING
For practical reasons, the reckoning of the two-year
prescriptive period for filing a claim for refund of input
VAT on zero-rated sales is from the date of the filing of
the return and payment of tax due. Atlas Consolidated
Mining and Development Corporation vs. Commissioner
of Internal Revenue, G.R. Nos. 141104 & 148763, June 8,
2007, 524SCRA73.
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MIRANT RULING
The reckoning point of the two-year prescri pti ve peri od
commences from the close of the taxable quarter when the
relevant sales were made pertaining to the input VAT
regardless of whether said tax was paid or not. Sections 204
(C) and 229 of the 1997 NIRC cannot appl yi na clai m for refund
of excess input VAT on zero-rated sales consi dering that i t is
not a case of erroneous payment or illegal collection of taxes.
(Commissioner of I nternal Revenue vs. Mi rant Pagbilao
Corporati on, G.R. No. 172129, September 12, 2008, 565 SCRA
154.)
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AICHI RULING
Following the rul ing i n Mirant case, the reckoning of the two-year prescriptive
period shal l be f rom the close of the taxable quarter when the sales were
made. Secti on 112 (A) whi ch states wi thi n two (2) years xxx apply f or the
issuance of a tax credi t certif icate or ref und refers to appli cati ons for
refund/credi t fi led wi th the CIR and not to appeals made to the CTA. The 120-
30 day period under Section 112 ( D) is crucial in fi ling an appeal to the CTA.
Secti on 229 does not apply to ref unds/credits of unuti lized input VAT arising
from zero- rated sales. In computing legal periods, the Administrative Code of
1987 prevails over the Civil Code. ( Commissioner of Internal Revenue vs.
Aichi Forging Company of Asia, Inc. G.R. No. 184823, October 6, 2010.)
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CTA CASE
Following Aichi case, the CTA En Banc (5-3-1 vote) dismissed the
refund case for having been prematurely filed. (Administrative claim
was filed on December 30, 2003 while judicial claim was filed on
February 19, 2004). Three justices voted to grant the refund on the
ground that the failure to exhaust administrative remedy results only
to lack of cause of action which is waivable and is not jurisdictional.
One justice maintained that the two-year period applies both to
administrative and judicial claims and Mirant ruling should be applied
prospectively. CIR vs. Taganito Mining Corp., CTA EB No. 559, April 18,
2011; Resolution dated August 9, 2011.
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2. PERIOD TO FILE A CLAIM FOR REFUND OF
ERRONEOUSLY PAID ADVANCE VAT; SALE OF
SUGAR PRODUCE BY A COOPERATIVE TO ITS
MEMBERS AND NON-MEMBERS IS EXEMPT
FROM VAT; CTA HAS NO JURISDICTION TO
RULE ON THE VALIDITY OF A REVENUE
REGULATION
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A mul ti- purpose cooperative f iled a claim f or refund of al leged
erroneously paid advance VAT on the wi thdrawal of its refi ned sugar
produced. The cooperative assail ed the vali di ty of Revenue Regulati on 13-
2008 whi ch provi des f or instances where wi thdrawal of sugar f rom
refineries / mill s is exempt f rom advance VAT. The CTA di d not rule on the
validity of the revenue regulati on for lack of juri sdi cti on, nonethel ess,
allowed the partial ref und of the advance VAT upon showi ng the
cooperatives sale of sugar produce to its members and non-members is
exempt f rom VAT. Both the administrative and judicial clai ms were fi led
within two (2) years pursuant to Sections 204 and 229 of 1997 NIRC.
United Cadiz Sugar Farmers Association Multi- Purpose Cooperative vs.
Commissioner of Internal Revenue, CTA Case No. 7995, August 16, 2011.
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3.PERIOD TO FILE A CLAIM FOR REFUND OF
FINAL WITHHOLDING VAT, SECTIONS 204
(C) AND 229 OF THE NIRC FINDS
APPLICATION; SALE OF COAL BY A HOLDER
OF A COAL OPERATING CONTRACT IS
EXEMPT FROMVAT
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The sale of coal to National Power Corporation by a holder
of Coal Operating Contract (COC) is exempt from final withholding
VAT. RA 9337 neither expressly nor impliedly repealed PD 972. A
special lawsuch as PD 972 cannot be repealed, amended or altered
by subsequent general law by mere implication. The applicable
provisions are Sections 204 (c) and 229 of the NIRC of 1997 which
gives the taxpayer a period of two years from date of payment of
tax within which to file both its administrative and judicial claims for
refund. ( Semirara Mining Corporation vs. CIR, CTA Case No. 7867,
January 4, 2011, CTA First Division, consolidated cases of CTA Case
No. 7727 & 7783, February 10, 2011, CTASecond Division.)
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4. EXCESS CREDITABLE VAT WITHHELD
MAY BE REFUNDED AS ERRONEOUSLY
COLLECTED TAX; VAT WITHHELD UNDER
SECTION 114 IS NOW A FINAL VAT IN RA
9337
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The SC declared that the excess credi table VAT
wi thheld is refundable and may be treated as an
erroneousl y collected tax under Secti ons 204 (C) and onl y
to credi table VAT wi thheld under Section 114 of the NIRC
prior to i ts amendment because under RA 9337, the
amount wi thheld under Section 114 is now treated as a
final VAT whi ch is no longer under the creditable
wi thhol ding tax system. (CIR vs. Ironcon Buil ders and
Development Corp., G.R. No. 180042, February8, 2010.)
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5.PRINTING OF THE WORDS ZERO-RATED,
TIN- VAT IN THE INVOICE / RECEIPT IS
MANDATORY; FAILURE TO COMPLY WITH
THIS REQUIREMENT RESULTS IN THE
DISALLOWANCE OF CLAIM FOR INPUT VAT
REFUND
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The invoi cing requi rement set forth in Secti on 4.108-1
of RR 7-95, parti cularl y the printing of the word zero-rated
on invoi ces/recei pts, though not expressl y provi ded i n law,
was recogni zedas reasonable and in accord wi th the effi cient
collection of VAT. When RA 9337 took effect on November 1,
2005, i t incl uded the invoi cing requi rement under RR 7-95.
The conversion from regulation to law did not dimi nish the
bi ndi ng force of such regulati on wi th respect to acts
commi tted prior to the enactment of that law. ( Panasonic
Communi cation Imaging Corp. of the Phils. vs. CIR, G.R. No.
178090, February 8, 2010.)
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The absence of the word zero-rated
on the invoices / receipts is fatal to a claim
for credit / refund of input VAT. The
period involved in this refund refers to the
taxable quarters of 2000. (J.R.A.
Philippines, Inc. vs. CIR, G.R. No. 177127,
October 11, 2010 citing Panasonic case,
supra.)
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Non-compliance with the requirements
under Section 4.108-1 of RR 7-95 is fatal to the
claim for refund. Hitachi Global Storage
Technologies Phils. Corp. (formerly Hitachi
Computer Products (Asia) Corporation) vs. CIR,
G.R. No. 174212, October 20, 2010, citing
Panasoniccase, supra.
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The SC also denied Kepcos claim for failure to
comply with the substantiation requirements of RR
7-95 particularly the imprinting of the word TIN-
VAT in the invoices and receipts. SC reiterated that
Section 4, 108-1 of RR 7-95 neither expanded nor
supplanted the tax code but merely supplemented
what the tax code already defined and discussed.
Kepco Philippines Corporation vs. CIR, G.R. No.
181858, November 24, 2010.
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A VAT-registered taxpayer is requi red to compl y wi th
all the VAT i nvoi ci ng requi rements to be able to file a clai m
for input taxes on domesti c purchases for goods or servi ces
attributable to zero-rated sales. A VAT invoi ce is an
invoi ce that meets the requi rements of Secti on 4.108-1 of
RR 7-95. xxx [A]11 purchases covered by invoices other
than a VAT invoice shall not give rise to any input tax.
Mi crosofts invoi ce, lacki ng the word zero-rated, is not a
VAT i nvoi ce, and thus cannot gi ve rise to any input tax.
Microsoft Phili ppi nes, Inc. vs. Commissioner of Internal
Revenue, G.R. No. 180173, Apri l 6, 2011.
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6.NON-PRESENTATION OF THE
AUTHORITY TO PRINT (ATP) IS FATAL
TO A CLAIMFOR REFUND OF INPUT
VAT
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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. Silicon Philippines, Inc.
(Formerly Intel Phils. Manufacturing, Inc.) vs. CIR,
G.R. No. 172378, January 17, 2011.
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7. SALES INVOICE VIS A VIS
OFFICIAL RECEIPT
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The petition for refund of unutilized input VAT
for the taxable year 2002 was denied. There is a fine
distinction between a VAT invoice and a VAT official
receipt. VAT invoice and VAT receipt should not be
confused as referring to one and the same thing.
Certainly, neither does the law intend the two to be
used alternatively. (Kepco Philippines Corporation
vs. CIR, G.R. No. 181858, November 24, 2010, SC
SecondDivision.)
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8.CLAIM FOR REFUND MUST BE
FULLY SUBSTANTIATED; IT MUST
BE ACCOMPANIED BY VAT
RETURNS
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When claimi ng tax refund / credi t, the VAT-registered
taxpayer must be able to establish that i t does have
refundable or credi table input VAT, and the same has not
been applied against i ts output VAT liabilities the
informati on that supposed to be reflected in the taxpayers
VAT returns. Thus, an applicati on for tax refund / credi t must
be accompanied by copies of the taxpayers VAT return/s for
the taxable quarter/s concerned. ( Atlas Consoli dated Mini ng
and Development Corp. vs. CIR, G.R. No. 159471, January 26,
2011.)
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PeriodtoCLAIM; EXCEPTION
The instant case is one of the special circumstances
where the two (2)-year prescriptive period may be
suspended. On the other hand, the dissenting
opinion was primarily anchored on the claim of
right doctrine and emphasized that the two-year
prescriptive period applies regardless of any
supervening cause that may arise after payment
under Section 229 of the 1997 NIRC. Manila Electric
Company vs. CIR, CTA Case No. 7242, December 6,
2010.
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9. WITHDRAWAL OF AN
APPEAL RENDERS THE
ASSAILED DECISION FINAL
ANDEXECUTORY
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I n a tax refund case, when the taxpayer opted to file a
Moti on To Wi thdraw instead of compl ying wi th the courts
order to file a repl y during an appeal , peti tioner is deemed to
have accepted the decision of the CTA. And since the CTA had
al ready denied peti tioners request for the issuance of a tax
credi t certi fi cate in the amount of P32,170,409 for
insuffi ciency of evidence, i t may no longer be incl uded in
peti tioners future claims. When an appeal is wi thdrawn,
the assailed decision becomes final and executory. ( Central
Luzon Drug Corp. vs. CIR, G.R. No. 181371, Resol ution dated
March 2, 2011.)
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10. PAN IS PART OF DUE
PROCESS; ABSENCE OF PAN
RENDERS NUGATORY ANY
ASSESSMENT; VOID
ASSESSMENT BEARS NO
FRUIT
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The sending of PAN under Section
228 of the 1997 NIRC is a substantive
requirement and not merely a formal
requirement; that PAN is part of the
due process requirement in the
issuance of a deficiency tax assessment
and the absence of which renders
nugatory any assessment made by tax
authorities.
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Thus, for its failure to send the
PAN stating the facts and the law on
which the assessment was made as
required by Section 228 of R.A. No.
8424, the assessment made by the
CIR is void. ( CIR vs. Metro Star
Superama, Inc., G.R. No. 185371,
December 8, 2010.)
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THANK YOU THANK YOU THANK YOU THANK YOU
And And And And
Have a Blessed Day! Have a Blessed Day! Have a Blessed Day! Have a Blessed Day!
nelson.aspe@bir.gov.ph
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