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from the VAT charged on its sales or outputs the VAT it paid on its purchases, inputs
and imports.
VALUE-ADDED TAX
* VAT is a percentage tax. There is a percentage fixed by law which will be applied to
the gross selling price in order to arrive to the VAT to be paid.
For example, when a seller charges VAT on its sale, it issues an invoice to the
buyer, indicating the amount of VAT he charged.
For his part, if the buyer is also a seller subjected to the payment of VAT on his
sales, he can use the invoice issued to him by his supplier to get a reduction of
his own VAT liability.
The difference in tax shown on invoices passed and invoices received is the tax
paid to the government.
In case the tax on invoices received exceeds that on invoices passed, a tax
refund may be claimed.
Viewed broadly, the VAT is a uniform tax ranging, at present, from 0 percent to 12%
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.
The case of CIR v. Benguet Corporation defined input tax and output tax.
Input tax
Output tax
Input VAT or input tax represents the When that person or entity sells his/its
actual payments, costs and expenses products or services, the VAT-registered
incurred by a VAT-registered taxpayer in taxpayer generally becomes liable for
connection with his purchase of goods 12% of the selling price as output VAT or
and services
output tax.
Hence, "output tax" is the value-added
Thus, "input tax" means the value- tax on the sale of taxable goods or
added tax paid by a VAT-registered services by any person registered or
person/entity in the course of his/its required to register under Section 107
trade or business on the importation of the (old) Tax Code.
of goods or local purchases of goods
or services from a VAT-registered
person
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.
Situations that may arise: (General Principles)
1.
2.
3.
4.
If at the end of a taxable quarter the output taxes charged by a seller are
equal to the input taxes passed on by the suppliers, no payment is
required.
If at the end of a taxable quarter, the output taxes exceed the input taxes,
the excess has to be paid by the seller.
If the input taxes exceed the output taxes, the excess shall be carried over to the
succeeding quarter or quarters
If the input taxes result from zero-rated or effectively zero-rated transactions
or from acquisition of capital goods any excess over the output taxes shall
be refunded to the taxpayer or credited against other internal revenue taxes.
Under the VAT method of taxation, which is invoice-based, an entity can subtract
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The phrase 'in the course of trade or business' means the regular conduct or pursuit of a
commercial or an economic activity, including transactions incidental thereto, by any person
regardless of whether or not the person engaged therein is a non-stock, nonp-rofit private
organization (irrespective of the disposition of its net income and whether or not it sells
exclusively to members or their guests), or government entity.
The rule of regularity, to the contrary notwithstanding, services as defined in this Code
rendered in the Philippines by nonresident foreign persons shall be considered as being course
of trade or business.
Q: UNDER 1ST PARAGRAPH OF SEC 105, WHAT ARE THE VAT-ABLE TRANSACTIONS?
[SALE, IMPORTATION AND SERVICES]
-In this case, Y will pay for/ultimately be liable for the vat of 6,000 on the sale because
the output tax is greater than the input tax. (see 2nd situation in first page)
1.
2.
3.
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4.
Q: UNDER PAR 2, VAT IS AN INDIRECT TAX. DISTINGUISH BETWEEN LIABILITY FOR THE TAX
AND BURDEN OF THE TAX.
* The case of Contex Corporation v. CIR made a distinction between the two
concepts. It provided [[Contex Corporation v. CIR, GR No. 151135, 2 July 2004.]
At this juncture, it must be stressed that the VAT is an indirect tax. As such, the
amount of tax paid on the goods, properties or services bought, transferred, or leased
may be shifted or passed on by the seller, transferor, or lessor to the buyer,
transferee or lessee.
Unlike a direct tax, such as the income tax, which primarily taxes an individuals ability
to pay based on his income or net wealth, an indirect tax, such as the VAT, is a tax
on consumption of goods, services, or certain transactions involving the same.
The VAT, thus, forms a substantial portion of consumer expenditures.
Further, in indirect taxation, there is a need to distinguish between the liability for
the tax and the burden of the tax.
As earlier pointed out, the amount of tax paid may be shifted or passed on by the
seller to the buyer.
o What is transferred in such instances is not the liability for the tax,
but the tax burden.
o In adding or including the VAT due to the selling price, the seller remains
the person primarily and legally liable for the payment of the tax. What is
shifted only to the intermediate buyer and ultimately to the final
purchaser is the burden of the tax.
That the sale of the vessels was not in the ordinary course of trade or business of
NDC was appreciated by both the CTA and the Court of Appeals, the latter doing so
even in its first decision which it eventually reconsidered. We cite with approval the
CTAs explanation on this point:
In Imperial v. Collector of Internal Revenue, G.R. No. L-7924, September 30, 1955
(97 Phil. 992), the term "carrying on business" does not mean the performance of a
single disconnected act, but means conducting, prosecuting and continuing business
by performing progressively all the acts normally incident thereof; while "doing
business" conveys the idea of business being done, not from time to time, but all the
time.
"Course of business" is what is usually done in the management of trade or
business.
What is clear therefore, based on the aforecited jurisprudence, is that "course of
business" or "doing business" connotes regularity of activity. In the instant case, the
sale was an isolated transaction. The sale which was involuntary and made
pursuant to the declared policy of Government for privatization could no longer
be repeated or carried on with regularity. It should be emphasized that the normal
VAT-registered activity of NDC is leasing personal property.
This finding is confirmed by the Revised Charte of the NDC which bears no indication
that the NDC was created for the primary purpose of selling real property.
The conclusion that the sale was not in the course of trade or business, which the CIR
does not dispute before this Court should have definitively settled the matter. Any
sale, barter or exchange of goods or services not in the course of trade or
business is not subject to VAT.
The decision contained an explanation of VAT, to wit:
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SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter
or exchange of goods or properties, value-added tax equivalent to twelve percent (12%) of the
gross selling price or gross value in money of the goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor.
(1) The term 'goods' or 'properties' shall mean all tangible and intangible objects which
are capable of pecuniary estimation and shall include:
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(a) Real properties held primarily for sale to customers or held for lease in the ordinary course
of trade or business;
(b) The right or the privilege to use patent, copyright, design or model, plan, secret formula or
process, goodwill, trademark, trade brand or other like property or right;
(2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a
resident local export-oriented enterprise to be used in manufacturing, processing, packing or
repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP);
(c) The right or the privilege to use in the Philippines of any industrial, commercial or
scientific equipment;
(3) Sale of raw materials or packaging materials to export-oriented enterprise whose export
sales exceed seventy percent (70%) of total annual production;
(d) The right or the privilege to use motion picture films, tapes and discs; and
(5) Those considered export sales under Executive Order NO. 226, otherwise known as the
Omnibus Investment Code of 1987, and other special laws.
The term 'gross selling price' means the total amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in consideration of the sale , barter or
exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, on
such goods or properties shall form part of the gross selling price.
Q: WHAT IS A SALE OF GOODS OR PROPERTIES?
* In CIR v. Sony Philippines, Inc., Sony Philippines engaged the services of several
advertising companies.
Due to Sony Philippines dire economic conditions, Sony International Singapore
handed Sony Philippines a dole-out to answer for the expenses payable to the
advertising companies. Sony Philippines was thereafter assessed deficiency VAT for
the transaction, i.e., dole-out, between Sony International Singapore and Sony
Philippines. The Supreme Court ruled that the dole-out or subsidy from the
Singaporean company to the Philippine company neither constituted a sale of
goods or properties, nor a sale of services. Hence, Sony Philippines was not liable
to pay VAT on the same.
[CIR v. Sony Philippines, Inc., GR No. 178697, 17 Nov. 2010.]
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In transactions taxed at a 12% rate (VAT rating), when at the end of any given
taxable quarter the output VAT exceeds the input VAT, the excess shall be paid to
the government; when the input VAT exceeds the output VAT, the excess would
be carried over to VAT liabilities for the succeeding quarter or quarters.
On the other hand, transactions which are taxed at zero-rate do not result in
any output tax. Input VAT attributable to zero-rated sales could be refunded or
credited against other internal revenue taxes at the option of the taxpayer.
Exemptions from VAT are granted by express provision of the Tax Code or special
laws. Under VAT, the transaction can have preferential treatment in the following
ways:
Vat Exempt Sales (Vat-Exempt)
Simply put, the VAT is removed at the
exempt stage (e.g. point of the sale,
barter, etc)
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Zero-Rated
Zero-rated transactions generally refer
to the export sale of goods and supply of
services.
Effectively Zero-Rated
Effectively zero-rated transactions
refer to the sale of goods or supply of
services to persons or entities whose
exemption under special laws or
international agreements to which the
Philippines is a signatory effectively
actual export of goods and services from the Philippines to a foreign country
must be free of VAT;
On the other hand, those destined for use or consumption within the Philippines
shall be imposed with ten percent (10%) [now 12%] VAT.
Additionally, sales made by an enterprise within a non-ECOZONE territory, i.e.,
Customs Territory, to an enterprise within an ECOZONE territory shall be free of
VAT.
[CIR v. Toshiba Information Equipment (Phils.), Inc., GR No. 150154, 9 Aug. 2005.]
Q: Give examples of export sales in the form of actual shipment of goods from
the Philippines to a foreign country.
* Toshiba Information Equipment (Phils.), Inc. v. CIR is a claim for tax refund/credit of
alleged unutilized input VAT on local purchases of goods and services which are
attributable to export sales for the first and second quarters of 1997. [NOTE: This is
different from the Toshiba Case previously cited.]
In the case at bar, the CIR, in the Joint Stipulation of Facts and Issues, admitted that
Toshiba was a registered VAT entity and that it was subject to 0% VAT on its
export sales. Later, in his Motion for Reconsideration of the adverse Court of Tax
Appeals decision, the CIR would argue that Toshiba was not entitled to its claim
for tax refund/credit because it was VAT-exempt and its export sales were VATexempt transactions (CIR argued this way because if the export sales were VAT
exempt, then it would be entitled to claim any credit from input tax)
The Supreme Court ruled that Toshiba was a registered VAT entity and its export
sales were subject to 0% VAT.
Note: Remember, 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 purchases of goods, properties or services related to such zero-rated sale shall
be available as tax credit or refund in accordance with these regulations
[Toshiba Information Equipment (Phils.), Inc. v. CIR, GR No. 157594, 9 Mar. 2010.]
The case of Intel Technology Philippines, Inc. v. CIR is a claim for tax refund/credit of
alleged unutilized input VAT on local purchases of goods and services which are
attributable to export sales for the second quarter of 1998.
To prove that it was engaged in the sale and actual shipment of goods from the
Philippines to a foreign country and therefore entitled to tax credit of input VAT,
Intel Technology presented documentary evidence such as summary of export
sales, sales invoices, official receipts, airway bills, and export declarations.
And, to prove that payment was made in acceptable foreign currency or its
equivalent in goods or services, and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP), a certification of
inward remittances was presented by Intel Technology
The Supreme Court found that Intel Technologys evidence sufficiently
established that it was engaged in export sales.
Note: Based on Sec 106, export sales, or sales outside the Philippines, are subject to
VAT at 0% rate if made by a VAT-registered person. When applied to the tax base,
the 0% rate obviously results in no tax chargeable against the purchaser. The seller
of such transactions charges no output tax, but can claim a refund or tax credit
certificate for the VAT previously charged by suppliers.
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Additionally, Under Sections 106 (A)(2)(a)(1) in relation to 112(A) of the Tax Code, a
taxpayer engaged in zero-rated or effectively zero-rated transactions may apply for a
refund or issuance of a tax credit certificate for input taxes paid attributable to such
sales upon complying with the following requisites: (1) the taxpayer is engaged in
sales which are zero-rated (like export sales) or effectively zero-rated; (2) the
taxpayer is VAT-registered; (3) the claim must be filed within two years after the close
of the taxable quarter when such sales were made; (4) the creditable input tax due or
paid must be attributable to such sales, except the transitional input tax, to the extent
that such input tax has not been applied against the output tax; and (5) in case of
zero-rated sales under Section 106(A)(2)(a)(1) and (2), Section 106(B), and Section
108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had
been duly accounted for in accordance with BSP rules and regulations. It is added
that, "where the taxpayer is engaged in zero-rated or effectively zero-rated sale and
also in taxable or exempt sale of goods or properties or services, and the amount of
creditable input tax due or paid cannot be directly or entirely attributed to any one of
the transactions, it shall be allocated proportionately on the basis of the volume of the
sales
[Intel Technology Philippines, Inc. v. CIR, GR No. 166732, 27 Apr. 2007.]
phrase 'foreign
currency denominated sale' means sale to a nonresident of goods, except those mentioned
in Sections 149 and 150, assembled or manufactured in the Philippines for delivery to a
resident in the Philippines, paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
These are:
(1) transfer to shareholders/investors as share in the profits of a VAT-registered person/entity;
(2) transfer to creditors in payment of debt;
(3) consignment of goods, if actual sale is not made within 60 days following the date such
goods were consigned; and
(4) retirement from or cessation of business, with respect to inventories of taxable goods
existing as of such retirement or cessation.
Q: Give an example of a transaction deemed sale under this provision.
* In San Roque Power Corporation v. CIR, San Roque Power Corporation was
engaged in the supply of electricity to the National Power Corporation. Such sale
of service qualified as a zero-rated transaction under Section 108(B)(3) of the 1997
Tax Code.
A portion of SRPCs claim for tax refund/credit for alleged unutilized input VAT was
attributable to a sale of electricity to NPC that was made during the testing
period sometime in 2002, for which SRPC was paid an amount of Php 42.5 million.
The issue was whether such sale qualified for zero-rating. The Supreme Court held
that although the sale was not a commercial sale or in the normal course of
business, it was a transaction deemed sale under Section 106(B)(1) of the 1997 Tax
Code. It thus qualified for zero-rating.
[San Roque Power Corporation v. CIR, GR No. 180345, 25 Nov. 2009.]
106(C) Changes in or Cessation of Status of a VAT-Registered Person
106(D) Sales Returns, Allowances, and Sales Discounts
106(E) Authority of the Commissioner to Determine the Appropriate Tax Base
Sec. 107, Value-Added Tax on Importation of Goods
Q: Does VAT apply on every importation of goods?
* In explaining value-added tax, CIR v. Seagate Technology (Philippines)
stated that VAT shall be imposed on every importation of goods, whether or
not in the course of trade or business. This is unlike VAT on sale of goods or
properties which must be in the course of trade or business. Otherwise, the
person/transaction shall not be liable to pay VAT. Pertinent portion of the
decision read:
Viewed broadly, the VAT is a uniform tax ranging, at present, from 0 percent to
10 percent [now 12 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,
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Sec. 108, Value-Added Tax on Sale of Services and Use or Lease of Properties
108(A) Rate and Base of Tax
Q: What is a sale of services?
* In CIR v. Sony Philippines, Inc., Sony Philippines engaged the services of
several advertising companies. Due to Sony Philippines dire economic
conditions, Sony International Singapore handed Sony Philippines a dole-out
to answer for the expenses payable to the advertising companies. Sony
Philippines was thereafter assessed deficiency VAT for the transaction, i.e.,
dole-out, between Sony International Singapore and Sony Philippines. The
Supreme Court ruled that the dole-out or subsidy from the Singaporean
company to the Philippine company neither constituted a sale of goods or
properties, nor a sale of services. Hence, Sony Philippines was not liable to
pay VAT on the same.
[CIR v. Sony Philippines, Inc., GR No. 178697, 17 Nov. 2010.]
** Quezon City v. ABS-CBN Broadcasting Corporation dealt with VAT-able
sales of services of franchise grantees of electric utilities, telephone and
telegraph, radio and television broadcasting and all other franchise grantees
except those under Section 119 of this Code.
[NOTE: Section 119 of the Tax Code imposes a percentage tax, in the form of
a 3% franchise tax, on radio and television broadcasting companies whose
annual gross receipts do not exceed Php 10 million. Such franchise holders,
however, has the option of paying 3% franchise tax or 12% VAT. On the other
hand, radio and television broadcasting companies whose annual gross
receipts exceed Php 10 million are governed by Section 108 of the 1997 Tax
Code. They are liable to pay VAT, and do not have the option to choose
between paying franchise tax or VAT.]
ABS-CBN, being a broadcasting company with yearly gross receipts
exceeding Php 10 million, was found liable to pay VAT.
[Quezon City v. ABS-CBN Broadcasting Corporation, GR No. 166408, 6 Oct.
2008.]
*** Section 108 of the 1997 Tax Code defines sale of services as the
performance of all kinds of services in the Philippines for others for a fee,
remuneration or consideration, including supply of technical advice,
assistance or services rendered in connection with technical management or
administration of any scientific, industrial or commercial undertaking, venture,
project or scheme. In the case of CIR v. CA, COMASERCO was a non-stock
non-profit organization engaged in the sale of services of such nature.
However, COMASERCO argued that its sales of services were not subject to
VAT because although it charged a fee for such sales, the organization was
operating on a reimbursement-of-cost basis and hence, did not derive profit
from such sales. The Supreme Court held that any sale of services for a fee,
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DEAN LILY K. GRUBA
S/Y 2011-2012
**** Sale of services includes lease of motion picture films, films, tapes and
discs. In CIR v. SM Prime Holdings, Inc., SM Prime and First Asia were
engaged in the business of operating cinema houses. At issue was whether
cinema operators/proprietors were liable to pay VAT, on top of the amusement
tax imposed by the 1991 LGC. The Supreme Court conceded that the
enumeration of services subject to VAT under Section 108 of the 1997 Tax
Code was not exhaustive. However, lease of motion picture films, films, tapes
and discs did not equate to showing or exhibition of motion pictures or films.
SM Prime and First Asia were not liable to pay VAT.
[CIR v. SM Prime Holdings, Inc., GR No. 183505, 26 Feb. 2010.]
***** Sonza v. ABS-CBN Broadcasting Corporation differentiated between
services rendered pursuant to an employer-employee relationship and
services rendered by an independent contractor pursuant to a contractual
relationship. Subsumed under the latter, professionals such as talent and
television and radio broadcasters are liable to pay VAT.
[Sonza v. ABS-CBN Broadcasting Corporation, GR No.138051, 10 June 2004.]
108(B) Zero-Rated Sales of Services
Q: What is the destination principle? Are there exceptions to the rule?
* According to CIR v. American Express International, Inc.: 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. The
decision proceeded to define consumption as the use of a thing in a way
that thereby exhausts it. Applied to services, it means the performance or
successful completion of a contractual duty, usually resulting in the performers
release from any past or future liability.
Exceptions to the destination principle are found in Section 108(B) of the 1997
Tax Code. They are deemed exceptions because although the services are
performed in the Philippines, upon compliance with certain requirements, the
sales of such services are zero-rated.
[CIR v. American Express International, Inc. (Philippine Branch), GR No.
152609, 29 June 2005.]
108(B)(1) Processing, Manufacturing, or Repacking Goods for Other Persons
Doing Business outside the Philippines
108(B)(2) Services Other than Those Mentioned in the Preceding Paragraph
Q: Cite examples of services other than processing, manufacturing, or repacking of
goods.
8
ruled that SRPCs sale of service to NPC was zero-rated, pursuant to NPCs
charter and under Section 108(B)(3) of the 1997 Tax Code. It explained the
rationale for the effective zero-rating of NPC in this manner:
It bears emphasis that effective zero-rating is not intended as a benefit to the
person legally liable to pay the tax, such as petitioner, but to relieve certain
exempt entities, such as the NPC, from the burden of indirect tax so as to
encourage the development of particular industries. Before, as well as after,
the adoption of the VAT, certain special laws were enacted for the benefit of
various entities and international agreements were entered into by the
Philippines with foreign governments and institutions exempting sale of goods
or supply of services from indirect taxes at the level of their suppliers. Effective
zero-rating was intended to relieve the exempt entity from being burdened with
the indirect tax which is or which will be shifted to it had there been no
exemption. In this case, petitioner is being exempted from paying VAT on its
purchases to relieve NPC of the burden of additional costs that petitioner may
shift to NPC by adding to the cost of the electricity sold to the latter.
[San Roque Power Corporation v. CIR, GR No. 180345, 25 Nov. 2009.]
108(B)(4) Sale of Services to Persons Engaged in International Shipping or Air
Transport Operations
108(B)(5) Sale of Services for Export-Oriented Enterprise
108(B)(6) Transport of Passengers and Cargo by Air or Seal Vessels from the
Philippines to a Foreign Country
* Section 109(U) of the 1997 Tax Code provides that transactions involving
services rendered by banks, non-bank financial intermediaries performing
quasi-banking functions, and other non-bank financial intermediaries shall be
VAT-exempt. The case of First Planters Pawnshop, Inc. v. CIR pertained to a
taxable period prior to the adoption of the present wording of Section 109(U) of
the 1997 Tax Code. However, the decision is relevant in that it discussed the
tax treatment of a pawnshop business. The Supreme Court held that
pawnshops are non-bank financial intermediaries.
[First Planters Pawnshop, Inc. v. CIR, GR No. 174134, 30 July 2008.]
Sec. 110, Tax Credits
110(A) Creditable Input Tax
Q: Distinguish between input tax and output tax.
* The case of CIR v. Benguet Corporation defined input tax and output tax.
Input VAT or input tax represents the actual payments, costs and expenses
incurred by a VAT-registered taxpayer in connection with his purchase of
goods and services. Thus, "input tax" means the value-added tax paid by a
VAT-registered person/entity in the course of his/its trade or business on
the importation of goods or local purchases of goods or services from a
VAT-registered person.
On the other hand, when that person or entity sells his/its products or services,
the VAT-registered taxpayer generally becomes liable for 10% of the selling
price as output VAT or output tax. Hence, "output tax" is the value-added
tax on the sale of taxable goods or services by any person registered or
required to register under Section 107 of the (old) Tax Code.
The VAT system of taxation allows a VAT-registered taxpayer to recover its
input VAT either by (1) passing on the 10% output VAT on the gross selling
price or gross receipts, as the case may be, to its buyers, or (2) if the input tax
is attributable to the purchase of capital goods or to zero-rated sales, by filing
a claim for a refund or tax credit with the BIR.
Simply stated, a taxpayer subject to 10% output VAT on its sales of goods and
services may recover its input VAT costs by passing on said costs as output
VAT to its buyers of goods and services but it cannot claim the same as a
refund or tax credit, while a taxpayer subject to 0% on its sales of goods and
services may only recover its input VAT costs by filing a refund or tax credit
with the BIR.
[CIR v. Benguet Corporation, GR No. 145559, 14 July 2006.]
110(B) Excess Output or Input Tax
110(C) Determination of Creditable Input Tax
Sec. 111, Transitional/Presumptive Input Tax Credits
111(A) Transitional Input Tax Credits
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(6) the input taxes have not been applied against output taxes during and in
the succeeding quarters;
(7) the input taxes claimed are attributable to zero-rated or effectively zerorated sales;
(8) in certain types of zero-rated sales, the acceptable foreign currency
exchange proceeds thereof had been duly accounted for in accordance with
BSP rules and regulations [Sections 106(A)(2)(a)(1) and (2); Section 106(B);
Sections 108(B)(1) and (2)]; and
(9) where there are both zero-rated or effectively zero-rated sales and taxable
or exempt sales, and the input taxes cannot be directly and entirely attributable
to any of these sales, the input taxes shall be proportionately allocated on the
basis of sales volume.
[Intel Technology Philippines, Inc. v. CIR, GR No. 166732, 27 Apr. 2007; San
Roque Power Corporation v. CIR, GR No. 180345, 25 Nov. 2009.]
Q: In claims for VAT refund/credit, what is the reckoning point for the two-year
prescriptive period?
* In 2007, the Supreme Court promulgated its decision in Atlas Consolidated
Mining and Development Corporation v. CIR which essentially held that in
claims for VAT refund/credit, the prescriptive period for filing administrative and
judicial claims shall be two years reckoned from the date of filing of the VAT
quarterly return.
A year later, in the highly publicized case of CIR v. Mirant Pagbilao
Corporation, the Supreme Court changed its mind and ruled that the two-year
prescriptive period in claims for VAT refund/credit must be counted not from
the date of filing of the VAT quarterly return, but from the close of the taxable
quarter when the relevant sales were made.
[Atlas Consolidated Mining and Development Corporation v. CIR, GR Nos.
141104 & 148763, 8 June 2007; CIR v. Mirant Pagbilao Corporation, GR No.
172129, 12 Sept. 2008.]
*** On other hand, the case of Kepco Philippines Corporation v. CIR made a
distinction between a VAT invoice and a VAT receipt, such that only a VAT
invoice might be presented to substantiate a sale of goods or properties, while
only a VAT receipt could substantiate a sale of services. Pertinent portion of
the decision read:
In other words, the VAT invoice is the sellers best proof of the sale of the
goods or services to the buyer while the VAT receipt is the buyers best
evidence of the payment of goods or services received from the seller. Even
though VAT invoices and receipts are normally issued by the supplier/seller
alone, the said invoices and receipts, taken collectively, are necessary to
substantiate the actual amount or quantity of goods sold and their selling price
(proof of transaction), and the best means to prove the input VAT payments
(proof of payment). Hence, 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 v. CIR, GR No. 181858, 24 Nov. 2010.]
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