Professional Documents
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Respondent CIR denied the request. As such, respondent held, donor's tax
became imposable on the price difference pursuant to Sec. 100 of the NIRC.
The case was elevated to CA and it was dismissed due to lack of jurisdiction,
then the case was elevated to SC.
SC affirmed that the case must be elavated to CTA and not to CA, but it
discussed the issue on donor's tax.
Issue: WON the price difference in the adverted sale of shares in PhilamCare
attracts donor's tax.
Lourdes College
versus Commissioner of Internal Revenue
CTA EB No. 1164. February 2, 2016
En Banc, Ringpis-Liban, J.
Aggrived, petitioner filed before the Court En Banc for petition for review.
Petitioner argues that the amount paid by the School to the Congrogation for
the services rendered by the 10 sisters were actually paid by the School to the
Congregation, since the sisters are not allowed to receive income under their
vow of poverty. Hence the amount paid was not a donation but an income of
the corporation.
Issue: WON petitioner can invoke the exemption from payment of donor's tax.
Held: No. This Court agrees with the findings of the Court in Division that
petitioner cannot invoke exemption from payment of donor's tax since
petitioner failed to prove that the amount of P2,326,01 0.52 paid by petitioner
to the Congregation is considered as income of the latter.
As correctly ruled by the Court in Division in the Assailed Resolution:
"Notwithstanding the admission of petitioner that the
payment was made for the services rendered by the ten sisters, it
should have presented documents such as withholding certificate
for compensation, SSS remittance forms or any similar
documents, that would prove that the amount of P2,316,010.52,
represents petitioner's payment to the Congregation for the
services rendered. Without any supporting documents, this Court
cannot determine the intent of petitioner as to the sum of money
given to the Congregation. Considering so, petitioner cannot
invoke its exemption from donor's tax pursuant to Section
101 (A) (3) of the 1997 Tax Code; particularly, whether or not
more than thirty percent (30%) of said gifts is used by such donee
for administration purposes:
Petitioner received the FAN with attached Assessment Notice assessing and
demanding from the petitioner the payment of deficiency donor's tax relative to
the Capital Infusion Agreement of P16,467,534.25 and compromise penalty of
P50,000.00
Petitioner filed a protest letter stating that the sale of stocks were made without
donative intent and it was an arms length transaction; thus, it is not subject to
donor's tax.
Issue: WON the difference between the book value and selling price of the
shares sold is considered as a gift subject to donor's tax under Sec. 100 of the
NIRC
Held: Yes. Donor's tax is imposed upon the transfer by any person of the
property b~ gift as provided under Section 98 of the NIRC of 1997, as
amended. 9
While the NIRC of 1997, as amended, does not define transfer
· of property by gift, donation is defined in Article 725 of the Civil Code
as an act of liberality whereby a person disposes gratuitously of a
thing or right in favor of another, who accepts it. 50 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 <:>r animus donandi.
the Court
in Division ruled in favor of respondent, and granted the latter's
Petition for Review, ordering petitioner to refund in its favor the
amount of P57,829,600.50, representing erroneously paid donor's
tax. It found that the sale by respondent of the SLHCPI shares is not
subject to donor's tax, since the fair market value thereof did not
exceed the value of the consideration.
Facts: Respondent applied for and granted zero-rated status on its sale of gold
to Central Bank. BIR issued VAT Ruling which declared that "the sale of gold to
Central Bank is considered as export sale subject to zero-rate pursuant to Sec.
100 of the Tax Code. The BIR came out with at least 6 other issuances reiterating
the zero-rating of the sale of gold.
Relying on its zero-related status, respondent sold gold to the Central Bank and
entered into transactions that resulted in input VAT incurred in relation to the
subject sales of gold. It then filed applications for tax refunds/credits
corresponding to input VAT for the amounts of P46m, 19m, and 84m.
Respondent's application were either unacted upon or expressly disallowed by
petitioner.
1. In general, for purposes of the term "export sales" only direct export sales and
foreign currency denominated sales, shall be qualified for zero-rating.
....
4. Local sales of goods, which by fiction of law are considered export sales (e.g.,
the Export Duty Law considers sales of gold to the Central Bank of the
Philippines, as export sale). This transaction shall not be considered as export
sale for VAT purposes.
....
[A]ll Orders and Memoranda issued by this Office inconsistent herewith are
considered withdrawn, modified or superseded." (Emphasis supplied)
CTA dismissed the respondent's petitions noting that no prejudice had befallen
respondent by virtue of the retroactive application of BIR VAT Ruling No. 008-92,
and that, consequently, the application did not violate Sec. 246 of the NIRC.,
The CA reversed the decision and ordered the CIR to award tax credits to the
respondent.
Issue: WON the retroactive application was prejudicial to respondent and could
not be applied retroactively.
Held: Yes. At the time when the subject transactions were consummated, the
prevailing BIR regulations relied upon by respondent ordained that gold sales to
the Central Bank were zero-rated. The BIR interpreted Sec. 100 of the NIRC in
relation to Sec. 2 of E.O. No. 581 s. 1980 which prescribed that gold sold to the
Central Bank shall be considered export and therefore shall be subject to the
export and premium duties. In coming out with this interpretation, the BIR also
considered Sec. 169 of Central Bank Circular No. 960 which states that all sales
of gold to the Central Bank are considered
constructive exports.45 Respondent should not be faulted for relying on the BIR’s
interpretation of the said laws and regulations.46 While it is true, as petitioner
alleges, that government is not estopped from collecting taxes which remain
unpaid on account of the errors or mistakes of its agents and/or officials and
there could be no vested right arising from an erroneous interpretation of law,
these principles must give way to exceptions based on and in keeping with the
interest of justice and fairplay, as has been done in the instant matter. For, it is
primordial that every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith.
This Court is not unaware of the well-entrenched principle that the [g]overnment
is never estopped from collecting taxes because of mistakes or errors on the
part of its agents. But, like other principles of law, this also admits of exceptions in
the interest of justice and fairplay.
Respondent, in this case, has similarly been put on the receiving end of a grossly
unfair deal. Before respondent was entitled to tax refunds or credits based on
petitioner’s own issuances. Then suddenly, it found itself instead being made to
pay deficiency taxes with petitioner’s retroactive change in the VAT
categorization of respondent’s transactions with the Central Bank. This is the sort
of unjust treatment of a taxpayer which the law in Sec. 246 of the NIRC abhors
and forbids.
Facts: The two Houses of Congress passed the a law on E-VAT. On the day of its
effectivity, the Court issued a TRO.
Petitioners in this case filed petitions for certiorary and prohibitions stating that
the said law violates the provisions of the Constitution.
As a prelude, the Court deems it apt to restate the general principles and
concepts of value-added tax (VAT), as the confusion and inevitably, litigation,
breeds from a fallacious notion of its nature.
The VAT is a tax on spending or consumption. It is levied on the sale, barter,
exchange or lease of goods or properties and services.8 Being an indirect tax on
expenditure, the seller of goods or services may pass on the amount of tax paid
to the buyer,9 with the seller acting merely as a tax collector.10 The burden of
VAT is intended to fall on the immediate buyers and ultimately, the end-
consumers.
In contrast, a direct tax is a tax for which a taxpayer is directly liable on the
transaction or business it engages in, without transferring the burden to someone
else.11 Examples are individual and corporate income taxes, transfer taxes, and
residence taxes.12
In the Philippines, the value-added system of sales taxation has long been in
existence, albeit in a different mode. Prior to 1978, the system was a single-stage
tax computed under the "cost deduction method" and was payable only by the
original sellers. The single-stage system was subsequently modified, and a
mixture of the "cost deduction method" and "tax credit method" was used to
determine the value-added tax payable.13 Under the "tax credit method," an
entity can credit against or subtract from the VAT charged on its sales or outputs
the VAT paid on its purchases, inputs and imports.
Held. No.
Petitioners allege that the grant of the stand-by authority to the President to
increase the VAT rate is a virtual abdication by Congress of its exclusive power
to tax because such delegation is not within the purview of Section 28 (2),
Article VI of the Constitution, which provides:
The Congress may, by law, authorize the President to fix within specified limits,
and may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national
development program of the government.
Facts: The value-added tax (VAT) is levied on the sale, barter or exchange of
goods and properties as well as on the sale or exchange of services. It is
equivalent to 10% of the gross selling price or gross value in money of goods or
properties sold, bartered or exchanged or of the gross receipts from the sale or
exchange of services. Republic Act No. 7716 seeks to widen the tax base of the
existing VAT system and enhance its administration by amending the National
Internal Revenue Code.
These are various suits for certiorari and prohibition, challenging the
constitutionality of Republic Act No. 7716 on various grounds.
The Philippine Press Institute (PPI), petitioner in G.R. No. 115544, is a nonprofit
organization of newspaper publishers established for the improvement of
journalism in the Philippines. On the other hand, petitioner in G.R. No. 115781, the
Philippine Bible Society (PBS), is a nonprofit organization engaged in the printing
and distribution of bibles and other religious articles. Both petitioners claim
violations of their rights under § § 4 and 5 of the Bill of Rights as a result of the
enactment of the VAT Law.
The PPI questions the law insofar as it has withdrawn the exemption previously
granted to the press under § 103 (f) of the NIRC. Although the exemption was
subsequently restored by administrative regulation with respect to the
circulation income of newspapers, the PPI presses its claim because of the
possibility that the exemption may still be removed by mere revocation of the
regulation of the Secretary of Finance. On the other hand, the PBS goes so far as
to question the Secretary's power to grant exemption for two reasons: (1) The
Secretary of Finance has no power to grant tax exemption because this is
vested in Congress and requires for its exercise the vote of a majority of all its
members 26 and (2) the Secretary's duty is to execute the law.
§ 103 of the NIRC contains a list of transactions exempted from VAT. Among the
transactions previously granted exemption were:
Held: No. The law does not abridge freedom of speech, expression or the press,
nor interfere with the free exercise of religion, nor deny to any of the parties the
right to an education.
Facts: Petitioner filed with the BIR its VAT Return. It alleged that it likewise filed
with the BIR the corresponding application for the refund/credit of its input VAT
on its purchases of capital goods and on its zero-rated sales in the amount of
P26,030,460.00. When its application for refund/credit remained unsolved,
petitioner filed its Petition for Review with the CTA. CTA denied the on the
ground that at least 70% of sales of the firm must consist of exports for zero-rating
to apply.
Petitioner contends that CTA failed to consider the sales to PASAR and Philphos
within EPZA as zero-rated export sales, and that the claim has not yet
prescribed.
ISSUE: WON the petitioner sufficiently establish the factual bases for its
applications for refund/credit of input VAT
HELD: No. The Court ruled that the petitioner corporation has failed to establish
the factual bases.
Although the Court agreed with the petitioner corporation that the two-year
prescriptive period for the filing of claims for refund/credit of input VAT must be
counted from the date of filing of the quarterly VAT return, and that sales to
PASAR and PHILPOS inside the EPZA are taxed as exports because these export
processing zones are to be managed as a separate customs territory from the
rest of the Philippines, and thus, for tax purposes, are effectively considered as
foreign territory, it still denies the claims of petitioner corporation for refund of its
input VAT on its purchases of capital goods and effectively zero-rated sales
during the period claimed for not being established and substantiated by
appropriate and sufficient evidence.
[respondent] filed with the BIR a letter-request for the refund of its 1997 excess
input taxes in the amount of ₱3,751,067.04, which amount was arrived at after
deducting from its total input VAT paid of ₱3,763,060.43 its applied output VAT
liabilities only for the third and fourth quarters of 1997 amounting to ₱5,193.66
and ₱6,799.43, respectively.
CA reversed the ruling of the CTA and ordered the petitioner to refuld to
respondent the amount of 3.3m representing the latter's excess input VAT paid
for the year 1997.
Held. Yes. The law is very clear. 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.
As a general rule, the value-added tax (VAT) system uses the destination
principle. However, our VAT law itself provides for a clear exception, under
which the supply of service shall be zero-rated when the following requirements
are met: (1) the service is performed in the Philippines; (2) the service falls under
any of the categories provided in Section 102(b) of the Tax Code; and (3) it is
paid for in acceptable foreign currency that is accounted for in accordance
with the regulations of the Bangko Sentral ng Pilipinas. Since respondent’s
services meet these requirements, they are zero-rated. Petitioner’s Revenue
Regulations that alter or revoke the above requirements are ultra vires and
invalid.