Tax 2 Week 2 Digests

VALUE ADDED TAX
NATURE, CHARACTERISTICS AND PURPOSE OF VAT

1. Tolentino v Sec Finance GR 115455 LIM
DOCTRINES:
E-VAT is NOT a license tax.
It is fully compliant with the requisites of a valid tax law (Enforced contribution of money
proportionate in character levied against persons, property, or the exercise of a right, by the law
making body of the State who has jurisdiction over them in the name of some public purpose)
The transactions which are subject to the VAT are those which involve goods and services
which are used or availed of mainly by higher income groups.
FACTS:
This is a consolidated case concerning the validity of RA 7716, also known as the E-VAT.
The issues relating to Tax 2 are found in the alleged violation of press and religious freedom of
the Philippine Press Institute and Philippine Bible Society (respectively) and the alleged
violations of the due process, equal protection and contract clauses and the rule on taxation
raised by CREBA.
The first issue tackles the matter of the nature of the E-VAT while the second takes on the
matter of its characteristics and purpose.
ISSUES:
W/N RA 7716 violates the right to freedom of religion by imposing a tax on the Philippine Bible
Society.
W/N RA 7716 violates due process, equal protection, contract clauses, and the rule on taxation
HELD: (No on both counts.
On the FIRST issue:
Now it is contended by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press. At any rate, it is
averred, "even nondiscriminatory taxation of constitutionally guaranteed freedom is
unconstitutional."
With respect to the first contention, it would suffice to say that since the law granted the press a
privilege, the law could take back the privilege anytime without offense to the Constitution. The
reason is simple: by granting exemptions, the State does not forever waive the exercise of its
sovereign prerogative.
1 | Taxation Law 2 DP | Atty. Marissa Cabreros
Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden
to which other businesses have long ago been subject. It is thus different from the tax involved
in the cases invoked by the PPI. (All of whom had as issues taxes which were proven to have
censure as their primary purpose; not taxation.)
The PPI says that the discriminatory treatment of the press is highlighted by the fact that
transactions, which are profit oriented (They refer to exemptions from the VAT, such as those
previously granted to PAL, petroleum concessionaires, enterprises registered with the Export
Processing Zone Authority, and many more are likewise totally withdrawn, in addition to
exemptions which are partially withdrawn, in an effort to broaden the base of the tax), continue
to enjoy exemption under R.A. No. 7716. An enumeration of some of these transactions will
suffice to show that by and large this is not so and that the exemptions are granted for a
purpose. As the Solicitor General says, such exemptions are granted, in some cases, to
encourage agricultural production and, in other cases, for the personal benefit of the end-user
rather than for profit.
The PPI asserts that it does not really matter that the law does not discriminate against the
press because "even nondiscriminatory taxation on constitutionally guaranteed freedom is
unconstitutional." PPI cites in support of this assertion the following statement in Murdock v.
Pennsylvania where it was held that a license tax is invalid when levied upon rights protected by
the First Amendment (Freedom of Speech and Religion).
The court held that VAT is different. It is not a license tax. It is not a tax on the exercise of a
privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of
goods or properties or the sale or exchange of services and the lease of properties purely for
revenue purposes. To subject the press to its payment is not to burden the exercise of its right
any more than to make the press pay income tax or subject it to general regulation is not to
violate its freedom under the Constitution.
The Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from
the sales are used to subsidize the cost of printing copies which are given free to those who
cannot afford to pay so that to tax the sales would be to increase the price, while reducing the
volume of sale. Granting that to be the case, the resulting burden on the exercise of religious
freedom is so incidental as to make it difficult to differentiate it from any other economic
imposition that might make the right to disseminate religious doctrines costly. Otherwise, to
follow the petitioner's argument, to increase the tax on the sale of vestments would be to lay an
impermissible burden on the right of the preacher to make a sermon.
On the other hand the registration fee of P1,000.00 imposed by 107 of the NIRC, as amended
by 7 of R.A. No. 7716, although fixed in amount, is really just to pay for the expenses of
registration and enforcement of provisions such as those relating to accounting in 108 of the
NIRC. That the PBS distributes free bibles and therefore is not liable to pay the VAT does not
excuse it from the payment of this fee because it also sells some copies. At any rate whether
the PBS is liable for the VAT must be decided in concrete cases, in the event it is assessed this
tax by the Commissioner of Internal Revenue.
On the SECOND issue:
CREBA asserts that R.A. No. 7716 (E-VAT)
(1) Impairs the obligations of contracts, (Does not)
(2) Classifies transactions as covered or exempt without reasonable basis (Does not) and
(3) Violates the rule that taxes should be uniform and equitable and that Congress shall "evolve
a progressive system of taxation." (Does not)
(1) With respect to the first contention, it is claimed that the application of the tax to existing
contracts of the sale of real property by installment or on deferred payment basis would result in
substantial increases in the monthly amortizations to be paid because of the 10% VAT. The
additional amount, it is pointed out, is something that the buyer did not anticipate at the time he
entered into the contract.
The court held in earlier cases that:
"Authorities from numerous sources are cited by the plaintiffs, but none of them show that a
lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or
impairs its obligation, within the meaning of the Constitution. Even though such taxation may
affect particular contracts, as it may increase the debt of one person and lessen the security of
another, or may impose additional burdens upon one class and release the burdens of another,
still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs
the obligation of any existing contract in its true legal sense."
Indeed not only existing laws but also "the reservation of the essential attributes of
sovereignty, is . . . read into contracts as a postulate of the legal order."
Contracts must be understood as having been made in reference to the possible exercise
of the rightful authority of the government and no obligation of contract can extend to the defeat
of that authority.
(2) It is next pointed out that while 4 of R.A. No. 7716 exempts such transactions as the sale of
agricultural products, food items, petroleum, and medical and veterinary services, it grants no
exemption on the sale of real property which is equally essential. The sale of real property for
socialized and low-cost housing is exempted from the tax, but CREBA claims that real estate
transactions of "the less poor," i.e., the middle class, who are equally homeless, should likewise
be exempted.
The sale of food items, petroleum, medical and veterinary services, etc., which are essential
goods and services was already exempt under 103, pars. (b) (d) (1) of the NIRC before the
enactment of R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716 granted
exemption to these transactions, while subjecting those of petitioner to the payment of the VAT.
Moreover, there is a difference between the "homeless poor" and the "homeless less poor" in
the example given by petitioner, because the second group or middle class can afford to rent
houses in the meantime that they cannot yet buy their own homes. The two social classes are
thus differently situated in life. "It is inherent in the power to tax that the State be free to select
the subjects of taxation, and it has been repeatedly held that 'inequalities which result from a
singling out of one particular class for taxation, or exemption infringe no constitutional
limitation.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio v. De Leon, 134
Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).
(3) Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art.
VI, 28(1) which provides that "The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation."
Equality and uniformity of taxation means that all taxable articles or kinds of property of the
same class be taxed at the same rate. The taxing power has the authority to make reasonable
and natural classifications for purposes of taxation. To satisfy this requirement it is enough that
the statute or ordinance applies equally to all persons, forms and corporations placed in similar
situation.
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted.
R.A. No. 7716 merely expands the base of the tax. The validity of the original VAT Law was
questioned in an earlier case on grounds similar to those made in these cases, namely, that the
law was "oppressive, discriminatory, unjust and regressive in violation of Art. VI, 28(1) of the
Constitution." (At 382) The court rejected this challenge to the law, by holding that:
EO 273 satisfies all the requirements of a valid tax. The sales tax adopted in EO 273 is applied
similarly on all goods and services sold to the public, which are not exempt, at the constant rate
of 0% or 10%.
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by
persons engaged in business with an aggregate gross annual sales exceeding P200,000.00.
Small corner sari-sari stores are consequently exempt from its application. Likewise exempt
from the tax are sales of farm and marine products, so that the costs of basic food and other
necessities, spared as they are from the incidence of the VAT, are expected to be relatively
lower and within the reach of the general public.
CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of
the Philippines, Inc. (CUP), while petitioner Juan T. David argues that the law contravenes the
mandate of Congress to provide for a progressive system of taxation because the law imposes
a flat rate of 10% and thus places the tax burden on all taxpayers without regard to their ability
to pay.
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are
regressive. What it simply provides is that Congress shall "evolve a progressive system of
taxation." The constitutional provision has been interpreted to mean simply that "direct taxes are
. . . to be preferred [and] as much as possible, indirect taxes should be minimized." Indeed, the
mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise,
sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited
with the proclamation of Art. VIII, 17(1) of the 1973 Constitution from which the present Art. VI,
28(1) was taken. Sales taxes are also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not
impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In
the case of the VAT, the law minimizes the regressive effects of this imposition by providing for
zero rating of certain transactions (R.A. No. 7716, 3, amending 102 (b) of the NIRC), while
granting exemptions to other transactions. (R.A. No. 7716, 4, amending 103 of the NIRC).
The transactions which are subject to the VAT are those which involve goods and services
which are used or availed of mainly by higher income groups. These include real properties held
primarily for sale to customers or for lease in the ordinary course of trade or business, the right
or privilege to use patent, copyright, and other similar property or right, the right or privilege to
use industrial, commercial or scientific equipment, motion picture films, tapes and discs, radio,
television, satellite transmission and cable television time, hotels, restaurants and similar
places, securities, lending investments, taxicabs, utility cars for rent, tourist buses, and other
common carriers, services of franchise grantees of telephone and telegraph.
2. Abakada Guro et, al. v Ermita, et. al. GR 168056 MANCIA

Doctrine:
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. Being an indirect tax on expenditure, the seller of goods or
services may pass on the amount of tax paid to the buyer, with the seller acting merely as a tax
collector.The burden of VAT is intended to fall on the immediate buyers and ultimately, the endconsumers.
FACTS:
ABAKADA GURO Party List et al filed a petition for prohibition questioning the constitutionality
of Section 4, 5, and 6 of RA 9337 amending Sections 106, 107, and 108 respectively of the
NIRC. These questioned provisions contain a uniform proviso authorizing the President upon
recommendation of the Secretary of Finance, to raise the VAT rate to 12% effective January 1,
2006 after certain conditions provided for in the law have been satisfied to wit:
(i) VAT collection as a percentage of GDP of the previous year exceeds 2 4/5 % or
(ii) National government deficit as a percentage of GDP of the previous year exceeds 1 %
Petitioners argue that the law is unconstitutional as it constitutes abandonment by Congress of
its exclusive authority to fix the rate of taxes under Article VI Section 28(2) of the 1987
Constitution. They contend that delegating to the President the legislative power to tax is
contrary to republicanism. They insist that accountability, responsibility, and transparency should
dictate the actions of Congress and they should not pass so the President the decision to
impose taxes. They also argue that the law also effectively nullified the Presidents power of
control, which includes the authority to set aside and nullify the acts of her subordinates like the
Secretary of Finance by mandating the fixing of the tax rate by the President upon the
recommendation of the Secretary of Finance.
Issues:
1.
Whether or not the authority granted to the President to increase the rate of VAT from
10% to 12% is unconstitutional
2.
Whether or not the contingent increase of the VAT rate a violation of due process as it
imposes an unfair and additional tax burden on the people.
3.
Whether or not the imposition of VAT contravene the rules of uniformity and equitability of
taxation provided for in the Constitution
4.
Whether or not the imposition of a 70% limit on the amount of input tax to be credited
against the output tax militate against the Constitutional mandate prescribing a progressive
system of taxation
5.
Whether or not VAT violate the due process and equal protection clauses of the
Constitution
Held:
1.
No, because there is no delegation of legislative power involved in this case. There is but
simply a delegation of ascertainment of facts upon which enforcement and administration of the
increase rate under the law is contingent Congress does not abdicate its functions or unduly
delegate power when it describes what job must be done, who must do it and what us the scope
of his authority.
No discretion would be exercised by the President. Highlighting the absence of discretion is the
fact that the word shall is used in the common proviso. The use of the word shall connotes a
mandatory order. Its use in a statute denotes an imperative obligation and is inconsistent with
the idea of discretion.
When one speaks of the Sec of Finance as the alter ego of the President, it simply means that
as head of the Department of Finance he is the assistant and agent of the Chief Executive. The
acts of the secretaries of such departments such as the Department of Finance, performed and
promulgated in the regular course of business, are unless disapproved or reprobated by the
Chief Executive, presumptively the acts of the Chief Executive.
In the present case, in making his recommendation to the President on the existence of either of
the two conditions, the Sec of Finance is not acting as the alter ego of the President or even her
subordinate. In such instance, he is not subject to the power of control and direction of the
President. He is acting as the agent of the legislative department to determine and declare the
event upon which its expressed will is to take effect. The Secretary of Finance becomes the
means or tool by which legislative policy is determined and implemented considering that
possesses all the facilities to gather data and information and has much broader perspective to
properly evaluate them. His function is to gather and collate statistical date and other pertinent
information and verily if any of the two conditions laid out by Congress is present. His
personality in such instance is in reality but a projection if that of Congress. Thus being the
agent of congress and not of the President, the President cannot later or modify or nullify or set
aside the findings of the Sec of finance and to substitute the judgment of the former for that of
the latter.
Congress did not delegate the power to tax but the mere implement of the law. The intent and
will to increase the VAT rate to 12% came from Congress chose to do in such a manner is not
within the province if the Court to inquire into, its task being to interpret the law.
2.
No. it is not an unfair and additional tax burden on the people because Congress passed
the law hoping for rescue from an inevitable financial catastrophe. Whether the law is indeed
sufficient to answer the states economic dilemma is not for the Court to judge. Government
policy is within the exclusive dominion of the political branches of the government. It is not this
court to look into the wisdom or propriety of legislative determination.
The law clearly does not provide for a return to the 10% rate nor does it empower the President
to so revert if, after the rate is increased to 12%, the Vat collection foes below the 2 4/5 % of the
GDP of the previous year or that the national government deficit as a percentage of the GDP of
the previous year does not exceed 1 %. Therefore no statutory construction or interpretation is
needed. Neither can conditions or limitations be introduced where none is provided for. There is
no basis for petitioners feat of a fluctuating VAT rate because the law itself does not provide that
the rate should go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer
present. The rule is that where the provision of the law us clear and unambiguous.
3.
No. the law is uniform as it provides as a standard rate of 0% or 10% (or 12%) on all
goods and services. Section 4, 5, and 6 of RA No 9337, amending Sections 206, 207, 208,
respectively of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties,
importation of goods, and sale of services and use or lease of properties. These same sections
also provide for a 0% rate on certain sales and transactions.
Uniformity in taxation means that all taxable articles or kinds if property of the same class shall
be taxed at the same rate. Different articles may be taxed at different amounts provided that the
rate is uniform on the same class everywhere with all people at all times.
Neither does the law make any distinction as to the type of industry or trade that will bear the
70% limitation on the creditable input tax, 5 year amortization of input tax paid on purchase of
capital goods or the 5% withholding tax by the government. It must be stressed that the rule of
uniform taxation does not deprive Congress of the power to classify subjects of taxation and
only demands uniformity within the particular class.
RA No 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0%
or 10% (or 12%) does not apply to sales of goods or services with gross annual sales or
receipts not exceeding P1, 500,000. Also basic marine and agricultural food products in their
original state are still not subject to tax, thus ensuring that prices at the grassroots level will
remain accessible.
It is admitted that RA No 9337 puts a premium on business with low profit margins and unduly
favors those with high profit margins. Congress was not oblivious to this. Thus to equalize the
eighty burden the law entails, the law under Section 116 imposed a 3% percentage tax on VAT
exempt persons under Section 109 i.e. transactions with gross annual sales and/or receipts not
exceeding P1.5 Million. This acts as an equalizer because in effect, bugger business that qualify
for VAT coverage and VAT exempt taxpayers stand on equal footing. Moreover, congress
provided mitigating measures to cushion the impact of the imposition of the tax on those
previously exempt. Excise taxes on petroleum products and natural gas were reduced.
Percentage tax on domestic carriers was removed. Power producers are not exempt from
paying franchise tax.
Aside from these, Congress also increased the income tax rates of corporations in order to
distribute the burden of taxation. Domestic, foreign and non-resident corporations are now
subject to a 35% income tax rate, from a previous 32%. Inter-corporate dividends of nonresident foreign corporations are still subject to 15% final withholding tax but the tax credit
allowed on the corporations domicile was increased to 20%. The Philippine Amusement and
Gaming Corporation (PAGCOR) is not exempt from income taxes anymore. Even the sale by an
artist of his works or services performed for the production of such works was not spared.
All these were designed to ease, as well as spread out the burden of taxation, which would
otherwise rest largely on the consumers. It cannot therefore be gainsaid that RA 9337 is
equitable.
4.
No, because the Constitution does not really prohibit the imposition of indirect taxes, like
the VAT. What it simply provides is that Congress shall evolve a progressive system of taxation.
The constitutional provision has been interpreted to mean simply that direct taxes are to be
preferred and as much as possible indirect taxes should be minimized. Indeed, the mandate to
Congress is not to prescribe, but to evolve a progressive tax system.
The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle
of progressive taxation has no relation with the VAT system inasmuch the VAT paid by the
consumer or business for every goods bought or services enjoyed is the same regardless of
income. In other words, the VAT paid eats the same portion of an income whether big or small.
The disparity lied in the income earned by a person or profit margin marked by a business, such
that the higher the income or profit margin, the smaller the portion of the income or profit that is
eaten by VAT. The lower the income or profit margin, the bigger the part that the VAT eats away.
At the end of the day, it is really the lower income group or business with low profit margins that
is always hardest hit.
5.
No. There is no violation of due process in this case because input tax is not a property or
a property right within the constitutional purview of the due process clause. A VAT registered
persons entitlement to the creditable input tax is a mere statutory privilege. The distinction
between statutory privileges. The distinction between statutory privileges and vested rights must
be borne in mind for persons have no vested rights in statutory privileges. The state may
change or take away rights, which were created by the law of the state, although it may not take
away property, which was vested by virtue of such rights.
Neither is the equal protection clause impinged because the power of the State to make
reasonable and natural classifications for the purposes of taxation has long been established.
Whether it relates to the subject of taxation the kind of property, the rates to be levied or the
amounts to be raised the methods of assessment, valuation and collection the States power is
entitled to presumption of validity. As a rule, the judiciary will not interfere with such power
absent a clear showing of unreasonableness, discrimination or arbitrariness.
Equal protection does not require the universal application of the laws on all persons or things
without distinction. What the clauses requires is equally among equals as determined according
to a valid classification. By classification is meant the grouping of persons or things similar to
each other in certain particulars and different from all others in these same particulars.
PERSONS LIABLE: in the course of trade of business v isolated transaction v incidental to

the main line of business
1. CIR v Magsaysay Lines GR 146984 MORENO
DOCTRINE: In a case involving the sale of vessels, pursuant to the privatization efforts of the
government, by a GOCC engaged in the business of leasing out properties, the Supreme Court
held that the sale of goods not in the course of trade or business of the taxpayer is not subject
to VAT. The Supreme Court pointed out that under Section 99 (now Section 105) of the Tax
Code, the tax is levied only on the sale, barter or exchange of goods or services by persons
who engage in such activities, in the course of trade or business. Transactions undertaken
outside the course of trade or business may invariably contribute to the production chain, but
they do so only as a matter of accident or incident. As the sales of goods or services do not
occur within the course of trade or business, the providers of such goods or services would
hardly, if at all, have the opportunity to appropriately credit any VAT liability as against their own
accumulated VAT collections since the accumulation of output VAT arises in the first place only
through the ordinary course of trade or business.
FACTS: Pursuant to a government program of privatization, The National Development
Corporation (NDC) decided to sell in one lot its National Marine Corporation (NMC) shares and
five (5) of its ships, which are 3,700 DWT Tween-Decker, "Kloeckner" type vessels.
The vessels were constructed for the NDC between 1981and 1984, then initially leased to
Luzon Stevedoring Company, also its wholly-owned subsidiary. Subsequently, the vessels were
transferred and leased, on a bareboat basis, to the NMC.
The NMC shares and the vessels were offered for public bidding. Among the stipulated terms
and conditions for the public auction was that the winning bidder was to pay "a value added tax
of 10% on the value of the vessels."
On 3 June 1988, private respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy
the shares and the vessels for P168,000,000.00. The bid was made by Magsaysay Lines,
purportedly for a new company still to be formed composed of itself and was approved by the
Committee on Privatization, and a Notice of Award dated 1 July 1988 was issued to Magsaysay
Lines who in turn was assessed of VAT through VAT Ruling No.568-88 dated 14 December
1988 from the BIR, holding that the sale of the vessels was subject to the 10% VAT. The ruling
cited the fact that NDC was a VAT-registered enterprise, and thus its "transactions incident to its
normal VAT registered activity of leasing out personal property including sale of its own assets
that are movable, tangible objects which are appropriable or transferable are subject to the 10%
[VAT].CTA ruled that the sale of a vessel was an "isolated transaction," not done in the ordinary
course of NDCs business, and was thus not subject to VAT, which under Section 99 of the Tax
Code, was applied only to sales in the course of trade or business
The CTA further held that - the sale of the vessels could not be "deemed sale," and thus subject
to VAT, as the transaction did not fall under the enumeration of transactions deemed sale as
listed either in Section 100(b) of the Tax Code, or Section 4 of R.R. No. 5-87. Finally, the CTA
ruled that any case of doubt should be resolved in favor of private respondents since Section 99
of the Tax Code which implemented VAT is not an exemption provision, but a classification
provision which warranted the resolution of doubts in favor of the taxpayer. Hence CIR appealed
the CTA Decision.
ISSUE:
Whether the sale by the National Development Company (NDC) of five (5) of its vessels to the
private respondentsis subject to value-added tax (VAT) under the National Internal Revenue
Code of 1986 (Tax Code)then prevailing at the time of the sale. The facts are culled primarily
from the ruling of the CTA.
HELD:
NOT SUBJECT TO VAT.
VAT is ultimately a tax on consumption, even though it is assessed on many levels of
transactions on the basis of a fixed percentage.
It is the end user of consumer goods or services which ultimately shoulders the tax, as the
liability therefrom is passed on to the end users by the providers of these goods or services who
in turn may credit their own VAT liability (or input VAT)from the VAT payments they receive from
the final consumer (or output VAT).
The final purchase by the end consumer represents the final link in a production chain that itself
involves several transactions and several acts of consumption. The VAT system assures fiscal
adequacy through the collection of taxes on every level of consumption, yet assuages the
manufacturers or providers of goods and services by enabling them to pass on their respective
VAT liabilities to the next link of the chain until finally the end consumer shoulders the entire tax
liability. Yet VAT is not a singular-minded tax on every transactional level. Its assessment bears
direct relevance to the taxpayers role or link in the production chain. Hence, as affirmed by
Section 99 of the Tax Code and its subsequent incarnations, the tax is levied only on the sale,
barter or exchange of goods or services by persons who engage in such activities, in the course
of trade or business.
2. Mindanao II Geothermal Partnership v CIR GR 193301 SANTOS

DOCTRINE: x x x it does not follow that an isolated transaction cannot be an incidental
transaction for purposes of VAT liability. x x x Section 105 of the 1997 Tax Code would show that
a transaction "in the course of trade or business" includes "transactions incidental thereto."
FACTS: Mindanao II entered into a Built-Operate-Transfer (BOT) contract with the Philippine
National Oil Corporation Energy Development Company (PNOC-EDC) for operation and
maintenance of a geothermal power plant. Mindanao II shall convert the steam into electric
capacity and energy for PNOC-EDC and shall deliver the same to the National Power
Corporation (NPC) for and in behalf of PNOC-EDC.
Mindanao II alleges that its sale of generated power and delivery of electric capacity and energy
of Mindanao II to NPC for and in behalf of PNOC-EDC is its only revenue-generating activity
which is in the ambit of VAT zero-rated sales under the EPIRA Law. Hence, the amendment of
the NIRC of 1997 modified the VAT rate applicable to sales of generated power by generation
companies from ten (10%) percent to zero (0%) percent.
Pursuant to the provisions of the National Internal Revenue Code (NIRC), Mindanao II alleges
that it can use its accumulated input tax credits to offset its output tax liability.
Thus, on the belief that its sales qualify for VAT zero-rating, Mindanao II adopted the VAT zerorating of the EPIRA in computing for its VAT payable when it filed its Quarterly VAT Returns.
Considering that it has accumulated unutilized creditable input taxes from its only incomegenerating activity, Mindanao II filed an application for refund and/or issuance of tax credit
certificate with the BIR.
The CTA First Division found that Mindanao II is entitled to a refund in the amount of
P7,703,957.79, after disallowing P522,059.91 from input VAT and deducting P18,181.82 from
Mindanao IIs sale of a fully depreciated P200,000.00 Nissan Patrol. The input VAT on the sale
of the Nissan Patrol was reduced by P18,181.82 because the output VAT for the sale was not
included in the VAT declarations.
Mindanao II filed a motion for partial reconsideration. It stated that the sale of the fully
depreciated Nissan Patrol is a one-time transaction and is not incidental to its VAT zero-rated
operations. Moreover, the disallowed input taxes substantially complied with the requirements
for refund or tax credit.
The CTA First Division found that the records of Mindanao IIs case are bereft of evidence that
the sale of the Nissan Patrol is not incidental to Mindanao IIs VAT zero-rated operations.
Moreover, Mindanao IIs submitted documents failed to substantiate the requisites for the refund
or credit claims.
ISSUE: W/N the sale of the Nissan Patrol was an isolated transaction.
HELD: NO! It is a transaction incidental to its business.
"Incidental" Transaction
Mindanao II asserts that the sale of a fully depreciated Nissan Patrol is not an incidental
transaction in the course of its business; hence, it is an isolated transaction that should not have
been subject to 10% VAT. 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."
Section 105 of the 1997 Tax Code does not support Mindanao IIs position:
SEC. 105. Persons Liable. - Any person who, in the course of trade or business, sells barters,
exchanges, leases goods or properties, renders services, and any person who imports goods
shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties or services.
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 nonstock, nonprofit 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.
Mindanao IIs 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 IIs property,
plant, and equipment. Therefore, the sale of the Nissan Patrol is an incidental transaction made
in the course of Mindanao IIs business which should be liable for VAT.
OUTPUT TAX ON SALE OF SERVICES

A. Meaning of Sale or Exchange of Services
a. CIR v Commonwealth Management and Services Corp GR No.
125355 SUPAPO
DOCTRINE:
"sale of services" is defined by the NIRC 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."
FACTS:
1.
Commonwealth
Management
and
Services
Corporation (COMASERCO), a domestic corp. and an affiliate of Philamlife,
was organized by the letter to perform collection, consultative and other
technical services, including functioning as an internal auditor, of Philamlife
and its other affiliates.
2.
For taxable year 1988, the CIR assessed
COMASERCO with a deficiency VAT (incl. of 25% surcharge, and 20%
interest) for services it rendered to clients.
3.
COMASERCO asserted that the services it
rendered to Philamlife and its affiliates were on a "no-profit, reimbursementof-cost-only" basis.
4.
It averred that it was not engaged in the business of
providing services to Philamlife and its affiliates as it was established to
ensure operational orderliness and administrative efficiency of Philamlife and

its affiliates, and not in the sale of services. Hence, not liable to pay VAT.
5.
COMASERCO also pointed out that it incurred net
loss in its operation for the year 1988.
6.
CTA: Affirmed CIRs decision. COMASERCO is
liable to pay VAT.
7.
CA: Reversed CTAs decision. The CA anchored its
decision on the ratiocination in another tax case involving the same parties,
where it was held that COMASERCO was not liable to pay fixed and
contractor's tax for services rendered to Philamlife and its affiliates.
7.1.
The CA, in that case, reasoned that
COMASERCO was not engaged in business of providing services
to Philamlife and its affiliates.
7.2.
In the same manner, the CA held
that COMASERCO was not liable to pay VAT for it was not
engaged in the business of selling services.
8.
CIR avers that to "engage in business" and to
"engage in the sale of services" are two different things. Petitioner maintains
that the services rendered by COMASERCO to Philamlife and its affiliates, for
a fee or consideration, are subject to VAT. VAT is a tax on the value added by
the performance of the service. It is immaterial whether profit is derived from
rendering the service.
9.
COMASERCO contends that the term "in the
course of trade or business" requires that the "business" is carried on with a
view to profit or livelihood.
9.1.
It avers that the activities of the
entity must be profit- oriented.
9.2.
COMASERCO submits that it is not
motivated by profit, as defined by its primary purpose in the
articles of incorporation, stating that it is operating "only on
reimbursement-of-cost basis, without any profit."
9.3.
It argues that profit motive is
material in ascertaining who to tax for purposes of determining
liability for VAT.
ISSUE: whether COMASERCO was engaged in the sale of services, and thus
liable to pay VAT thereon
HELD: YES! The Court agreed with the CIR.
Contrary to COMASERCO's contention, the provision in the EVAT law clarifies
that even a non-stock, non-profit, 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.
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.
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."
Per BIR Ruling No. 010-98, 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. Hence, 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.
b. CIR v SM Prime Holdings, Inc. and First Asia GR 183505
VELASCO
DOCTRINE:
A cursory reading of the Sec108 NIRC shows that the enumeration of the sale or
exchange of services subject to VAT is not exhaustive. The words, including, similar
services, and shall likewise include, indicate that the enumeration is by way of
example only.
The legislature never intended operators or proprietors of cinema/theater houses to be
covered by VAT. No distinction must be made between the places of amusement taxed
by the national government and those taxed by the local government.
FACTS
SM Prime and First Asia are domestic corporations.
engaged in the business of operating cinema houses, among others.
Both are
Case 1:
BIR sent SM Prime a Preliminary Assessment

Notice (PAN) for value added tax (VAT) deficiency on cinema ticket sales
for the year 2000.
BIR sent SM Prime a Formal Letter of Demand for
the alleged VAT deficiency, which the latter protested.
BIR denied the protest and ordered SM to pay the
VAT deficiency.
Case 2, 3 and 4:
BIR sent First Asia a PAN for VAT deficiency on
cinema ticket sales for the year 1999, 2000, 2002 and 2003.
BIR issued a Formal Letter of Demand for the
alleged VAT deficiency which was protested by First Asia.
BIR denied the protest and ordered First Asia to
pay the VAT deficiency.
The consolidated cases were submitted for decision on the sole
issue of whether gross receipts derived from admission tickets by cinema/theater
operators or proprietors are subject to VAT.
CTA: the activity of showing cinematographic films is not a service
covered by VAT under the NIRC, but an activity subject to amusement tax under
the Local Government Code of 1991, which is the 30% amusement tax imposed
by cities and provinces.
The national government should be precluded from
imposing its own business tax in addition to that already imposed and
collected by local government units.
Revenue Memorandum Circular (RMC) No. 282001, which imposes VAT on gross receipts from admission to cinema
houses, cannot be given force and effect because it failed to comply with
the procedural due process for tax issuances.
Section 108 of the NIRC actually sets forth an
exhaustive enumeration of what services are intended to be subject to
VAT. And since the showing or exhibition of motion pictures, films or
movies by cinema operators or proprietors is not among the enumerated
activities contemplated in the phrase sale or exchange of services, then
gross receipts derived by cinema/ theater operators or proprietors from
admission tickets in showing motion pictures, film or movie are not
subject to VAT.
ISSUE: WON the gross receipts derived by operators or proprietors of cinema/theater
houses from admission tickets are subject to VAT.
HELD: NO
The enumeration of services subject to VAT under Section 108 of the NIRC is not
exhaustive.
A cursory reading of the provision shows that the enumeration of
the sale or exchange of services subject to VAT is not exhaustive. The words,
including, similar services, and shall likewise include, indicate that the
enumeration is by way of example only.
Among those included in the enumeration is the lease of motion
picture films, films, tapes and discs. This, however, is not the same as the
showing or exhibition of motion pictures or films.
Since the activity of showing motion pictures, films or movies by
cinema/ theater operators or proprietors is not included in the enumeration, it is
incumbent upon the court to the determine whether such activity falls under the
phrase similar services. The intent of the legislature must therefore be
ascertained.
The legislature never intended operators or proprietors of cinema/theater houses to be
covered by VAT.
The Local Tax Code, in transferring the power to tax gross receipts
derived by cinema/theater operators or proprietor from admission tickets to the
local government, did not intend to treat cinema/theater houses as a separate
class.
No distinction must be made between the places of amusement
taxed by the national government and those taxed by the local government.
To hold otherwise would impose an unreasonable burden on
cinema/theater houses operators or proprietors, who would be paying an
additional 10% VAT on top of the 30% amusement tax imposed by Section 140 of
the LGC of 1991, or a total of 40% tax.
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for the
imposition of VAT.
The removal of the prohibition under the Local Tax Code did not
grant nor restore to the national government the power to impose amusement tax
on cinema/theater operators or proprietors.
It did not expand the coverage of VAT. Since the imposition of a
tax is a burden on the taxpayer, it cannot be presumed nor can it be extended by
implication.
A law will not be construed as imposing a tax unless it does so
clearly, expressly, and unambiguously.
c. Diaz and Timbol v Secretary of Finance GR 193007

VILLAFUERTE
Doctrine: Tollway operators are franchise grantees and they do not belong to exceptions
that Section 119 spares from the payment of VAT.
Facts: Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition
for declaratory relief assailing the validity of the impending imposition of value-added tax
(VAT) by the Bureau of Internal Revenue (BIR) on the collections of tollway operators.
Petitioners hold the view that Congress did not, when it enacted the NIRC, intend to
include toll fees within the meaning of "sale of services" that are subject to VAT; that a
toll fee is a "user's tax," not a sale of services; that to impose VAT on toll fees would
amount to a tax on public service; and that, since VAT was never factored into the
formula for computing toll fees, its imposition would violate the non-impairment clause of
the constitution.
The government avers that the NIRC imposes VAT on all kinds of services of franchise
grantees, including tollway operations; that the Court should seek the meaning and
intent of the law from the words used in the statute; and that the imposition of VAT on
tollway operations has been the subject as early as 2003 of several BIR rulings and
circulars.
The government also argues that petitioners have no right to invoke the non-impairment
of contracts clause since they clearly have no personal interest in existing toll operating
agreements (TOAs) between the government and tollway operators. At any rate, the
non-impairment clause cannot limit the State's sovereign taxing power which is generally
read into contracts.
Issue: WON toll fees collected by tollway operators can be subjected to VAT.
Held: Yes.
When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latter's
use of the tollway facilities over which the operator enjoys private proprietary rights that
its contract and the law recognize. In this sense, the tollway operator is no different from
the service providers under Section 108 who allow others to use their properties or
facilities for a fee.
Tollway operators are franchise grantees and they do not belong to exceptions that
Section 119 spares from the payment of VAT. The word "franchise" broadly covers
government grants of a special right to do an act or series of acts of public concern.
Tollway operators are, owing to the nature and object of their business, "franchise
grantees." The construction, operation, and maintenance of toll facilities on public
improvements are activities of public consequence that necessarily require a special
grant of authority from the state.
A tax is imposed under the taxing power of the government principally for the purpose of
raising revenues to fund public expenditures. Toll fees, on the other hand, are collected
by private tollway operators as reimbursement for the costs and expenses incurred in
the construction, maintenance and operation of the tollways, as well as to assure them a
reasonable margin of income.
Although toll fees are charged for the use of public facilities, therefore, they are not
government exactions that can be properly treated as a tax. Taxes may be imposed only
by the government under its sovereign authority, toll fees may be demanded by either
the government or private individuals or entities, as an attribute of ownership.
B. Zero rated sale of services: Foreign Currency Denominated Sale

a. CIR v Placer Dome Technical Services GR 164365 ATIENZA
DOCTRINE: Section 102(b)(2) of the Tax Code is very clear. Therefore, no statutory
construction or interpretation is needed. 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
FACTS
Take note:
1. Placer Dome, Inc (referred as PDI) is the owner of the Marcopper
2. Placer Dome Technical Services Limited (referred as PDTSL) is a non-resident foreign
corporation asked by PDI to clean up and rehabilitate
3. Placer Dome Technical Services (Philippines) Inc. (referred as respondent) is a domestic
corporation hired by PDTSL to do the clean up
On 24 March 1996, a tailing leak occurred at the San Antonio Mines in Marinduque owned by
Marcopper Mining Corporation (Marcopper). To contain the damage and prevent the further
spread of the tailing leak, Placer Dome, Inc. (PDI), the owner of Marcopper, undertook to
perform the clean-up and rehabilitation. To accomplish this, PDI engaged Placer Dome
Technical Services Limited (PDTSL), a non-resident foreign corporation with office in Canada, to
carry out the project. In turn, PDTSL engaged the services of Placer Dome Technical Services
(Philippines), Inc. (respondent), a domestic corporation and registered Value-Added Tax (VAT)
entity, to implement the project in the Philippines.
In August of 1998, respondent amended its quarterly VAT returns for the last two quarters of
1996, and for the four quarters of 1997. In the amended returns, respondent declared a total
input VAT payment of P43,015,461.98 for the said quarters, and P42,837,933.60 as its total
excess input VAT for the same period. It subsequently asked for a refund arguing that the
revenues it derived from services rendered to PDTSL, pursuant to the Agreement, qualified as
zero-rated sales under Section 102(b)(2) of the then Tax Code, since it was paid in foreign
currency inwardly remitted to the Philippines.
However, the Commission of Internal Revenue (CIR), the petitioner, argues that pursuant to
Revenue Regulation No. 5-96, there are only two categories of services that are subject to zero
percent VAT, namely: services other than processing, manufacturing or repacking for other
persons doing business outside the Philippines for goods which are subsequently exported; and
services by a resident to a non-resident foreign client, such as project studies, information
services, engineering and architectural designs and other similar services. Petitioner explains
that the services rendered by respondent were not for goods which were subsequently
exported. Likewise, it is argued that the services rendered by respondent were not similar to
"project studies, information services, engineering and architectural designs" which were
destined to be consumed abroad by non-resident foreign clients.
ISSUE: WON the goods or services that should be paid in foreign currency to qualify as zerorated must form part of the cost of goods or services to be exported.
HELD: NO
The SC referred back to its previous ruling in Commissioner of Internal Revenue v. American
Express. The SC concluded in American Express that the service or goods rendered need NOT
be directly part of the cost of the exported goods.
It is to be noted that the transaction of the respondent is for a cleanup operation. This does not
form part of the cost of the goods to be exported. Regardless, the SC ruled that this is still zero
rated as it complied with the requirements of Section 102(b).
Section 102(b) of the 1986 NIRC applies zero-rating on two categories of transactions: (1)
Processing, manufacturing or repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of
the BSP; and (2) services other than those mentioned in the preceding subparagraph, the
consideration for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP.
It is argued by the petitioner that the second category is too broad and vague. However, the SC
held that even if it is broad, Section 102(b) is, in fact, "very clear," the Court declared that any
resort to statutory construction or interpretation was unnecessary. Neither can conditions or
limitations be introduced where none is provided for.
The case revolved more on the issue of WON a spill is to be considered as a zero-rated service,
however, in the statement of facts, there is a mention of the CTAs ruling that limited the zero
rated service to those foreign currency payment that were actually remitted to the Philippines
and supported by documents as such.
In its Decision dated 19 March 2002, the CTA supported respondents legal position that its sale
of services to PDTSL constituted a zero-rated transaction under the Tax Code, as these
services were paid for in acceptable foreign currency which had been inwardly remitted to the
Philippines in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP). However, at the same time, the CTA pointed out that of the US$27,544,707.00 paid by
PDTSL to respondent, only US$14,750,473.00 was inwardly remitted and accounted for in
accordance with the BSP. The CTA also noted that not all the reported total input VAT payments
of respondent were properly supported by VAT invoices and/or official receipts, and that not all
of the allowable input VAT of the respondent could be directly attributed to its zero-rated sales.
b. Accenture, Inc v. CIR GR 190102 BUENAVENTURA
FACTS: Accenture is a domestic corporation claiming an administrative claim for VAT
refund or the issuance of Tax Credit Certificate (TCC) filed with the DOF in 1 July 2004.
The DOF did not act on the claim. Thus, Accenture filed a petition for review with the
CTA. In 13 November 2008, CTA denied the petition of Accenture for failing to prove that
the latter's sale of services to the alleged foreign clients qualified for zero percent VAT.
CTA ruled that Accenture's services would qualify for zero-rating under the 1997 Tax
Code only if the recipient of the services was doing business outside of the Philippines,
similar to the 2007 SC ruling on the case of CIR v. Burmeister and Wain Scandinavian
Contractor Mindanao, Inc. (Burmeister) Accenture questions the Division's application to
this case of the pronouncements made in Burmeister. According to petitioner, the
provision applied to the present case was Section 102 (b) of the 1977 Tax Code, and not
Section 108 (B) of the 1997 Tax Code, which was the law effective when the subject
transactions were entered into and a refund was applied for.
ISSUE: WON the contention of SCs rulings is applicable to the denial of Accentures
claim for tax refund
HELD: The recipient of services must be doing business outside the Philippines for the
transaction to qualify it as zero-rated under Section 108 (B) of the National Internal
Revenue Code of 1997 (1997 Tax Code). Since Section 108 (B) of the 1997 Tax Code is
a verbatim copy of Section 102 (b) of the National Internal Revenue Code of 1977 (1977
Tax Code), any interpretation of the latter holds true for the former. When the Supreme
Court decides a case, it does not pass a new law, but merely interprets a pre-existing
one. Even though the taxpayers present petition was filed before the decision in the
case of Commissioner of Internal Revenue v Burmeister and Wain Scandinavian
Contractor Mindanao, Inc. was promulgated, the pronouncements made in that case
may be applied to the present case without violating the rule against retroactive
application. When the Court interpreted Section 102 (b) of the 1977 Tax Code in the
Burmeister case, this interpretation became part of the law from the moment it became
effective. It is elementary that the interpretation of a law by the Court constitutes part of
that law from the date it was originally passed, since the Courts construction merely
establishes the contemporaneous legislative intent that the interpreted law carried into
effect.
As explained by the Court in the Burmeister case: If the provider and recipient of the
other services are both doing business in the Philippines, the payment of foreign
currency is irrelevant. Otherwise, those subject to the regular VAT under section 102 (a)
[of the 1977 Tax Code] can avoid paying the VAT by simply stipulating payment in
foreign currency inwardly remitted by the recipient of services. To interpret section 102
(b) (2) to apply to a payer-recipient of services doing business in the Philippines is to
make the payment of the regular VAT under section 102 (a) dependent on the generosity
of the taxpayer. The provider of services can choose to pay the regular VAT or avoid it by
stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such
interpretation removes section 102 (a) as a tax measure in the Tax Code, an
interpretation this Court cannot sanction. A tax is a mandatory exaction, not a voluntary
contribution.
Instant petition is DENIED. The decision of CTA En Banc is AFFIRMED
C. Zero rated sale of services: Contractors and Subcontractors for Export

Enterprises
a. Atlas Consolidated Mining v CIR GR 134467 CARIAGA
DOCTRINE: Sales to an export-oriented enterprise whose export sales exceed 70
percent of its annual production are to be zero-rated, provided the seller complies with
other requirements, like registration with the BOI and the EPZA. The said Regulation
does not even hint, much less expressly mention, that only a percentage of the sales
would be zero-rated. The internal revenue commissioner cannot, by administrative fiat,
amend the law by making compliance therewith more burdensome.
FACTS: The antecedent facts of the case as agreed to by the parties in the Joint
Stipulation of Facts submitted to the Court of Tax Appeals (CTA) are as follows:
XXX XXX XXX
2. Petitioner is engaged in the business of mining, production and sale of various mineral
products, consisting principally of copper concentrates and gold and duly registered with
the BIR as a VAT enterprise per its Registration No. 32-A-6-002224.
3. Respondent BIR duly approved petitioners application for VAT zero-rating of the
following sales:
A. Gold to the Central Bank (CB);
B. Copper concentrates to the Phil. Smelting and Refining Corp.
(PASAR); and
C. Pyrite to Philippine Phosphates, Inc. (Philphos).
The BIRs approval of sales to CB and PASAR was dated April 21, 1988 while zerorating of sales to PHILPHOS was approved effective June 1, 1988.
4. PASAR and Philphos are both Board of Investments (BOI) and Export Processing
Zone Authority (EPZA) registered export-oriented enterprises located in an EPZA zone.
5. On April 20, 1990, petitioner filed a VAT return with the BIR for the first quarter of 1990
whereby it declared its sales described in par. 3 hereof as zero-rated sales and therefore
not subject to any output VAT.
6. On or about July 24, 1990, petitioner filed a claim with respondent for refund/credit of
VAT input taxes on its purchase of goods and services for the first quarter of 1990 in the
total amount of P40,078,267.81.
7. On or about September 2, 1992, petitioner filed an Amended Application for tax
credit/refund in the amount of P 35,522,056.58.
8. On September 9, 1992, respondent resolved petitioners claim for VAT refund/credit by
allowing only P2,518,122.32 as refundable/creditable while disallowing P33,003,934.26.
9. A supplemental report of investigation was submitted by the BIR examiners
recommending the increase in allowable input tax credit from P2,518,122.32 to
P12,101,569.11 or an increment of P9,583,446.79 due to petitioners submission of BOI
certifications on the sales to PASAR which brought down the deduction of
P12,404,150.65 to P2,518,122.32.
CTA rendered a decision in favor of the respondent: That the petitioner is registered with
the BIR as a VAT enterprise effective August 15, 1990. It explained that the "zeropercent rating" of BOI-registered enterprises shall be set in proportion to the amount of
its actual exports; and that EPZA and BOI registrations were by themselves not enough
for zero-rating to apply.
The petitioner moved for reconsideration of the decision but was denied.
Thus, this petition.
SUB-ISSUE: Whether the court erred in upholding the finding of the CTA that petitioner
is not VAT-registered for the 1st quarter of 1990 despite clear evidence showing the date
of effectivity of petitioners VAT registration to be January 1, 1988.
HELD: YES, the court erred. Petitioner contends that its sales to Philphos and PASAR
should be zero-rated for the first quarter of 1990, and not only as of August 15, 1990 as
held by the CA, which allegedly ignored "clear evidence" that petitioner's VAT registration
had been effected earlier, on January 1, 1988.
Respondent commissioner counters that by virtue of the Joint Stipulation of Facts,
petitioner is bound by its admission therein that it was registered as a VAT enterprise
effective only from August 15, 1990, well beyond the first quarter of 1990, the period for
which it is applying for tax credit.
We agree with the CA that, as a rule, a judicial admission, such as that made by
petitioner in the Joint Stipulation of Facts, is binding on the declarant. However, such
rule does not apply when there is a showing that (1) the admission was made through a
"palpable mistake," or that (2) "no such admission was made."
We are convinced that a "palpable mistake" was committed. True, petitioner was VATregistered under Registration No. 32-A-6-00224, as indicated in Item 2 of the Stipulation.
Moreover, the Registration Certificate bears the number 32-0-004622 and became
effective August 15, 1990. But the actual VAT Registration Certificate, which petitioner
mentioned in the stipulation, is numbered 32-A-6-002224 and became effective on
January 1, 1988, thereby showing that petitioner had been VAT-registered even prior to
the first quarter of 1990. Clearly, there exists a discrepancy, since the VAT registration
number stated in the joint stipulation is NOT the one mentioned in the actual Certificate
attached to the BIR Records.
The foregoing simply indicates that petitioner made a "palpable mistake" either in
referring to the wrong BIR record, which was evident, or in attaching the wrong VAT
Registration Certificate.
Petitioner also had another registration number, 32-0-004622, because sometime during
the third quarter of 1990, it moved its principal place of business to a different revenue
district. Its second registration as a VAT enterprise on August 15, 1990 was made in
compliance with Section 3 of Revenue Memo Circular No. 6-88, which required it to reregister after it moved its principal place of business to another revenue district.
Even the respondent commissioner, as shown in the other provisions of the joint
stipulation, has granted petitioner VAT exemption for the period even prior to the first
quarter of 1990; that is, as early as January 1, 1988.
MAIN ISSUE: Whether the court erred in NOT holding that the totality of sales to EPZAregistered enterprises should be zero-rated, not merely the proportion which such sales
have to the actual exports of the enterprise.
HELD: YES, the court erred. It is the totality of petitioner's sales to Philphos and PASAR
that must be taken into account, not merely the proportion of such sales to the actual
exports of the said enterprises.
Respondent maintains that before zero-rating can be applied, petitioner must first show
that the entities to which the raw materials have been sold are export-oriented, and that
their export sales exceed 70 percent of their total annual production. Should these
conditions be met, zero-rating would apply, but only in proportion to the exports actually
made.
The Joint Stipulation of Facts expressly states that petitioners sales of raw materials
have been approved for zero-rating. Verily, the commissioner has already conceded that
PASAR and Philphos qualify as export-oriented enterprises whose export sales exceed
70 percent of their total annual production, and that petitioners sales to them thus
qualify for zero-rating.
Indeed, the BIR has already recognized and admitted that said transactions are zerorated. Said stance is demonstrated in the following acts of the BIR:
a. the grant of petitioners applications for zero-rating of sales to
PASAR AND PHILPHOS;
b. Revenue Regulation No. 2-88, wherein it recognized sales to BOIregistered enterprises which export over 70% of its sales as zero-rated, subject
to certain conditions;
c. VAT Ruling No. 271-88 (dated June 24, 1988), wherein it was
recognized that sales to PHILPHOS are zero-rated;
d. Letter dated April 18, 1988, whereby it recognized that sales of
copper concentrates to PASAR are zero-rated; and
e. VAT Ruling No. 008-92, which states that the sale of raw materials
to BOI-registered enterprises can qualify for zero-rating.
Finally, an examination of Section 4.100.2 of Revenue Regulation 7-95 in relation to

Section 102 (b) of the Tax Code shows that sales to an export-oriented enterprise whose
export sales exceed 70 percent of its annual production are to be zero-rated, provided
the seller complies with other requirements, like registration with the BOI and the EPZA.
The said Regulation does not even hint, much less expressly mention, that only a
percentage of the sales would be zero-rated. The internal revenue commissioner cannot,
by administrative fiat, amend the law by making compliance therewith more
burdensome.
EXEMPT TRANSACTIONS
A. Exempt v Zero Rated Sales
a. CIR v Cebu Toyo Corporation GR 149073 DORIA
DOCTRINE:
Taxable transactions are those transactions which are subject to VAT either at 10% or 0%.
In taxable transactions, the seller shall be entitled to tax credit for the VAT 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.
FACTS:
Cebu Toyo Corporation is a domestic subsidiary of Toyo Lens Corporation Japan, a non-resident corporation, engaged in the manufacture of lenses and optical
components used in TV sets, cameras, CDs and other devices.
Its principal office is located at the Mactan Export Processing
Zone (MEPZ) in Cebu as it is a zone export enterprise registered with the
Philippine Economic Zone Authority (PEZA), pursuant to P.D. No. 66.
It is also registered with the BIR as a VAT taxpayer.

As an export enterprise, Cebu Toyo sells 80% of its products to its mother
corporation pursuant to an Agreement of Offsetting. The rest are sold to various
enterprises doing business in the MEPZ.
Both sales are considered export sales subject to VAT at 0% rate
under Sec. 106(A)(2)(a) of the NIRC.
Cebu Toyo filed its quarterly VAT returns from April 1996 to
December 1997 showing a total input VAT of P4.4M.
March 1998: Cebu Toyo filed an application for tax credit/refund with the
Department of Finance, representing excess VAT input payments for the period of April
1996 to December 1997 amounting to P4.4M.
However, it did not bother to wait for the Resolution of its claim by
the CIR. Instead, it filed a Petition for Review with the CTA.
Cebu Toyos claim: as a VAT-registered exporter of goods, it is subject to VAT at
0% on its export sales that do not result in any output tax. Hence, the unutilized VAT
input taxes on its purchases of goods and services related to such zero-rated activities
are available as tax credits or refunds.
CIRs position: Cebu Toyo was not entitled to a refund or tax credit.
Initially, the CTA denied the petition for insufficiency of evidence. The CTA found:
Cebu Toyo was a VAT-registered entity.
Sales to Toyo Lens and to establishments in the MEPZ were
export sales subject to VAT at 0%.
The input VAT covered by the claim was not applied against any
output VAT.
Cebu Toyo filed a Motion for Reconsideration
CTA partly granted the MR. Respondent was entitled to a refund but not in the full
amount of its claim.
CIR was ordered to REFUND or, in the alternative, ISSUE a TAX
CREDIT CERTIFICATE in favor of Cebu Toyo in the amount of P2.1M
representing unutilized input tax payments.
CIR filed an MR arguing that Cebu Toyo was not entitled to a refund because as
a PEZA-registered enterprise, it was not subject to VAT pursuant to Sec. 2413 of R.A.
No. 7916, as amended by R.A. No. 8748. Thus, since respondent was not subject to
VAT, the capital goods it purchased must be deemed not used in VAT taxable business
and therefore it was not entitled to a refund of input taxes on such capital goods.
CTA denied MR.
CIR appealed to the CA.
CA affirmed CTA decision.
CIR appealed to the SC.
CIRs contention: Cebu Toyo Corporation, as a PEZA-registered enterprise, is
exempt from national and local taxes, including VAT, under Section 24 of R.A. No. 7916
and Sec. 10921 of the NIRC. Thus, it is not entitled to any refund or credit on input taxes
it previously paid as provided under Sec. 4.103-122 of Revenue Regulations No. 7-95,
notwithstanding its registration as a VAT taxpayer. Such registration was erroneous and
did not confer upon Cebu Toyo any right to claim recognition of the input tax credit.
Cebu Toyos contention: it availed of the income tax holiday under E.O. No. 226
for 4 years from August 1995 making it exempt from income tax but not from other taxes
such as VAT. Hence, its export sales are not exempt from VAT, contrary to the CIRs
claim, but are subject to 0% VAT.
ISSUE: WON Cebu Toyo Corp, a PEZA-registered enterprise, is subject to VAT and is entitled to
a refund. YES
HELD:
Cebu Toyo 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.
It is undisputed that respondent is engaged in the export business and is

registered as a VAT taxpayer per Certificate of Registration of the BIR. The records show
that the respondent is subject to VAT as it availed of the income tax holiday under E.O.
No. 226. Perforce, respondent is subject to VAT at 0% rate and is entitled to a refund or
credit of the unutilized input taxes.
CIRs 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 Sec. 23 of R.A. No. 7916. Under said statute, Cebu Toyo had TWO options
with respect to its tax burden.
1. 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
2. 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 CA and the CTA found that respondent availed of the income tax holiday for 4 years, 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.
Export sales (sales outside the Philippines) shall be subject to VAT at 0% if made by a VATregistered person. Under the VAT 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.
In principle, the purpose of applying a 0% rate on a taxable transaction is to exempt the
transaction completely from VAT previously collected on inputs. It is 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:
(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.
b. Toshiba Information Equipment GR 157594 FERNANDEZ

Doctrine: Value-added tax (VAT); exemption. Prior to the issuance by the BIR of Revenue
Memorandum Circular No. 74-99, whether a PEZA-registered enterprise was exempt from VAT
or subject to VAT depended on the type of fiscal incentive availed of by said enterprise. If the
enterprise availed itself of 5% gross income taxation under Republic Act No. 7916, it was
exempt from VAT. If it availed itself of income tax holiday under the Omnibus Investments Code,
it was subject to VAT.
VAT; zero-rating. Upon issuance of RMC 74-99, the rule was clearly established that following
the cross-border doctrine, based on the fiction that ecozones are foreign territory, a sale by a
supplier in the customs territory to a PEZA-registered enterprise is considered an export sale
and therefore subject to zero VAT.
Facts:
Toshiba is a domestic corporation with the primary purpose of engaging in the business
of manufacturing and exporting of electrical and mechanical machinery and goods relating
to information technology, computer hardware and software.
In 1995, Toshiba registered w/ Philippine Economic Zone Authority (PEZA) as an

Ecozone Export Enterprise. Toshiba also registered with the BIR as a VAT taxpayer.
Toshiba filed its VAT returns for the year 1996 reporting its input VAT and alleging that its
input VAT was from its purchases of capital goods and services which remained unutilized
since it had not yet engaged in any business activity for which it may be liable for output
VAT.
Consequently, Toshiba filed with the One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback center of the Department of Finance applications for tax credit/refund of its
unutilized input VAT.
Toshiba also filed a petition for review with the CTA to toll the running of the two-year
prescriptive period for judicially claiming a tax credit/refund.
CTA ordered the CIR to refund or to issue a tax credit certificate to Toshiba.
CIR opposed on the ground that since Toshiba is registered with PEZA as an Ecozone
Export Enterprise, its business is not subject to VAT pursuant to Section 109 of the Tax
Code. Since Toshibas business is not subject to VAT, the capital goods and services it
purchased are considered not used in VAT taxable business and therefore, it is not entitled
to refund of input taxes on such capital goods.
I: W/n Toshiba is entitled to the tax credit/refund of its input VAT on its purchases of
capital goods and services
R: Yes, Toshiba is entitled to tax credit/refund of its input VAT on its purchases of capital
goods and services.
An Ecozone enterprise is a VAT-exempt entity. Sales of goods, properties, and services

by persons from the Customs Territory to Ecozone enterprise shall be subject to VAT at zero
percent (0%).
PEZA-registered enterprises, which would necessarily be located within Ecozones, are

VAT-exempt entities because of Section 8 of RA 7916 which establishes the fiction that
Ecozones are foreign territory. The national territory of the Philippines outside of the
proclaimed borders of the Ecozone are referred to as Customs Territory. The provision
provides that PEZA shall manage and operate the Ecozones as a separate customs
territory, thus creating the fiction that the Ecozone is a foreign territory.
The Philippine VAT system adheres to the Cross Border Doctrine, according to which,
no VAT shall be imposed to form part of the cost of goods destined for consumption outside
of the territorial board of the taxing authority.
Sales of goods, properties, and services by a VAT-registered supplier from the Customs
Territory to an Ecozone enterprise shall be treated as export sales.
If such sales are made by a VAT-registered supplier, they shall be subject to VAT at 0%.
In zero-rated transactions, the VAT-registered supplier shall not pass on any output VAT to
the Ecozone enterprise, and at the same time, shall be entitled to claim tax credit/refund of
its input VAT attributable to such sales.
Zero-rating of export sales primarily intends to benefit the export (i.e., the supplier from
Customs territory), who is directly and legally liable for VAT. Meanwhile, sales to an Ecozone
enterprise made a by a non-VAT or unregistered supplier would only be exempt from VAT
and the supplier shall not be able to claim credit/refund of its input VAT.
Even conceding, however, that Toshiba as a PEZA-registered enterprise, is a VATexempt entity that could not have engaged in a VAT-taxable business, given the particular
circumstances, Toshiba is entitled to a credit/refund of its input vat.
The sales made to Toshiba, for which it is claiming a refund or credit of its unutilized
input vat, were made in 1996 under the old rule that the tax-status of Ecozone enterprises
would depend upon the tax incentives it chooses to avail of, either the 5% preferential tax or
the income tax holiday under the Omnibus Investments Code where the entity will only be
exempt from income tax but not from VAT.
Since Toshiba chose to avail of the income tax holiday, it was therefore subject to the
10% VAT. Therefore Toshibas transactions in 1996 being subject to VAT, is entitled to a
credit/refund of the unutilized input VAT it incurred which it wasnt able to apply against its
output taxes.
The transaction from a supplier in a customs territory to Toshiba, being a PEZAregistered enterprise, was considered an effectively VAT zero-rated transaction.
However, the sales made by Toshiba to a foreign country were considered export sales.
Thus, they were considered to be automatically VAT zero-rated transactions.
Given that in the case of Toshiba, Toshiba was Buyer 1 and not the Seller, then it
should not have claimed for an input tax credit since theoretically, there was no input
VAT on Toshibas part.
However, the Toshiba case happened prior to RMC 74-99 where PEZAregistered enterprises availed of income tax holidays and so Toshiba was subject to
VAT. Thus, there was an assumption that the seller passed on VAT to Toshiba and so,
Toshiba should be allowed to claim for an input tax credit.
As regards the fact that Toshiba was asking for an input tax credit on capital
goods, the ruling in that case is no longer applicable as input tax credit for capital goods
under RA 9337 are governed by new rules.
In this case, the Court also made a pronouncement that a VAT-registered

supplier from the customs territory to an Ecozone enterprise shall be treated as export
sales, while sales to an ECOZONE enterprise made by a NON-VAT or unregistered
supplier would only be exempt from VAT and the supplier shall not be able to claim
credit/refund for his input VAT.
B. Exempt Transactions
a. Sale or importation of agricultural and marine food products in
their original state
i.
Misamis Oriental Coco Traders v Sec of Finance
and BIR GR 108524 FRANCISCO
Doctrine:
Copra is not food and is not intended for human consumption. Thus, it is
not exempt from VAT. The rule now is the sale of copra is VAT- exempt.
The sale of agricultural non-food products is exempt from VAT only when
made by the primary producer or owner of the land from which the same is
produced, but in the case of agricultural food products their sale in their original
state is exempt at all stages of production or distribution.
Facts:
Misamis Oriental Association of Coco Traders, Inc.
(MOACTI) is a domestic corporation engaged in the buying and selling
copra in Misamis Oriental.
MOACTI alleges that prior to the issuance of
Revenue Memorandum Circular 47-91 on June 11, 1991, which
implemented VAT Ruling 190-90, copra was classified as agricultural food
product under Sect. 103(b) of the NIRC and, therefore, exempt from VAT
at all stages of production or distribution.
Under Sec. 103(b) of the NIRC, the
sale of agricultural food products in their original state is exempt
from VAT at all stages of production or distribution.
The reclassification had the effect of denying to the
MOACTI the exemption it previously enjoyed when copra was classified
as an agricultural food product under Sect. 103(b) of the NIRC. MOACTI
challenges RMC No. 47-91 on various grounds.
Issue:
W/n copra is an agricultural food product, hence, VAT-exempt.
Held:
No, copra is not an agricultural food product rather
it is an an agricultural nonfood product.
SC opined that copra is not food and is not

intended for human consumption. Thus, it is not exempt from VAT. The
rule now is the sale of copra is VAT- exempt.
Pertinent Provision:
SEC. 1203. Exempt Transactions.The following shall be exempt
from the value-added tax:
a. Sale
of
nonfood
agricultural, marine and forest products in their original
state by the primary producer or the owner of the land
where the same are produced;
b. Sale or importation in
their original state of agricultural and marine food products,
livestock and poultry of a kind generally used as, or
yielding or producing foods for human consumption, and
breeding stock and genetic material therefor;
b. Medical, dental, hospital and veterinary services
i.
Hermano (San Miguel Ferbes Cordero..) v CIR
CTA Case No. 8194 GATCHALIAN
DOCTRINE: The sale of drugs or pharmaceutical items to in-patients of the hospital is
considered part of the term hospital services" covered by the exemption from VAT under
Section 109 (G) of the NIRC of 1997.
FACTS:
Respondent CIR is praying that Petitioner be ordered to pay the amount of P2,607,933.07 as
deficiency (VAT) for the calendar year 2006 and 20% deficiency and delinquency interest and
compromise penalty until fully paid. Below are its two allegations:
The sale of pharmacy drugs/medicine to in -patients is not covered by the
exemption from VAT under Section 109 (G)
BASIS: respondent contends that since the drugs being sold by
petitioner are tangible and capable of pecuniary estimation, drugs are considered
'goods' which when sold is subject to VAT under Section 106 (A)(1) of the NIRC
of 1997. Respondent pointed out that petitioner's exemption based on Section
109 (G) of the NIRC of 1997, as amended, pertains to services.
PETITIONERS OPPOSITION: They are exempt because they are
included in the term hospital services in Sec. 109 (G) of NIRC
Petitioner is liable for Deficiency VAT assessments for its failure
submit sufficient documents to prove their exemption.
ISSUES:
1. WON the sale of pharmacy drugs/medicine to in patients is covered by the

exemption from VAT under Sec. 109 of the NIRC? YES! BUT!! please refer to the
second issue
2. WON petitioner is liable for deficiency VAT for its failure to submit sufficient
evidence to prove their exemption? YES
HELD:
The sale of drugs or pharmaceutical items to in-patients of the hospital is considered part of the
term hospital services" covered by the exemption from VAT under Section 109 (G) of the NIRC
of 1997, as amended, 'because the maintenance and operation of a pharmacy or drugstore by a
hospital is a necessary and essential service or facility rendered by any hospital for its patients
and also because "unlike the sale of retailing of drugs or medicines by drugstores in general,
the procurement of medicines and pharmaceutical items from the hospital drugstore or
pharmacy amounts to the availment of service rendered or made available by the hospital for its
in-patients and not simply the buying of such goods
HOWEVER!!!!! Before a taxpayer may claim that its sale of drugs or pharmaceutical items is
classified as 'hospital services' exempt from VAT under Section 109 (G) of the NIRC of 1997, as
amended, the following must be established:
1. that the taxpayer operates a hospital;
2. that the said hospital has a pharmacy or drugstore; and
3. that the sale of drugs - claimed to be exempt from VAT - was made by the said
hospital drugstore or pharmacy
Petitioner failed to establish by competent evidence that it is an entity that operates as a
hospital
Its Articles of Incorporation reveals that it is a non-stock, non-profit educational
corporation formed to provide institutional medium for financing programs dedicated to
the establishment, maintenance, operation and management of educational facility in the
field of medical and physical sciences.
The Petition for Review it filed stated that it is a non-stock, non-profit educational
corporation
There is nowhere in the records or documents formally offered by the petitioner
from which this Court infer that it actually operates as a hospital
Hence, its alleged sale of drugs or pharmaceutical items CANNOT be considered as part
of the term 'hospital services' exempt from VAT under Section 109 (G) of the NIRC of
1997, as amended; thereby making the alleged sale of drugs or pharmaceutical items by
petitioner an appropriate subject of the deficiency VAT assessment.
Even if, it was able to prove that it operates as a hospital, the court cannot still award the
exemption because of its failure to fully account for and substantiate by competent evidence its
stance that the NET discrepancy in the deficiency VAT assessment consists sales of pharmacy
items to in-patients and/or special units such as operating and delivery rooms during medical
procedures, and items which are no longer sold or passed on to patients or clients such as
equipment and supplies
ii.
CIR v Phil ealth Care Providers GR 168129
HAUTEA
1.
2.
1.
2.
CIR v PHILHEALTH
Facts:
PHILHEALTH is a corporation that operates a prepaid group practice health care
delivery system to take care of sick and disabled people enrolled in a health plan. It wrote the
Commissioner to inquire whether the services it provided to the participants in its health care
program are exempt from VAT. At that time, the Commissioner issued VAT Ruling 231-88 stating
that PHILHEALTH as a provider of medical services, was exempt from the VAT coverage.
Meanwhile, RA 7716 or the E-VAT Law took effect, amending the NIRC of 1977. Subsequently
the NIRC of 1997 took effect and reproduced the provisions of the E-VAT Law. With the passage
of these laws, the BIR sent a Preliminary Assessment Notice (PAN) for deficiency in its payment
of VAT and doc stamp taxes for 1996 and 1997. PHILHEALTH then filed a protest with the
Commissioner which was not acted upon by the Commissioner. PHILHEALTH then brought the
case to the CTA. Initially, the CTA required PHILHEALTH to pay deficiency VAT but cancelled
the payment of DST. Upon Partial Reconsideration, CTA overruled its decision and held that
PHILHEALTH was entitled to benefit from the non-retroactivity of rulings under the Tax Code.
Issues:
W/N PHILHEALTHs services are subject to VAT
W/N VAT Ruling 231-88 has retroactive application
Held:
PHILHEALTH services are not VAT exempt
The imposition of VAT relates to the sale or exchange of services. One of those
exempted from VAT are those engaged in the performance of medical, dental, hospital and
veterinary services except those rendered by professionals. PHILHEALTH is not actually
rendering medical service but is merely acting as a conduit between the members and their
accredited and recognized hospitals and clinics. Therefore, since PHILHEALTH does not
actually provide medical and/or hospital services but merely arranges for the same, its services
are not VAT-exempt.
VAT Ruling 231-88 has no retroactive application
Section 246 of the 1997 NIRC, as amended, provides that rulings, circulars, rules and
regulations promulgated by the Commissioner have no retroactive application if to apply them
would prejudice the taxpayer. However, there are exceptions, such as:
a) Where the taxpayer deliberately misstates or omits material facts from his return or
in any doc required of him by the BIR
b) Where the facts subsequently gathered by the BIR are materially different from the
facts on which the ruling is based
c) Where the taxpayer acted in bad faith.
The failure of PHILHEALTH to refer to itself as a health maintenance organization is not
indication of bad faith. It is thus apparent that when the VAT Ruling was issued in
PHILHEALTHS favor, the term health maintenance organization was yet unknown or had no
significance for taxation purposes. PHILHEALTH therefore acted in good faith in believing that it
was VAT exempt for the years 1996 and 1997.
INPUT TAXES ON PURCHASES OF GOODS OR SERVICES AND IMPORTATION

A. Transitional Input Tax: Fort Bonifacio Development Corp v CIR GR 158885
and GR 170680 LIM
DOCTRINE:
Transitional Input Tax Credits are computed from the beginning inventory of goods, materials or
services held by a taxable entity. In the case of real estate developers, the term goods shall be
understood to refer to real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business.
Regulations must not contravene the laws upon which they are based in order to be valid.
FACTS:
STATUTORY ANTECEDENTS:
The issue stems from the wording of the first VAT law (EO273) and the second VAT Law
(RA7716). Both laws amend the NIRC of 1986. Both amended provisions of the Old NIRC
principally by restructuring the VAT system.
The value-added tax (VAT) system was first introduced in the Philippines on 1 January 1988,
with the tax imposable on any person who, in the course of trade or business, sells, barters or
exchanges goods, renders services, or engages in similar transactions and any person who
imports goods.[1] The first VAT law is found in Executive Order No. 273 (E.O. 273), which
amended several provisions of the then National Internal Revenue Code of 1986 (Old NIRC).
E.O. No. 273 likewise accommodated the potential burdens of the shift to the VAT system by
allowing newly liable VAT-registered persons to avail of a transitional input tax credit, as
provided for in Section 105 of the old NIRC, as amended by E.O. No. 273. Said Section 105 is
quoted, thus:
SEC. 105. Transitional input tax credits. A person who becomes liable to value-added tax or
any person who elects to be a VAT-registered person shall, subject to the filing of an inventory
as prescribed by regulations, be allowed input tax on his beginning inventory of goods,
materials and supplies equivalent to 8% of the value of such inventory or the actual valueadded tax paid on such goods, materials and supplies, whichever is higher, which shall be
creditable against the output tax.
There are other measures contained in E.O. No. 273 which were similarly intended to ease the
shift to the VAT system. These measures also took the form of transitional input taxes which
can be credited against output tax, and are found in Section 25 of E.O. No. 273, the section
entitled Transitory Provisions. Said transitory provisions, which were never incorporated in the
Old NIRC, read:
Sec. 25. Transitory provisions. (a) All VAT-registered persons shall be allowed transitional input
taxes which can be credited against output tax in the same manner as provided in Sections 104
of the National Internal Revenue Code as follows:
1) The balance of the deferred sales tax credit account as of December 31, 1987 which are
accounted for in accordance with regulations prescribed therefor;
2) A presumptive input tax equivalent to 8% of the value of the inventory as of December 31,
1987 of materials and supplies which are not for sale, the tax on which was not taken up or
claimed as deferred sales tax credit; and
3) A presumptive input tax equivalent to 8% of the value of the inventory as of December 31,
1987 as goods for sale, the tax on which was not taken up or claimed as deferred sales tax
credit.
Tax credit prescribed in paragraphs (2) and (3) above shall be allowed only to a VAT-registered
person who files an inventory of the goods referred to in said paragraphs as provided in
regulations.
(b) Any unused tax credit certificate issued prior to January 1, 1988 for excess tax credits which
are applicable against advance sales tax shall be surrendered to, and replaced by the
Commissioner with new tax credit certificates which can be used in payment for value-added tax
liabilities.
(c) Any person already engaged in business whose gross sales or receipts for a 12-month
period from September 1, 1986 to August 1, 1987, exceed the amount of P200,000.00, or any
person who has been in business for less than 12 months as of August 1, 1987 but expects his
gross sales or receipts to exceed P200,000 on or before December 31, 1987, shall apply for
registration on or before October 29, 1987.
It was under Rep. Act No. 7716 that VAT was imposed for the first time on the sale of real
properties. This was accomplished by amending Section 100 of the NIRC to include real
properties among the goods or properties, the sale, barter or exchange of which is made
subject to VAT. The relevant portions of Section 100, as amended by Rep. Act No. 7716, thus
read:
Sec. 100. 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, a value-added tax equivalent to 10% 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:
(A) Real properties held primarily for sale to customers or held for lease in the ordinary
course of trade or business; xxx
The provisions of Section 105 of the NIRC, on the transitional input tax credit, had remained
intact despite the enactment of Rep. Act No. 7716. (This issue was fixed in the 1997 NIRC)
FACTUAL ANTECEDENTS:
Petitioner is a real estate developer that bought from the national government a parcel of land
that used to be the Fort Bonifacio military reservation. At the time of the said sale there was as
yet no VAT imposed so Petitioner did not pay any VAT on its purchase.
Subsequently, Petitioner sold two parcels of land to Metro Pacific Corp. In reporting the said
sale for VAT purposes (because the VAT had already been imposed in the interim), Petitioner
claimed transitional input VAT corresponding to its inventory of land.
The BIR disallowed the claim of presumptive input VAT and thereby assessed Petitioner for
deficiency VAT. This was so on the ground of the then-current regulation stating that the
developer must be taxed for VAT for improvements made after the passing of the new law in
1988.
ISSUE:
W/N Petitioner entitled to claim the transitional input VAT on its sale of real properties given its
nature as a real estate dealer and if so (i) is the transitional input VAT applied only to the
improvements on the real property or is it applied on the value of the entire real property and (ii)
should there have been a previous tax payment for the transitional input VAT to be creditable?
HELD:
YES. Petitioner is entitled to claim transitional input VAT based on the value of not only the
improvements but on the value of the entire real property and regardless of whether there was
in fact actual payment on the purchase of the real property or not.
The amendments to the VAT law do not show any intention to make those in the real estate
business subject to a different treatment from those engaged in the sale of other goods or
properties or in any other commercial trade or business.
On the scope of the basis for determining the available transitional input VAT, the CIR has no
power to limit the meaning and coverage of the term "goods" in Section 105 of the Tax Code
without statutory authority or basis. The Supreme Court struck down this regulation by ruling
that the regulation must not contravene the law upon which it is based.
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.
REFUNDS OR TAX CREDIT INPUT TAX

A. When Allowed: Zero rated or Effectively zero-rated Sales
a. Eastern Telecommunication Philippines v CIR GR 168856
MANCIA
Doctrine:
The absence of the word zero-rated on the invoices and receipts of a taxpayer will result in the
denial of the claim for tax refund.
Facts:
Petitioner Eastern Telecommunications Philippines, Inc. (ETPI) is a duly authorized corporation
engaged in telecommunications services by virtue of a legislative franchise. It has entered into
various international service agreements with international non-resident telecommunications
companies and it handles incoming telecommunications services for non-resident foreign
telecommunication companies and the relay of said international calls within the Philippines.
ETPI seasonably filed its Quarterly Value-Added Tax (VAT) Returns for the year 1999, but these
were later amended on February 22, 2001.
Both ETPI and respondent Commissioner of Internal Revenue (CIR) confirmed the veracity of
the entries
Believing that it is entitled to a refund for the unutilized input VAT attributable to its zero-rated
sales, ETPI filed with the Bureau of Internal Revenue (BIR) an administrative claim for refund
and/or tax credit in the amount of P 23,070,911.75 representing excess input VAT derived from
its zero-rated sales for the period from January 1999 to December 1999.
Without waiting for the decision of the BIR, ETPI filed a petition for review before the Court of
Tax Appeals (CTA) to toll the running of the two-year prescriptive period.
CTA (CTA-Division) denied the petition for lack of merit, finding that ETPI failed to imprint the
word "zero-rated" on the face of its VAT invoices or receipts, in violation of Revenue Regulations
No. 7-95. In addition, ETPI failed to substantiate its taxable and exempt sales, the verification of
which was not included in the examination of the commissioned independent certified public
accountant.
CTA-En Banc affirms the decision.
ETPI filed a motion for reconsideration, but it was denied by the CTA-En Banc.
Issue:
Whether or not the failure to imprint the word zero-rated on its invoices or receipts is fatal to its
claim for tax refund or tax credit for excess input VAT.
Held:
Yes. The failure to print the word zero-rated on the invoices or receipts is fatal to a claim for
refund or credit of input VAT on zero-rated sales.
Consequently, the following invoicing requirements enumerated in Section 4.108-1 of Revenue

Regulations No. 7-95 must be observed by all VAT-registered taxpayers:
Sec. 4.108-1. Invoicing Requirements. All VAT-registered persons shall, for every sale or lease
of goods or properties or services, issue duly registered receipts or sales or commercial
invoices which must show:
1. The name, TIN and address of seller;
2. Date of transaction;
3. Quantity, unit cost and description of merchandise or nature of service;
4. The name, TIN, business style, if any, and address of the VAT-registered purchaser, customer
or client;
5. The word zero-rated imprinted on the invoice covering zero-rated sales; and
6. The invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal or market value is higher
than the actual consideration, the VAT shall be separately indicated in the invoice or receipt.
Only VAT-registered persons are required to print their TIN followed by the word VAT in their
invoices or receipts and this shall be considered as a VAT invoice. All purchases covered by
invoices other than a VAT Invoice shall not give rise to any input tax.
The need for taxpayers to indicate in their invoices and receipts the fact that they are zero-rated
or that its transactions are zero-rated became more apparent upon the integration of the above
quoted provisions of Revenue Regulations No. 7-95 in Section 113 of the NIRC enumerating the
invoicing requirements of VAT-registered persons when the tax code was amended by Republic
Act (R.A.) No. 9337.
Revenue Memorandum Circular No. 42-2003, to wit:
A-13: Failure by the supplier to comply with the invoicing requirements on the documents
supporting the sale of goods and services will result to the disallowance of the claim for input tax
by the purchaser-claimant. If the claim for refund/TCC is based on the existence of zero-rated
sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of
sales invoices (e.g. failure to indicate the TIN), its claim for tax credit/refund of VAT on its
purchases shall be denied considering that the invoice it is issuing to its customers does not
depict its being a VAT-registered taxpayer whose sales are classified as zero-rated sales.
Nonetheless, this treatment is without prejudice to the right of the taxpayer to charge the input
taxes to the appropriate expense account or asset account subject to depreciation, whichever is
applicable. Moreover, the case shall be referred by the processing office to the concerned BIR
office for verification of other tax liabilities of the taxpayer.
B. Period within which to file claim for refund or tax credit: Requisites
a. CIR v Aichi Forging Company of Asia GR 184823 MORENO
Doctrine:
- The CIR has 120 days, from the date of the submission of the complete documents within
which to grant or deny the claim for refund/credit of input vat. In case of full or partial denial by
the CIR, the taxpayers 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.
- A taxpayer is entitled to a refund either by authority of a statute expressly granting such right,
privilege, or incentive in his favor, or under the principle of solutio indebiti requiring the return of
taxes erroneously or illegally collected. In both cases, a taxpayer must prove not only his
entitlement to a refund but also his compliance with the procedural due process.
- As between the Civil Code and the Administrative Code of 1987, it is the latter that must
prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori.
- The phrase within two (2) years x x x apply for the issuance of a tax credit certificate or
refund under Subsection (A) of Section 112 of the NIRC refers to applications for refund/credit
filed with the CIR and not to appeals made to the CTA.
Facts:
Petitioner filed a claim of refund/credit of input vat in relation to its zero-rated sales from July 1,
2002 to September 30, 2002. The CTA 2nd Division partially granted respondents claim for
refund/credit.
Petitioner filed a Motion for Partial Reconsideration, insisting that the administrative and the
judicial claims were filed beyond the two-year period to claim a tax refund/credit provided for
under Sections 112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap
year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the twoyear period, which expired on September 29, 2004. He cited as basis Article 13 of the Civil
Code, which provides that when the law speaks of a year, it is equivalent to 365 days. In
addition, petitioner argued that the simultaneous filing of the administrative and the judicial
claims contravenes Sections 112 and 229 of the NIRC. According to the petitioner, a prior filing
of an administrative claim is a condition precedent before a judicial claim can be filed.
The CTA denied the MPR thus the case was elevated to the CTA En Banc for review. The
decision was affirmed. Thus the case was elevated to the Supreme Court.
Respondent contends that the non-observance of the 120-day period given to the CIR to act on
the claim for tax refund/credit in Section 112(D) is not fatal because what is important is that
both claims are filed within the two-year prescriptive period. In support thereof, respondent cited
Commissioner of Internal Revenue v. Victorias Milling Co., Inc. [130 Phil 12 (1968)] where it was
ruled that if the CIR takes time in deciding the claim, and the period of two years is about to
end, the suit or proceeding must be started in the CTA before the end of the two-year period
without awaiting the decision of the CIR.
Issues:
1. Whether or not the claim for refund was filed within the prescribed period
2. Whether or not the simultaneous filing of the administrative and the judicial claims
contravenes Section 229 of the NIRC, which requires the prior filing of an administrative claim,
and violates the doctrine of exhaustion of administrative remedies
Held:
1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation (G.R. No. 172129, September 12, 2008), the two-year period should be reckoned
from the close of the taxable quarter when the sales were made.
In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No. 162155,
August 28, 2007, 531 SCRA 436), we said that as between the Civil Code, which provides that a
year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is
composed of 12 calendar months, it is the latter that must prevail being the more recent law,
following the legal maxim, Lex posteriori derogat priori.
Thus, applying this to the present case, the two-year period to file a claim for tax refund/credit
for the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence,
respondents administrative claim was timely filed.
2. Yes. We find the filing of the judicial claim with the CTA 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 taxpayers
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.
Subsection (A) of Section 112 of the NIRC 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.
The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. is inapplicable as
the tax provision involved in that case is Section 306, now Section 229 of the NIRC. Section 229
does not apply to refunds/credits of input VAT.
The premature filing of respondents claim for refund/credit of input VAT before the CTA warrants
a dismissal inasmuch as no jurisdiction was acquired by the CTA.
b. CIR v San Roque Power Corporation GR 187485 SANTOS

FACTS: San Roque is a domestic corporation with principal office at Barangay San Roque, San
Manuel, Pangasinan and operates power-generating plants under contract with the
Government.
San Roque entered into a Power Purchase Agreement ("PPA") with the National Power
Corporation ("NPC") to develop hydro-potential of the Lower Agno River and generate additional
power and energy for the Luzon Power Grid, by building the San Roque Multi-Purpose Project
located in San Manuel, Pangasinan.
For the first, second, third, and fourth quarters of 2001, San Roque filed its VAT returns . These
returns were all subsequently amended on March 28, 2003. On the other hand, San Roque
originally filed its separate claims for refund for the first, second, third, and fourth quarters of
200, and subsequently filed amended claims for all quarters on March 28, 2003.
Moreover, the Petition for Review was filed on April 10, 2003. Counting from the respective
dates when San Roque originally filed its VAT returns for the first, second, third and fourth
quarters of 2001, the administrative claims for refund (original and amended) and the Petition
for Review fall within the two-year prescriptive period.
On 10 April 2003, a mere 13 days after it filed its amended administrative claim with the
Commissioner on 28 March 2003, San Roque filed a Petition for Review with the CTA.
ISSUE: W/N San Roque was correct in filing its judicial claim.
HELD: NO! San Roque must have waited for the lapse of 120 days after the administrative
claim was filed.
Sec. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-Rated or Effectively Zero-Rated Sales. Any VAT-registered person, whose sales
are zero-rated or effectively zero-rated may, within two (2) years after the close of the
taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been applied against output tax:
Provided, however, That in the case of zero-rated sales under Section 106(A)(2) (a)(1), (2) and
(B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof
had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services,
and the amount of creditable input tax due or paid cannot be directly and entirely attributed to
any one of the transactions, it shall be allocated proportionately on the basis of the volume of
sales.
xxx
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases,
the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes
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) and (B) hereof.
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.
xxx
From this we gather two crucial facts: first, San Roque did not wait for the 120-day period to
lapse before filing its judicial claim; second, San Roque filed its judicial claim more than four (4)
years before the Atlas doctrine, which was promulgated by the Court on 8 June 2007.
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 Roques application for tax
refund or credit. It is indisputable that compliance with the 120-day waiting period is mandatory
and jurisdictional.
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 taxpayers petition.
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.
San Roques failure to comply with the 120-day mandatory period renders its petition for review
with the CTA void. Article 5 of the Civil Code provides, "Acts executed against provisions of
mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity."
San Roques void petition for review cannot be legitimized by the CTA or this Court because
Article 5 of the Civil Code states that such void petition cannot be legitimized "except when the
law itself authorizes [its] validity." There is no law authorizing the petitions validity.
Whether the Atlas doctrine or the Mirant doctrine is applied to San Roque is immaterial because
what is at issue in the present case is San Roques non-compliance with the 120-day mandatory
and jurisdictional period, which is counted from the date it filed its administrative claim with the
Commissioner. The 120-day period may extend beyond the two-year prescriptive period, as
long as the administrative claim is filed within the two-year prescriptive period. However, San
Roques fatal mistake is that it did not wait for the Commissioner to decide within the 120-day
period, a mandatory period whether the Atlas or the Mirant doctrine is applied.
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory
periods were already in the law. Section 112(C) expressly grants the Commissioner 120 days
within which to decide the taxpayers claim. The law is clear, plain, and unequivocal: "x x x the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes
within one hundred twenty (120) days from the date of submission of complete documents."
Following the verba legis doctrine, this law 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 Commissioners 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. In San Roques case, it filed its petition with the CTA
a mere 13 days after it filed its administrative claim with the Commissioner. Indisputably, San
Roque knowingly violated the mandatory 120-day period, and it cannot blame anyone but itself.
c. Nippon Express Corp v CIR GR 196907 SUPAPO

DOCTRINE: the 120+30-day period is mandatory and jurisdictional and hence
must be strictly complied with before filing a claim to the CTA.
FACTS:
1.
Nippon Express Philippines is a VAT-registered
large taxpayer.
2.
For taxable year 2001, Nippon wanted to refund
(P20,345,824.29) representing excess input tax attributable to its zero-rated
sales.
3.
Pending review by the BIR (1 day after filing for
refund), Nippon requested CTA for a tax credit certification for the said
excess.
4.
As to the timeliness of the filing of Nippons
administrative and judicial claims, the CTA First Division ruled that while the
administrative application for refund was made within the two-year
prescriptive period, Nippons immediate recourse to the court was a
premature invocation of the courts jurisdiction due to the non-observance of
the procedure in Section 112(D) of the NIRC providing that an appeal may be
made with the CTA within 30 days from the receipt of the decision of the CIR
denying the claim or after the expiration of the 120-day period without action
on the part of the CIR.
5.
Nevertheless, the CTA ruled that the CIR deemed
waived its objection thereto when it filed its Answer.
6.
The CIR elevated the case to the CTA En banc. It
denied Nippons claim for refund or issuance of a tax credit certificate for lack
of merit.
7.
Subsequently, the CTA en banc changed its
position and granted Nippons motion.
8.
However, upon reconsideration, said court held that
the 120-day period under Section 112(D) of NIRC, which granted the CIR the
opportunity to act on the claim for refund, was jurisdictional in nature such
that Nippons failure to observe the said period before resorting to judicial
action warranted the dismissal of its petition for review for having been
prematurely filed.
9.
Now, before the SC, Nippon argued that the nonexhaustion of administrative remedies is not a jurisdictional defect as to
prevent the tax court from taking cognizance of the case.
10.
It further argued that it merely renders the filing of
the case premature and makes it susceptible to dismissal for lack of cause of
action, if invoked. Considering, however, that the CIR failed to seasonably
object to the filing of the case with the CTA, it is deemed to have waived any
defect in the petition for review.
ISSUE: Whether the CTA had no jurisdiction over the case because the
expiration of 120-day period in filing for claims and refunds was not observed.
HELD: YES! The petition was premature. Hence, CTA had no jurisdiction to
hear the case.
A simple reading of Section 112(D) (now C) reveals that the taxpayer may appeal
the denial or the inaction of the CIR only within thirty (30) days from receipt of the
decision denying the claim or the expiration of the 120-day period given to the
CIR to decide the claim. Because the law is categorical in its language, there is
no need for further interpretation by the courts and non-compliance with the
provision cannot be justified.
Moreover, contrary to petitioners position, the 120+30-day period is indeed
mandatory and jurisdictional, as recently ruled in Commissioner of Internal
Revenue v. San Roque Power Corporation. Thus, failure to observe the said
period before filing a judicial claim with the CTA would not only make such
petition premature, but would also result in the non- acquisition by the CTA of
jurisdiction to hear the said case.
Because the 120+30 day period is jurisdictional, the issue of whether petitioner
complied with the said time frame may be broached at any stage, even on
appeal. Jurisdiction cannot be waived. (Parts omitted) Consequently, the fact that
the CIR failed to immediately express its objection to the premature filing of the
petition for review before the CTA is of no moment.
Pursuant to the ruling of the Court in San Roque, the 120+30-day period is
mandatory and jurisdictional from the time of the effectivity of R.A. No. 8424 or
the Tax Reform Act of 1997. The Court, however, took into consideration the
issuance by the BIR of Ruling No. DA- 489-03, which expressly stated that the
taxpayer need not wait for the lapse of the 120-day period before seeking judicial
relief. Because taxpayers cannot be faulted for relying on this declaration by the
BIR, the Court deemed it reasonable to allow taxpayers to file its judicial claim
even before the expiration of the 120-day period. This exception is to be
observed from the issuance of the said ruling on December 10, 2003 up until its
reversal by Aichi on October 6, 2010. In the landmark case of Aichi, this Court
made a definitive statement that the failure of a taxpayer to wait for the decision
of the CIR or the lapse of the 120-day period will render the tiling of the judicial
claim with the CTA premature. As a consequence, its promulgation once again
made it clear to the taxpayers that the 120+30-day period must be observed.
As laid down in San Roque, judicial claims filed from January 1, 1998 until the
present should strictly adhere to the 120+30-day period referred to in Section 112
of the NIRC. The only exception is the period from December 10, 2003 until
October 6, 2010, during which, judicial claims may be tiled even before the
expiration of the 120-day period granted to the CIR to decide on the claim for
refund.
As its judicial claim was filed during which strict compliance with the 120+30-day
period was required, the Court cannot but declare that the filing of the petition for
review with the CTA was premature and that the CTA had no jurisdiction to hear
the case.
d. CIR v Team Sual Corporation GR 205055 VELASCO
DOCTRINE
There is nothing in Section 112 of the NIRC, RR 3-88 or RMO 53-98 itself that requires
submission of the complete documents enumerated in RMO 53-98 for a grant of a refund or
credit of input VAT.
Under Section 112(C) of the NIRC, in case of failure on the part of the CIR to act on the
application, the taxpayer affected may, within 30 days after the expiration of the 120-day period,
appeal the unacted claim with the CTA.
FACTS
Team Sual Corporation (TSC) applied for the VAT zero-rating of its sale of electric
power to NPC for the taxable year 2004.
TSCs application was subsequently approved by the BIR.
TSC filed its quarterly VAT returns with the BIR.
TSC filed an administrative claim for refund of its input VAT, which it incurred for
the four quarters of 2004.
Due to the BIRs inaction, TSC filed a petition for review with the CTA.
CTA: TSCs sale of electric power to NPC was effectively zero-rated. TSC
complied with the five requirements to be entitled to a refund or issuance of tax credit
certificate on its input VAT, to wit:
a. That there must be zero-rated or effectively zero-rated sales;
b. That input taxes were incurred or paid;
c. That such input taxes are attributable to zero-rated sales or
effectively zero-rated sales;
d. That the input taxes were not applied against any output VAT
liability; and
e. That the claim for refund was filed within the two-year prescriptive
period.
ISSUE: WON TSC is entitled to a refund or tax credit
HELD: YES
Section 112 of the NIRC provides the requirements to enable the taxpayer to claim a refund or
credit of its input tax.
Under Section 112(C) of the NIRC, the CIR has 120 days to decide the
taxpayers claim from the date of submission of complete documents in support of the
application filed in accordance with Section 112(A) of the NIRC.
Once the taxpayer has established by sufficient evidence that it is entitled to a
refund or issuance of a tax credit certificate, in accordance with the requirements of
Section 112(A) of the NIRC, its claim should be granted.
Applications for refund or credit of input tax with the BIR must comply with the
appropriate revenue regulations. Thus, applications must be in accordance with Section
2 of Revenue Regulations No. 3-88.
CTA found that TSC complied with the requirements of Section 112(A) of the
NIRC and granted its claim for refund or credit of input VAT. The findings of fact of the
CTA are not to be disturbed unless clearly shown to be unsupported by substantial

evidence.
The CIR insists that TSC failed to submit the complete documents enumerated in RMO 53-98.
Thus, the 120-day period given for it to decide allegedly did not commence.
There is nothing in Section 112 of the NIRC, RR 3-88 or RMO 53-98 itself that
requires submission of the complete documents enumerated in RMO 53-98 for a grant of
a refund or credit of input VAT.
The subject of RMO 53-98 states that it is a "Checklist of
Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities x x x."
TSC was applying for a grant of refund or credit of its input tax.
There was no allegation of an audit being conducted by the CIR.
Even assuming that RMO 53-98 applies, it specifically states that
some documents are required to be submitted by the taxpayer "if applicable."
Under Section 112(C) of the NIRC, in case of failure on the part of the CIR to act
on the application, the taxpayer affected may, within 30 days after the expiration of the
120-day period, appeal the unacted claim with the CTA.
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.
The CIR failed to act on TSC's claim within this 120-day period
thus, TSC filed its petition for review with the CTA within 30 days after the
expiration of the 120-day period. Accordingly, there is no merit in the CIR' s
argument that the judicial claim was prematurely filed.
COMPLIANCE REQUIREMENTS
A. Invoicing and Accounting Requirements: Information in the VAT Invoice or Official
Receipts
a. Panasonic Communication Imaging Corp v CIR GR 178090
VILLAFUERTE
Doctrine:
Zero-rated transactions generally refer to the export sale of goods and services. The tax
rate in this case is set at zero. When applied to the tax base or the selling price of the
goods or services sold, such zero rate results in no tax chargeable against the foreign
buyer or customer. But, although the seller in such transactions charges no output tax,
he can claim a refund of the VAT that his suppliers charged him. The seller thus enjoys
automatic zero rating, which allows him to recover the input taxes he paid relating to the
export sales, making him internationally competitive. For the effective zero rating of such
transactions, however, the taxpayer has to be VAT-registered and must comply with
invoicing requirements.
Facts: Claiming that the input VAT it paid remained unutilized or unapplied, petitioner
Panasonic filed with the Bureau of Internal Revenue (BIR) two separate applications for
refund or tax credit of what it paid. When the BIR did not act on the same, Panasonic
filed a petition for review with the CTA, averring the inaction of the respondent
Commissioner of Internal Revenue (CIR) on its applications.
CTAs First Division rendered judgment denying the petition for lack of merit. The First
Division said that, while petitioner Panasonics export sales were subject to 0% VAT
under Section 106(A)(2)(a)(1) of the 1997 NIRC, the same did not qualify for zero-rating
because the word "zero-rated" was not printed on Panasonics export invoices. This
omission, said the First Division, violates the invoicing requirements of Section 4.108-1
of Revenue Regulations (RR) 7-95.
Petitioner Panasonic appealed the First Divisions decision to the CTA en banc. CTA en
banc upheld the First Divisions decision and resolution and dismissed the petition.
Panasonic filed a motion for reconsideration of the en banc decision but this was denied.
Thus, petitioner filed the present petition in accordance with R.A. 9282.
Issue: whether or not the CTA en banc correctly denied petitioner Panasonics claim for
refund of the VAT it paid as a zero-rated taxpayer on the ground that its sales invoices
did not state on their faces that its sales were "zero-rated."
Held: Yes.
Zero-rated transactions generally refer to the export sale of goods and services. The tax
rate in this case is set at zero. When applied to the tax base or the selling price of the
goods or services sold, such zero rate results in no tax chargeable against the foreign
buyer or customer. But, although the seller in such transactions charges no output tax,
he can claim a refund of the VAT that his suppliers charged him. The seller thus enjoys
automatic zero rating, which allows him to recover the input taxes he paid relating to the
export sales, making him internationally competitive.
For the effective zero rating of such transactions, however, the taxpayer has to be VATregistered and must comply with invoicing requirements. Interpreting these
requirements, respondent CIR ruled that under Revenue Memorandum Circular (RMC)
42-2003, the taxpayers failure to comply with invoicing requirements will result in the
disallowance of his claim for refund. RMC 42-2003 provides:
A-13. Failure by the supplier to comply with the invoicing requirements on the
documents supporting the sale of goods and services will result to the
disallowance of the claim for input tax by the purchaser-claimant.
Petitioner Panasonics citation of Intel Technology Philippines, Inc. v. Commissioner of
Internal Revenue is misplaced. Quite the contrary, it strengthens the position taken by
respondent CIR. In that case, the CIR denied the claim for tax refund on the ground of
the taxpayers failure to indicate on its invoices the "BIR authority to print." But Sec.
4.108-1 required only the following to be reflected on the invoice:
1. The name, taxpayers identification number (TIN) and address of seller;
2. Date of transaction;
3. Quantity, unit cost and description of merchandise or nature of service;
4. The name, TIN, business style, if any, and address of the VAT-registered
purchaser, customer or client;
5. The word "zero-rated" imprinted on the invoice covering zero-rated sales; and
6. The invoice value or consideration.
This Court held that, since the "BIR authority to print" is not one of the items required to
be indicated on the invoices or receipts, the BIR erred in denying the claim for refund.
Here, however, the ground for denial of petitioner Panasonics claim for tax refundthe
absence of the word "zero-rated" on its invoicesis one which is specifically and
precisely included in the above enumeration. Consequently, the BIR correctly denied
Panasonics claim for tax refund.
b. Microsoft Phil, Inc. v CIR ATIENZA

Doctrine: The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC
and revenue regulations are clear. A VAT-registered taxpayer is required to comply with all the
VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for
goods or services attributable to zero-rated sales. A VAT invoice is an invoice that meets the
invoicing requirements.
FACTS:
Petitioner Microsoft Philippines, Inc. (Microsoft) is a value-added tax (VAT) taxpayer duly
registered with the Bureau of Internal Revenue (BIR). Microsoft renders marketing services to
Microsoft Operations Pte Ltd. (MOP) and Microsoft Licensing, Inc. (MLI), both affiliated nonresident foreign corporations. The services are paid for in acceptable foreign currency and
qualify as zero-rated sales for VAT purposes under Section 108(B)(2) of the National Internal
Revenue Code (NIRC) of 1997,5 as amended.
Microsoft paid VAT input taxes in the amount of P11,449,814.99 on its domestic purchases of
taxable goods and services. On 27 December 2002, Microsoft filed an administrative claim for
tax credit of VAT input taxes in the amount of P11,449,814.99 with the BIR. On 23 April 2003,
due to the BIR's inaction, Microsoft filed a petition for review with the CTA
In a Decision dated 31 August 2006, the CTA Second Division denied the claim for tax credit of
VAT input taxes. The CTA explained that Microsoft failed to comply with the invoicing
requirements of Sections 113 and 237 of the NIRC as well as Section 4.108-1 of Revenue
Regulations No. 7-957 (RR 7-95). The CTA stated that Microsoft's official receipts do not
bear the imprinted word zero-rated on its face, thus, the official receipts cannot be
considered as valid evidence to prove zero-rated sales for VAT purposes.
ISSUE: WON Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes on
domestic purchases of goods or services attributable to zero-rated sales for the year 2001 even
if the word zero-rated is not imprinted on Microsoft's official receipts.
HELD: NO
Microsoft insists that Sections 113 and 237 of the NIRC and Section 4.108-1 of RR 7-95 do not
provide that failure to indicate the word zero-rated in the invoices or receipts would result in
the outright invalidation of these invoices or receipts and the disallowance of a claim for tax
credit or refund.
At the outset, a tax credit or refund, like tax exemption, is strictly construed against the taxpayer.
The taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to the
refund or credit, in this case VAT input tax, by submitting evidence that he has complied with the
requirements laid down in the tax code and the BIR's revenue regulations under which such
privilege of credit or refund is accorded.
Sec. 4.108-1. Invoicing Requirements. All VAT-registered persons shall, for every sale or
lease of goods or properties or services, issue duly registered receipts or sales or commercial
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer
or client;
5. the word zero-rated imprinted on the invoice covering zero-rated sales; and
6. the invoice value or consideration.
invoices or receipts and this shall be considered as a VAT invoice. All purchases covered by
invoices other than a VAT invoice shall not give rise to any input tax. (Emphasis supplied)
The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue
regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT invoicing
requirements to be able to file a claim for input taxes on domestic purchases for goods or
services attributable to zero-rated sales. A VAT invoice is an invoice that meets the
requirements of Section 4.108-1 of RR 7-95. Contrary to Microsoft's claim, RR 7-95 expressly
states that [A]ll purchases covered by invoices other than a VAT invoice shall not give rise
to any input tax. Microsoft's invoice, lacking the word zero-rated, is not a VAT invoice, and
thus cannot give rise to any input tax.
The reason for this has been explained in Panasonic v. Commissioner of Internal Revenue.
There, It was held that 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 is actually paid. Absent such word, the government may be refunding taxes it did not
collect.
c. Western Mindanao Power Corp v CIR BUENAVENTURA

FACTS: Petitioner WMPC is a domestic corporation engaged in the production and sale of
electricity. It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer.
Petitioner alleges that it sells electricity solely to the National Power Corporation (NPC), which is
in turn exempt from the payment of all forms of taxes, duties, fees and imposts, pursuant to
Section 13 of Republic Act (R.A.) No. 6395 (An Act Revising the Charter of the National Power
Corporation). In view thereof and pursuant to Section 108(B) (3) of the National Internal
Revenue Code (NIRC),petitioners power generation services to NPC is zero-rated.
Under Section 112(A) of the NIRC, a VAT-registered taxpayer may, within two years after the
close of the taxable quarter, apply for the issuance of a tax credit or refund of creditable input
tax due or paid and attributable to zero-rated or effectively zero-rated sales. Hence, on 20 June
2000 and 13 June 2001, WMPC filed with the Commissioner of Internal Revenue (CIR)
applications for a tax credit certificate of its input VAT covering the taxable 3rd and 4th quarters
of 1999 (amounting to 3,675,026.67) and all the taxable quarters of 2000 (amounting to
5,649,256.81).
Noting that the CIR was not acting on its application, and fearing that its claim would soon be
barred by prescription, WMPC on 28 September 2001 filed with the Court of Tax Appeals (CTA)
in Division a Petition for Review docketed as C.T.A. Case No. 6335, seeking refund/tax credit
certificates for the total amount of 9,324,283.30.
The CIR filed its Comment on the CTA Petition, arguing that WMPC was not entitled to the
latters claim for a tax refund in view of its failure to comply with the invoicing requirements
under Section 113 of the NIRC in relation to Section 4.108-1 of RR 7-95, which provides:
SECTION 4.108-1. Invoicing Requirements All VAT-registered persons shall, for every sale
or lease of goods or properties or services, issue duly registered receipts or sales or commercial
1. the name, TIN and address of seller;

2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of service;
4.
the name, TIN, business style, if any, and address of the VAT-registered purchaser,
customer or client;
5. the word zero rated imprinted on the invoice covering zero-rated sales; and
6. the invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal or market value is higher
than the actual consideration, the VAT shall be separately indicated in the invoice or receipt.
invoice or receipts and this shall be considered as a VAT Invoice. All purchases covered by
invoices other than VAT Invoice" shall not give rise to any input tax.
If the taxable person is also engaged in exempt operations, he should issue separate invoices
or receipts for the taxable and exempt operations. A VAT Invoice shall be issued only for sales
of goods, properties or services subject to VAT imposed in Sections 100 and 102 of the Code.
The invoice or receipt shall be prepared at least in duplicate, the original to be given to the
buyer and the duplicate to be retained by the seller as part of his accounting records.
WMPC countered that the invoicing and accounting requirements laid down in RR 7-95 were
merely compliance requirements, which were not indispensable to establish the claim for
refund of excess and unutilized input VAT. Also, Section 113 of the NIRC prevailing at the time
the sales transactions were made did not expressly state that failure to comply with all the
invoicing requirements would result in the disallowance of a tax credit refund. [7] The express
requirement that the term zero-rated sale shall be written or printed prominently on the VAT
invoice or official receipt for sales subject to zero percent (0%) VAT appeared in Section 113 of
the NIRC only after it was amended by Section 11 of R.A. 9337. This amendment cannot be
applied retroactively, considering that it took effect only on 1 July 2005, or long after petitioner
filed its claim for a tax refund, and considering further that the RR 7-95 is punitive in nature.
Further, since there was no statutory requirement for imprinting the phrase zero-rated on
official receipts prior to 1 July 2005, the RR 7-95 constituted undue expansion of the scope of
the legislation it sought to implement.
WMPC appealed to the CTA En Banc, which on 15 November 2007 issued a Decision
dismissing the appeal and affirming the CTA ruling. The CTA En Banc held that the receipts and
evidence presented by petitioner failed to fully substantiate the existence of the latters
effectively zero-rated sales to NPC for the 3rd and 4th quarters of taxable year 1999 and the
four quarters of taxable year 2000.
ISSUE: WON the CTA En Banc seriously erred in dismissing the claim of petitioner for a refund
or tax credit on input tax on the ground that the latters Official Receipts do not contain the
phrase zero-rated
HELD: NO.
Being a derogation of the sovereign authority, a statute granting tax exemption is strictly
construed against the person or entity claiming the exemption. When based on such statute, a
claim for tax refund partakes of the nature of an exemption. Hence, the same rule of strict
interpretation against the taxpayer-claimant applies to the claim.
In the present case, petitioners claim for a refund or tax credit of input VAT is anchored on
Section 112(A) of the NIRC, viz:
Section 112. Refunds or Tax Credits of Input Tax. (A) Zero-rated or Effectively Zero-rated Sales. - any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output tax: Provided, however, That in
the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1)
and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted
for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP):
Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale
and also in taxable or exempt sale of goods of properties or services, and the amount of
creditable input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume of sales.
Thus, a taxpayer engaged in zero-rated or effectively zero-rated sale may apply for the issuance
of a tax credit certificate, or refund of creditable input tax due or paid, attributable to the sale.
In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant
of the claim under substantive law. It must also show satisfaction of all the documentary and
evidentiary requirements for an administrative claim for a refund or tax credit. Hence, the mere
fact that petitioners application for zero-rating has been approved by the CIR does not, by itself,
justify the grant of a refund or tax credit. The taxpayer claiming the refund must further comply
with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue
regulations implementing them.
Under the NIRC, a creditable input tax should be evidenced by a VAT invoice or official receipt,
which may only be considered as such when it complies with the requirements of RR 7-95,
particularly Section 4.108-1. This section requires, among others, that (i)f the sale is subject to
zero percent (0%) value-added tax, the term zero-rated sale shall be written or printed
prominently on the invoice or receipt.
We are not persuaded by petitioners argument that RR 7-95 constitutes undue expansion of the
scope of the legislation it seeks to implement on the ground that the statutory requirement for
imprinting the phrase zero-rated on VAT official receipts appears only in Republic Act No.
9337. This law took effect on 1 July 2005, or long after petitioner had filed its claim for a refund.
RR 7-95, which took effect on 1 January 1996, proceeds from the rule-making authority granted
to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and
its amendments. In Panasonic Communications Imaging Corporation of the Philippines v.
Commissioner of Internal Revenue, we ruled that this provision is reasonable and is in accord
with the efficient collection of VAT from the covered sales of goods and services. Moreover, we
have held in Kepco Philippines Corporation v. Commissioner of Internal Revenue[19] that the
subsequent incorporation of Section 4.108-1 of RR 7-95 in Section 113 (B) (2) (c) of R.A. 9337
actually confirmed the validity of the imprinting requirement on VAT invoices or official receipts
a case falling under the principle of legislative approval of administrative interpretation by
reenactment.
In fact, this Court has consistently held as fatal the failure to print the word zero-rated on the
VAT invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales,
even if the claims were made prior to the effectivity of R.A. 9337. Clearly then, the present
Petition must be denied.

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VALUE ADDED TAX

NATURE, CHARACTERISTICS AND PURPOSE OF VAT

1 | Taxation Law 2 DP | Atty. Marissa Cabreros

2 | Taxation Law 2 DP | Atty. Marissa Cabreros

3 | Taxation Law 2 DP | Atty. Marissa Cabreros

4 | Taxation Law 2 DP | Atty. Marissa Cabreros

2. Abakada Guro et, al. v Ermita, et. al. GR 168056 MANCIA

5 | Taxation Law 2 DP | Atty. Marissa Cabreros

6 | Taxation Law 2 DP | Atty. Marissa Cabreros

7 | Taxation Law 2 DP | Atty. Marissa Cabreros

8 | Taxation Law 2 DP | Atty. Marissa Cabreros

PERSONS LIABLE: in the course of trade of business v isolated transaction v incidental to

9 | Taxation Law 2 DP | Atty. Marissa Cabreros

2. Mindanao II Geothermal Partnership v CIR GR 193301 SANTOS

10 | Taxation Law 2 DP | Atty. Marissa Cabreros

11 | Taxation Law 2 DP | Atty. Marissa Cabreros

OUTPUT TAX ON SALE OF SERVICES

12 | Taxation Law 2 DP | Atty. Marissa Cabreros

ensure operational orderliness and administrative efficiency of Philamlife and

regular conduct or pursuit of a commercial or an economic activity, regardless of

14 | Taxation Law 2 DP | Atty. Marissa Cabreros

BIR sent SM Prime a Preliminary Assessment

c. Diaz and Timbol v Secretary of Finance GR 193007

16 | Taxation Law 2 DP | Atty. Marissa Cabreros

17 | Taxation Law 2 DP | Atty. Marissa Cabreros

B. Zero rated sale of services: Foreign Currency Denominated Sale

18 | Taxation Law 2 DP | Atty. Marissa Cabreros

19 | Taxation Law 2 DP | Atty. Marissa Cabreros

C. Zero rated sale of services: Contractors and Subcontractors for Export

21 | Taxation Law 2 DP | Atty. Marissa Cabreros

22 | Taxation Law 2 DP | Atty. Marissa Cabreros

23 | Taxation Law 2 DP | Atty. Marissa Cabreros

Finally, an examination of Section 4.100.2 of Revenue Regulation 7-95 in relation to

It is also registered with the BIR as a VAT taxpayer.

24 | Taxation Law 2 DP | Atty. Marissa Cabreros

25 | Taxation Law 2 DP | Atty. Marissa Cabreros

It is undisputed that respondent is engaged in the export business and is

b. Toshiba Information Equipment GR 157594 FERNANDEZ

In 1995, Toshiba registered w/ Philippine Economic Zone Authority (PEZA) as an

An Ecozone enterprise is a VAT-exempt entity. Sales of goods, properties, and services

PEZA-registered enterprises, which would necessarily be located within Ecozones, are

27 | Taxation Law 2 DP | Atty. Marissa Cabreros

28 | Taxation Law 2 DP | Atty. Marissa Cabreros

In this case, the Court also made a pronouncement that a VAT-registered

29 | Taxation Law 2 DP | Atty. Marissa Cabreros

SC opined that copra is not food and is not

30 | Taxation Law 2 DP | Atty. Marissa Cabreros

1. WON the sale of pharmacy drugs/medicine to in patients is covered by the

31 | Taxation Law 2 DP | Atty. Marissa Cabreros

CIR v Phil ealth Care Providers GR 168129

32 | Taxation Law 2 DP | Atty. Marissa Cabreros

INPUT TAXES ON PURCHASES OF GOODS OR SERVICES AND IMPORTATION

33 | Taxation Law 2 DP | Atty. Marissa Cabreros

34 | Taxation Law 2 DP | Atty. Marissa Cabreros

35 | Taxation Law 2 DP | Atty. Marissa Cabreros

REFUNDS OR TAX CREDIT INPUT TAX

36 | Taxation Law 2 DP | Atty. Marissa Cabreros

Consequently, the following invoicing requirements enumerated in Section 4.108-1 of Revenue

37 | Taxation Law 2 DP | Atty. Marissa Cabreros

38 | Taxation Law 2 DP | Atty. Marissa Cabreros

b. CIR v San Roque Power Corporation GR 187485 SANTOS

39 | Taxation Law 2 DP | Atty. Marissa Cabreros

40 | Taxation Law 2 DP | Atty. Marissa Cabreros