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Gentlemen :
This refers to your letter dated January 19, 2009 requesting for con rmation that
the input taxes shifted or passed-on to JGC Manila ROHQ by its local value-added tax
(VAT) registered suppliers of goods, properties and services may be recognized
outright as an expense for income tax purposes, or be added to the acquisition cost
upon purchase of the capital asset subject to depreciation, as the case may be.
It is represented that JGC Corporation Manila-ROHQ ("JGC Manila ROHQ") is a
multi-national company organized and existing under the laws of Japan and engaged in
the business of IT-enabled engineering, procurement and construction services.
On December 11, 2000, JGC Manila ROHQ registered with the Securities and
Exchange Commission (SEC) as a regional operating headquarters in the Philippines for
which it was issued a license to engage certain qualifying services, to wit:
• general administration and planning;
• business planning and coordination;
• sourcing/procurement of raw materials and components;
• corporate finance advisory services;
• marketing control and sales promotion;
• training and personnel management;
• logistics services; DHETIS
In Court of Appeals (CA) Case CA-G.R. S.P. Nos. 37205, 38958 and 39435 dated
July 10, 1998, involving Benguet Corporation vs. CIR, though the CA opined that the
remedy suggested by the CTA in the CTA cases mentioned above would not result in
the full recovery of the cost of input taxes, it did not disagree on the treatment of input
taxes as deduction for income tax purposes. A perusal of Revenue Regulations No. 9-89
(Guidelines in Determining Refundable/Creditable Input Taxes Attributable to Zero-
Rated Transactions), this O ce illustrated the sample journal entry to record
disallowance of input taxes attributed to zero-rated sales in a company's claim for
refund. The pro-forma journal entry includes a Debit to Purchase or Cost of Sales for an
amount equivalent to the disallowed input tax and a credit to Receivables. The
foregoing entry, a debit to Purchases or Cost of Sales of the amount of the disallowed
input tax is a cost recovery method whereby the amount of tax/cost (i.e., input tax) duly
identi able with the particular asset sold but cannot be passed on as part thereof may
be claimed as expense deductible from the taxpayer as gross income.
In BIR Ruling Nos. DA-636-06 dated October 27, 2006 and DA-(VAT-086)539-09
dated September 15, 2009, this O ce had already made con rmation that creditable
input taxes whose periods for refund have already prescribed may be deducted from
gross income for income tax purposes.
Finally, Revenue Memorandum Circular (RMC) No. 42-2003 dated July 15, 2003,
provides that the input VAT claimed for refund or tax credit may be charged to
appropriate expense account or asset account subject to depreciation, whichever is
applicable, in case the zero-rated sales fail to comply with the invoicing requirement,
e.g., including the TIN of the VAT registered seller-claimant in the VAT invoice or VAT
receipt it issued to its customers. Thus:
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
CD Technologies Asia, Inc. 2017 cdasiaonline.com
disallowance of the claim for input tax by the purchaser-claimant. AEcIaH
This ruling is being issued on the basis of the foregoing facts as represented.
However, if upon investigation it will be disclosed that the facts are different, then this
ruling shall be considered null and void.