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CIR vs Manila Mining Corporation

Case:

Facts:
Manila Mining Corporation, a mining corporation duly organized and existing under Philippines laws, is
registered with the Bureau of Internal Revenue (BIR) as a VAT-registered enterprise. it filed its VAT
Returns for the 1st, 2nd, 3rd and 4th quarters of 1991, respectively, with the BIR. It sold gold to the
Central Bank. Pursuant to the law, gold sold to the Central Bank is considered an export sale and is
subject to zero-rated if such sale is made by a VAT registered person. So MMC filed an application for tax
refund/credit of the input VAT it paid. As the CIR failed to act upon respondent’s application within sixty
(60) days from the dates of filing, it filed a Petition for Review against the CIR before the CTA seeking the
issuance of tax credit certificate or refund.

PROCEDURAL FACTS:
Respondent filed in CTA Case No. 4968 a "Request for Admissions". The CIR’s Reply, however, was not
verified, prompting respondent to file a "SUPPLEMENT (To Annotation of Admission)" alleging that as the
reply was not under oath, "an implied admission of [its requests] arose]" as a consequence thereof

CTA, finding that the matters subject of respondent’s Request for Admissions are "relevant to the facts
stated in the petition for review" and there being an implied admission by the CIR

The CIR filed on August 16, 1993 its Answer, it averring that sales of gold to the Central Bank may not be
legally considered export sales for purposes of Section 100(a) in relation to Section 100(a)(1)21 of the
Tax Code

BACK TO SUBSTANTIVE
Upon the issue of whether respondent’s sales of gold to the BSP during the four quarters of 1991 are
subject to 10% VAT under Section 100 of the Tax Code or should be considered zero-rated, the CTA held
that said sales are not subject to 10% output VAT

Nonetheless, the CTA denied respondent’s claim for refund of input VAT for failure to prove that it paid
the amounts claimed as such for the year 1991, no sales invoices, receipts or other documents as
required under Section 2(c)(1) of Revenue Regulations No. 3-88 having been presented

Respondent’s motion for reconsideration of the CTA decision having been denied, respondent brought
the case to the Court of Appeals before which it contended that the CTA erred in denying the refund for
insufficiency of evidence. Court of Appeals reversed the decision of the CTA and granted respondent’s
claim for refund or issuance of tax credit certificates. The appellate court held that there was no need for
respondent to present the photocopies of the purchase invoices or receipts evidencing the VAT paid

Issue:
Whether respondent adduced sufficient evidence to prove its claim for refund

Ruling:
No

The sale of gold to Central Bank is considered as export sale subject to zero-rate pursuant to Section 100
of the Tax Code, as amended by Executive Order No. 273. As export sales, the sale of gold to the Central
Bank is zero-rated, hence, no tax is chargeable to it as purchaser. Zero rating is primarily intended to be
enjoyed by the seller – respondent herein, which charges no output VAT but can claim a refund of or a
tax credit certificate for the input VAT previously charged to it by suppliers

For a judicial claim for refund to prosper, however, respondent must not only prove that it is a VAT
registered entity and that it filed its claims within the prescriptive period. It must substantiate the input
VAT paid by purchase invoices or official receipts.

[S]ale of gold to the Central Bank should not be subject to the 10% VAT-output tax but this does not ipso
facto mean that [the seller] is entitled to the amount of refund sought as it is required by law to present
evidence showing the input taxes it paid during the year in question. What is being claimed in the instant
petition is the refund of the input taxes paid by the herein petitioner on its purchase of goods and
services. Hence, it is necessary for the Petitioner to show proof that it had indeed paid the said input
taxes during the year 1991. In the case at bar, Petitioner failed to discharge this duty. It did not adduce in
evidence the sales invoice, receipts or other documents showing the input value added tax on the
purchase of goods and services

A photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be submitted
together with the application.

Mere listing of VAT invoices and receipts, even if certified to have been previously examined by an
independent certified public accountant, would not suffice to establish the truthfulness and accuracy of
the contents thereof unless offered and actually verified by this Court. CTA Circular No. 1-95, as
amended by CTA Circular No. 10-97, requires that the photocopies of invoices, receipts and other
documents covering said accounts or payments must be pre-marked by the party and submitted to
this Court.

For failure of respondent then not only to strictly comply with the rules of procedure but also to
establish the factual basis of its claim for refund, this Court has to deny its claim. A claim for refund is in
the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer and
liberally in favor of the taxing authority

Notes:
There is nothing, however, in CTA Circular No. 1-95, as amended by CTA Circular No. 10-97, which either
expressly or impliedly suggests that summaries and schedules of input VAT payments, even if certified by
an independent CPA, suffice as evidence of input VAT payments.

REQUIREMENTS UNDER CTA CIRCULAR


1. The party who desires to introduce as evidence such voluminous documents must present:
(a) a Summary containing the total amount/s of the tax account or tax paid for the period involved
and a chronological or numerical list of the numbers, dates and amounts covered by the invoices
or receipts; and
(b) a Certification of an independent Certified Public Accountant attesting to the correctness of the
contents of the summary after making an examination and evaluation of the voluminous receipts
and invoices.

2. The method of individual presentation of each and every receipt or invoice or other documents for
marking, identification and comparison with the originals thereof need not be done before the Court or
the Commissioner anymore after the introduction of the summary and CPA certification. It is enough
that the receipts, invoices and other documents covering the said accounts or payments must be pre-
marked by the party concerned and submitted to the Court in order to be made accessible to the
adverse party whenever he/she desires to check and verify the correctness of the summary and CPA
certification.
Microsoft vs CIR

Case:
Petition for review on certiorari assailing the Decision of the Court of Tax Appeals (CTA) En Banc which
affirmed the Decision and Resolution of the CTA Second Division

Facts:
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 non-resident foreign corporations. The services
are paid for in acceptable foreign currency and qualify as zero-rated sales for VAT purposes

Microsoft filed an administrative claim for tax credit of VAT input taxes wit hthe BIR. The administrative
claim for tax credit was filed within two years from the close of the taxable quarters when the zero-rated
sales were made. due to the BIR's inaction, Microsoft filed a petition for review with the CTA. Microsoft
claimed to be entitled to a refund of unutilized input VAT attributable to its zero-rated sales and prayed
that judgment be rendered directing the claim for tax credit or refund of VAT input taxes

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. 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

Microsoft filed a motion for reconsideration which was denied by the CTA Second Division. Microsoft
then filed a petition for review with the CTA En Banc. CTA En Banc denied the petition for review and
affirmed in toto the Decision and resolution of the CTA second Division

Issue:
whether Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes

Ruling:
No.

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

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.
[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 printing of the word "zero-rated" is required to be placed on VAT invoices or receipts covering zero-
rated sales in order to be entitled to claim for tax credit or refund.

Notes:
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

SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. – All persons subject to an internal
revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five
pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least
in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or
nature of service x x x

SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. –


(A) Invoicing Requirements. – A VAT-registered person shall, for every sale, issue an invoice or receipt. In
addition to the information required under Section 237, the following information shall be indicated in
the invoice or receipt:
(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification
number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication
that such amount includes the value-added tax. x x x
KEPCO vs CIR

Case:
Petition for review on certiorari assailing Decision of the Court of Tax Appeals En Banc which denied
petitioner’s claim for refund or issuance of tax
credit certificate for the unapplied input value-added taxes attributable to zero-rated sales of services for
taxable year 1999, as well as its Resolution, which denied the motion for reconsideration

Facts:
Kepco Philippines Corporation (Kepco) is a domestic corporation. It is a value-added tax (VAT) registered
taxpayer engaged in the production and sale of electricity as an independent power producer. It sells its
electricity to the National Power Corporation (NPC). Kepco filed with respondent Commissioner of
Internal Revenue (CIR) an application for effective zero-rating of its sales of electricity to the NPC

KEPCO alleged that it incurred input VAT on its domestic purchases of goods and services that were used
in its production and sale of electricity to NPC. In its 1999 quarterly VAT returns filed with the Bureau of
Internal Revenue (BIR). Kepco filed an administrative claim for refund corresponding to its reported
unutilized input VAT for the four quarters of 1999. Kepco filed a petition for review before the CTA which
grants refund of unutilized input taxes attributable to zero-rated or effectively zero-rated sales.

CTA Second Division rendered a decision denying Kepco’s claim for refund for failure to properly
substantiate its effectively zero-rated sales. The tax court held that Kepco failed to comply with the
invoicing requirements.

In view of the denial of its motion for reconsideration, Kepco filed an appeal via petition for review
before the CTA En Banc. In view of the denial of its motion for reconsideration, Kepco filed an appeal via
petition for review before the CTA En Banc.

Hence this case

Issue:
Whether Kepco’s failure to imprint the words"zero-rated" on its official receipts issued to NPC justifies an
outright denial of its claim for refund of unutilized input
tax credits

Ruling:
There is no doubt that NPC is an entity with a special charter and exempt from payment of all forms of
taxes, including VAT. As such, services rendered by any VAT-registered person/entity, like Kepco, to NPC
are effectively subject to zero percent (0%) rate

For the effective zero rating of such services, however, the VAT-registered taxpayer must comply with
invoicing requirements under Sections 113 and 237 of the 1997 NIRC as implemented by Section 4.108-1
of R.R. No. 7-95
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 "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

It is the duty of Kepco to comply with the requirements, including the imprinting of the words "zero-
rated" in its VAT official receipts and invoices in order for its sales of electricity to NPC to qualify for zero-
rating

The imprinting of "zero-rated" is necessary to distinguish sales subject to 10% VAT, those that are subject
to 0% VAT (zero-rated) and exempt sales, to enable the Bureau of Internal Revenue to properly
implement and enforce the other provisions of the 1997 NIRC on VAT

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 was actually paid. If, absent
such word, a successful claim for input VAT is made, the government would be refunding money it did
not collect.

Section 264 categorically provides for penalties in case of "Failure or Refusal to Issue Receipts or Sales or
Commercial Invoices, Violations related to the Printing of such Receipts or Invoices and Other
Violations," but not to penalties for failure to comply with the requirement of invoicing

Notes:
Sec. 13 Non-profit Character of the Corporation x x x the Corporation, including its subsidiaries, is hereby
declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service
fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings.

Said revenue regulation is merely a precautionary measure to ensure the effective implementation of the
Tax Code. It was not used by the CTA to expound the meaning of Sections 113 and 237 of the NIRC. As a
matter of fact, the provision of Section 4.108-1 of R.R. 7-95 was incorporated in Section 113 (B)(2)(c) of
R.A. No. 9337
Panasonic vs CIR
Case:
petition for review puts in issue the May 23, 2007 Decision1 of the Court of Tax Appeals (CTA) en banc
which affirmed the denial of petitioner’s claim for refund

Facts:
Panasonic) produces and exports plain paper copiers and their sub-assemblies, parts, and components.
It is registered with the Board of Investments as a preferred pioneer enterprise. It is also a VAT
enterprise.

It generated export sales. Believing that these export sales were zero-rated for VAT, Panasonic paid input
VAT attributable to its zero rated sales.

Claiming that the input VAT it paid remained unutilized or unapplied, Panasonic filed with the BIR
applications for refund or tax credit. When the BIR did not act on the same, Panasonic filed a petition for
review with the CTA.

CTA’s First Division rendered judgment,3 denying the petition for lack of merit. petitioner Panasonic’s
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 Panasonic’s export invoices.

Its motion for reconsideration having been denied petitioner Panasonic appealed the First Division’s
decision to the CTA en banc. CTA en banc upheld the First Division’s decision and resolution and
dismissed the petition. It also denied the subsequent MR of Panasonic. Hence this petition.

Issue:
whether or not the CTA en banc correctly denied petitioner Panasonic’s
claim for refund of the VAT it paid

Ruling:
Under the VAT method of taxation, which is invoice-based, an entity can subtract from the VAT charged
on its sales or outputs the VAT it paid on its purchases, inputs and imports.

For the effective zero rating of such transactions, however, the taxpayer has to be VAT-registered and
must comply with invoicing requirements. the taxpayer’s failure to comply with invoicing requirements
will result in the disallowance of his claim for refund

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.
When petitioner Panasonic made the export sales subject of this case the rule that applied was Section
4.108-1 of RR 7-95. It already required the printing of the word "zero-rated" on the invoices covering
zero-rated sales. When R.A. 9337 amended the 1997 NIRC on November 1, 2005, it made this particular
revenue regulation a part of the tax code.

The requirement is reasonable and is in accord with the efficient collection of VAT from the
covered sales of goods and services.

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 was actually paid. If, absent
such word, a successful claim for input VAT is made, the government would be refunding money it did
not collect

Further, the printing of the word "zero-rated" on the invoice helps segregate sales that are subject to
10% (now 12%) VAT from those sales that are zero-rated.

Notes
Zero-rated transactions generally refer to the export sale of goods and services. 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.

when a seller charges VAT on its sale, it issues an invoice to the buyer, indicating the amount of VAT he
charged. For his part, if the buyer is also a seller subjected to the payment of VAT on his sales, he can use
the invoice issued to him by his supplier to get a reduction of his own VAT liability. The difference in tax
shown on invoices passed and invoices received is the tax paid to the government. In case the tax on
invoices received exceeds that on invoices passed, a tax refund may be claimed.