ATLAS CONSOLIDATED VS. CIR Facts: Atlas Consolidated is a zero-rated VAT person for being an exporter of copper concentrates.

On January 1994, Atlas filed its VAT return for the fourth quarter of 1993, showing a total input tax and an excess VAT credit. Then, on January 1996, Atlas filed for a tax refund or tax credit certificate with CIR. However, the CTA denied Atlas claim for refund due to Atlas failure to comply with the documentary requirements prescribed under Sec. 16 of RR No. 5-87, as amended by RR No. 3-88. CTA denied Atlas MR stating that Atlas has failed to substantiate its claim that it has not applied its alleged excess in put taxes to any of its subsequent quarters output tax liability. The CA affirmed CTAs ruling. ISSUE: What are the documents required to claim for VAT input refund? W/N Atlas is entitled to claim to a tax refund. Ruling: When claiming tax refund/credit, the VAT-registered taxpayer must be able to establish that it does not have refundable or creditable input VAT, and the same has not been applied against its output VAT liabilities information which are supposed to be reflected in the taxpayers VAT returns. Thus, an application for tax refund/credit must be accompanied by copies of the taxpayers VAT return/s for the taxable quarter/s concerned. The formal offer of evidence of Atlas failed to include photocopy of its export documents, as required. Without the export documents, the purchase invoice/receipts submitted by Atlas as proof of its input taxes cannot be verified as being directly attributable to the goods so exported. Atlas claim for credit or refund of input taxes cannot be granted due to its failure to show convincingly that the same has not been applied to any of its output tax liability as provided under Sec. 106(a) of the Tax Code. National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added tax; documentary requirements. When claiming tax refund or credit, the value-added taxpayer must be able to establish that it does have refundable or creditable input value-added tax (VAT), and the same has not been applied against its output VAT liabilities- information which are supposed to be reflected in the taxpayers VAT returns. Thus, an application for tax refund or credit must be accompanied by copies of the taxpayers VAT return or returns for taxable quarter or quarters concerned. Atlas Consolidated Mining and Development Corporation vs Commissioner of Internal Revenue, G.R. No. 159471, January 26, 2011. In the recent case of Mirant Pagbilao Corporation vs. CIR (G.R. No. 172129, September 12, 2008), the Supreme Court had ruled that the claim for refund of unutilized input VAT payments must be filedwithin two (2) years from the close of the taxable quarter when the relevant sales were made. Said ruling, however, should not be made to apply to the present case but should be applied prospectively pursuant to and consistent with the numerous rulings of the Supreme Court, given that petitioner Kepco's claim involves unutilized input taxes for the 3rd quarter of 2000. Hence, the prescriptive period applicable in the instant case would still be the period enunciated in the case of Atlas Consolidated Mining and Development Corporation vs. CIR

(G.R. Nos. 141104 & 148763, June 8, 2007), where it was held that the counting of the two-year prescriptive period is reckoned from the filing of the quarterly VAT returns. Kepco Ilijan Corporation v. Commissioner of Internal Revenue, C.T.A. E.B. Case No. 528 (C.T.A. Case No. 6550), October 14, 201 CIR vs. Sony Philippines, Inc. Facts: On Dec. 6, 1999 CIR issued a preliminary assessment for 1997 deficiency taxes and penalties to Sony, which it protested. A petition for review was filed by Sony before the CTA, within 30 days after the lapse of the 180 days from the submission of the supporting documents to the CIR. CTA-1st Division disallowed the deficiency VAT assessment the subsidized advertising expense paid by Sony was duly covered by a VAT invoice resulted in an input VAT credit. However, for the EWT, the deficiency assessment was upheld. CIR sought reconsideration on the ground that Sony should be liable for the deficiency VAT. It contends that Sonys advertising expense cannot be considered as an input VAT credit because the same was eventually reimbursed by Sony International Singapore (SIS). As a result, Sony is not entitled to a tax credit and that the said advertising expense should be for the account of SIS. ISSUE: W/N the source of the payment of tax is relevant to determine Ruling: NO. Sonys deficiency VAT assessment derived from the CIRs allowance of the input VAT credits that should have been realized from advertising expense of the latter. Under Sec. 110 of the 1997 Tax Code, an advertising expense duly covered by a VAT invoice is a legitimate business expense. It cannot be denied that Sony incurred advertising expense. CIRs own witness Aluquin even testified that advertising companies issued invoices in the name of Sony and the latter paid for the same. Hence, Sony incurred and paid for advertising expense services. Where the money came from is another matter all together. Before any VAT is levied, there must be sale, barter or exchange of goods or property. In this case, there was no sale, barter, exchange in the subsidy given by SIS to Sony. It was but a dole out and not in payment for the goods or properties sold, bartered or exchanged by Sony. COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS and COMMONWEALTH MANAGEMENT AND SERVICES CORPORATION, respondents. BIR issued an assessment to COMASERCO for deficiency value-added tax (VAT) amounting to P351,851.01, for taxable year 1988. COMASERCO's annual corporate income tax return ending December 31, 1988 indicated a net loss in its operations in the amount of P6,077.00.

COMASERCO filed with the BIR, a letter-protest objecting to the finding of deficiency VAT COMASERCO filed with the Court of Tax Appeals a petition for review contesting the Commissioner's assessment. COMASERCO asserted that the services it rendered to Philamlife were on a "no-profit, reimbursement-of-costonly" basis. It was not engaged in the business of providing services to Philamlife and its affiliates. COMASERCO was established to ensure operational orderliness and administrative efficiency of Philamlife and its affiliates, and not in the sale of services. COMASERCO stressed that it was not profit-motivated, thus not engaged in business. In fact, it did not generate profit but suffered a net loss in taxable year 1988. COMASERCO averred that since it was not engaged in business, it was not liable to pay VAT. CTA favored CIR. CA reversed. 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. COMASERCO was not engaged in business of providing services to Philamlife and its affiliates. So COMASERCO was not liable to pay VAT for it was not engaged in the business of selling services. ISSUE: Is COMASERCO was engaged in the sale of services, and thus liable to pay VAT? YES. to "engage in business" and to "engage in the sale of services" are two different things. 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. 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. "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." BIR Ruling: 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 realizing profit, any income or profit generated by the entity in the conduct of its activities was subject to income tax. There is no merit to COMARSERCOs contention that the Court of Appeals' decision in CA-G.R. No. 34042, declaring the COMASERCO as not engaged in business and not liable for the payment of fixed and percentage taxes, binds CIR. The issue in CA-G.R. No. 34042 is different from the present case, which involves COMASERCO's liability for VAT. COMMISSIONER OF INTERNAL REVENUE VS. SONY PHILIPPINES, INC.- Value Added Tax, Final Withholding Tax, Letter of Authority FACTS:

Sony Philippines was ordered examined for the period 1997 and unverified prior years as indicated in the Letter of Authority. The audit yielded assessments against Sony Philippines for deficiency VAT and FWT, viz: (1) late remittance of Final Withholding Tax on royalties for the period January to March 1998 and (2) deficiency VAT on reimbursable received by Sony Philippines from its offshore affiliate, Sony International Singapore (SIS). ISSUES: (1) Is Petitioner liable for deficiency (2) Was the investigation of its 1998 Final Withholding Tax return valid?

Value

Added

Tax?

HELD: (1) NO. Sony Philippines did in fact incur expenses supported by valid VAT invoices when it paid for certain advertising costs. This is sufficient to accord it the benefit of input VAT credits and where the money came from to satisfy said advertising billings is another matter but does not alter the VAT effect. In the same way, Sony Philippines can not be deemed to have received the reimbursable as a fee for a VAT-taxable activity. The reimbursable was couched as an aid for Sony Philippines by SIS in view of the companys dire or adverse economic conditions. More importantly, the absence of a sale, barter or exchange of goods or properties supports the non-VAT nature of the reimbursement. This was distinguished from the COMASERCO case where even if there was similarly a reimbursement-on-cost arrangement between affiliates, there was in fact an underlying service. Here, the advertising services were rendered in favor of Sony Philippines not SIS. (2) NO. A Letter of Authority should cover a taxable period not exceeding one year and to indicate that it covers unverified prior years should be enough to invalidate it. In addition, even if the Final Withholding Tax was covered by Sony Philippines fiscal year ending March 1998, the same fell outside of the period 1997 and was thus not validly covered by the Letter of Authority.

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SEAGATE TECHNOLOGY (PHILIPPINES), respondent. Facts: Seagate a resident foreign corporation, registered with the Philippine Export Zone Authority (PEZA). It is a VAT [(Value Added Tax)]-registered entity. VAT returns for the period 1 April 1998 to 30 June 1999 have been filed by [respondent]; Respondent filed an administrative claim for refund of VAT input taxes. No final action has been received by [respondent] from [petitioner] on [respondents] claim for VAT refund, thus prompting the [respondent] to elevate the case to [the CTA]. The CIR contends that granting, without admitting, that [respondent] is a PEZA enterprise, then its business is not subject to VAT. As [respondents] business is not subject to VAT, the capital goods and services it alleged to have purchased are considered not used in VAT taxable business. As such, [respondent] is not entitled to refund of input taxes on such capital goods. The Tax Court rendered a decision granting the claim for refund. CA affirmed. Issue: Whether or not Seagate is entitled to the refund representing alleged unutilized input VAT paid on capital goods purchased. Held: Yes it is entitled.

As a PEZA-registered enterprise within a special economic zone,7 respondent is entitled to the fiscal incentives and benefits8 provided for in either PD 669 or EO 226.10 It shall, moreover, enjoy all privileges, benefits, advantages or 11 exemptions under both Republic Act Nos. (RA) 7227 and 7844. The VAT on capital goods is an internal revenue tax from which Seagate as an entity is exempt. Although the transactions involving such tax are not exempt, petitioner as a VAT-registered person,28 however, is entitled to their credits. Nature of the VAT and the Tax Credit Method Viewed broadly, the VAT is a uniform tax levied on every importation of goods, whether or not in the course of trade or business, or imposed on each sale, barter, exchange or lease of goods or properties or on each rendition 29 of services in the course of trade or business as they pass along the production and distribution chain, the tax 30 being limited only to the value added to such goods, properties or services by the seller, transferor or lessor. 31 It is an indirect tax that may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services.32 As such, it should be understood not in the context of the person or entity that is primarily, directly and 33 legally liable for its payment, but in terms of its nature as a tax on consumption. In either case, though, the same conclusion is arrived at. Zero-Rated and Effectively Zero-Rated Transactions Although both are taxable and similar in effect, zero-rated transactions differ from effectively zero-rated transactions as to their source. Zero-rated transactions generally refer to the export sale of goods and supply of services.47 The tax rate is set at zero.48 When applied to the tax base, such rate obviously results in no tax chargeable against the purchaser. The seller of such transactions charges no output tax,49 but can claim a refund of or a tax credit certificate for the VAT previously charged by suppliers. Effectively zero-rated transactions, however, refer to the sale of goods50 or supply of services51 to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such 52 transactions to a zero rate. Again, as applied to the tax base, such rate does not yield any tax chargeable against the purchaser. The seller who charges zero output tax on such transactions can also claim a refund of or a tax credit certificate for the VAT previously charged by suppliers. Zero Rating and Exemption In terms of the VAT computation, zero rating and exemption are the same, but the extent of relief that results from either one of them is not. Applying the destination principle53 to the exportation of goods, automatic zero rating54 is primarily intended to be enjoyed by the seller who is directly and legally liable for the VAT, making such seller internationally competitive by allowing the refund or credit of input taxes that are attributable to export sales.55 Effective zero rating, on the contrary, is intended to benefit the purchaser who, not being directly and legally liable for the payment of the VAT, will ultimately bear the burden of the tax shifted by the suppliers. 56 In both instances of zero rating, there is total relief for the purchaser from the burden of the tax. But in an 57 exemption there is only partial relief, because the purchaser is not allowed any tax refund of or credit for input 58 taxes paid. Exempt Transaction >and Exempt Party The object of exemption from the VAT may either be the transaction itself or any of the parties to the transaction.59 An exempt transaction, on the one hand, involves goods or services which, by their nature, are specifically listed in and expressly exempted from the VAT under the Tax Code, without regard to the tax status -- VAT-exempt or not -of the party to the transaction.60 Indeed, such transaction is not subject to the VAT, but the seller is not allowed any tax refund of or credit for any input taxes paid.

An exempt party, on the other hand, is a person or entity granted VAT exemption under the Tax Code, a special law or an international agreement to which the Philippines is a signatory, and by virtue of which its taxable 61 transactions become exempt from the VAT. Such party is also not subject to the VAT, but may be allowed a tax refund of or credit for input taxes paid, depending on its registration as a VAT or non-VAT taxpayer. As mentioned earlier, the VAT is a tax on consumption, the amount of which may be shifted or passed on by the seller to the purchaser of the goods, properties or services.62 While the liability is imposed on one person, theburden may be passed on to another. Therefore, if a special law merely exempts a party as a seller from its direct liability for payment of the VAT, but does not relieve the same party as a purchaser from its indirect burden of the VAT shifted to it by its VAT-registered suppliers, the purchase transaction is not exempt. Applying this principle to the case at bar, the purchase transactions entered into by respondent are not VAT-exempt. Special laws may certainly exempt transactions from the VAT. 63 However, the Tax Code provides that those falling under PD 66 are not. PD 66 is the precursor of RA 7916 -- the special law under which respondent was registered. The purchase transactions it entered into are, therefore, not VAT-exempt. These are subject to the VAT; respondent is required to register. Its sales transactions, however, will either be zero-rated or taxed at the standard rate of 10 percent,64 depending again on the application of the destination principle.65 If respondent enters into such sales transactions with a purchaser -- usually in a foreign country -- for use or consumption outside the Philippines, these shall be subject to 0 percent. 66 If entered into with a purchaser for use or consumption in the Philippines, then these shall be subject to 10 percent, 67 unless the purchaser is exempt from the indirect burden of the VAT, in which case it shall also be zero-rated. Since the purchases of respondent are not exempt from the VAT, the rate to be applied is zero. Its exemption under both PD 66 and RA 7916 effectively subjects such transactions to a zero rate, 68 because the ecozone within which it is registered is managed and operated by the PEZA as a separate customs territory.69 This means that in 70 71 such zone is created the legal fiction of foreign territory. Under the cross-border principle of the VAT system 72 being enforced by the Bureau of Internal Revenue (BIR), no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. If exports of goods and services from the Philippines to a foreign country are free of the VAT,73 then the same rule holds for such exports from the national territory -- except specifically declared areas -- to an ecozone. Sales made by a VAT-registered person in the customs territory to a PEZA-registered entity are considered exports to a foreign country; conversely, sales by a PEZA-registered entity to a VAT-registered person in the customs territory are deemed imports from a foreign country.74 An ecozone -- indubitably a geographical territory of the Philippines -- is, however, regarded in law as foreign soil.75 This legal fiction is necessary to give meaningful 76 effect to the policies of the special law creating the zone. If respondent is located in an export processing 77 zone within that ecozone, sales to the export processing zone, even without being actually exported, shall in 78 79 fact be viewed as constructively exported under EO 226. Considered as export sales, such purchase 80 transactions by respondent would indeed be subject to a zero rate. Tax Exemptions Broad and Express Applying the special laws we have earlier discussed, respondent as an entity is exempt from internal revenue laws and regulations. This exemption covers both direct and indirect taxes, stemming from the very nature of the VAT as a tax on consumption, for which the direct liability is imposed on one person but the indirect burden is passed on to another. Respondent, as an exempt entity, can neither be directly charged for the VAT on its sales nor indirectly made to bear, as added cost to such sales, the equivalent VAT on its purchases. Ubi lex non distinguit, nec nos distinguere debemus. Where the law does not distinguish, we ought not to distinguish. Having determined that respondents purchase transactions are subject to a zero VAT rate, the tax refund or credit is in order.

Compliance with All Requisites for VAT Refund or Credit First, respondent is a VAT-registered entity. Second, the input taxes paid on the capital goods of respondent are duly supported by VAT invoices and have not been offset against any output taxes. Summary To summarize, special laws expressly grant preferential tax treatment to business establishments registered and operating within an ecozone, which by law is considered as a separate customs territory. As such, respondent is exempt from all internal revenue taxes, including the VAT, and regulations pertaining thereto. It has opted for the income tax holiday regime, instead of the 5 percent preferential tax regime. Its sales transactions intended for export may not be exempt, but like its purchase transactions, they are zerorated. No prior application for the effective zero rating of its transactions is necessary. Being VAT-registered and having satisfactorily complied with all the requisites for claiming a tax refund of or credit for the input VAT paid on capital goods purchased, respondent is entitled to such VAT refund or credit.

G.R. No. 150154. August 9, 2005 COMMISSIONER OF INTERNAL REVENUE, Petitioners, vs. TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC., Respondent. FACTS: Toshiba registered with the Philippine Economic Zone Authority (PEZA) as an ECOZONE Export Enterprise and it registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer and a withholding agent Toshiba filed its VAT returns for the first and second quarters of taxable year 1996, reporting input VAT in the amount of P13,118,542.007 and P5,128,761.94,8 respectively, or a total of P18,247,303.94. It alleged that the said input VAT was from its purchases of capital goods and services which remained unutilized since it had not yet engaged in any business activity or transaction for which it may be liable for any output VAT. Toshiba filed with (DOF) applications for tax credit/refund of its unutilized input VAT. To toll the running of the two-year prescriptive period for judicially claiming a tax credit/refund Toshiba, filed with the CTA a Petition for Review. CTA ordered CIR to refund, or in the alternative, to issue a tax credit certificate to Toshiba in the amount of P16,188,045.44. CA AFFIRMED. ISSUE: WON Toshiba is entitled to the tax credit/refund of its input VAT on its purchases of capital goods and services? YES HELD: An ECOZONE enterprise is a VAT-exempt entity. Sales of goods, properties, and services by persons from the Customs Territory to ECOZONE enterprises shall be subject to VAT at zero percent (0%). It would seem that CIR failed to differentiate between VAT-exempt transactions from VAT-exempt entities. An exempt transaction, on the one hand, involves goods or services which, by their nature, are specifically listed in and expressly exempted from the VAT under the Tax Code, without regard to the tax status VAT-exempt or not of the party to the transaction

An exempt party, on the other hand, is a person or entity granted VAT exemption under the Tax Code, a special law or an international agreement to which the Philippines is a signatory, and by virtue of which its taxable transactions become exempt from VAT CIR, bases its argument on VAT-exempt transactions. Since such transactions are not subject to VAT, the sellers cannot pass on any output VAT to the purchasers of goods, properties, or services, and they may not claim tax credit/refund of the input VAT they had paid thereon. This cannot apply to transactions of Toshiba because although the transactions covered by special laws may be exempt from VAT, those falling under Presidential Decree No. 66 (EPZA) are not. This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities because ECOZONES are foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs 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 border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent (10%) VAT. No output VAT may be passed on to an ECOZONE enterprise since it is a VAT-exempt entity. The VAT treatment of sales to it, however, varies depending on whether the supplier from the Customs Territory is VAT-registered or not. 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 zero percent (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 exporter (i.e., the supplier from the Customs Territory), who is directly and legally liable for the VAT, making it internationally competitive by allowing it to credit/refund the input VAT attributable to its export sales. Meanwhile, 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 of its input VAT. Even conceding, however, that respondent Toshiba, as a PEZA-registered enterprise, is a VAT-exempt entity that could not have engaged in a VAT-taxable business, this Court still believes, given the particular circumstances of the present case, that it is entitled to a credit/refund of its input VAT. The sale of capital goods by suppliers from the Customs Territory to Toshiba took place way before the issuance of RMC No. 74-99, and when the old rule was accepted and implemented by no less than the BIR itself. Since Toshiba opted to avail itself of the income tax holiday under Exec. Order No. 226, as amended, then it was deemed subject to the ten percent (10%) VAT. It was very likely therefore that suppliers from the Customs Territory had passed on output VAT to Toshiba, and the latter, thus, incurred input VAT. Accordingly, this Court gives due respect to and adopts herein the CTAs findings that the suppliers of capital goods from the Customs Territory did pass on output VAT to Toshiba and the amount of input VAT which Toshiba could claim as credit/refund. Kepco v. CIR

Facts: Kepco is a domestic corporation engaged in the independent production of of energy. It sells its electricity to NaPoCor, who is a VAT exempt entity. In 1999, Kepco incurred input VAT amounting to PhP 10.5 Million on its domestic purchase of goods and services used in the production and sale of electricity to Napocor. Kepco filed an administrative claim for refund on the unutilized input taxes. The CTA denied Kepcos claim for refund for failure to substantiate its effectively zero-rated sales during the taxable year. The CTA held that Kepco failed to comply with the invoicing requirements. The CTA reasoned that Kepcos failure to comply with the requirement of imprinting the words zero-rated on its official receipts resulted in non-entitlement to the benefit of VAT zero-rating and denial of Kepcos claim for refund of input tax. Issue: Whether or not Kepcos failure to imprint the words zero-rated on its VAT official receipts issued to NPC is fatal to its claim for refund of unutilized input tax credits. Held: Yes Ratio: 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, thus: 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 taxpayers identification number; 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.

(B) Accounting Requirements. Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.[10] (Emphasis supplied) 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: Provided, however, That in the case of sales, receipts or transfers in the amount of One Hundred Pesos (P100.00) or more, or regardless of amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client; Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser. The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period. The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section. [11] 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 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; 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 "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. (Emphases supplied)

Also, as correctly noted by the CTA En Banc, in Kepcos approved Application/Certificate for Zero Rate issued by the CIR on January 19, 1999, the imprinting requirement was likewise specified, viz: Valid only for sale of services from Jan. 19, 1999 up to December 31, 1999 unless sooner revoked. Note: Zero-Rated Sales must be indicated in the invoice/receipt.
[12]

Indeed, 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 zerorating. It must be emphasized that the requirement of imprinting the word zero-rated on the invoices or receipts under Section 4.108-1 of R.R. No. 7-95 is mandatory as ruled by the CTA En Banc, citing Tropitek [13] International, Inc. v. Commissioner of Internal Revenue. In Kepco Philippines Corporation v. Commissioner of [14] Internal Revenue, the CTA En Banc explained the rationale behind such requirement in this wise: 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, namely: 1. 2. 3. 4. Zero-rated sales [Sec. 106(A)(2) and Sec. 108(B)]; Exempt transactions [Sec. 109] in relation to Sec. 112(A); Tax Credits [Sec. 110]; and Refunds or tax credits of input tax [Sec. 112]

ERNESTO M. MACEDA vs. HON. CATALINO MACARAIG, JR., et al G.R. No. No. 88291 May 31, 1991 and G.R. No. No. 88291 June 8, 1993 FACTS: Commonwealth Act No. 120 created the NPC as a public corporation to undertake the development of hydraulic power and the production of power from other sources. Several laws were enacted granting NPC tax and duty exemption privileges such as taxes, duties, fees, imposts, charges and restrictions of the Republic of the Philippines, its provinces, cities and municipalities "directly or indirectly," on all petroleum products used by NPC in its operation. However P.D. No. 1931 withdrew all tax exemption privileges granted in favour of governmentowned or controlled corporations including their subsidiaries but empowered the President and/or the then Minister of Finance, upon recommendation of the FIRB to restore, partially or totally, the exemption withdrawn. BIR ruled that the exemption privilege enjoyed by NPC under said section covers only taxes for which it is directly liable and not on taxes which are only shifted to it. In 1986, BIR Commissioner Tan, Jr. states that all deliveries of petroleum products to NPC are tax exempt, regardless of the period of delivery. Thereafter, the FIRB issued several Resolutions in different occasions restoring

the tax and duty exemption privileges of NPC indefinite period due to the restoration of the tax exemption privileges of NPC, NPC applied with the BIR for a "refund of Specific Taxes paid on petroleum products. On August 6, 1987, the Secretary of Justice, Opinion opined that "the power conferred upon Fiscal Incentives Review Board constitute undue delegation of legislative power and, therefore, unconstitutional. However, respondents Finance Secretary and the Executive Secretary declared that "NPC under the provisions of its Revised Charter retains its exemption from duties and taxes imposed on the petroleum products purchased locally and used for the generation of electricity. Thereafter investigations were made for the refund of the tax payments of the NPC which includes Millions of pesos Tax refund. Petitioner, as member of the Philippine Senate introduced as Resolution Directing the Senate Blue Ribbon Committee, In Aid of Legislation, to conduct a Formal and Extensive Inquiry into the Reported Massive Tax Manipulations and Evasions by Oil Companies, particularly Caltex (Phils.) Inc., Pilipinas Shell and Petrophil, Which Were Made Possible By Their Availing of the Non-Existing Exemption of National Power Corporation (NPC) from Indirect Taxes, Resulting Recently in Their Obtaining A Tax Refund Totalling P1.55 Billion From the Department of Finance. ISSUE: Whether or not respondent NPC is legally entitled to the questioned tax and duty refunds. RULING: Yes. In G.R. No. No. 88291 the Supreme Court ruled in favour of exempting NPC to the said taxes. Also in G.R. No. No. 88291 the Supreme Court ruled in favour of respondents. NPC under the provisions of its Revised Charter retains its exemption from duties and taxes imposed on the petroleum products purchased locally and used for the generation of electricity. Presidential Decree No. 938 amended the tax exemption of NPC by simplifying the same law in general terms. It succinctly exempts NPC from "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." the NPC electric power rates did not carry the taxes and duties paid on the fuel oil it used. The point is that while these levies were in fact paid to the government, no part thereof was recovered from the sale of electricity produced. As a consequence, as of our most recent information, some P1.55 B in claims represent amounts for which the oil suppliers and NPC are "out-of-pocket. There would have to be specific order to the Bureaus concerned for the resumption of the processing of these claims. MICROSOFT VS. CIR FACTS: Microsoft renders marketing services to two affiliated nonresident foreign corporations with their services being paid for in foreign currency. Microsoft filed a claim for refund for unutilized input VAT but the CTA denied the same on the basis that the official receipts issued did not bear the imprinted word zero-rated on its face and are thus not valid evidence of Microsofts sales. ISSUE: Is Microsoft entitled to a refund? HELD:

NO. The regulations in effect when the sales were made by Microsoft clearly indicate in the portion outlining the Invoicing Requirements that the word zero-rated must be imprinted in the invoice. Without such, the invoice are not considered as VAT invoices and thus could not give rise to any input tax. The Court added that the reason for enforcing this rule even if only based on regulation is that it prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid.

PAGCOR vs. BIR: ISSUE : W/N PAGCOR IS EXEMPTED FROM VAT. YES. Facts: With the passage of Republic Act No. (RA) 9337, the Philippine Amusement and Gaming Corporation (PAGCOR) has been excluded from the list of government-owned and controlled corporations (GOCCs) that are exempt from tax under Section 27(c) of the Tax Code; PAGCOR is now subject to corporate income tax. The Supreme Court (SC) held that the omission of PAGCOR from the list of tax-exempt GOCCs by RA 9337 does not violate the right to equal protection of the laws under Section 1, Article III of the Constitution, because PAGCORs exemption from payment of corporate income tax was not based on classification showing substantial distinctions; rather, it was granted upon the corporations own request to be exempted from corporate income tax. Legislative records likewise reveal that the legislative intention is to require PAGCOR to pay corporate income tax. With regard to the issue that the removal of PAGCOR from the exempted list violates the non-impairment clause contained in Section 10, Article III of the Constitution which provides that no law impairing the obligation of contracts shall be passed the SC explained that following its previous ruling in the case of Manila Electric Company v. Province of Laguna 366 Phil. 428 (1999), this does not apply. Franchises such as that granted to PAGCOR partake of the nature of a grant, and is thus beyond the purview of the non-impairment clause of the Constitution. As regards the liability of PAGCOR to VAT, the SC finds Section 4.108-3 of Revenue Regulations No. (RR) 16-2005, which subjects PAGCOR and its licensees and franchisees to VAT, null and void for being contrary to the National Internal Revenue Code (NIRC), as amended by RA 9337. According to the SC, RA 9337 does not contain any provision that subjects PAGCOR to VAT. Instead, the SC finds support to the VAT exemption of PAGCOR under Section 109(k) of the Tax Code, which provides that transactions exempt under international agreements to which the Philippines is a signatory or under special laws [except Presidential Decree No. (PD) 529] are exempt from VAT. Considering that PAGCORs charter, i.e., PD 1869 which grants PAGCOR exemption from taxes is a special law, it is exempt from payment of VAT. Accordingly, the SC held that the BIR exceeded its authority in subjecting PAGCOR to VAT, and thus declared RR 1605 null and void insofar as it subjects PAGCOR to VAT for being contrary to the NIRC, as amended by RA 9337. PAGCOR is subject to income tax but remains exempt from the imposition of value-added tax. With the amendment by R.A. No. 9337 of Section 27 (c) of the National Internal Revenue Code of 1997 by omitting PAGCOR from the list of government corporations exempt for income tax, the legislative intent is to require PAGCOR to pay corporate income tax. However, nowhere in R.A. No. 9337 is it provided that PAGCOR can be subjected to VAT. Thus, the provision of RR No. 16-2005, which the respondent BIR issued to implement the VAT law, subjecting PAGCOR to 10% VAT is invalid for being contrary to R.A. No. 9337. (Philippine Amusement and Gaming Corporation vs. BIR, G.R. No. 172087, March 15, 2011)

With the passage of Republic Act No. (RA) 9337, the Philippine Amusement and Gaming Corporation (PAGCOR) has been excluded from the list of government-owned and controlled corporations (GOCCs) that are exempt from tax under Section 27(c) of the Tax Code; PAGCOR is now subject to corporate income tax. The Supreme Court (SC) held that the omission of PAGCOR from the list of tax-exempt GOCCs by RA 9337 does not violate the right to equal protection of the laws under Section 1, Article III of the Constitution, because PAGCORs exemption from payment of corporate income tax was not based on classification showing substantial distinctions; rather, it was granted upon the corporations own request to be exempted from corporate income tax. Legislative records likewise reveal that the legislative intention is to require PAGCOR to pay corporate income tax. With regard to the issue that the removal of PAGCOR from the exempted list violates the non-impairment clause contained in Section 10, Article III of the Constitution which provides that no law impairing the obligation of contracts shall be passed the SC explained that following its previous ruling in the case of Manila Electric Company v. Province of Laguna 366 Phil. 428 (1999), this does not apply. Franchises such as that granted to PAGCOR partake of the nature of a grant, and is thus beyond the purview of the non-impairment clause of the Constitution. As regards the liability of PAGCOR to VAT, the SC finds Section 4.108-3 of Revenue Regulations No. (RR) 16-2005, which subjects PAGCOR and its licensees and franchisees to VAT, null and void for being contrary to the National Internal Revenue Code (NIRC), as amended by RA 9337. According to the SC, RA 9337 does not contain any provision that subjects PAGCOR to VAT. Instead, the SC finds support to the VAT exemption of PAGCOR under Section 109(k) of the Tax Code, which provides that transactions exempt under international agreements to which the Philippines is a signatory or under special laws [except Presidential Decree No. (PD) 529] are exempt from VAT. Considering that PAGCORs charter, i.e., PD 1869 which grants PAGCOR exemption from taxes is a special law, it is exempt from payment of VAT. Accordingly, the SC held that the BIR exceeded its authority in subjecting PAGCOR to VAT, and thus declared RR 16-05 null and void insofar as it subjects PAGCOR to VAT for being contrary to the NIRC, as amended by RA 9337. [Philippine Amusement and Gaming Corporation (PAGCOR) v. the Bureau of Internal Revenue (BIR), et. al., GR 172087, March 15, 2011.

Philippine Acetylene Co. Inc. vs. Commissioner GR L-19707, 17 August 1967 En Banc, Castro (J): 7 concur, 2 took no part

Facts: Philippine Acetylene Co. Inc. is engaged in the manufacture and sale of oxygen and acetylene gases. It sold its products to the National Power Corporation (Napocor), an agency of the Philippine Government, andthe Voice of America (VOA), an agency of the United States Government. The Commissioner assessed deficiency sales tax and surcharges against the company. The company denied liability for the payment of tax on the ground that both Napocor and VOA are exempt from taxes. Issue: Whether Philippine Acetylene Co. is exempt from the tax. Held: Sales tax are paid by the manufacturer or producer who must make a true and complete return of the amount of his, her or its gross monthly sales, receipts or earnings or gross value of output actually removed from the factory or mill, warehouse and to pay the tax due thereon. The tax imposed by Section 186 of the Tax Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very remote and inconsequential sense. Accordingly, its levy on the sales made to tax-exempt entities like the Napocor is permissible. On the other hand, there is nothing in the language of the Military Bases Agreement to warrant the general exemption granted by General Circular V-41 (1947). Thus, the expansive construction of the tax exemption is void; and the sales to the VOA are subject to the payment of percentage taxes under Section 186 of the Tax

Code. Therefore, tax exemption is strictly construed and exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention. Diaz vs. Secretary of Finance (2011) 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. Court treated the case as one of prohibition. 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: May toll fees collected by tollway operators be subjected to VAT (Are tollway operations a franchise and/or a service that is subject to VAT)? Ruling: 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. Silicon Philippines Intel Philippines Manufacturing vs. CIR

Facts: Silicon Philippines, Inc. is a corporation duly organized and existing under the laws of the Philippines. It is registered with the BIR das a VAT-taxpayer and with the BOI as a preferred pioneer enterprise. Then, on May, 1999, Silicon filed with the CIR an application for credit/refund of unutilized input VAT for the period of Oct. 1, 1998 to Dec. 31, 1998. Due to the inaction of the CIR, Silicon, on Dec. 27, 2000, filed a Petition for Review with the CTA Division. Silicon th alleged that the 4 quarter of 1998, it generated and recorded zero-rated export sales paid to Silicon in acceptable foreign currency and that for the said period, Silicon paid input VAT in the total amount which have not been applied to any output VAT. The CIR, on the other hand, raised the defenses that: 1. Silicon did not show that it complied with the provisions of Sec. 229 of the Tax Code; 2. That claims for refund are construed strictly against the claimant similar to the nature of exemption from taxes; and that Silicon failed to prove that is entitled for refund. The CTA Division granted Silicons claim for refund of unutilized input VAT on capital goods. However, it denied Silicons claim for credit/refund of input VAT attributable to its zero-rated export sales. It is because Silicon failed to present an Authority to Print (ATP) from the BIR neither did it print on its export sales invoices the ATP and the word zero-rated. Silicon moved for reconsideration claiming that it is not required to secure an ATP since it has a Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipts from the BIR. And that the printing of the word zero-rated on its export sales invoices is not necessary because all its finished products are exported to its mother company, Intel Corp., a non-resident corporation and a non-VAT registered entity. ISSUE: W/N Silicon entitled to claim from refund of Input VAT attributable to its zero-rated sales. Ruling: no. There are two types of input VAT credits: 1. 2. A credit/refund of input VAT attributable to zero-rated sales under Sec. 112(A) of the NIRC; and A credit/refund of input VAT on capital goods pursuant to Sec. 112(B) of the same Code.

To claim for credit/refund of input VAT attributable to zero-rated sales, Sec. 112(A) laid down 4 requisites: 1. 2. 3. 4. The taxpayer must be a VAT-registered; The taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; The claim must be filed within 2 years after the close of the taxable quarter when such sales were made; and The creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax.

A. Printing the ATP on the invoices or receipts is not required. In a case, the SC ruled that ATP need not be reflected or indicated in the invoices or receipts because there is no law or regulation requiring it.

Thus, failure to print the ATP on the invoices or receipts should not result in the outright denial of a claim or the invalidation of the invoices or receipts for purposes of claiming a refund. B. ATP must be secured from the BIR Sec. 238 of the NIRC expressly requires persons engaged in business to secure an ATP from the BIR prior to printing invoices or receipts. Failure to do so, makes the person liable under Sec. 264 of the Tax Code.

W/N a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has secured an ATP from the BIR prior to the printing of its invoices or receipts. YES. Since ATP is not indicated in the invoices or receipts, the only way to verify whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from the BIR. Without which, the invoices would have no probative value for the purpose of refund. Failure to print the word zero-rated on the sales invoices is fatal to a claim for refund of input VAT. In compliance with Sec. 4.108-1 of RR 7-95, requiring the printing of the word zero-rated on the invoice covering zero-rate sales is essential as this regulation proceeds from the rulemaking authority of the Secretary of Finance under Sec. 244 of the NIRC. In this case, Silicon failed to present its ATP and to print the word zero-rated on its export sales invoices. Thus, the claim for credit/refund of input VAT attributable to its zero-rated sales must be denied.