Professional Documents
Culture Documents
Magsayasay Lines
Gr no. 146984
Doctrine:
What Section 100 and Section 4(E)(i) of R.R. No. 5-87
elaborate on is not the meaning of "in the course of trade or
business," but instead the identification of the transactions which
may be deemed as sale.
If the transaction transpired outside the course of trade or
business, it would be irrelevant for the purpose of determining
VAT liability whether the transaction may be deemed sale, since it
anyway is not subject to VAT.
Facts:
Pursuant to a government program of privatization, NDC
decided to sell to private enterprise all of its shares in its whollyowned subsidiary the National Marine Corporation (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." 3 On 3 June 1988, private
respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to
buy the shares and the vessels for P168,000,000.00.
movable,
tangible
objects
which
are
appropriable
or
What
is
clear
therefore,
based
on
the
aforecited
Economic
Zone
--
like
herein
respondent
--
are entities exempt from all internal revenue taxes and the
implementing rules relevant thereto, including the value-added
taxes
or
VAT.
Although
export
sales
are
not
deemed
Zero-Rated Transactions
Zero-rated transactions generally refer to the export sale of
goods and supply of services. The tax rate is set at zero. The
seller of such transactions charges no output tax, 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 goods or supply of services to persons or entities whose
exemption under special laws or international agreements to
which the Philippines is a signatory effectively subjects such
transactions to a zero rate.
Zero Rating and Exemption:
In both instances of zero rating, there is total relief for the
purchaser from the burden of the tax. But in an exemption there
is only partial relief because the purchaser is not allowed any tax
refund of or credit for input taxes paid.
Exempt Transaction and Exempt Party
Exempt transaction 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 transactionseller is not allowed any tax refund of or credit for any input taxes
paid.
Facts:
[Respondent] is registered with the Philippine Export Zone
Authority (PEZA) and has been issued PEZA Certificate No. 97-044
pursuant to Presidential Decree No. 66, as amended, to engage in
the manufacture of recording components primarily used in
computers for export. Respondent is VAT [(Value Added Tax)]registered entity.
An administrative claim for refund of VAT input taxes in the
amount of P28,369,226.38 with supporting documents, was filed
on 4 October 1999 with Revenue District Office No. 83, Talisay
Cebu. No final action has been received by [respondent] from
[petitioner] on [respondents] claim for VAT refund.
Tax Court rendered a decision granting the claim for refund.
The CA affirmed the Decision of the CTA granting the claim for
as
Issue:
W/N respondent is entitled to a tax refund or credit
representing alleged unutilized input VAT paid on capital goods
purchased for the period April 1, 1998 to June 30, 1999?
Held:
Having determined that respondents purchase transactions
are subject to a zero VAT rate, the tax refund or credit is in order.
Respondent complied with all the requisites for claiming a
VAT refund or credit. First, respondent is a VAT-registered
tax
regime. As
matter
of
law
and
Doctrine:
Sec.
4.108-1.
Invoicing
Requirements.
All
VAT-
Facts:
Petitioner Microsoft Philippines, Inc. (Microsoft) is a valueadded 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 under Section 108(B)(2) of the
National Internal Revenue Code (NIRC) of 1997.
For the year 2001, Microsoft yielded total sales in the
amount of P261,901,858.99. On 27 December 2002, Microsoft
filed an administrative claim for tax credit of VAT input taxes in
the amount ofP11,449,814.99 with the BIR.
In a Decision dated 31 August 2006, the CTA Second Division
denied the claim for tax credit of VAT input taxes. 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:
The main issue is whether 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:
A tax credit or refund, like tax exemption, is strictly
construed against the taxpayer. 9 The taxpayer claiming the tax
credit or refund has the burden of proving that he is entitled to
the refund or credit.
The invoicing requirements for a VAT-registered taxpayer as
provided in the NIRC and revenue regulations are clear. A VATregistered 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 zerorated sales.
In Panasonic v. Commissioner of Internal Revenue, 12 we 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.
Sony. It was but a dole out by SIS and not in payment for goods or
properties sold, bartered or exchanged by Sony.
*SIS-Sony Singapore
Facts:
On
November
24,
1998,
the
CIR
issued
Letter
of
sought
re-evaluation
of
the
aforementioned
Held:
NO. advertising expense paid by Sony which was duly
covered by a VAT invoice resulted in an input VAT credit.
The fact that due to adverse economic conditions, SonySingapore has granted Sony Philippines a subsidy equivalent to
the latters advertising expenses will not affect the validity of the
input taxes from such expenses. Thus, at the most, this is an
additional income subject to income tax. We submit further that it
is not subject to VAT on the subsidy income as this was not
derived from the sale of goods or services.
Thus, there must be a sale, barter or exchange of goods or
properties before any VAT may be levied. Certainly, there was no
such sale, barter or exchange in the subsidy given by SIS to
Sony. It was but a dole out by SIS and not in payment for goods or
properties sold, bartered or exchanged by Sony.
Court had the occasion to rule that services rendered for a
fee even on reimbursement-on-cost basis only and without
realizing profit are also subject to VAT. This is not true in the
present case. Sony did not render any service to SIS at all. The
services rendered by the advertising companies, paid for by Sony
using SIS dole-out, were for Sony and not SIS. SIS just gave
assistance to Sony in the amount equivalent to the latters
advertising expense but never received any goods, properties or
service from Sony.