MICROSOFT PHILIPPINES, INC. VS.

COMMISSIONER OF INTERNAL
REVENUE- VAT Zero Rating

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.