You are on page 1of 12

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

On January 1994, Atlas filed itsVAT return for the fourth quarter of 1993, showing a total inputtax and an excess VAT credit. Then, on January 1996, Atlas filedfor a tax refund or tax credit certificate with CIR.However, the CTA denied Atlas claim for refund due to Atlasfailure to comply with the documentary requirements prescribedunder Sec. 16 of RR No. 5-87, as amended by RR No. 388.CTA denied Atlas MR stating that Atlas has failed tosubstantiate 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 inputrefund?W/N Atlas is entitled to claim to a tax refund.Ruling:When claiming tax refund/credit, the VATregistered taxpayer must be able to establish that it does not have refundable or creditable input VAT, and the same has not been applied againstits output VAT liabilities information which are supposed to bereflected 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/sconcerned.The formal offer of evidence of Atlas failed to include photocopyof its export documents, as required. Without the exportdocuments, the purchase invoice/receipts submitted by Atlas as proof of its input taxes cannot be verified as being directlyattributable to the goods so exported.Atlas claim for credit or refund of input taxes cannot be granteddue to its failure to show convincingly that the same has not beenapplied 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 creditor refund of input valueadded tax; documentary

requirements.

When claiming tax refund or credit, the value-added taxpayer must be able to establish that it does haverefundable or creditable input value-added tax (VAT), and thesame has not been applied against its output VAT liabilities-information which are supposed to be reflected in the taxpayersVAT returns. Thus, an application for tax refund or credit must beaccompanied by copies of the taxpayers VAT return or returnsfor 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 ruledthat 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. Saidruling, however, should not be made to apply to the present case but should be applied prospectively pursuant to and consistentwith the numerous rulings of the Supreme Court, given that petitioner Kepco' s claim involves unutilized input taxes for the3rd quarter of 2000. Hence, the prescriptive period applicable inthe 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 heldthat the counting of the two-year prescriptive period is reckonedfrom the filing of the quarterly VAT returns. Kepco IlijanCorporation v. Commissioner of Internal Revenue, C.T.A. E.B.Case No. 528 (C.T.A. Case No. 6550), October 14, 201

PAGCOR vs. BIR: ISSUE : W/N PAGCOR IS EXEMPTED FROM VAT. YES.Facts:With the passage of Republic Act No. (RA) 9337, the PhilippineAmusement and Gaming Corporation (PAGCOR) has beenexcluded from the list of government-owned and -controlledcorporations (GOCCs) that are exempt from tax under Section27(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 violatethe right to equal protection of the laws under Section 1, ArticleIII of the Constitution, because PAGCORs exemption from payment of corporate income tax was not based on classificationshowing substantial distinctions; rather, it was granted upon thecorporations own request to be exempted from corporateincome tax. Legislative records likewise reveal that the legislativeintention is to require PAGCOR to pay corporateincome tax.With regard to the issue that the removal of PAGCOR from theexempted list violates the non-impairment clause contained inSection 10, Article III of the Constitution which provides thatno law impairing the obligation of contracts shall be passed theSC 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 natureof a grant, and is thus beyond the purview of the non-impairmentclause of the Constitution.As regards the liability of PAGCOR to VAT, the SC findsSection 4.108-3 of Revenue Regulations No. (RR) 162005,which subjects PAGCOR and its licensees and franchisees toVAT, null and void for being contrary to the National InternalRevenue Code (NIRC), as amended by RA 9337. According tothe SC, RA 9337 does not contain any provision that subjectsPAGCOR to VAT. Instead, the

SC finds support to the VATexemption of PAGCOR under Section 109(k) of theTax 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] areexempt from VAT. Considering that PAGCORs charter, i.e., PD1869 which grants PAGCOR exemption from taxes is aspecial law, it is exempt from payment of VAT.Accordingly, the SC held that the BIR exceeded its authority insubjecting PAGCOR to VAT, and thus declared RR 16-05 nulland void insofar as it subjects PAGCOR to VAT for beingcontrary to the NIRC, as amended by RA 9337. PAGCOR is subject to income tax but remains exempt fromthe 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 corporateincome tax. However, nowhere in R.A. No. 9337 is it providedthat PAGCOR can be subjected to VAT. Thus, the provision of RR No. 16-2005, which the respondent BIR issued to implementthe 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 PhilippineAmusement and Gaming Corporation (PAGCOR) has beenexcluded from the list of government-owned and controlledcorporations (GOCCs) that are exempt from tax under Section27(c) of the Tax Code; PAGCOR is now subject to corporateincome tax. The Supreme Court (SC) held that the omission of PAGCOR from the list of tax-exempt GOCCs by RA 9337 doesnot violate the right to equal protection of the laws under Section1, Article III of the Constitution, because PAGCORs exemptionfrom payment of corporate income tax was not based onclassification showing substantial dis tinctions; rather, it wasgranted upon the corporations own request to be exempted fromcorporate income tax. Legislative records likewise reveal that thelegislative intention is to require PAGCOR to pay corporateincome tax.With regard to the issue that the removal of PAGCOR from theexempted list violates the non-impairment clause contained inSection 10, Article III of the Constitution which provides thatno law impairing the obligation of contractsshall be passed the SC explained that following its previousruling in the case of Manila Electric Company v. Province of Laguna 366 Phil. 428(1999), this does not apply. Franchises such as that granted toPAGCOR partake of the nature of a grant, and is thus beyond the purview of the non-impairment clause of the Constitution. Asregards the liability of PAGCOR to VAT, the SC finds Section4.1083 of Revenue Regulations No. (RR) 16-2005, whichsubjects PAGCOR and its licensees and franchisees to VAT, nulland void for being contrary to the National Internal RevenueCode (NIRC), as amended by RA 9337.According to the SC, RA 9337 does not contain any provisionthat subjects PAGCOR to VAT. Instead, the SC finds support tothe VAT exemption of PAGCOR under Section 109(k) of the TaxCode, 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] areexempt from VAT. Considering that PAGCORs charter, i.e., PD1869 which grants PAGCOR exemption from taxes is aspecial law, it is exempt from payment of VAT. Accordingly, theSC held that the BIR exceeded its authority in subjectingPAGCOR to VAT, and thus declared RR 16-05 null and void insofar as it subjects PAGCOR to VAT for being contrary tothe NIRC, as amended by RA 9337. [Philippine Amusement andGaming Corporation (PAGCOR) v. the Bureau of InternalRevenue (BIR), et. al., GR 172087, March 15, 2011

G.R. No. 181298

March 2, 2011

BELLE CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. RESOLUTION DEL CASTILLO, J.:

Petitioner Belle Corporation is a domestic corporation engaged in the real estate and property business.[4] On May 30, 1997, petitioner filed with the Bureau of Internal Revenue (BIR) its Income Tax Return (ITR) for the first quarter of 1997, showing a gross income of P741,607,495.00, a deduction of P65,381,054.00, a net taxable income of P676,226,441.00 and an income tax due of P236,679,254.00, which petitioner paid on even date through PCI Bank, Tektite Tower Branch, an Authorized Agent Bank of the BIR.[5] On August 14, 1997, petitioner filed with the BIR its second quarter ITR, declaring an overpayment of income taxes in the amount of P66,634,290.00. Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax credit to the succeeding taxable year by marking the tax credit option box in its 1997 ITR.[9] For the taxable year 1998, petitioners amended ITR showed an overpayment ofP106,447,318.00 Notwithstanding the filing of the administrative claim for refund, petitioner carried over the amount of P106,447,318.00 to the taxable year 1999 and applied a portion thereof to its 1999 Minimum Corporate Income Tax (MCIT) liability, as evidenced by its 1999 ITR. It is an elementary rule in taxation that an automatic carry over of an excess income tax payment should only be made for the succeeding year. (Paseo Realty and Devt. Corp. vs. CIR, CTA Case No. 4528, April 30, 1993) True enough, implicit from the provisions of Section 69 of the NIRC, as amended, (supra) is the fact that the refundable amount may be credited against the income tax liabilities for the taxable quarters of the succeeding taxable year not succeeding years; and that the carry-over is only limited to the quarters of the succeeding taxable year. (citing ANSCOR Hagedorn Securities Inc. vs. CIR, CA-GR SP 38177, December 21, 1999) To allow the application of excess taxes paid for two successive years would run counter to the specific provision of the law above-mentioned. For Resolution is the Motion for Clarification1 filed by petitioner Belle Corporation. In the Motion, petitioner prays that our Decision dated January 10, 2011 be modified or clarified to indicate petitioners entitlement to a tax credit of unutilized excess income tax payments for the taxable year 1997.

In our Decision, we held that Section 76 of the 1997 National Internal Revenue Code (NIRC) and not Section 69 of the old NIRC applies. Section 76 provides that a taxpayer has the option to file a claim for refund or to carry-over its excess income tax payments. The option to carry-over, however, is irrevocable. Thus, once a taxpayer opted to carry-over its excess income tax payments, it can no longer seek refund of the unutilized excess income tax payments. The taxpayer, however, may apply the unutilized excess income tax payments as a tax credit to the succeeding taxable years until such has been fully applied pursuant to Section 76 of the NIRC. In our Decision, we denied petitioners claim for refund because it has earlier opted to carry over its 1997 excess income tax payments by marking the tax credit option box in its 1997 income tax return. We must clarify, however, that while petitioner may no longer file a claim for refund, it properly carried over its 1997 excess income tax payments by applying portions thereof to its 1998 and 1999 Minimum Corporate Income Tax in the amounts of P25,596,210.00 and P14,185,874.00, respectively. Pursuant to our ruling, petitioner may apply the unutilized excess income tax payments as a tax credit to the succeeding taxable years until fully utilized. Thus, as of the taxable year 1999, petitioner still has an unutilized excess income tax payments of P92,261,444.00 which may be carried over to the succeeding taxable years until fully utilized. IN VIEW OF THE FOREGOING, it is hereby clarified that although petitioner may no longer file a claim for refund, it may, however, apply the excess income tax payments for the taxable year 1997 as a tax credit to the succeeding taxable years until fully utilized.1avvphi1 SO ORDERED.

EXXONMOBIL PETROLEUM AND CHEMICAL HOLDINGS, INC. PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL REVENUE

FACTS: Exxonmobil was a US corporation engaged in selling petroleum products to domestic and international carriers. It purchased petroleum products from local suppliers (Caltex and Petron), the excise taxes on which were remitted by the said suppliers but the amount of which were, however, passed-on to Exxonmobil. It then filed a claim for refund of excise taxes paid on its purchase of petroleum products from its suppliers.

ISSUE: Is Exxonmobil entitled to file the claim for the refund of the excise taxes passed-on by Caltex and Petron? HELD: NO. The proper party to seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden to another. Although the burden of an indirect tax can be shifted to the purchaser, the amount added or shifted becomes part of the price. Thus, the purchaser does not really pay the tax per se but only the price of the commodity. Indirect taxes were defined as those that are demanded, in the first instance, from, or are paid by, one person to someone else. When the seller passes on the tax to the buyer he in effect shifts only the tax burden and not the liability to pay for it.

National Internal Revenue Code; coverage of excise tax. Excise taxes are imposed under Title VI of the National Internal Revenue Code (Tax Code). They apply to specific goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and to those that are imported. In effect, these taxes are imposed when the following conditions concur: (1) the articles subject to tax belong to any of the categories of goods enumerated in Title VI of the Tax Code and (2) that said articles are for domestic sale or consumption, excluding those that are actually exported. There are certain exemptions to the coverage of excise taxes, such as petroleum products sold to international carriers and exempt entities or agencies such as under section 135 of the Tax Code.

COMMISSIONER OF INTERNAL REVENUE VS. MIRANT (PHILIPPINES) OPERATIONS, CORPORATION- TAX CREDIT AND TAX REFUND

FACTS: Mirant filed its final adjusted Annual Income Tax Return for fiscal year ending 1999 declaring a net loss. It then amended the said return this time reflecting an increased net loss and showing that it opted to carry over as tax credit its overpayment to the succeeding taxable year. This excess tax credit was unutilized in 2000 as Mirant still reported a net loss. Mirant then filed a claim for refund of its excess creditable income tax for 1999.

ISSUE: Can Mirant claim for refund its excess credits from 1999?

HELD: NO. Mirants choice to carry over its 1999 excess income tax credit to succeeding taxable years is irrevocable, regardless of whether it was able to actually apply the said amount to a tax liability. It is a mistake to understand the phrase "for that taxable period" as a prescriptive period for the irrevocability rule i.e., that since the tax credit in this case was acquired in 1999, and Respondent opted to carry it over to 2000, then the irrevocability of the option to carry over expired by the end of 2000, leaving Respondent free to again take another option as regards its 1999 excess income tax credit. The Court ruled that this interpretation effectively renders nugatory the irrevocability rule. The requisites for claiming a tax credit or a refund of creditablewithholding tax are as follows: (1) the claim must be filed with the Commissioner of Internal Revenue within the two-year period from the date of the payment of the tax; (2) it must be shown on the return that the income received was declared as part of the gross income; and (3) the fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld.

PHILAM ASSET MANAGEMENT v. CIR (2005) - Philam has creditable withholding taxes from 1997. Thefollowing year, Philam wanted to utilize the credit. It applied for a tax refund by filing a written claimbefore the Commissioner. The Commissioner refused to grant a refund, holding that for a request for eithera refund or a credit of income tax paid, a corporation must signify its intention by marking thecorresponding option box on its annual corporate final adjustment return (FAR). Parenthetically, Section 76of the NIRC offers two options to a taxable corporation whose total quarterly income tax payments in agiven taxable year exceeds its total income tax due. These options are (1) filing for a tax refund or (2)availing of a tax credit .Tax refund is easier as it only requires that a taxpayer properly apply for the refund (through written claimbefore the Commissioner). The tax credit option works by applying the refundable amount, as shown on theFAR of a given taxable year, against the estimated quarterly income tax liabilities of the succeeding taxableyear. These two options are alternative in nature; the choice of one precludes the other. Meanwhile, while a taxpayer is required to mark its choice in the form provided by the BIR (the FAR), thisrequirement is only for the purpose of facilitating tax collection. Failure to signify ones intention in the FAR does not mean outright barring of a valid request for a refund, should one still choose thisoption later on. The taxpayers failure to indicate an option in its FAR does not automatically mean that the taxpayer has opted to carry-over its income tax credit. The tax payers choice may be ascertained using circumstantial evidence. Nonetheless, when a choice to carry-over the tax credit in the succeeding year has beenmade actually or constructively, this becomes irrevocable already. Finally, the Commissioner erroneously ruled that the ITR or FAR of the succeeding year be submitted asevidence to determine whether its claimed 1997 tax credit had not been applied against its 1998 taxliabilities.

Requiring that the ITR or the FAR of the succeeding year be presented to the BIR inrequesting a tax refund has no basis in law and jurisprudence COMMISSIONER OF INTERNAL REVENUE VS. FILINVEST DEVELOPMENT CORPORATION- THEORETICAL INTEREST

Filinvest Development Corporation extended advances in favor of its affiliates and supported the same with instructional letters and cash and journal vouchers. The BIR assessed Filinvest for deficiency income tax by imputing an arms length interest rate on its advances to affiliates. Filinvest disputed this by saying that the CIR lacks the authority to impute theoretical interest and that the rule is that interests cannot be demanded in the absence of a stipulation to the effect. ISSUE: Can the CIR impute theoretical interest on the advances made by Filinvest to its affiliates?

HELD: NO. Despite the seemingly broad power of the CIR to distribute, apportion and allocate gross income under (now) Section 50 of the Tax Code, the same does not include the power to impute theoretical interests even with regard to controlled taxpayers transactions. This is true even if the CIR is able to prove that interest expense (on its own loans) was in fact claimed by the lending entity. The term in the definition of gross income that even those income from whatever source derived is covered still requires that there must be actual or at least probable receipt or realization of the item of gross income sought to be apportioned, distributed, or allocated. Finally, the rule under the Civil Code that no interest shall be due unless expressly stipulated in writing was also applied in this case.

The Court also ruled that the instructional letters, cash and journal vouchers qualify as loan agreements that are subject to DST.

DIAZ VS. SECRETARY OF FINANCE- VALUE ADDED TAX (VAT)

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 asale 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 thenon-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 subjectas early as 2003 of several BIR rulings and circulars.The government also argues that petitioners have no right to invoke the non-impairment of contractsclause since they clearly have no personal interest in existing toll operating agreements (TOAs) between the government and tollway operators. At any rate, the nonimpairment clause cannot limitthe State's sovereign taxing power which is generally read into contracts. May toll fees collected by tollway operators be subject to VAT?

YES. (1) VAT is imposed on all kinds of services and tollway operators who are engaged in constructing, maintaining, and operating expressways are no different from lessors of property, transportation contractors, etc.

(2) Not only do they fall under the broad term under (1) but also come under those described as all other franchise grantees which is not confined only to legislative franchise grantees since the law does not distinguish. They are also not a franchise grantee under Section 119 which would have made them subject to percentage tax and not VAT.

(3) Neither are the services part of the enumeration under Section 109 on VAT-exempt transactions.

(4) The toll fee is not a users tax and thus it is permissible to impose a VAT on the said fee. The MIAA case does not apply and the Court emphasized that toll fees are not taxes since they are not assessed by the BIR and do not go the general coffers of the government. Toll fees are collected by private operators as reimbursement for their costs and expenses with a view to a profit while taxes are imposed by the government as an attribute of its sovereignty. Even if the toll fees were treated as users tax, the VAT

can not be deemed as a tax on tax since the VAT is imposed on the tollway operator and the fact that it might pass-on the same to the tollway user, it will not make the latter directly liable for VAT since the shifted VAT simply becomes part of the cost to use the tollways.

(5) The assertion that the VAT imposed is not administratively feasible given the manner by which the BIR intends to implement the VAT (i.e., rounding off the toll rates and putting any excess collection in an escrow account) is not enough to invalidate the law. Non-observance of the canon of administrative feasibility will not render a tax imposition invalid except to the extent that specific constitutional or statutory limitations are impaired.