Intel Technology Phils vs.

CIR
Intel Technology Phils. Inc. vs. CIR GR No. 166732 | April 27, 2007 Facts: Intel Tech domestic corporation engaged primarily in the business of designing, developing, manufacturing and exporting advanced and large- scale integrated circuit components registered with the BIR as VAT entity registered with PEZA As a VAT-registered entity, Intel file its monthly VAT declarations and quarterly VAT return During the 2Q of 1998, Intel declared zero-rated export sales of 2.5Mn and VAT input taxes from domestic purchases of goods and services of 11.7Mn Zero-rated export sales were paid in acceptable foreign currency and were inwardly remitted On 1999, a claim for tax refund/credit of VAT input taxes was filed by Intel Prior to the lapse of 2-year prescriptive prd and due to inaction by the CIR, a petition for review was filed with the CTA and prayed for the issuance of a tax credit certificate amtg to 11.7Mn for the period covering April 01, 1998 to June 30, 1998, having generated zero-rated sales and paid VAT input taxes in the course of its trade or business, which VAT input taxes are attributable to the zero-rated sales and have not been applied to any VAT output tax liability for said period or any succeeding quarter or quarters nor has been issued any tax credit certificate, it follows that it is entitled to the issuance of a tax credit certificate for VAT input taxes in the amount of PhP11,770,181.70 CTA decision: denied the claim for tax refund or issuance of a tax credit certificate since the export invoices offered as evidence could not be considered as competent evidence to prove its zero-rated sales of goods for VAT purposes and for refund or issuance of a tax credit certificate because no BIR authority to print said invoices was indicated A petition for review was filed before the CA, arguing that the info (sellers TIN, statement that seller is VA Tregistered) required to be printed in the invoice or receipt do not apply to its export sales since no input VAT may be claimed and that the absence of BIR authority to print its TIN-V in some of the invoices is not fatal to its claim for refund or issuance of a tax credit certificate as to invalidate the documents used to prove its export sales CA decision: since Intel issued invoices with the BIRs authority to print, it must be concluded that these invoices were not registered as they did not comply with the invoicing requirements under Section 113, and the requirements for issuance of receipts or sales or commercial invoices under Section 237. Thus, an unregistered receipt could not be used as supporting document for input tax Issue: W/N Intel is not entitled to a tax refund/credit for failure to comply with the invoicing requirements? Ruling: a taxpayer engaged in zero-rated or effectively zero-rated transactions may apply for a refund or issuance of a tax credit certificate for input taxes paid attributable to such sales upon complying with the following requisites: (1) the taxpayer is engaged in sales which are zero-rated (like export sales) or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the claim must be filed within two years after the close of the taxable quarter when such sales were made; (4) 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; and (5) in

case of zero-rated sales under Section 106(A)(2)(a)(1) and (2), Section 106(B), and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with BSP rules and regulations. The docu evid submitted by Intel such as summary of export sales, sales invoices, official receipts, airway bills and export declarations, prove that it is engaged in the "sale and actual shipment of goods from the Philippines to a foreign country." Hence, Intel is considered engaged in export sales (a zero-rated transaction) if made by a VATregistered entity the certification of inward remittances attests to the fact of payment "in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the BSP Therefore, Intels evidence, juxtaposed with the requirements of Sections 106 (A)(2)(a)(1) and 112(A) of the Tax Code, as enumerated earlier, sufficiently establish that it is entitled to a claim for refund or issuance of a tax credit certificate for creditable input taxes. while entities engaged in business are required to secure from the BIR an authority to print receipts or invoices and to issue duly registered receipts or invoices, it is not required that the BIR authority to print be reflected or indicated therein. Only the following items are required to be indicated in the receipts or invoices: a. b. c. d. e. f. g. a statement that the seller is a VAT-registered entity followed by its TIN-V; 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; date of the transaction; quantity of merchandise; unit cost; description of merchandise or nature of service; the name, business style, if any, and address of the purchaser, customer or client in the case of sales, receipt or transfers in the amount of P100.00 or more, or regardless of the amount, where the sale or transfer is made by a person liable to VAT to another person also liable to VAT, or where the receipt is issued to cover payment made as h. rentals, commissions, compensations or fees; and the TIN of the purchaser where the purchaser is a VAT-registered person. while the pertinent provisions of the Tax Code and the rules and regulations implementing them require entities engaged in business to secure a BIR authority to print invoices or receipts and to issue duly registered invoices or receipts, it is not specifically required that the BIR authority to print be reflected or indicated therein. Indeed, what is important with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are duly registered. Intel, as a VAT-registered entity, is engaged in export sales of advanced and large-scale ICs and, as such, under Section 106 (A)(2)(a)(1) of the Tax Code, its sales or transactions are subject to VAT at 0% rate. Further, subject to the requirements stated in Section 112(A), it is entitled to claim refund or issuance of a tax credit certificate for input VAT taxes attributable to its export sales. As the Court had the occasion to explain since no output VAT was imposed on the zero-rated export sales, what the government reimburses or refunds to the claimant is the input VAT paid thus, the necessity for the input VAT paid to be substantiated by purchase invoices or official receipts. These sales invoices or receipts issued by the supplier are necessary to substantiate the actual amount or quality of goods sold and their selling price, and, taken collectively, are the best means to prove the input VAT payments of the claimant In a claim for refund or issuance of a tax credit certificate attributable to zero-rated sales, what is to be closely scrutinized is the documentary substantiation of the input VAT paid, as may be proven by other export documents, rather than the supporting documents for the zero-rated export sales. And since petitioner has established by sufficient evidence that it is entitled to a refund or issuance of a tax credit certificate, in accordance with the requirements of Sections 106 (A)(2)(a)(1) and 112(A) of the Tax Code, then its claim should not be denied, notwithstanding its failure to state on the invoices the BIR authority to print and the TIN-V.

The incentives offered to PEZA enterprises, among which are tax exemptions and tax credits, ultimately redound to the benefit of the national economy, enticing as they do more enterprises to invest and do business within the zones, thus creating more employment opportunities and infusing more dynamism to the vibrant interplay of market forces

San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009,
San Roque did not make any commercial sale of electricity to National Power Corporation (NPC) during the period in question as San Roque was still constructing its power plant. However, during the same period, and while the power plant was being tested, San Roque produced and transferred electricity to NPC in exchange for P42.5 million. San Roque filed a claim for refund with the Bureau of Internal Revenue (BIR). The BIR failed to act on San Roques claim for refund, which prompted San Roque to file a petition for review with the Court of Tax Appeals (CTA). The CTAs Second Division rendered a decision denying San Roques claim for tax refund or credit. According to the Second Division, San Roque did not make any zero-rated or effectively-zero rated sales for the taxable year 2002; hence, San Roques claim must be denied. The CTA En Banc eventually reiterated the ruling of the Second Division that San Roques claim based on Section 112(A) of the NIRC should be denied since it did not present any records of any zero-rated or effectively zero-rated transactions. The main issue before the Supreme Court is whether or not San Roque may claim a tax refund or credit for creditable input tax attributable to zero-rated or effectively zero-rated sales pursuant to Section 112(A) of the NIRC or for input taxes paid on capital goods as provided under Section 112(B) of the NIRC. The Supreme Court found San Roques petition meritorious and reversed the CTA. It laid out the requirements for claiming a tax refund or credit: To claim refund or tax credit under Section 112(A), petitioner must comply with the following criteria: (1) the taxpayer is VAT registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the input taxes are due or paid; (4) the input taxes are not transitional input taxes; (5) the input taxes have not been applied against output taxes during and in the succeeding quarters; (6) the input taxes claimed are attributable

to zero-rated or effectively zero-rated sales; (7) for zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; (8) where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and (9) the claim is filed within two years after the close of the taxable quarter when such sales were made. The Supreme Court noted that the issue pertains to compliance with the sixth requirement, i.e., whether the input VAT claimed are attributable to zero-rated or effectively zero-rated sales: The main dispute in this case is whether or not petitioners claim complied with the sixth requirementthe existence of zero-rated or effectively zero-rated sales, to which creditable input taxes may be attributed. The CTA in Division and en banc denied petitioners claim solely on this ground. The tax courts based this conclusion on the audited report, marked as Exhibit J-2, stating that petitioner made no sale of electricity to NPC in 2002. Moreover, the affidavit of Echevarria (Exhibit L), petitioners Vice President and Director for Finance, contained an admission that no commercial sale of electricity had been made in favor of NPC in 2002 since the project was still under construction at that time. The Supreme Court ruled that there was a sale of electricity by San Roque to NPC in 2002: . . . upon closer examination of the records, it appears that on 2002, petitioner carried out a sale of electricity to NPC. The fourth quarter return for the year 2002, which petitioner filed, reported a zero-rated sale in the amount of P42,500,000.00. In the Affidavit of Echevarria dated 9 February 2005 (Exhibit L), which was uncontroverted by respondent, the affiant stated that although no commercial sale was made in 2002, petitioner produced and transferred electricity to NPC during the testing period in exchange for the amount of P42,500,000.00 . . . The Supreme Court noted that while the sale was not a commercial sale, it was a deemed sale transaction: The Court is not unmindful of the fact that the transaction described hereinabove was not a commercial sale. In granting the tax benefit to VAT-registered zero-rated or effectively zero-rated taxpayers, Section 112(A) of the NIRC does not limit the definition of sale to commercial transactions in the normal course of business. Conspicuously, Section 106(B) of the NIRC, which deals with the imposition of the VAT, does not limit the term sale to commercial sales, rather it extends the term to transactions that are deemed sale. . . After carefully examining this provision, this Court finds it an equitable construction of the law that when the term sale is made to include certain transactions for the purpose of imposing a tax, these same transactions

should be included in the term sale when considering the availability of an exemption or tax benefit from the same revenue measures. It is undisputed that during the fourth quarter of 2002, petitioner transferred to NPC all the electricity that was produced during the trial period. The fact that it was not transferred through a commercial sale or in the normal course of business does not deflect from the fact that such transaction is deemed as a sale under the law. With its finding that the petition is meritorious. the Supreme Court order the BIR to refund, or in the alternative, to issue a tax credit certificate to San Roque in the amount of P246,131,610.40, representing unutilized input VAT for the period 1 January 2002 to 31 December 2002.