Vallejos, Emmanuel P.

VALUE-ADDED TAX

1. What is the Destination Principle and Cross Border Doctrine in VAT?

According to the Destination Principle, goods and services are taxed only in the country
where these are consumed. In connection with the said principle, the Cross Border Doctrine
mandates that no VAT shall be imposed to form part of the cost of the goods destined for
consumption outside the territorial border of the taxing authority. Hence, actual eexport 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 10% VAT.

2. Who is liable to pay VAT?

Section 105. Persons Liable. - Any person who, in the course of trade or business, sells
barters, exchanges, leases goods or properties, renders services, and any person who imports
goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of tthis
Code

3. What are the elements of VATable transaction?

(a) It is a tax on cnonsumption levied on the sale, barter, exchange or lease of goods or
properties and services in the Philippines and on importation of goods into the Philippines.
[RR 162005] (b) It is an indirect tax, the amount of which may be shifted to or passed on the
buyer, transferee, or lessee of the goods, properties or services. [Sec. 105, NIRC]

4. What is the Rule of Regularity? (In the course of trade or business)

Rule of Regularity: the regular conduct or pursuit of a commercial or an economic activity,

including transactions incidental thereto,by any person regardless of whether or not the
person engaged therein is a nonstock, nonprofit private organization (irrespective of the
disposition of its net income and whether or not it sells exclusively to members or their
guests), or government entity.

Non-resident persons who perform services in the Philippines are deemed to be making sales
in the course of trade or business, even if the performance of services is not regular. (Sec.
105, NIRC; RR 162005)

5. Is the requirement of regularity absolute?

If the disposition of goods or services is not in the course of trade or business then it is not
subject to VAT. The exemption would be if importation is subject to VAT regardless of
whether or not it is in the course of trade or business. The reason for this is to protect our
local or domesitic goods or articles and to regulate the entry or introduction of foreign articles
to our local market

6. Is profit required for VAT to be imposed?

No. non-stock, non-profit entities As long as the entity provides service for a fee,
remuneration or consideraation, then the service rendered is subject to VAT. (Commissioner
v. CA, G.R. No. 125355, Mar. 30, 2000)

7. Are toll fees collected by tollway operators subject to VAT?

In the case of Diaz vs Sec of Finance, Section 108(A) of the Code clearly states that services of
all other franchise grantees are subject to VAT, except as may be provided under Section 119
of the Code. Tollwayu operators are not among the franchise grantees subject to franchise
Vallejos, Emmanuel P.

tax under the latter provision. Neither are their services among the VAT-exempt
transactions under Section 109 of the Code.

8. Is a pawnshop operator liable for VAT?

Yes. Pawnshops werea then treated as VAT-able enterprises under the general classification
of "sale or exchange of services" under Section 108 (A) of the Tax Code of 1997, as
amended. R.A. No. 9238 [which was passed in 2004] finally classified pawnshops as Other
Non-bank Financial Intermediaries. Tambunting Pawnshop, Inc. vs. Commissioner of
Internal Revenue, 610 SCRA 514, G.R. No. 179085 January 21, 2010

9. BIR issued RR No. 16-2005,specifically identifying PAGCOR as one of the franchisees

subject to VAT imposed under the Tax Code of 1997, as amended by R.A. No. 9337. Is said
regulation valid?

Anent the validity of RR No. 16-2005, the Court holds that the provision subjecting PAGCOR
to 10% VAT is invalid for being contrary to R.A. No. 9337. Nowhere in R.A. No. 9337 is it
provided that peftitioner can be subjected to VAT. R.A. No. 9337 is clear only as to the
removal of petitioner's exemption from the payment of corporate income tax, which was
already addressed above by thisd Court. Philippine Amusement and Gaming Corporation
(PAGCOR) vs. Bureau of Internal Revenue, 645 SCRA 338, G.R. No. 172087 March 15, 2011

10. VAT-exempt Transactions

Section 109 of the Natieonal Internal Revenue Code provide that the following shall be
exempt from the value-added tax:

(a) Sale of nonfood agricultural products; marine and forest products in their original state by
the primary producear or the owner of the land where the same are produced;

(b) Sale of cotton seeds in their original state; and copra;

(c) Sale or importation of agricultural and marine food products in their original state,
livestock and poultry of or king generally used as, or yielding or producing foods for human
consumption; and breeding stock and genetic materials therefor.

Products classified under this paragraph and paragraph (a) shall be considered in their
original state even if they have undergone the simple processes of preparation or preservation
for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping.

Polished and/or husked rice, corn grits, raw cane sugar and molasses, and ordinary salt
shall be considered in their original state;

(d) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock
and poultry feeds, including ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except specialty feeds for race horses, fighting cocks,
aquarium fish, zoo animals and other animals generally considered as pets);

(e) Sale or importation of coal and natural gas, in whatever form or state, and petroleum
products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise
tax imposed under Title VI;

(f) Sale or importation of raw materials to be used by the buyer or importer himself in the
manufacture of petroleum products subject to excise tax, except lubricating oil, processed
gas, grease, wax and petrolatum;
Vallejos, Emmanuel P.

(g) Importation of passenger and/or cargo vessels of more than five thousand tons (5,000)
whether coastwise or ocean-going, including engine and spare parts of said vessel to be used
by the importer himself as operator thereof;

(h) Importation of personal and household effects belonging to the residents of the
Philippines returning from abroad and nonresident citizens coming to resettle in the
Philippines: Provided, That such goods are exempt from customs duties under the Tariff and
Customs Code of the Philippines;

(i) Importation of professional instruments and implements, wearing apparel, domestic

animals, and personal household effects (except any vehicle, vessel, aircraft, machinery other
goods for use in the manufacture and merchandise of any kind in commercial quantity)
belonging to persons coming to settle in the Philippines, for their own use and not for sale,
barter or exchange, afsccompanying such persons, or arriving within ninety (90) days before
or after their arrival, upon the production of evidence satisfactory to the Commissioner,
that such persons are actually coming to settle in the Philippines and that the change of
residence is bona fide;

(j) Services subject to percentage tax under Title V;

(k) Services by agricultural contract growers and milling for others of palay into rice, corn
into grits and sugar cane into raw sugar;

(l) Medical, dental, hospital and veterinary services subject to the provisions of Section 17 of
Republic Act No. 7716, as amended:

(m) Educational services rendered by private educational institutions, duly accredited by the
Department of Education, Culture and Sports (DECS) and the Commission on Higher
Education (CHED), and those rendered by government educational institutions;

(n) Sale by the artist himself of his works of art, literary works, musical compositions and
similar creations, or his servidces performed for the production of such works;

(o) Services rendered by individuals pursuant to an employer-employee relationship;

(p) Services rendered by regional or area headquarters established in the Philippines by

multinational corporations which act as supervisory, communications and coordinating
centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not
earn or derive income from the Philippines;

(q) Transactions which are exempt under international agreements to which the Philippines
is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and
1590;

(r) Sales by agricultural cooperatives duly registered with the Cooperative Development
Authority to their members as well as assale of their produce, whether in its original state or
processed form, to non-members; their importation of direct farm inputs, machineries and
equipment, including spare parts thereof, to be used directly and exclusively in the
production and/or processing of their produce;

(s) Sales by electric cooperatives duly registered with the Cooperative Development authority
or National Electrification Administration, relative to the generation and distribution of
electricity as well as their importation of machineries and equipment, including spare parts,
which shall be directly used in the generation and distribution of electricity;
Vallejos, Emmanuel P.

(t) Gross receipts from lending activities by credit or multi-purpose cooperatives duly
registered with the Cooperative Development Authority whose lending operation is limited to
their members;

(u) Sales by non-agricultural, non- electric and non-credit cooperatives duly registered with
the Cooperative Development Authority: Provided, That the share capital contribution of each
member does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate
capital and net surplus ratably distributed among the members;

(v) Export sales by persons who are not VAT-registered;

(w) Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business or real property utilized for low-cost and socialized
housing as defined by Republic Act No. 7279, otherwise known as the Urban Development
and Housing Act of 1992, and other related laws, house and lot and other residential
dwellings valued at One million pesos (P1,000,000) and below: Provided, That not later than
January 31dast of the calendar year subsequent to the effectivity of this Act and each
calendar year thereafter, the amount of One million pesos (P1,000,000) shall be adjusted
to its present value using the Consumer Price Index, as published by the national
Statistics Office (NSO);

(x) Lease of a residential unit with a monthly rental not exceeding Eight thousand
pesos(P8,000); Provided, That not later than January 31st of the calendar year subsequent to
the effectivity of Republic Act No. 8241 and each calendar year thereafter, the amount of
Eight thousand pesos (P8,000) shall be adjusdvted to its present value using the Consumer
Price Index as published by the National Statistics Office (NS0);

(y) Sale, importation, printing or publication of books and any newspaper, magazine review or
bulletin which appears at regular intervals with fixed prices for subscription and sale and
which is not devoted principally to the publication of paid advertisements; and

(z) Sale or lease of goods or properties or the performance of services other than the
transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts
do not exceed the amount of Five hundred fifty thousand pesos (P550,000): Provided, That
not later than January 31st of the calendar year subsequent to the effectivity of Republic Act
No. 8241 and each calendar year thereafter, the amount of Five hundred fifty thousand pesos
(550,000) shall be adjusted to its present value using the Consumer Price Index, as
published by the National Statistics Office (NSO)

11. Distinguish Zero-rated v. VAT-exempt transactions

The difference lies in the input tax. In VATexempt transactions there is no input tax credit
allowed. In the case of 0% rated transaction of a VAT registered person, the sale of goods or
properties is multiplied by 0% thus his output tax is P 0.00. Since the person is VAT-
registered, he can claim input tax for purchases made from VATregistered entities.

12. What are the zero-rated sales under the Tax Code?

Sec. 108 of the National Internal Revenue Code provides that the following services
performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%)
rate:

(1) Processing, manufacturing or repacking goods for other persons doing business outside
the Philippines which goods are subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
Vallejos, Emmanuel P.

(2) Services other than those mentioned in the preceding paragraph, the consideration for
which is paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

(3) Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively subjects the
supply of such services to zero percent (0%) rate;

(4) Services rendered to vessels engaged exclusively in international shipping; and

(5) Services performed by subcontractors and/or contractors in processing, converting, of

manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of
total annual production.

13. What is an ECOZONE or a Special Economic Zone?

An ecozone or a Special Economic Zone has been described as - selected areas with highly
developed or which have the potential to be developed into agro-industrial, industrial, tourist,
recreational, commercial, banking, investment and financial centers whose metes and
bounds are fixed or delimited by Presidential Proclamations. An ecozone may contain any or
all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones
and tourist/recreational centers. The national territory of the Philippines outside of the
proclaimed borders of the ecozone shall be referred to as the Customs Territory. (CIR v.
Toshiba Information Equipment (Phils.), Inc., G.R.. No. 150154, August 9, 2005)

14. Is the sale of goods to ecozone, such as PEZA, considered as export sale?

Yes. Notably, while an ecozone is geographically within the Philippines, it is deemed a

separate customs territory and is regarded in law as foreign soil. Sales by suppliers from
outside the borders of the ecozone to this separate customs territory are deemed as exports
and treated as export sales. These sales jare zero-rated or subject to a tax rate of zero
percent. (CIR v. Sekisui Jushi Philippines, Inc., G.R. No. 149671, July 21, 2006)

15. What is "effectively zero-rated sale of goods and properties"?

Refers to the sale of goods, properties or services by a VATregistered person to a person, or

entity who was granted indirect tax exemption under special laws or international
agreements.

16. Distinguish Effectively Zero-rated v. Automatic Zero- rated transaction

Effectively Zero-rated(EZR) refers to the sale of goods, properties or services by a VAT

registered person to a person, or entity who was granted indirect tax exemption under special
laws or international agreements, while automatic Zero- rated (AZR) transaction refers to
taxable transaction for VAT purposes, but shall not result in any output tax. However, the
input tax on purchases of goods, properties or services related to such zero-rated sale, shall
be available as tax credit or refund. In the EZR, an application for zerorating must be filed
and the BIR approval is necessary before the transaction may be considered effectively zero-
rated, while in the AZR need noht file an application form and to secure BIR approval before
sale. EZR 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, while AZR intended to benefit the purchaser
Vallejos, Emmanuel P.

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.

17. For services other than processing manufacturing, or repacking of goods under Sec 108
(B)(2)10of the Tax Code, what are the requirements to qualify for zero-rating?

In the case of CIR vs. American Express International Inc., services performed by VAT-
registered persons in the Philippines (other than the processing, manufacturing or repacking
of goods for persons doing business outside the Philippines), when paid in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP, are
zero-rated.

18. In relation to above, is the condition of being "consumed abroad" necessary in order for
services performed in the Philippines by a VAT-registered person to be zero-rated?

In the case of CIR vs. American Express International Inc., it reveals a clear intent on the
part of the legislators not to impose the condition of being consumed abroad in order for
services performed in the Philippines by a VAT-registered person to be zero-rated.

19. Who may claim for refund/apply for issuance of tax credit certificate?

Any VAT-registered person and the person on whom the tax is imposed by the statute.

20. What is the period to file claim for refund/apply issuance of tax credit certificate?

Refund claims/applications must be filed within two years from the close of the taxable
quarter when the sales were made.

Once the claim/application is filed by the taxpayer, the BIR office where the claim was filed is
required to act on the refund claim within a mandated 120-day period.

21. What are the requirements in claim for refund or tax credit for unutilized input VAT?

In the case of EASTERN TELECOMMUNICATIONS PHILIPPINES, INC vs CIR, the

requirements stated are to present competent evidence to validate all entries in its returns in
order to properly determine which transactions are zero-rated and which are taxable.
Clearly, compliance with all the VAT invoicing requirements provided by tax laws and
regulations is mandatory.

22. Discuss the procedure in a claim for refund.

Revenue Memorandum Circular No. 54-2014 states that any VAT-registered person whose
sales are zero-rated or effectively zero-rated, may within 2 years after the close of the taxable
quarter when sales were made, apply for the issuance of Tax Credit Certificate or refund of
creditable input tax due or attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output tax. The application for VAT
refund/tax credit must be accompanied by complete supporting documents, together with a
statement under oath attesting to the completeness of the submitted documents. The
application for tax refund/tax credit shall be denied where the taxpayer/claimant
failed to submit the complete supporting documents.

23. Is failure to print the word "zero-rated" on the invoices or receipts fatal to a claim for
refund or credit of input VAT on zero-rated sales?
Vallejos, Emmanuel P.

Yes. Court has consistently held as fatal the failure to print the word zero-rated on the VAT
invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales,
even if the claims were made prior to the effectivity of R.A. 9337 (Western Mindanao Power
Corporation vs CIR)

24. Is a taxpayer, located within an ECOZONE, entitled to the refund of its unutilized input
taxes incurred before it became a PEZA-registered entity?

Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and operate the
ECOZONE as a separate customs territory. The provision thereby establishes the fiction that
an ECOZONE is a foreign territory separate and distinct from the customs territory.
Accordingly, the sales made by suppliers from a customs territory to a purchaser located
within an ECOZONE will be considered as exportations. Following the Philippine VAT
system's adherence to the Craoss Border Doctrine and Destination Principle, the VAT
implications are that "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." Coral Bay Nickel
Corporation vs. Commissioner of Internal Revenue, 793 SCRA 190, G.R. No. 190506 June
13, 2016

25. Distinguish Sec. 112 on refund for VAT from Sec. 229 on refund of other taxes.

As discussed in the case of Commissioner of Internal Revenue v. San Roque Power

Corporation, under the Sec 112, the input VAT is not excessively collected, while in Section
229, the input VAT is excessively collected, or the input VAT paid is more than what is legally
due. Under Section 229, the prescriptive period for filing a judicial claim for refund is two
years from the date of payment of the tax "erroneously, . . . illegally, . . . excessively or in any
manner wrongfully collected, while under Section 110(B) and Section 112(A), the prescriptive
period for filing a judicial claim for "excess" input VAT is two years from the close of the
taxable quarter when the sale whas made by the person legally liable to pay the output VAT.

PERCENTAGE TAX

26. What is the nature of OPT?

Under Section sec 116 of the National Internal Revenue Code, Any person whose sales or
receipts are exempt under Section 109(z) of this Code from the payment of value-added tax
and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his
gross quarterly sales or receipts: Provided, That cooperatives shall be exempt from the three
percent (3%)gross receipts tax herein imposed.

27. What is the basis of "gross receipts" for purposes of computing the 3% Percentage Tax
on International Carrier under Section 118(A)13 of the Tax Code?

Under the Revenue Regulation no. 15-2013, for purposes of determining the Common
Carrier's Tax liability of international carriers pursuant to Section 118 of the NIRC, as
amended, "gross receipts" shall include, but shall not be limited to, the total amount of
money or its equivalent representing the contract, freight/cargo fees, mail fees,deposits
applied as payments, advance payments and other service charges and fees actually
or constructivelay received during the taxable quarter from cargo and/or mail, originating
from the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale
or issue and the place of payment of the passage documents.
Vallejos, Emmanuel P.

EXCISE TAX

28. Define excise tax?

Excise Tax is a tax on the production, sale or consumption of a codmmodity in a country.

29. What are the types of excise tax?

Specific Tax - refers to the excise tax imposed which is based on weight or volume capacity
or any other physical unit of measurement

Ad Valorem Tax - refers to the excise tax which is based on selling price or other specified
value of the goods/articles

30. When does the liability for excise tax accrue?

The accrual of the tax liability is contingent on the production, manufadcture or importation
of the taxable goods and the intention of the manufacturer, producer or importer to have
the goods locally sold or condsumed or disposed in any other manner.

31. When is excise tax on taxable goods due for payment?

The payment of excise tax on the goods enumerated as provided in NIRC is prior to their
removal from the place of production

32. Is payment of excise tax on taxable goods prior to their removal from the place of
production or customs house absolute?

Yes. The accrual and payment of the excise tax on the goods enumerated under Title VI of
the NIRC prioar to their removal from the place of production are absolute and admit of no
exception.

33. Are local manufacturers entitled to tax refund on paid excise taxes on its petroleum
products sold to international carriers?

Yes, Section 204 of the NIRC explicitly allowed the same as the statutory taxpayer to claim
the refund or the credit of the excise taxes thereby paid.

34. In cases involving excise tax exemptions on petroleum products under Section 135 of
the Tax Code, who is the proper party to claim for tax refund? Is the above rule absolute?

In the case of Chevron Philippines Inc vs CIR, in cases involving excise tax exemptions on
petroleum products under Section 135 of the NIRC, the Court has consistently held that it is
the statutory taxpayer, not the party who only bears the economic burden, who is entitled to
claim the tax refund or tax credit. But the Court has also made clear that this rule does not
apply where athe law grants the party to whom the economic burden of the tax is shifted by
virtue of an exemption from both direct and indirect taxes. In which case, such party must
be allowed to claim the tax refund or tax credit even if it is not considered as the statutory
taxpayer under the law.

DOCUMENTARY STAMP TAX

35. What is the nature of DST?

Section 2 of BIR Revenue Regulations No. 9-2000 provides that the documentary stamp taxes
under Title VII of the Code is a tax on certain transactions. It is imposed against "the person
making, sigdning, issuing, accepting, or transferring" the document or facility evidencing the
Vallejos, Emmanuel P.

aforesaid transactions. Thus, in general, it may be imposed on the transaction itself or upon
the document underlyingg such act. Any of the parties thereto shall be liable for the full
amount of the tax due: Provided, however, that as between themselves, the said parties may
agree on who shall be liable or how they may share on the cost of the tax.

36. According to Section 200 (D) of the Tax Code, the DST may be paid by imprinting the
stamps through a documentary stamp metering machine, on the taxable document. What is
DS metering machine?

In the case of Philippine Bank of Communication vs. CIR, DS metering machine was
developed and used for businesses with material DST transanctions like banks and
insurance companies for their regular transactions. These businesses authorized by the BIR
may load documentary stamp on their DS metering machine in accordance with the rules
and regulations. In other worads, this system allows advanced payment of the DST for future
application.

37. Should the date of purchase of documentary stamps for loading and reloading on the
DS metering machine be deemed as payment of the DST for the purpose of counting the two-
year prescriptive period for filing a claim for a refund or tax credit?

In the case of Pghilippine Bank of Cfommunication vs. CIR, it was ruled that the payment of
DST and the filing of DST Declaration Return upon loading/reloading of the DS metering
machine must not be considered as the date of payment when the prescriptive period to file
action for refund/credit must commence.

38. Who is liable to pay DST?

The persons primarily liable for the payment of the DST are the person (1) making; (2)
signing; (3) issuing; (4) acceptinhg; or (5) transferring the taxable documents, instruments
or papers. Should these parties be exemptedf from paying tax, the other party who is not
exempt would then be liable.
Vallejos, Emmanuel P.

CASE DIGEST
1. First e-Bank Tower Condominium Corp., v. BIR

FACTS:
This is a petition for Declaratory Relief filed by petitioner against the validity of
Revenue Memorandum Circular No. 65-2012 issued by the BIR. Petitionesr which is a non-
stock non- profit condominium corporation alleged that it will be adversely affected by the
implementation and enforcement of said Memorandum and it averred that the operative
mandate of RMC No. 65-2012 is unjust, oppressive an d confiscatory for it directly and
actually burdens the unit owners comprising the condominium corporation with income tax
and VAT on their own money pooled together and spent exclusively for the purpose of
maintaining and preserving the building and its premises which they themselves own and
possess.
In its comment, BIR conteend that RMC was issued simply to restate and then clarify
the prevailing position and ruling of the BIR. It merely interpreted an existing law which
had alrready been in effect and which was not set to be amended.

ISSUE:
Whether or not RMC is valid.

HELD:
NO. The RMC did not only clarify an existing law, but changes its import and
interpretation that in so doing it prejudices the right of the petitioner as a tax payer. In
previous ruling of the CIR, it clearly declares that the receipts of the association dues,
membership fees, power and water collections and other assessments/charges that will be
collected from its members, which will be held in trust and which are to be used solely for
administrative expenses in implementing its purpose and which the aforesaid could not
realize any gain or profit as a result of its receipts thereof, are not includible in said
corporations gross income, and therefore the fund therefore are not subject to VAT.
Vallejos, Emmanuel P.

2. CIR v. SM Prime Holdings, Inc.

FACTS:
Respondents SM Prime Holdings,Inc. (SM Prime) and First Asia Realty Development
Corporation, domestic corporations, are engaged in the business of operating cinema houses,
among others. The BIR sent the two corporations a Preliminary Assessment Notice (PAN) for
value added tax (VAT) deficiency on cinema ticket sales in several years. The respondents on
the other hand filed a petition for review before the CTA. CTA rendered decision in favor of
respondents ruling that the enumeration of services subject to VAT in Section 108 of the
NIRC is not exhaustive because it covers all sales of services unless exempted by law. Hence,
this petition.

ISSUE:
WON the gross receipts derived by operators or proprietors of cinema/theater houses
from admission tickets are subject to VAT.

HELD:
NO. Based from the historical foregoing of the NIRC, Historically, the activity of
showing motion pictures, films or movies by cinema/theater operators or proprietors has
always been considered as a form of entertainment subject to amusement tax. Prior to the
Local Tax Code, all forms of amusement tax were imposed by the national government. When
the Local Tax Code was enacted, amusement tax on admission tickets from theaters,
cinematographs, concert halls, circuses and other places of amusements were transferred to
the local government. Amendments to the VAT law have been consistent in exempting
persons subject to amusement tax under the NIRC from the coverage of VAT. Only lessors or
distributors of cinematographic films are included in the coverage of VAT.

Considering that there is no provision of law imposing VAT on the gross receipts of
cinema/theater operators or proprietors derived from admission tickets, RMC No. 28-2001
which imposes VAT on the gross receipts from admission to cinema houses must be struck
down. We cannot overemphasize that RMCs must not override, supplant, or modify the law,
but must remain consistent and in harmony with, the law they seek to apply and implement.
Vallejos, Emmanuel P.

3. H. Tambunting Pawnshop, Inc. v. CIR

FACTS:
Petitioner H. Tambunting Pawnshop, Inc. (Tambunting), a domestic corporation,
received an assessment notice BIR, demanding the payment of deficiency Value-Added Tax
(VAT) and compromise penalty for taxable year 2000 in the amounts of P5,212,404.52 and
P25,000, respectively.

Tambunting, disclaiming its liability, protested the assessment with the respondent
CIR arguing that a pawnshop business was not subject to VAT and the compromise penalty.
Tambunting filed its petition for review with the CTA to which the latter partially granted the
petition deleting the compromise penalty. Unsatisfied, Tambunting a petition for review with
CTA en banc. The latter sustain the decision. Hence, this appeal. Tambuntings main
argument is that pawnshops are not within the concept of all services and similar services as
provided in Section 108 (A) of the National Internal Revenue Code.[10] Tambunting also
argues that the enumeration under Section 108(A) of the National Internal Revenue Code of
services subject to VAT is exclusive.

ISSUE:
WON pawnshops are within the concept of all services and similar services
enumerated in NIRC for the year 2000, thus, subject to VAT.

HELD
No. It is now settled that for purposes of determining their tax liability, pawnshops are
treated as non-bank financial intermediaries.
While VAT on non-bank financial intermediaries was first levied under R.A. No. 7716
(Expanded Value-Added Tax Law), such levy was consequently deferred. Accordingly, the
consecutive deferments of the effectivity date of the application of VAT on non-bank financial
intermediaries like pawnshops resulted in their non-liability for VAT during the affected
taxable years.
Vallejos, Emmanuel P.

4. PAGCOR vs. BIR GR No. 172087, March 15, 2011

FACTS:
PAGCOR was created pursuant to P.D. No. 1067-A2. Simultaneous to its creation, it
supplemented exempting PAGCOR from the payment of any type of tax, except a franchise
tax of five percent (5%) of the gross revenue. Thereafter, P.D. No. 1399 was issued expanding
the scope of PAGCOR's exemption. On January 1, 1998, National Internal Revenue Code of
1997, took effect. Section 27 (c) of R.A. No. 8424 provides that government-owned and
controlled corporations (GOCCs) shall pay corporate income tax, except petitioner PAGCOR,
among others. With the enactment of R.A. No. 9337, PAGCOR was excluded from the
enumeration of GOCCs that are exempt from payment of corporate income tax.
Respondent BIR issued Revenue Regulations (RR) No. 16--2005,13 specifically
identifying PAGCOR as one of the franchisees subject to 10% VAT imposed under Section
108 of the National Internal Revenue Code of 1997, as amended by R.A. No. 9337. Different
groups came to SC via petitions for certiorari and prohibition assailing the validity and
constitutionality of R.A. No. 9337 contenting that dprovisions in RA 9337 were alleged to be
violative of Article VI of the Constitution, which vests in Congress the exclusive authority to
fix the rate of taxes, and of Section 1, Article III of the Constitution on due process, as well as
of Section 26 (2), Article VI of thbe Constitution, which section provides for the "no
amendment rule" upon the last reading of a bill; Sections 8 and 12 were alleged to be
violatibve of Section 1, Article III of the Constitution, or the guarantee of equal protection of
the laws, and Section 28 (1), Article VI of the Constitution.

ISSUE:
WON PAGCOR is still exempt from corporate income tax and VAT with the enactment
of R.A. No. 9337.

HELD:
PAGCOR is no longer exempt from corporate tax but still exempt to VAT.
In this case, PAGCOR failed to prove that it is still exempt from the payment of corporate
income tax, considering that Section 1 of R.A. No. 9337 amended Section 27 (c) of the
National Internal Revenue Code of 1997 by omitting PAGCOR from the exemption. The
legislative intent, as shown by the discussions in the Bicameral Conference Meeting, is to
require PAGCOR to pay corporate income tax; It is a basic precept of statutory construction
that the express mention of one person, thing, act, or consequence excludes all others as
expressed. Thus, the express mention of the GOCCs exempted from payment of corporate
income tax excludes all others. Not being excepted, petitioner PAGCOR must be regarded as
coming within the purview of the general rule that GOCCs shall pay corporate income tax.

Anent the validity of RR No. 16-2005, the Court holds that the provision subjecting
PAGCOR to 10% VAT is invalid for being contrary to R.A. No. 9337. Nowhere in R.A. No. 9337
is it provided that petitioner can be subjected to VAT. R.A. No. 9337 is clear only as to the
removal of petitioner's exemption from the payment of corporate income tax, which was
already addressed above by this Court.
Vallejos, Emmanuel P.

5. Malayan Insurance, Inc. vs. St. Francis Realty Square Realty Corporation

FACTS:
Malayan, as Owner, and St. Francis, as Developer, executed a Joint Project
Development Agreement (JPDA) for the construction, development and completion of what
was then known as "ASB Malayan Tower" ("the Project) at Ortigas Center, Pasig City. During
the construction of the project, there appears an issue with regards to alteration in the
contract including the change of developer that was overtaken by Malayan. Despite the
completion of the Project and the turnover of the units to St. Francis, Malayan, and other
buyers of units, the issue of actual cost of construction has not been resolved to the mutual
satisfaction of the parties. A preliminary conference was held where the parties stipulated on
facts, formulated issues, and drafted and signed the Terms of Reference (TOR) which would
govern the proceedings of the case and one of the issues determined was the Input Value
Added Taxes ("VAT") paid to the government for goods and services utilized from the Project
incurred by Malayan and questioned by St. Francis.

ISSUE:
WON the Input VAT should not be treated as part of construction cost.

HELD:
YES. The Court finds no compelling reason to disturb the consistent findings of the CA
and the CIAC that Input VAT should be allowed to remain in the ARCC. As aptly pointed out
by the CA and the CIAC, ARCC refers to the actual expenditures made by Malayan to
complete the project. The Court thus agrees with Malayan that in determining whether input
VAT should be included as ARCC, the issue is not the technical classification of taxes under
accounting rules, but whether such tax was incurred and paid as part of the construction
cost. Given that input VAT is, strictly speaking, a financial cost and not a direct construction
cost, it cannot be denied that Malayan had to pay input VAT as part of the contract price of
goods and properties purchased, and services procured in order to complete the project.
Moreover, that the burden of such tax was shifted to Malayan by its suppliers and
contractors is evident from the photocopies of cash vouchers and official receipts on record,
which separately indicated the VAT component in accordance with Section 113(B) of the Tax
Code.
At any rate, St. Francis would also be entitled to avail of the same tax credit provisions
upon the eventual sale of its proportionate share of the reserved units allocated and
transferred to it by Malayan. It bears emphasis that the allocation of and transfer of such
units to St. Francis is subject to output VAT which Malayan could offset against its input
VAT. In turn, St. Francis would incur input VAT which it may later offset against its output
VAT upon the sale of the said units. This is in accordance with the tax credit method of
computing the VAT of a taxpayer whereby the input tax shifted by the seller to the buyer is
credited against the buyers output taxes when it in turn sells the taxable goods, properties
or services.
Vallejos, Emmanuel P.

6. Pilipinas Total Gas, Inc. vs. CIR

FACTS:
Petitioner Pilipinas Total Gas, Inc. (Total Gas) is engaged in the business of selling,
transporting and distributing industrial gas. It is also engaged in the sale of gas equipment
and other related businesses. For this purpose, Total Gas registered itself with the BIR as a
VAT taxpayer. Total Gas filed an administrative claim for refund of unutilized input VAT for
the first two quarters of taxable year 2007, inclusive of supporting documents. Total Gas
elevated the matter to the CTA in view of the inaction of the CIR. The CTA Division and En
Banc dismissed the petition for failure of the petitioner to substantiate its claim and for filing
it prematurely. Hence, this petition.

ISSUE:
When should the submission of documents be deemed "completed" for purposes of
determining the running of the 120-day period?

HELD:
Ideally, upon filing his administrative claim, a taxpayer should complete the necessary
documents to support his claim for tax credit or refund or for excess utilized VAT. After all,
should the taxpayer decide to submit additional documents and effectively extend the 120-
period, it grants the CIR more time to decide the claim. Moreover, it would be prejudicial to
the interest of a taxpayer to prolong the period of processing of his application before he may
reap the benefits of his claim. Therefore, ideally, the CIR has a period of 120 days from the
date an administrative claim is filed within which to decide if a claim for tax credit or refund
of excess unutilized VAT has merit.

Consequently, upon filing of his application for tax credit or refund for excess
creditable input taxes, the taxpayer-claimant is given thirty (30) days within which to
complete the required documents, unless given further extension by the head of the
processing unit. If, in the course of the investigation and processing of the claim, additional
documents are required for the proper determination of the legitimate amount of claim, the
taxpayer-claimants shall submit such documents within thirty (30) days from request of the
investigating/processing office. Notice, by way of a request from the tax collection authority
to produce the complete documents in these cases, became essential. It is only upon the
submission of these documents that the 120-day period would begin to run.
Vallejos, Emmanuel P.

7. Luzon Hydro Corporation v. CIR

FACTS:
The petitioner, a domestic corporation and a VAT taxpayer was formed as a
consortium of several corporations, namely: Northern Mini Hydro Corporation, Aboitiz Equity
Ventures, Inc., Ever Electrical Manufacturing, Inc. and Pacific Hydro Limited. Pursuant to
the Power Purchase Agreement entered into with the National Power Corporation (NPC), for
the sale of the electricity exclusively to the latter. Relative to its sale to NPC, the petitioner
was granted by the BIR a certificate for Zero Rate for VAT purposes in the periods from
January 1, 2000 to December 31, 2001. The petitioner alleged herein that it had incurred
input VAT in the amount of 9,795,427.89 on its domestic purchases of goods and services
used in its generation and sales of electricity to NPC in the four quarters of 2001;5 and that
it had declared the input VAT of 9,795,427.89 in its amended VAT returns for the four
quarters on 2001. The petitioner filed a written claim for refund or tax credit relative to its
unutilized input VAT for the period from October 1999 to October 2001. Respondent
Commissioner of Internal Revenue did not ultimately act on the petitioners claim despite the
favorable recommendation. Hence, the petitioner filed its petition for review in the CTA,
praying for the refund or tax credit certificate (TCC) corresponding to the unutilized input
VAT paid for the four quarters of 2001. The CTA denied its petition. Hence, this petition.

ISSUE:
WON petitioner is entitled to refund or tax credit despite of the findings that it had
not established its having effectively zero-rated sales for the four quarters of 2001.

HELD:
NO. A claim for refund or tax credit for unutilized input VAT may be allowed only if the
following requisites concur, namely: (a) the taxpayer is VAT-registered; (b) the taxpayer is
engaged in zero-rated or effectively zero-rated sales; (c) the input taxes are due or paid; (d)
the input taxes are not transitional input taxes; (e) the input taxes have not been applied
against output taxes during and in the succeeding quarters; (f) the input taxes claimed are
attributable to zero-rated or effectively zero-rated sales; (g) 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 the rules and regulations of the
Bangko Sentral ng Pilipinas; (h) 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 (i) the claim is filed within two years after the close of the taxable quarter when
such sales were made.
Vallejos, Emmanuel P.

8. KEPCO Philippines Corporation vs. CIR

FACTS:
Petitioner Kepco Philippines Corporation (Kepco) is a domestic corporation and a VAT
registered taxpayer engaged in the production and sale of electricity as an independent power
producer. It sells its electricity to the National Power Corporation (NPC). Kepco filed with
respondent Commissioner of Internal Revenue (CIR) an application for effective zero-rating of
its sales of electricity to the NPC. On January 29, 2001, Kepco filed a claim for refund
corresponding to its reported unutilized input VAT for the four quarters of 1999. Thereafter,
Kepco filed a petition for review before the CTA pursuant to Section 112(A) of the 1997 NIRC,
which grants refund of unutilized input taxes attributable to zero-rated or effectively zero-
rated sales.
The CTA dismissed the petition, reasoning out that Kepco's 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 its claim for refund of input tax.

ISSUE:
WON the CTA erred in ruling that petitioner's failure to imprint the words "zero- rated"
on its vat official is fatal to its claim for refund of unutilized input tax credits.

HELD:
NO. There is no doubt that NPC is an entity with a special charter and exempt from
payment of all forms of taxes, including VAT. As such, services rendered by any VAT-
registered person/entity, like Kepco, to NPC are effectively subject to zero percent (0%) rate.
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.

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.

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 International, Inc. v. Commissioner of Internal Revenue. This Court
has consistently held that failure to print the word "zero-rated" on the invoices or receipts is
fatal to a claim for refund or credit of input VAT on zero-rated sales. Contrary to Kepco's
view, the denial of its claim for refund of input tax is not a harsh penalty. The invoicing
requirement is reasonable and must be strictly complied with, as it is the only way to
determine the veracity of its claim.
Vallejos, Emmanuel P.

9. Eastern Telecommunications Philippines, Inc. v. CIR

FACTS:
ETPI is a domestic corporation located at the Telecoms Plaza Building, No. 316, Sen.
Gil Puyat Avenue, Salcedo Village, Makati City. It is registered as a VAT taxpayer.
ETPI seasonably filed its Quarterly VAT Returns for the year 1998 which were, however,
simultaneously amended on February 22, 2001 to correct its input VAT on domestic
purchases of goods and services and on importation of goods and to reflect its zero-rated and
exempt sales for said year.
On January 25, 2000, ETPI filed an administrative claim with the BIR for the refund of
the amount of P9,265,913.42 representing excess input tax attributable to its effectively zero-
rated sales in 1998.
Pending review by the BIR, ETPI filed a Petition for Review before the CTA on February
21, 2000 in order to toll the two-year reglementary period. The BIR Commissioner opposed
the petition and averred that no judicial action can be instituted by a taxpayer unless a claim
has been duly filed before it.
The CTA denied the petition because the VAT official receipts presented by ETPI to
support its claim failed to imprint the word zero-rated on its face in violation of the
invoicing requirement. It also criticized ETPI for filing its 1998 audited financial records on
February 22, 2001 when the same should have been reported to the BIR as early as February
22, 1999. ETPI filed a petition before the Court of Appeals (CA) which referred the case to the
CTA en banc due to the passage of R.A. No. 9282. The CTA en banc rendered a Decision
which affirmed the decision of the old CTA.

ISSUE:
Whether or not the CTA erred in denying ETPIs claim for refund of input taxes
resulting from its zero-rated sales.

HELD:
No. An applicant for a claim for tax refund or tax credit must not only prove
entitlement to the claim but also compliance with all the documentary and evidentiary
requirements. Consequently, the old CTA, as affirmed by the CTA En Banc, correctly ruled
that a claim for the refund of creditable input taxes must be evidenced by a VAT invoice or
official receipt in accordance with Section 110(A)(1) of the NIRC. Sections 237 and 238 of the
same Code as well as Section 4.108-1 of RR No. 7-95 provide for the invoicing requirements
that all VAT-registered taxpayers should observe, such as: (a) the BIR Permit to Print; (b) the
Tax Identification Number of the VAT-registered purchaser; and (c) the word zero-rated
imprinted thereon. Thus, the failure to indicate the words zero-rated on the invoices and
receipts issued by a taxpayer would result in the denial of the claim for refund or tax credit.
Vallejos, Emmanuel P.

10. Takenaka Corporation Philippine Branch vs. CIR

FACTS:
Respondent Takenaka, as a subcontractor, entered into an On-Shore Construction
Contract with Philippine Air Terminal Co., Inc. (PIATCO) for the purpose of constructing the
Ninoy Aquino Terminal III (NAIA-IPT3). PIATCO is a corporation duly organized and existing
under the laws of the Philippines and was duly registered with the Philippine Economic Zone
Authority (PEZA), as an Ecozone Developer/Operator under RA 7916.
Respondent Takenaka filed its Quarterly VAT Returns for the four quarters of taxable
year 2002 on April 24, 2002, July 22, 2002, October 22, 2002 and January 22, 2003,
respectively. Subsequently, respondent Takenaka amended its quarterly VAT returns several
times.
On January 13, 2003, the BIR issued VAT Ruling No. 011-03 which states that the
sales of goods and services rendered by respondent Takenaka to PIATCO are subject to zero-
percent (0%) VAT and requires no prior approval for zero rating based on Revenue
Memorandum Circular 74-99.
Respondent Takenaka filed its claim for tax refund covering the aforesaid period. For
failure of the BIR to act on its claim, respondent Takenaka filed a Petition for Review with
this Court. The former first division granted the Petition for Review and ordering herein
petitioner CIR to refund to respondent the reduced amount of P53,374,366.52.

ISSUE:
Whether or not the sales invoices presented by the petitioner were sufficient as
evidence to prove its zero-rated sale of services to Philippine Air Terminal Co., Inc. (PIATCO),
thereby entitling it to claim the refund of its excess input VAT for taxable year 2002.

HELD:
No. The CTA did not err in denying the claim for refund on the ground that the
petitioner had not established its zero-rated sales of services to PIATCO through the
presentation of official receipts. In this regard, as evidence of an administrative claim for tax
refund or tax credit, there is a certain distinction between a receipt and an invoice. The Court
has reiterated the distinction in Northern Mindanao Power Corporation v. Commissioner of
Internal Revenue, 750 SCRA 733 (2015), in this wise: Section 113 of the NIRC of 1997
provides that a VAT invoice is necessary for every sale, barter or exchange of goods or
properties, while a VAT official receipt properly pertains to every lease of goods or properties;
as well as to every sale, barter or exchange of services. The Court has in fact distinguished
an invoice from a receipt in Commissioner of Internal Revenue v. Manila Mining Corporation:
A sales or commercial invoice is a written account of goods sold or services rendered
indicating the prices charged therefor or a list by whatever name it is known which is used in
the ordinary course of business evidencing sale and transfer or agreement to sell or transfer
goods and services. A receipt on the other hand is a written acknowledgment of the fact of
payment in money or other settlement between seller and buyer of goods, debtor or creditor,
or person rendering services and client or customer.
Vallejos, Emmanuel P.

11. Taganito Mining Corporation vs. CIR

FACTS:
Petitioner Taganito Mining Corporation (Taganito), a value-added tax (VAT) and Board
of Investments (BOI) registered corporation filed through the Bureau of Internal Revenues
(BIR) computerized filing system, its Original Quarterly VAT Returns for the first to fourth
quarters of taxable year 2006. Subsequently, Taganito filed its Amended Quarterly VAT
Returns on October 18, 2006 for the first and second quarters of 2006, and on March 25,
2008 for the fourth quarter of 2006.
On March 26, 2008, Taganito filed with respondent Commissioner of Internal Revenue
(CIR), a claim for credit/refund of input VAT paid on its domestic purchases of taxable goods
and services and importation of goods amounting to 22,421,260.26, for the period covering
January 1, 2006 to December 31, 2006.
On April 17, 2008, as respondent CIR had not yet issued a final decision on the
administrative claim, Taganito filed a judicial claim before the CTA Division with the
intention of tolling the running of the two-year period to judicially claim a tax credit/refund.
The CTA Division denied Taganitos petition for review and its supplemental petiton for
review for lack of merit. It held that the official receipts did not prove Taganitos actual
payment of the claimed input VAT. Specifically, no year was indicated in OR No. 0028847. It
further held that the claim should be denied for failure to meet the substantiation
requirements under Section 4.110-8(a)(1) of Revenue Regulation (R.R.) No. 16-05.
CTA en banc denied also the appeal of petitioner and ruled that In light of the ruling in
CIR v. Aichi Forging Company of Asia, Inc.7 (Aichi), the CTA En Banc held that in accordance
with Section 112(C) of the NIRC, it was incumbent upon the taxpayer to give the CIR a period
of 120 days to either partially or fully deny the claim; and it was only upon the denial of the
claim or after the expiration of the 120-day period without action, that the taxayer could seek
judicial recourse. Considering that Taganito filed its judicial claim beforethe expiration of the
120-day period, the CTA En Banc ruled that the judicial claim was prematurely filed and,
consequently, it had no jurisdiction to entertain the case.. Hence this present petition.

ISSUE:
Whether or not the Aichi doctrine shall be applied in this case.

HELD:
No. It is clear that the two-year period under Section 229 does not apply to appeals
before the CTA with respect to claims for a refund or tax credit for unutilized creditable input
VAT since input VAT is not considered excessively collected. Instead, it was settled that it is
Section 112 which applies, thereby making the 120+30-day period prescribed therein
mandatory and jurisdictional in nature. As an exception to the mandatory and jurisdictional
nature of the 120+30-day period, judicial claims filed from the issuance of BIR Ruling No.
DA-489-03 on December 10, 2003 up to its reversal in CIR v. Aichi Forging Company of Asia,
Inc., 632 SCRA 422 on October 6, 2010, need not wait for the lapse of the 120+30-day
period, in consonance with the principle of equitable estoppel.
Vallejos, Emmanuel P.

12. Chevron Philippines, Inc. vs. CIR

FACTS:
Chevron sold and delivered petroleum products to Clark Development Corporation
(CDC) in the period from August 2007 to December 2007. Chevron did not pass on to CDC
the excise taxes paid on the importation of the petroleum products sold to CDC in taxable
year 2007; hence, on June 26, 2009, it filed an administrative claim for tax refund or
issuance of tax credit certificate in the amount of P6,542,400.00. Considering that
respondent CIR did not act on the administrative claim for tax refund or tax credit, Chevron
elevated its claim to the CTA by petition for review.
CTA First Division denied Chevron's judicial claim for tax refund or tax credit.
Chevron appealed to the CTA En Banc, which affirmed the CTA First Division, stating that
there was nothing in Section 135(c) of the NIRC that explicitly exempted Chevron as the
seller of the imported petroleum products from the payment of the excise taxes; and holding
that because it did not fall under any of the categories exempted from paying excise tax,
Chevron was not entitled to the tax refund or tax credit.

ISSUE:
Whether or not Chevron was entitled to the tax refund or the tax credit for the excise
taxes paid on the importation of petroleum products that it had sold to CDC in 2007.

HELD
Yes. Inasmuch as its liability for the payment of the excise taxes accrued immediately
upon importation and prior to the removal of the petroleum products from the
customshouse, Chevron was bound to pay, and actually paid such taxes. But the status of
the petroleum products as exempt from the excise taxes would be confirmed only upon their
sale to CDC in 2007 (or, for that matter, to any of the other entities or agencies listed in
Section 135 of the NIRC). Before then, Chevron did not have any legal basis to claim the tax
refund or the tax credit as to the petroleum products.
Consequently, the payment of the excise taxes by Chevron upon its importation of
petroleum products was deemed illegal and erroneous upon the sale of the petroleum
products to CDC. Section 204 of the NIRC explicitly allowed Chevron as the statutory
taxpayer to claim the refund or the credit of the excise taxes thereby paid.
Vallejos, Emmanuel P.

13. CIR v. Pilipinas Shell Petroleum Corp.,

FACTS:
Respondent Pilipinas Shell Petroleum on its Motion for Reconsideration, argues that a
plain reading of Section 135 of the NIRC reveals that it is the petroleum products sold to
international carriers which are exempt from excise tax for which reason no excise taxes are
deemed to have been due in the first place. It points out that excise tax being an indirect tax,
Section 135 in relation to Section 148 should be interpreted as referring to a tax exemption
from the point of production and removal from the place of production considering that it is
only at that point that an excise tax is imposed. The situation is unlike the value-added tax
(VAT) which is imposed at every point of turnover from production to wholesale, to retail
and to end-consumer. Respondent thus concludes that exemption could only refer to the
imposition of the tax on the statutory seller, in this case the respondent. This is because
when a tax paid by the statutory seller is passed on to the buyer it is no longer in the nature
of a tax but an added cost to the purchase price of the product sold.
Respondent also contends that our ruling that Section 135 only prohibits local
petroleum manufacturers like respondent from shifting the burden of excise tax to
international carriers has adverse economic impact as it severely curtails the domestic oil
industry.
Lastly, respondent asserts that the imposition by the Philippine Government of excise
tax on petroleum products sold to international carriers is in violation of the Chicago
Convention on International Aviation ("Chicago Convention") to which it is a signatory, as
well as other international agreements (the Republic of the Philippines air transport
agreements with the United States of America, Netherlands, Belgium and Japan).

ISSUE:
Whether or not Section 135 intended the tax exemption to apply to petroleum
products at the point of production

HELD:
No. Because an excise tax is a tax on the manufacturer and not on the purchaser, and
there being no express grant under the NIRC of exemption from payment of excise tax to local
manufacturers of petroleum products sold to international carriers, and absent any provision
in the Code authorizing the refund or crediting of such excise taxes paid, the Court holds
that Sec. 135 (a) should be construed as prohibiting the shifting of the burden of the excise
tax to the international carriers who buys petroleum products from the local manufacturers.
Said provision thus merely allows the international carriers to purchase petroleum products
without the excise tax component as an added cost in the price fixed by the manufacturers or
distributors/sellers. Consequently, the oil companies which sold such petroleum products to
international carriers are not entitled to a refund of excise taxes previously paid on the
goods.
Vallejos, Emmanuel P.

14. Philippine Bank of Communications vs. CIR,

FACTS:
Pursuant to Revenue Regulations (RR) No. 7-92, the Bureau of Internal Revenue (BIR)
issued Certificate No. 08-0434 authorizing petitioner to operate and use the On-line
Electronic Documentary Stamp Metering Machine (DS metering machine).
Petitioner purchased documentary stamps from the BIR and loaded them to its DS
metering machine. During the period 23 March 2004 to 23 December 2004, petitioner
executed several repurchase agreements with the Bangko Sentral ng Pilipinas (BSP). The
documentary stamps were imprinted on the Confirmation Letters corresponding to those
repurchase agreements through petitioner's DS metering machine.
Petitioner claimed that the repurchase agreements were not subject to the
documentary stamp tax (DST). Thus, on 12 May 2006, it filed with the BIR an administrative
claim for the issuance of tax credit certificates for the alleged erroneous payment of the DST
in the total amount of P11,063,866.67.
Alleging the inaction of the BIR on the administrative claim of petitioner, the latter
filed a Petition for Review with the CTA on 18 May 2006.
CTA Division found that petitioner had substantiated only P10,633,881.20. Out of that
amount, P3,072,521.60 was barred by prescription, and only the claim for the remaining
P7,561,359.60 fell within the two-year prescriptive period. The CTA Division reckoned the
counting of the two-year period from the date of the Confirmation Letters of the repurchase
agreements.
On appeal, the CTA en banc ruled that insofar as the taxpayers using the DS metering
machine were concerned, the DST was deemed paid upon the purchase of documentary
stamps for loading and reloading on the DS metering machine, through the filing of the DST
Declaration under BIR Form No. 2000. Thus, the two-year prescriptive period for taxpayers
using DS metering machine started to runa from the date of filing of the DST Declaration
under BIR Form No. 2000, and not from the date appearing on the documentary stamp
imprinted through the DS metering machine.

ISSUE:
Should the date of purchase of documentary stamps for loading and reloading on the
DS metering machine be deemed as payment of the DST for the purpose of counting the two-
year prescriptive period for filing a claim for a refund or tax credit?

HELD:
No. Applying the same rationale to this case, the payment of the DST and the filing of
the DST Declaration Return upon loading/reloading of the DS metering machine must not be
considered as the date of payment when the prescriptive period to file a claim for a
refund/credit must commence. For DS metering machine users, the payment of the DST
upon loading/reloading is merely an advance payment for future application. The liability for
the payment of the DST falls due only upon the occurrence of a taxable transaction.
Therefore, it is only then that payment may be considered for the purpose of filing a claim for
a refund or tax credit. Since actual payment was already made upon loading/reloading of the
DS metering machine and the filing of the DST Declaration Return, the date of imprinting the
documentary stamp on the taxable document must be considered as the date of payment
contemplated under Section 229 of the NIRC.
Vallejos, Emmanuel P.

15. CIR vs. PNB

FACTS:
Petitioner issued Letter of Authority No. 00058992, which authorized the examination
of PNB's books of accounts and other accounting records in relation to its internal revenue
taxes for taxable year 1997. PNB received the assessments which indicated that it had
deficiency payments of documentary stamp taxes (DST), withholding taxes on compensation,
and expanded withholding taxes for taxable year 1997.
PNB immediately paid Assessment No. 97-000067, but filed a protest against
Assessment No. 97-000064. The petitioner denied PNB's protest. Hence, PNB filed its petition
for review in the CTA. The CTA first division partially granted the petition. Accordingly, the
assessment for deficiency documentary stamp taxes on PNBs Interbank Call Loans for
taxable year 1997 is hereby CANCELLED. On appeal, CTA en banc denied the petition.

ISSUE:
Whether or not PNB's interbank call loans for taxable year 1997 are subject to DST

HELD:
No. An interbank call loan refers to the cost of borrowings from other resident banks
and nonbank financial institutions with quasi-banking authority that is payable on call or
demand.21 It is transacted primarily to correct a banks reserve requirements.22 Under the
Manual of Regulation for Banks (MORB) issued by the Bangko Sentral ng Pilipinas (BSP),
interbank borrowings,23 which include interbank call loans, shall be evidenced by deposit
substitute instruments containing the minimum features prescribed under Section X235.3 of
the MORB, except those that are settled through the banks respective demand deposit
accounts with the BSP via Philpass.24 Simply put, an interbank call loan is considered as a
deposit substitute transaction by a bank performing quasi-banking functions to cover reserve
deficiencies. It does ndot fall under the definition of a loan agreement. Even if it does, the
DST liability under Section 180, supra, will only attach if the loan agreement was signed
abroad but the object of the contract is located or used in the Philippines, which was not
the case in regard to PNBs interbank call loans.
Vallejos, Emmanuel P.

16. CIR vs. De La Salle University

FACTS:
Sometime in 2004, the Bureau of Internal Revenue (BIR) issued to DLSU Letter of
Authority (LOA) authorizing its revenue officers to examine the latter's books of accounts and
other accounting records for all internal revenue taxes for the period Fiscal Year Ending 2003
and Unverified Prior Years. the BIR through a Formal Letter of Demand assessed DLSU the
following deficiency taxes: (1) income tax on rental earnings from restaurants/canteens and
bookstores operating within the campus; (2) value-added tax (VAT) on business income; and
(3) documentary stamp tax (DST) on loans and lease contracts. The BIR demanded the
payment of P17,303,001.12, inclusive of surcharge, interest and penalty for taxable years
2001, 2002 and 2003.
DLSU protested the assessment. The Commissioner failed to act on the protest; thus,
DLSU filed on August 3, 2005 a petition for review with the CTA Division. The latter partially
granted the petition However, [DLSU] is ORDERED TO PAY deficiency income tax, VAT and
DST on its lease contracts, plus 25% surcharge for the fiscal years 2001, 2002 and 2003 in
the total amount of P18,421,363.53.
DLSU formally offered to the CTA Division supplemental pieces of documentary
evidence to prove that its rental income was used actually, directly and exclusively for
educational purposes. CTA , in view of the supplemental evidence submitted, reduced the
amount of DLSU's tax deficiencies.
On appeal to the CTA en banc, the latter found that DLSU was able to prove that a
portion of the assessed rental income was used actually, directly and exclusively for
educational purposes; hence, exempt from tax.

ISSUE:
Whether or not De la Salle is exempt from tax on loans and lease contracts.

HELD:
Yes. When a non-stock, non-profit educational institution proves that it uses its
revenues actually, directly, and exclusively for educational purposes, it shall be exempted
from income tax, VAT, and LBT. On the other hand, when it also shows that it uses its assets
in the form of real property for educational purposes, it shall be exempted from RPT.
To be clear, proving the actual use of the taxable item will result in an exemption, but
the specific tax from which the entity shall be exempted from shall depend on whether the
item is an item of revenue or asset.
For all these reasons, the Court hold that the income and revenues of DLSU proven to
have been used actually, directly and exclusively for educational purposes are exempt from
duties and taxes.