COURT OF TAX APPEALS DECISIONS
December 2021
REFUND OF UNUTILIZED CREDITABLE WITHHOLDING TAX
- In filing a claim for refund or credit of creditable withholding tax, compliance with the following must be met:
- The claim for refund must be filed within the two-year prescriptive period.
- The administrative and judicial remedy of filing a claim for refund of erroneously or excessively paid tax must be done within two (2) years from the date of payment of the tax both in the administrative and judicial levels. For actions for refund of excess corporate income tax, the Supreme Court ruled that the two-year prescriptive period should be counted from the filing of the Final Adjustment Return, because it is only during that date that the exact tax liability or refundability of the tax can be determined.
- The 2-year period is counted from the filing of original Final Adjusted Return, not on the amended. (Bethlehem Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9789, December 3, 2021; Sony Philippines, Inc. v. CIR, CTA Case No. 10115, December 16, 2021)
- Taxpayer need not wait for the resolution on the administrative claim for refund before filing the judicial claim. (Bethlehem Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9789, December 3, 2021)
- Although both the administrative claim and the judicial claim were filed within the two (2) year prescriptive period, the claimant must give BIR full opportunity to decide the administrative claim. If taxpayer files the judicial claim for refund a day after it filed administrative claim, with just one (1) day given to BIR to resolve a claim for refund that involves voluminous supporting documents, the BIR is said to not "afforded a complete chance to pass upon the matter" nor "given an opportunity to act and correct the errors committed in the administrative forum." Thus, petition should be dismissed. (Aecom Philippines Consultants Corporation v. CIR, CTA Case No. 10008, December 7, 2021)
- a corporation that is entitled to a tax refund or a tax credit for excess payment of quarterly income taxes may carry over and credit the excess income taxes paid in a given taxable year against the estimated income tax liabilities of the succeeding quarters. Once chosen, the carry-over option shall be considered irrevocable for that taxable period, and no application for a tax refund or issuance of a tax credit certificate shall then be allowed. (Bethlehem Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9789, December 3, 2021; Sony Philippines, Inc. v. CIR, CTA Case No. 10115, December 16, 2021)
- Taxpayer may originally opt for refund and shift to carry-over but can no longer revert to original choice due irrevocability rule. (Bethlehem Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9789, December 3, 2021)
- Once the carry-over option has been chosen, such shall be irrevocable and the unutilized excess tax credits will remain in the taxpayer's account and may be carried over and applied to succeeding taxable years until fully utilized. (Sony Philippines, Inc. v. CIR, CTA Case No. 10115, December 16, 2021)
- Taxpayer may have in a taxable year excess CWT for current year subject of refund and non-refundable CWT carried over from previous year that is not utilized. (Bethlehem Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9789, December 3, 2021)
- The administrative and judicial remedy of filing a claim for refund of erroneously or excessively paid tax must be done within two (2) years from the date of payment of the tax both in the administrative and judicial levels. For actions for refund of excess corporate income tax, the Supreme Court ruled that the two-year prescriptive period should be counted from the filing of the Final Adjustment Return, because it is only during that date that the exact tax liability or refundability of the tax can be determined.
- The claim for refund must be filed within the two-year prescriptive period.
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- The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom.
- The Court disallows supporting BIR Form no. 2307s, with incorrect TIN of the taxpayer indicated in the certificate (Bethlehem Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9789, December 3, 2021)
- The Court disallowed supporting BIR Form No. 2307s with incorrect/no TIN; incorrect address, among others. The CTA ruled though that even without TIN, as long as the name and address may be cross-referenced to the BIR Certificate of Registration (COR; moreover, CWT bearing the incorrect address may be allowed as long as the TIN is correct and may be cross-referenced to the ITR (if no COR is adduced as evidence) (Sony Philippines, Inc. v. CIR, CTA Case No. 10115, December 16, 2021)
- Proof of actual remittance of taxes withheld to the BIR is not required in a claim for refund of excess CWT. The claimant-taxpayer is only required to prove that the income payment formed part of the gross income and the fact of withholding. The proof of remittance of the withheld taxes remains the responsibility of the withholding agent. (Tullet Prebon (Philippines), Inc. v. CIR, CTA EB No. 2373, CTA Case No. 9804, Decemebr 16, 2021)
- The income upon which the taxes were withheld must be included in the return of the recipient. (Bethlehem Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9789, December 3, 2021)
- The Court disallows CWT, which was not traced in the General Ledger (Sony Philippines, Inc. v. CIR, CTA Case No. 10115, December 16, 2021)
- Presentation of CWT Certificates is not indispensable in proving the existence of prior year’s excess credits since the credits are not the actual subject of the claim for refund. BIR never refuted the truthfulness and existence of the taxpayer’s prior year’s excess credits. (Sony Philippines, Inc. v. CIR, CTA Case No. 10115, December 16, 2021)
- The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom.
Variance between the date of verification and Petition is not fatal when the variance is satisfactorily explained and petitioner substantially complied with the objective of the verification requirement. If Petition is dated 2 days later than the Verification for the reason that petition was revised subsequent to the signing of the verification, petitioner substantially complied with the objective of the verification requirement. (Sony Philippines, Inc. v. CIR, CTA Case No. 10115, December 16, 2021)
REFUND OF EXCESS INPUT VAT ON ZERO-RATED SALES
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- The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed.
- In order to be considered as a non- resident foreign corporation doing business outside the Philippines, each service-recipient must be supported, at the very least, by both a Certification of Non-Registration of Corporation/Partnership issued by the Philippine Securities and Exchange Commission (SEC), and certificate/articles of foreign incorporation/association. (Deutsche Knowledge Services Pte., Ltd. v. CIR, CTA EB No. 2249, CTA Case No. 9154, December 14, 2021)
- The CTA cannot give credence or probative value to the business registration documents derived by the database provided by the group of companies to which the claimant belongs as they are self-serving, lack credibility, and which can be easily manipulated to favor the claimant in view of its affinity with the entity that maintains or keels the database. (Deutsche Knowledge Services Pte., Ltd. v. CIR, CTA EB No. 2249, CTA Case No. 9154, December 14, 2021)
- If the claimant is neither a branch nor a subsidiary of the non-resident foreign corporation who is the service recipient, the service recipient is not considered an entity engaged in busines in the Philippines (CIR v. MSCI Hongkong Limited, CTA EB No. 2258, CTA Case No. 9661, December 15, 2021)
- The services rendered should be other than ''processing, manufacturing or repacking goods.” This may be supported by a professional service agreement (Teleworks Philippines, Incorporated v. CIR, CTA Case No. 9380, December 11, 2020)
- Testimony is not sufficient, if there is no indication that the services are rendered to the client-recipient. Dissenting Opinion: The testimony is sufficient if the services are supported by Certificate of Registration and License issued by the SEC, which enumerates the qualifying services that it may render as ROHQ. Deutsche Knowledge Services Pte., Ltd. v. CIR, CTA EB No. 2249, CTA Case No. 9154, December 14, 2021)
- The services must be performed in the Philippines by a VAT-registered person. The claimant must show that the services were performed in the Philippines. Dissenting Opinion: the testimony is supported by the fact that petitioner purchased goods and services in the Philippines for purposes of performing its services in the Philippines. Deutsche Knowledge Services Pte., Ltd. v. CIR, CTA EB No. 2249, CTA Case No. 9154, December 14, 2021)
- The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed.
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- For zero-rated sales of goods to non-resident foreign corporation:
- Certificate of Inward Remittance is required in support of sale to attest the fact that fact of payment in acceptable foreign currency accounted for with the BSP, regulation, regardless when the date was remitted. (Carmen Copper Corporation v. CIR, CTA Case No. 9954, December 16, 2021)
- Bank certification of inward remittance is not abolished but merely relaxed. It may be dispensed with in case of offsetting arrangements for the payment of export sales. (Carmen Copper Corporation v. CIR, CTA Case No. 9954, December 16, 2021)
- Invoice must be within the date of period of claim. (Carmen Copper Corporation v. CIR, CTA Case No. 9954, December 16, 2021)
- Invoicing requirements must be complied with.
- Sale of goods, properties or services made by a VAT-registered supplier to a BOI-registered entity whose products are 100% exported shall be VAT zero-rated, subject to requirements. In case where the taxpayer paid the input VAT, its recourse is not against the government but against the suppliers who shifted to it the output VAT. (Carmen Copper Corporation v. CIR, CTA Case No. 9954, December 16, 2021)
- For zero-rated sales of goods to non-resident foreign corporation:
TAX ASSESSMENTS
Taxpayer has thirty (30) days from the receipt of the decision or ruling or after the expiration of the period fixed by law for action of the BIR within which to file an appeal to the CTA. Otherwise, the Court has no jurisdiction to review the appeal.
- Where no documentary evidence was presented by the taxpayer to show the date of receipt of the decision, and taxpayer admitted that he could no longer find the files showing the date of receipt of the decision, thereby taxpayer failing to prove the date of decision, the 30-day period to file an appeal is counted from the date of issuance of the decision. (Ermilo Tan Ng Hua v. CIR, CTA Case No. 9912, December 7, 2021)
- A new Letter of Authority (LOA) must be issued in case of reassignment of the audit investigation to other Revenue Officers (ROs).
- Even if the CTA considers Memorandum of Assignment (MOA) as new LOA, it must be signed by the CIR or authorized representative, identified as Regional Director. The position equivalent to a Revenue Regional Director for the large taxpayer is the Assistant Commissioner/Head Revenue Executive Assistants. In this case, the MOA was signed and issued by Chief of Large Taxpayer Service (LTS). She is neither the CIR, Regional Director, nor an Assistant Commissioner/Head Revenue Executive Assistant of the LTS. She had no authority to issue the MOA, thus, the assessments resulting therefrom are void. Therefore, the RO and Group Supervisor (GS) who continued the audit of Star Songs, Inc. were not authorized by a valid LOA; hence, the assessments issued pursuant to said audit are void ab initio (ABS-CBN Film Productions, Inc. v. CIR, CTA Case No. 9982, December 3, 2021; Tann Philippines, Inc. v. CIR, December 16, 2021)
- A mere MOA signed by Revenue District Officer (RDO) does not and cannot confer authority to RO and GS to continue the audit or investigation of taxpayer’s books of accounts. As both are not authorized through an LOA, their investigation and subsequent assessment of could not be sanctioned. (Hard Rock Café (Makati City) Inc., v CIR, CTA Case No. 9945, December 10, 2021; Republic of the Philippines v. Robiegie Corporation, CTA EB No. 2339, CTA oC No. 023, December 2, 2021)
- In case of change of address, the taxpayer is required to give a written notice thereof to the Revenue District Officer or the district having jurisdiction over his former legal residence and/or place of business. Where taxpayer filed a letter with the RDO informing the BIR of the change of address; submitted another letter submitting the memorandum of the RO recommending the approval of transfer of registration from Palawan to Bulacan; where taxpayer sent another letter requesting all letters to taxpayer be addressed and delivered to Bulacan, taxpayer’s transfer f has been validly made, insofar as the subject income tax assessment is concerned.
- While a mailed letter is deemed received by the addressee in the course of the mail, this is merely a disputable presumption subject to rebuttal. Consequently, the direct denial thereof shifts the burden to the sender to prove that the said letter was actually received by the addressee. Where the taxpayer directly denies having received the subject PAN and FLD/FAN. the burden of proving the actual receipt of the same lies with the BIR. Registry Receipts only proves fact of mailing and not service to the taxpayer or to its authorized representative. Even so, the registry receipts shows no indication of the signature appearing thereon refer to taxpayer or tis authorized representative. Respondent's failure to prove that the subject PAN and FLD/FAN were received by petitioner renders the subject income tax assessment void, for violation of petitioner's right to due process.
- Section 203 of the NIRC mandates the government to assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. Hence, an assessment notice issued after the three-year prescriptive period is no longer valid and effective. Where taxpayer filed its ITR for taxable year 2014 on April 6, 2015, the period to assess the subject income tax assessment is until April 15, 2018. Thus, mailing of FLD/FAN on April 16, 2018 or a day after the lapse of 3-year prescriptive period, the assessment is void.
- A compromise penalty may not be validly imposed if the assessment is void. Nevertheless, even granting that the said tax assessment may be considered as valid, the imposition of compromise penalty cannot be sustained. It must be stressed that a compromise is, by its nature, mutual in essence. It implies agreement. One party cannot impose it upon the other. Compromise penalties are only amounts suggested in settlement of criminal liability and may not be imposed or exacted on the taxpayer in the event of refusal to pay the suggested amount. that there is no indication that petitioner consented to the subject compromise penalty, the same may not be validly imposed. (Megaconstruct Group, Inc. v CIR, CTA Case No. 9992, December 2, 2021)
- To question the Warrant of Distraint and Levy (WDL) necessitates looking into the validity of the assessment. This is so since the validity of petitioner's collection efforts through the WDL is chiefly dependent on the propriety of the assessment issued against the taxpayer. This is consistent with the long-standing principle that a void assessment bears no valid proof. In short, the determination of the assessment’s validity is directly necessary and related to the determination of the correctness of the issuance of the WDL.
- Receipt of the Formal Letter of Demand without the Formal Assessment Notice renders the assessment void
- Presentation of a registry receipt, without properly identifying and authenticating the signatures appearing thereon, is insufficient in proving the taxpayer's receipt of an assessment.
- Although the subject registry return receipt indicates a name and a signature, the BIR was unable to prove that the name appearing on the said document is an authorized representative of respondent. (CIR v. Nationwide Health Systems Baguio, Inc. CTA EB No. 2264, CTA Case No. 9507, December 9, 2021)
Where the FLD does not state a due date for the payment of the assessed taxes as the space in the Assessment Notice where the due date is to be indicated remained unaccomplished, the assessment is considered void. (CIR v. Universal Robina Corporation, CTA EB No. 2280, CTA Case No. 9530, December 7, 2021)
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