COURT OF TAX APPEALS DECISIONS January 2022

COURT OF TAX APPEALS DECISIONS

January 2022

REFUND OF EXCESS INPUT VAT ON ZERO-RATED SALES

Certain requisites must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT related to zero-rated sales. Said requisites are classified into certain categories, to wit:

As to the timeliness of the filing of the administrative and judicial claims:

• The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;
• That in case of full or partial denial of the refund claim rendered within a period of ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with the Court of Tax Appeals (CTA) within thirty (30) days from receipt of the decision.
  • The 120 (now 90) + 30-day periods to appeal are both mandatory and jurisdictional. After the lapse of the 120 (now 90)-day period, claimant has 30 days to elevate its claim to the CTA. The claimant need not wait for the decision of the BIR after the 120-(now 90) day waiting period. It should file a judicial claim for refund with the CTA. A waiting period of only 120 (now 90) days and respondent’s inaction within the said period is deemed a denial of the claim. (Lepanto Consolidated Mining Company v. CIR, CTA EB No. 2329, CTA Case No. 10153, CTA Case No. 10153, January 5, 2022)

With reference to the taxpayer’s registration with the BIR:

• The taxpayer is a VAT-registered person;

In relation to the taxpayer’s output VAT:

• The taxpayer is engaged in zero-rated or effectively zero-rated sales;
• Re. Sales of Goods: For zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b), and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations;
  • Re. sales of goods abroad, in order for an export sale to qualify as zero-rated, the following essential elements must be present:
    • the sale was made by a VAT registered person;
    • there was sale and actual shipment of goods from the Philippines to a foreign country, as evidenced by the following:
      • sales invoice as proof of sales of goods; the invoice must comply with the invoicing requirements. (Ametron Incorporated v. CIR, CTA Case No. 9893, January 4, 2022)
      • bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country
        • The sales invoice must indicate the related airway bill or details of items exported. Thus, there is a failure to ascertain whether goods covered by the invoice were actually shipped to the intended foreign customers. (Ametron Incorporated v. CIR, CTA Case No. 9893, January 4, 2022)
    • The sale was paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP. Amounts shown in the summary of VAT zero-rated sales supported with sales invoices must be traced with certainty to the certificates of inward remittance (Ametron Incorporated v. CIR, CTA Case No. 9893, January 4, 2022)
• Re. zero-rated sales of goods to a BOI-registered entity whose products are 100% exported, the following must be complied with:
  • The supplier must be VAT-registered;
  • The BOI-registered buyer must likewise be VAT-registered
  • The buyer must be a BOI-registered manufacturer/producer whose products are 100% exported. For this purpose, a Certification to this effect muse be issued by the BOI and which certification shall be good for one year unless subsequently re-issued by the BOI
  • The BOI-registered buyer shall furnish each of its suppliers with a copy of the aforementioned BOI Certification which shall serve as authority for the supplier to avail of the benefits of zero-rating for its sales to said BOI-registered buyers; and
  • The VAT-registered supplier shall issue for each sale to BOI-registered VAT invoice with the words “zero-rated” (Rema Tip Top Philippines, Inc. v. CIR, CTA Case No. 9794, January 24, 2022)
•  Re. sales of services, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%), to wit:
  •  The services fall under any of the categories under Section 108(6)(2), or simply, the services rendered should be other than ”processing, manufacturing or repacking of goods” i.e. corporate finance advisory services, training and personnel management, etc. (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022)
  •  The service must be performed in the Philippines by a VAT-registered person.  The agreement must specify that the services shall be performed in the Philippines (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022)
  •  The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules. Payment must be supported by Certificate of Inward Remittance. (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022); New York Bay Philippines, Inc. v. CIR, CTA Case No. 9896, January 26, 2022)
  • 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 (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022); New York Bay Philippines, Inc. v. CIR, CTA Case No. 9896, January 26, 2022)
    • in order to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity 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 proof of incorporation/registration in a foreign country (e.g., Articles/Certificate of Incorporation/Registration).  Failure to provide the documents warrants the denial of the claim (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022; New York Bay Philippines, Inc. v. CIR, CTA Case No. 9896, January 26, 2022; (Rema Tip Top Philippines, Inc. v. CIR, CTA Case No. 9794, January 24, 2022)

As regards the taxpayer’s input VAT being refunded:

• The input taxes are not transitional input taxes.
• The input taxes are due or paid;
• The input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, 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
• Input tax must comply with invoicing requirements.
• Other matters:

• • A counterclaim in a VAT refund case violates right to due process. In an action for refund of taxes, as the claim for refund is not based on the theory of erroneous payment but is filed to recover excess and unutilized input VAT under Section 112(A) and (C) of the NIRC of 1997, as amended. Excess input tax or creditable input tax is not an erroneously, excessively, or illegally collected tax. If there is a finding of VAT liability on the part of the taxpayer-claimant, the proper recourse would be to subject said taxpayer-claimant to an audit/investigation. The same will start with the issuance of a Letter of Authority (LOA) and thereafter, the issuance of an assessment notice. (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022)
  • Failure to submit supporting documents in the administrative level is not fatal to the claimant’s claim. The taxpayer may present additional documents before the CTA to substantiate its claim for refund, albeit the same were not presented at the administrative level. (CIR v. Plipinas Kyohritsu, Inc., CTA EB No. 2334 (CTA Case No. 9557), January 20, 2022)

REFUND OF EXCESS OR ERRONEOUSLY PAID TAX.

The withholding agent is considered the proper party to file a claim for refund of the withheld taxes. Where excess or erroneously paid tax arose from income payment made by the local taxpayer to a Japanese corporation not doing business in the Philippines, the payor becomes the withholding agent allowed to claim refund of tax. (CIR v. Toledo Power Corporation, CTA EB No. 2359 (CTA Case No. 9465), January 5, 2022)

TAX ASSESSMENTS

• The rules impose a 30-day expiration period for the service of the Letter of Authority (LOA). Upon its expiration, the LOA becomes wholly unenforceable. Thus, where the taxpayer received the LOA 62 days after its issuance, the LOA is void and without effect. (Vanguard Logistics Services, Phils., Inc. CTA Case No. 10155, January 27, 2022)
• Any re-assignment/transfer of cases to another revenue officer requires a new LOA, absence of which renders the assessment void. Thus, where the only basis for the authority of the new examiner to conduct audit was a Memorandum of Assignment (MOA) without LOA, the new examiner is considered not duly authorized to conduct the audit. Even if MOA is considered as LOA, it must be issued by the Assistant Commissioner/Head Revenue Executive Assistants for large taxpayers. Thus, where the MOA was signed only by the chief of the regular LT Audit Division, and not by the Assistant Commissioner/HREA, the assessment is void. (Metro Manila Star Asia Corp v. CIR, CTA Case No. 9302, January 26, 2022)
• The taxpayer must appeal the assessment to the CTA or Commissioner within 30 days from demand. In the absence of the Final Decision on Disputed Assessment, Preliminary Collection Letter (PCL) serves as demand of the BIR. Thus, where the taxpayer based the appeal on the BIR letter-response on the constructive service of the FDDA after the BIR has issued collection letters, and not on the PCL, the appeal is considered filed out of time. (Ten-four Readymix Concrete, inc. v.  CIR, 2311, CTA Case No. 10081, January 25, 2022)
• In tax evasion cases committed through willful refusal to pay taxes, the five-year prescription to file case would begin to run from the taxpayer’s receipt of the notice and demand for payment of the assessed tax deficiency. Thus, where the FAN was served on September 13, 2013, and it attains finality after 30 days or October 14, 2013, to toll the running of five-year prescriptive period, the BIR should have filed a criminal complaint with the DOJ on October 14, 2018. Since the criminal complaint was filed on April 11, 2019, the offense charged had already been prescribed (People of the Philippines v. Angelo R. Balili, CTA Crim Case No. A-8; Case Nos. R-mKT-20-01449-CR and R-MKT-20-01450-CR, January 25, 2022)
• One of the elements of violation of Section 255 is that the accused is a person required to file return, pay tax and supply correct and accurate information. The obligation to pay tax arises either by self-assessment or by BIR’s notice or demand via assessment. If the charge is based on BIR’s assessment, due process must be observed. Thus, where the BIR failed to establish that Notice of Informal Conference was issued to and that PAN and FAN/FLD were received by the accused, the failure to do so renders the assessment void and warrants the acquittal of the accused. (People of the Philippines v. Grand East Empire Corporation and Solania G. Ong, CTA Crim Case Nos. O-779, O-780 & O-781, January 24, 2022)