OCTOBER 2023 COURT OF TAX APPEALS DECISIONS

TAX ASSESSMENTS                     

 

THE LAPSE OF THE AUDIT PERIOD DOES NOT RENDER THE SUBJECT LOA INVALID AND WILL NOT HAVE THE EFFECT OF REVOKING THE AUTHORITY GIVEN THEREUNDER TO THE CONCERNED RO. The revalidation of LOAs which should be done “for failure of the revenue officials to complete the audit within the prescribed period.” The effect of such failure is merely to subject the concerned RO(s) to applicable administrative sanctions, not to render null the issued LOA. Here, there is a lapse of the 180-day period under RMO No. 19-2015 and there is a failure to revalidate the LOA. Thus, the lapse and the failure is of no moment and it will not have the effect of nullifying the subject tax assessments. (IBMS Technology Phils. Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 9970, October 05, 2023)

 

PERIOD OF ASSESSMENT WITHIN 3 YEARS WHEN WAIVER NOT PROPERLY EXECUTED. The Tax Code provides that internal revenue taxes shall be assessed, as a rule, within 3 years from the last day prescribed by law for filing of the return or from the day the return was filed, whichever is later. Such rule is subject to exception when there is an execution of a waiver by the CIR, or his or her authorized representative, and the taxpayer to extend the period to assess. Here, there was an improper execution of the waiver for not being compliant with RMO No. 20-90 and RDAO No. 05-01 as petitioner or his or her authorized representative did not accept the waiver, there is no date of respondent’s execution nor date of petitioner’s acceptance, it was not notarized; and there is no proof that respondent was notified of petitioner’s acceptance. Also, the FAN was received only on 30 April 2012, and the period to assess was only until 31 March 2012. Thus, following the general rule, petitioner henceforth lost his or her right to enforce the collection thereof. (Commissioner of Internal Revenue v. Medicard Philippines, Inc., C.T.A. E.B. No. 2603, October 11, 2023)

 

UNDER DECLARING ITS PROFESSIONAL FEES DOES NOT TRANSLATE TO GAIN. There are three elements in the imposition of income tax: (1) there must be gain or profit, (2) that the gain or profit is realized or received, actually or constructively, and (3) it is not exempted by law or treaty from income tax. If undeclared expenses represent undeclared income and need to be declared for tax purposes, the corresponding expenses need to be declared as well which results in zero taxable income. Here, there are undeclared expenses of professional fees. Thus, the respondent’s deficiency income tax assessment from petitioner’s unaccounted professional fees should be cancelled as it results in zero taxable income. (Intelligent Touch Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10215, October 19, 2023)

 

A PAN MUST BE ACTUALLY RECEIVED BY A TAXPAYER. A PAN is a mandatory requirement of due process in tax assessment proceeding. The sending of a PAN to taxpayer to inform him of the assessment made is but part of the “due process requirement in the issuance of a deficiency tax assessment,” the absence of which renders nugatory any assessment made by the tax authorities. Here, there is no PAN that was actually received by the taxpayer. Thus, petitioner’s right to due process was clearly violated when it did not receive a PAN for the instant assessment. (JTKC Land, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 9508, October 18, 2023)

 

TAX AUTHORITIES CANNOT COLLECT TAXES WITHOUT A PREVIOUS VALID ASSESSMENT. The BIR may summarily enforce collection only when it has accorded the taxpayer administrative due process, which vitally includes the issuance of a valid assessment. The CIR’s power to suspend business operations cannot supplant the due process requirements in the course of the assessment process under the Tax Code. Here, there is a 5-day VAT Compliance Notice containing an express demand to pay the alleged deficiency VAT without a formal assessment. Thus, the attempt to collect taxes via the 5-day VAT Compliance Notice and Closure Order without a formal assessment are a violation of the due process right of the taxpayer. (Commissioner of Internal Revenue v. Paymentwall Inc., C.T.A. E.B. No. 2510, October 17, 2023)

 

TAX AMNESTY REQUIRES ASSESSMENT NOTICE THAT HAS HAD BECOME FINAL AND EXECUTORY. Only tax delinquencies and assessments that have become final and executory on or before RR No. 4-2019 took effect can be the subject of a tax amnesty on delinquencies. Here, petitioners attached a letter issued by a Revenue District Officer (RDO), unfiled BIR Forms, reports, schedules and information returns, and/or amended returns showing interest and penalties without an assessment from the BIR. Meaning, the BIR is still about to make an assessment and there is no assessment notice that could have become final and executory against them. As such, no tax could have been due from them and could not yet be deemed as delinquent. Thus, it cannot be the proper subject of tax amnesty on delinquencies under the TAA. (Miguel v. Bureau of Internal Revenue, C.T.A. Case No. 10415, October 16, 2023)

 

TAX ASSESSMENT IN VIOLATION OF A TAXPAYER’S DUE PROCESS RIGHTS IS NULL AND VOID. In administrative proceedings, procedural due process has been recognized to include, among other things, a finding by said tribunal which is supported by substantial evidence submitted for consideration during the hearing or contained in the records or made known to the parties affected. Tax assessments issued in violation of the due process rights of a taxpayer are null and void. Here, the FLD is a mere reproduction of the PAN’s contents differing only in the calculation of interest without mention of the additional documents that respondent submitted in support of its protest to the PAN. Thus, the tax assessments are null and void for having fallen routinely on deaf ears in violation of the due process right of the taxpayer.(Commissioner of Internal Revenue v. Bac-Man Geothermal, Inc., C.T.A. E.B. No. 2621, October 11, 2023)

 

SALES MADE BY THE AGRICULTURAL COOPERATIVES TO MEMBERS ARE VAT-EXEMPT. An agricultural cooperative may be exempted from VAT provided that the following conditions are met. First, the seller must be an agricultural cooperative duly registered with the CDA; and, second, the cooperative must sell either: (1) exclusively to its members; or (2) to both members and non-members, its produce, whether in its original state or processed form. Here, VMC belongs to the category of duly registered cooperatives which transact business with members only. Thus, its transactions are VAT-exempt. (VMC Farmers Multi-Purpose Cooperative v. Commissioner of Internal Revenue, C.T.A. Case No. 9859, October 04, 2023)

 

COMPROMISE AGREEMENT IN CASE THE BASIC TAX EXCEEDS P1,000,000 MUST BE APPROVED BY THE EVALUATION BOARD WHICH IS COMPOSED OF FOUR DEPUTY COMMISSIONERS OF THE BIR. In case the basic tax exceeds P1,000,000 or where the settlement offered is less than the said prescribed minimum rates, the compromise must be approved by the Evaluation Board, which is composed of respondent and the four (4) Deputy Commissioners of the BIR. Here, the taxpayer paid the amount of P1,532,049.15 which tax exceeds P1,000,000  and the Certificate of Availment shows the approval signatures of four (4) Deputy Commissioners and of the respondent CIR. Such being the case, the Court approves the same for being in order and in compliance with established laws, rules and regulations. (Albert Araneta Enterprises, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10005, October 25, 2023)

 

THE UNDATED FLD AND FDDA RENDER THE ASSESSMENT VOID. The Tax Code provides that the taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. The issuance of a valid formal assessment is a substantive prerequisite to tax collection, for it contains not only a computation of tax liabilities but also a demand for payment within a prescribed period. Here, the FLD did not contain a definite due date. Thus, due to the failure to demand payment within a prescribed period rendered the assessment issued in violation of the right of the taxpayer to due process, null and void and bears no valid fruit. (Grand Union Supermarket Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10299, October 25, 2023)

 

ASSESSMENT VOID FOR IMPROPER SERVICE OF PAN AND FAN. Section 228 of the 1997 NIRC provides that the taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Revenue Regulation No. 12-99 prescribes service by mail using the registered or known address of the taxpayer. Here, the BIR sent the PAN and FAN to Pasig City despite knowledge that the taxpayer transferred from its old address in Pasig City to its new one in Mandaluyong City. Thus for the improperly served PAN and FAN, the assessment is void as the taxpayer’s right to due process was violated for not being informed in writing of the law and the facts on which the assessment was based. (Commissioner of Internal Revenue v. Altimax Broadcasting Co., Inc., C.T.A. EB No. 261 (C.T.A. Case No. 10044)

 

THE SUBJECT TAX ASSESSMENTS ARE VOID FOR VIOLATION OF PETITIONER’S RIGHT TO ADMINISTRATIVE DUE PROCESS. In case respondent or his duly authorized representatives fails to observe due process, it shall have the effect of rendering the deficiency tax assessment void, and of no force and effect. When the Commissioner of Internal Revenue rejects the taxpayer’s explanations, he must give some reason for doing so and the particular facts and law upon which his conclusions are based, and those facts must appear in the record. Here, the respondent or the BIR in its FLD did not address any refutations made by the petitioner in its letter-reply to the PAN. Thus, respondent has obviously not observed the due process requirement in the issuance of tax assessments as it did not give reasons for rejecting petitioner’s refutations and not giving particular facts upon which the conclusions for assessing petitioner. (Will Team Ph, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10154, October 5, 2023)

 

ALKYLATE IS NOT AN EXCISABLE ARTICLE AS IT DOES NOT FALL UNDER THE CATEGORY OF “OTHER SIMILAR PRODUCTS OF DISTILLATION”. In construing the phrase “other similar products of distillation” of the Tax Code, the same must only include or be restricted to things or cases akin to, resembling, or of the same kind or class as those specifically mentioned, (i.e., naphtha and regular gasoline). In this case, it involves Alkylate which does not belong to the same category as naphtha and regular gasoline which is subject to excise neither does alkylate belong to excisable articles enumerated in Sec. 148 (e) of the NIRC. Thus, the same should not be subjected to excise tax.(Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 8535, October 24, 2023)

 

LETTER OF AUTHORITY (LOA) MAY BE ISSUED ONLY BY AUTHORIZED OFFICERS AND RDO IS NOT AMONG THE AUTHORIZED BIR OFFICIALS TO ISSUE A LOA. The Revenue Office must be authorized through a Letter of Authority (LOA) to conduct the audit or investigation of the taxpayer. Only the CIR and the duly authorized BIR officials, i.e., Regional Directors and the Deputy Commissioners may issue an LOA.  Here, the Revenue District Office (RDO) issued a MOA reassigning the case to RO De Leon which led to the issuance of the PAN and the FLD. RDO is not among the authorized BIR officials to issue an LOA; hence, the MOA issued by RDO Calipusan is of no force and effect. (Commissioner of Internal Revenue v. The Merry Cooks, Inc., C.T.A. EB No. 2681, October 23, 2023)

 

A LETTER NOTICE (LN) IS DIFFERENT FROM AN LETTER OF AUTHORITY (LOA). The Tax Code confines the authority to examine any taxpayer for the correct determination of tax liabilities to Commissioner of Internal Revenue (CIR) or his duly authorized representatives. A LN must be converted to an LOA before the revenue officer may further proceed with the audit and examination of the taxpayer. Here, the BIR examination or audit conduct was anchored based on a Letter Notice without the CIR or his duly authorized representatives issuing a new or separate LOA in favor of the examining RO/s to allow the audit or examination of respondent. Thus, the BIR examination or audit conduct is illegal. (Commissioner of Internal Revenue v. Drugmakers Biotech Research Laboratories, Inc., C.T.A. E.B. No. 2570, October 17, 2023)

 

WITHOUT A MISSION ORDER, REVENUE OFFICERS HAVE NO AUTHORITY TO CONDUCT SURVEILLANCE ACTIVITIES AND, MUCH LESS, CLOSE A BUSINESS ESTABLISHMENT. RMO 3-2009 shows that a Closure Order may only be issued after the taxpayer has already submitted its corresponding explanations in response to the 48-hour Notice and, later, the 5-day VAT Compliance Notice. The said Notices must have been based on the results of surveillance activities conducted pursuant to a valid Mission Order. Here, the closure implemented against Payment well was not preceded by surveillance activities nor supported by a valid Mission Order but based on a Letter of Authority. Thus, the CIR’s failure to observe the prescribed procedure amounts to a violation of Paymentwall’s due process rights. (Commissioner of Internal Revenue v. Paymentwall Inc., C.T.A. E.B. No. 2510, October 17, 2023)

 

RESULTING TAX ASSESSMENT BY RO WHO CONTINUED THE AUDIT WITHOUT A VALID LOA TO PERFORM THE ASSESSMENT FUNCTION IS VOID AB INITIO. The power of a BIR revenue officer to conduct taxpayer investigation flows from a validly issued LOA and the reassignment of a taxpayer investigation to a different revenue officer must also be made pursuant to a LOA. Otherwise, the practice of reassigning without a separate or amended LOA violates the taxpayer’s right to due process in tax audit or investigation. Here, the LOA was initially issued to RO Panelo and GS Eltanal to audit and assess petitioner; however, it was reassigned to, and continued by, RO Alacapa by virtue of a MOA without the issuance of a new LOA. Thus, the MOA did not vest RO Alacapa with the authority to continue the audit investigation of petitioner as it is not equivalent to a LOA. (VMC Farmers Multi-Purpose Cooperative v. Commissioner of Internal Revenue, C.T.A. Case No. 9859, October 04, 2023)

 

PAGCOR’S TAX EXEMPTION PRIVILEGES UNDER PD NO. 1869 INURE TO THE BENEFIT OF, OR EXTEND TO, PETITIONER. PAGCOR is exempt from the payment of any tax, whether national or local; and such exemption inures to the benefit of and extends to corporations with whom PAGCOR or operator has any contractual relationship in connection with the operations of casino(s) authorized under PD No. 1869. PAGCOR, in its Casino Regulatory Manual for Fiesta Casino Licensees Version 2.0, defines “casino” as one to be operated by the Licensee under the Provisional License or Authority to Operate whichever is applicable, in which all gaming activities shall take place. Here, petitioner operates bingo games under a contractual relationship with PAGCOR. Thus, the PAGCOR’s tax exemption privileges extend to petitioner as the phrase “operation of casino” covers the bingo games.  (AB Leisure Exponent Inc. v. Commissioner of Internal Revenue, C.T.A. EB No. 2595 (CTA Case No. 9620), October 04, 2023)

 

CRIMINAL VIOLATION OF TAX CODE

 

ORDER OF PAYMENT OF THE TAXES SUBJECT OF THE CRIMINAL CASE REFERS TO THOSE FINALLY DECIDED BY THE COMMISSIONER. The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner. The latter pertains to a formal assessment or Final Assessment Notice. Here, PAN is used as basis to determine De Guzman’s civil liability. Thus, the order of payment of the taxes cannot be made on the basis of PAN (People v. De Guzman, C.T.A. EB Crim. No. 089 (C.T.A. Crim. Case Nos. O-690 & O-691), October 03, 2023)

 

REFUND OF ERRONEOUSLY OR ILLEGALLY ASSESSED OR COLLECTED TAX

• To be entitled to the refund, petitioner must show that the amount collected is detrimental to petitioner’s recovery of pre-operating and property expenses; otherwise, petitioner’s recourse is to deduct the unrecovered amount from the government’s share. Here, petitioner did not offer evidence the  foregoing requirements nor was it insufficient to warrant tax credit or refund. Thus, it is not entitled to refund for the failure to present pieces of evidence entitling a taxpayer to an exemption which must be duly proven (Oceangold, Inc. v. Commissioner of Internal Revenue, C.T.A. EB No. 2663 (C.T.A. Case Nos. 10021 & 10061), October 18, 2023, Valle Verde Country Club, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10306, October 06, 2023)            
• The taxpayer need not await the BIR’s action on an administrative claim before going to the CTA and it is only when the Adjusted Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. Here, the Final Adjustment Return took on April 15, 2011 and respondent filed its administrative claim on March 12, 2012 and its judicial claim on April 12, 2013. Therefore, both of the respondent’s administrative and judicial claims for refund were filed on time or within the two-year prescriptive period provided by law. Further, it ruled that for as long as the administrative claim and the judicial claim were filed within the two-year period, then there was exhaustion of administrative remedies (Commissioner of Internal Revenue v. Bethlehem Holdings, Inc., C.T.A. EB No. 2673 (C.T.A. Case No. 9789), October 11, 2023)
• The principle of solutio indebiti cannot supplant the mandatory application of Section 229 of the NIRC of 1997, as amended, in tax refund cases and that there can be no exception from the application of the two (2)-year prescriptive period based on equity considerations because equity cannot be applied when there is clear statutory law governing the matter. Here, Valle Verde is claiming that the government received something that it is not entitled to in the form of VAT remittances after the lapse of the two (2)-year prescriptive period for refund. Thus, it is not entitled for tax refund due to prescription. (Valle Verde Country Club, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10306, October 06, 2023)  
• Tax-exempt privileges of ADB Employees under the ADB Charter must yield to municipal laws or the prerogative of the Philippine Government to tax its nationals. The Philippines has reserved its right to tax the salaries and emoluments of its citizens who are ADB. Here, Aguilar is a resident citizen of the Philippines employed by ADB. Thus, petitioner is subject to income tax as the Tax Code provides that all citizens of the Philippines residing therein are subject to income tax on all income sourced within and outside the Philippines (Irish Aguilar v. Commissioner of Internal Revenue, C.T.A. EB No. 2652 (C.T.A. Case No. 9867), October 02, 2023

 

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:

1. The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made(Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023, Schaeffler Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10301, October 17, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023
2. That in case of full or partial denial of the refund claim rendered within a period of 120 (now 90) days from the date of submission of the official receipts of 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 made. (Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023  

• • • There are two ways by which a claimant may invoke the Court in Division’s jurisdiction: one, through a Petition for Review, filed within thirty (30) days from the receipt of the BIR’s adverse decision rendered within said ninety (90)-day period; or two, through a Petition for Review, filed within thirty (30) days after the lapse of such ninety (90)-day period, whichever comes earlier (Citco International Support Services Limited – Philippine ROHQ v. Commissioner of Internal Revenue, C.T.A. Case No. 10258, October 05, 2023
    • There are two (2) matters that must be proved before this Court upon appeal of an unsuccessful administrative claim, to wit: first, all documentary and evidentiary requirements for an administrative claim were satisfied at the BIR level, and second, the taxpayer’s entitlement to the claim for refund or tax credit under substantive law (New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023

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

3. The taxpayer is a VAT-registered person. (Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023, Schaeffler Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10301, October 17, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023

In relation to the taxpayer’s output VAT:

4. The taxpayer is engaged in zero-rated or effectively zero-rated sales (Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023, Commissioner of Internal Revenue v. Kurimoto (Philippines) Corporation, C.T.A. EB No. 2666 (C.T.A. Case No. 9740), October 11, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023
5. 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 (Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023          

o   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
      • Export declaration and bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country
        •  Bank credit advice, certificate of bank remittance or any document proving payment of the goods in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP (Commissioner of Internal Revenue v. Philip Morris Philippines Manufacturing, Inc., C.T.A. EB No. 2632, October 17, 2023

o   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(B)(2), or simply, the services render should be other than “processing, manufacturing or repacking of goods”
      • The services must be performed in the Philippines by a VAT-registered person
      • The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules
      • The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines when the services were performed (Commissioner of Internal Revenue v. Kurimoto (Philippines) Corporation, C.T.A. EB No. 2666 (C.T.A. Case No. 9740), October 11, 2023)
        • 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 and/or Tax Residence Certificate), and there is no other indication which would disqualify said entity in being classified as a non-resident foreign corporation (Rema Tip Top Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. EB No. 2623 (C.T.A. Case No. 9836), October 04, 2023)

 

As regards the taxpayer’s input VAT being refunded:

6. The input taxes are not transitional input taxes (Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023, Schaeffler Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10301, October 17, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023)       
7. The input taxes are due or paid (Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023, Schaeffler Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10301, October 17, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023)
8. 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 (Foundever Philippines Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 10224, October 25, 2023 Schaeffler Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10301, October 17, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023)        
9. Input tax must comply with invoicing requirements. Here, petitioner’s importation documents were mostly photocopies which they failed to present. Thus, the court ruled that the disallowances were due to petitioner’s failure to comply with the invoicing requirements under the NIRC of 1997, as amended, and RR No. 16-2005(Rema Tip Top Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. EB No. 2623 (C.T.A. Case No. 9836), October 04, 2023)
10. Input taxes have not been applied against output taxes during and in the succeeding quarters (Schaeffler Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10301, October 17, 2023, New York Bay Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 10417, October 04, 2023)

REFUND OR TAX CREDIT OF CREDITABLE WITHHOLDING TAX

There are two options available to a corporation whenever it overpays its income tax for the taxable year: (1) to carry over and apply the overpayment as tax credit against the estimated quarterly income tax liabilities of the succeeding taxable years until fully utilized, and (2) to apply for a cash refund or issuance of a tax credit certificate within the prescribed period. In exercising its option, the corporation must signify in its annual corporate adjustment return its intention to carry over the excess credit or to claim a refund or tax credit, by marking the option box provided in the BIR form. To facilitate tax collection, the two options are alternative and not cumulative, that is, the choice of one precludes the other (Stages Production Specialists, Inc. v. Commissioner of Internal Revenue, C.T.A. EB No. 2658 (C.T.A. Case No. 9817), October 04, 2023)

The requisites for claiming a tax credit or a refund of creditable withholding tax are as follows:

1. The claim must be filed with the CIR within the two (2)-year period from the date of payment of the tax;
2. The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld; and
3. It must be shown on the return that the income received was declared as part of the gross income(Stages Production Specialists, Inc. v. Commissioner of Internal Revenue, C.T.A. EB No. 2658 (C.T.A. Case No. 9817), October 04, 2023)