- The CTA denied that taxpayer’s claim for refund of input VAT arising from zero-rated sales.
- Pursuant to the NIRC, services rendered to persons engaged in international shipping or international air transport operations are subject to zero-rated VAT. Moreover, the services must be supported by VAT- official receipt.
- In this case, the taxpayer failed to submit the service agreement or contracts to show the nature of the transaction with foreign clients.
- Moreover, the taxpayer submitted invoices, which are not compliant with the invoicing requirements of the law. Thus, the claim for refund was denied (BSM Crew Service Centre Philippines, Inc.) v. CIR, CTA Case No.9892, September 8, 2020)
PHP 4 MILLION TAX ASSESSMENT UPHELD; APPEAL TO THE COURT OF TAX APPEALS ON DISPUTED ASSESSMENT MUST BE FILED WITHIN 30 DAYS FROM THE RECEIPT OF THE DECISION OR AFTER THE EXPIRATION OF THE PERIOD FIXED BY LAW FOR ACTION THEREON.
- The CTA dismissed the taxpayer petition questioning the validity of the tax assessment due to its failure to observe the 30-day reglementary period in appealing the assessment to the court.
- Under the rules, an appeal before the Court of Tax Appeals viapetition for review must be filed by the taxpayer from receipt of the decision or ruling or after the expiration of the period fixed by law for action thereon. If the taxpayer failed to file the petition within the statutory period, the disputed assessment becomes final, executory and demandable.
- In this case, the taxpayer received the FDDA on September 14, 2017 but filed his petition on October 23, 2017 instead of October 14, 2017. Therefore, the assessment becomes final and his petition is dismissed for filing the same out of time.(Bryan M. Torregosa v. BIR v. CTA Case No. 9703, September 9, 2020).
PHP 28 MILLION TAX ASSESSMENT CANCELLED; DEPOSIT FOR FUTURE SUBSCRIPTION IS NOT CONSIDERED A LOAN SUBJECT TO DST; ADVANCES FROM STOCKHOLDERS DATED PRIOR TO 2011 ARE NOT SUBJECT TO DST; THE BIR CANNOT RETROACTIVELY APPLY A SUPREME COURT CASE TO THE PRJUDICE OF THE TAXPAYER.
- The CTA cancelled the tax assessment for the reason that deposit for future subscription in 2005 and advances in 2008 are not subject to DST.
- A deposit on future subscription is characterized as money received by a corporation for purposes of applying the same as payment for additional issuance of shares in the future, an event which may or may not happen.
- In this case, the taxpayer was assessed DST on the deposit for future subscription on previous years that remained intact in company’s books at in the year subject of assessment. The CTA ruled that an assessment should not be based on mere presumptions. Even though an assessment is presumed correct, the presumption cannot be made to rest on another presumption. It also ruled that a deposit for future subscription is not a loan. The deposit is an amount held in trust for future subscriber which may be converted to shares or may be withdrawn. On the other hand, the loan is must be repaid.
- Advances from stockholders evidenced by vouchers are not subject to DST prior to the Filinvest Case decided in 2011.
- In this case, the advances were recorded in 2008 and 2009. The Filinvest case, which subjects the same to DST, cannot be applied retroactively to the prejudice to the taxpayer, who relied on earlier rulings that such advances are not subject to DST.
- Through a LOA, the BIR can examine the taxpayer’s books for a taxable period covered by the LOA.
- In the instant case, the LOA was limited to the examination of taxpayer’s books for taxes in 2009. However, the deposit for future subscription was recorded in 2005 and advances from stockholders were recorded in 2008. Therefore, the BIR examiners went beyond their authority when they audited 2005 and 2008 transactions when the LOA covers 2009 transactions only.
- Therefore, the assessment is cancelled.(Leadway Holdings, Incorporated v. CIR, CTA Case No. 9835, September 9, 2020)
PHP 5 MILLION REFUND OF LOCAL BUSINESS TAX GRANTED: CONDOMINIUM CORPORATIONS’ ASSOCIATION DUES ARE NOT SUBJECT TO LOCAL BUSINESS TAX, UNLESS THEY ENGAGE IN ACTIVITES FOR PROFIT.
- The CTA ordered the City of Taguig to refund or issue tax credit in favor of the Condominium Corporation representing erroneously or illegally paid local business tax, business plate/sticker fee and environmental fee.
- The Supreme Court has ruled that condominiums, by their nature, are generally exempt from local business tax under the Local Government Code for the reason that they are not engaged in the business when they collect assessments or dues from unit owners. Only when they engage in activities for profit will they be considered subject to business tax applying the rule on estoppel.
- In this case, the taxpayer is not engage in trade or business for the membership/association dues and other fees or charges collected by the taxpayer from its unit owners. There was also no evidence that the taxpayer is estopped from claiming that it is not engaged in busines.
- Further, the taxpayer is not engaged in business merely on the basis of the secondary purpose stated in the Articles of Incorporation. There has to be a clear and convincing proof that it had actually engaged in profit making activities and had derived income or profit therefrom.
- Moreover, the association dues cannot be considered as sale of services for fee or consideration.
- Therefore, they are not subject to local business tax and business plate/sticker fee.
- The Court also ruled that environmental fee is in the nature of a regulatory fee. However, the fee is imposed only to those entities engaged in business. Since the condominium unit is not considered a business, it should not be subject to environmental fee. Therefore, the assessment is cancelled(Taguig City Government v. Serendra Condominium Corporation, CTA AC No. 229, RTC Civil Case No. 74669, September 10, 2020).
PHP 4 MILLION TAX ASSESSMENT CANCELLED: TAXPAYER HAS 15 DAYS WITHIN WHICH TO REPLY TO THE PAN; BIR’S ISSUANCE OF FLD/FAN WITHIN THE 15-DAY PERIOD RENDERS THE ASSESSMENT VIOD FOR FAILURE TO OBSERVE THE TAXPAYER’S DUE PROCESS.
- The CTA cancelled the tax assessment for violation of taxpayer’s due process to premature issuance of the FLD/FAN.
- As part of due process in the issuance of tax assessments, the regulations provide that a taxpayer has 15 days within which to reply to the PAN. After the lapse of the said period, it is only then that the BIR shall issue the FLD/FAN.
- In the instant case, the taxpayer received the PAN dated January 8, 2015. Counting 15 days, it has until January 23, 2015 to reply to the PAN. However, the BIR issued the FLD/FAN on January 23, 22015, which is the last day of the said 15-day period for the taxpayer to reply to the PAN. Therefore, the taxpayer was deprived of the opportunity to be heard on the PAN, in violation of the due process requirement in the issuance of the tax assessment
- Therefore, the assessment is cancelled (Karina, Inc. v. Commissioner of Internal Revenue, CTA AC No. 9204, September 10, 2020).
PHP 8 MILLION TAX ASSESSMENT CANCELLED: ABSENCE OF LOA RENDERS THE TAX ASSESSMENT VOID; GENERALLY, THE BIR HAS 3 YEARS TO ASSESS THE TAX PAXPAYER.
- The CTA cancelled the tax assessment due to absence of LOA and prescription.
- Based on rules and jurisprudence, an assessment must spring from a valid LOA. In the absence of an LOA, the tax assessments issued by the BIR against such taxpayer shall be void.
- In the instant case, no evidence was presented to prove that an LOA was issued by the BIR. Neither were revenue officers who actually examined the taxpayer’s books and records presented in court. In other words, there is no indication that the examination and assessment of the taxpayer sprung from an LOA.
- Generally, the BIR has 3 years to assess the taxpayer after the last day prescribed by law for the filing of the return or actual date of filing whichever is later.
- In this case, the covered taxable year is 2006. The FAN was received by the taxpayer on June 10, 2011 or after the 3-year prescriptive period.
Therefore, the assessment is cancelled (Marily Development Corporation v. CIR, CTA Case No. 9756, September 10, 2020).