Landmark Cases on

Value- Added Tax(VAT)

Taxation II
Juderick Ramos
 AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. v. CIR
G.R. No. 182364 August 3, 2010
Doctrine:
Section 113 of the Tax Code does not create a distinction between a sales invoice and an official receipt.

Facts:
Petitioner filed with the respondent an application for tax refund and/or tax credit of its
excess/unutilized input VAT from zero-rated sales. To prevent the running of the prescriptive period,
petitioner subsequently filed a petition for review with the CTA.

The CTA held that since petitioner is engaged in sale of services, VAT Official Receipts should have been
presented in order to substantiate its claim of zero-rated sales, not VAT invoices which pertain to sale of
goods or properties.

Issue:
Whether or not a Sales Invoice would suffice as a proof for entitlement to a refund of unutilized input
VAT from zero-rated sales, even for seller of services

Held:
Yes. Section 113 of the Tax Code does not create a distinction between a sales invoice and an official
receipt. Parenthetically, to determine the validity of petitioners claim as to unutilized input VAT, an
invoice would suffice provided the requirements under Sections 113 and 237 of the Tax Code are met.
 Ruling, continued (AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. v.
CIR, G.R. No. 182364 August 3, 2010)
Sales invoices are recognized commercial documents to facilitate trade or credit transactions. They are
proofs that a business transaction has been concluded, hence, should not be considered bereft of
probative value (Seaoil Petroleum Corporation v. Autocorp Group, G.R. No. 164326, October 17, 2008).
Only the preponderance of evidence threshold as applied in ordinary civil cases is needed to
substantiate a claim for tax refund proper (Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation, G.R. No. 172129, September 12, 2008).

A taxpayer engaged in zero-rated transactions may apply for tax refund or issuance of tax credit
certificate for unutilized input VAT, subject to the following requirements:
1. the taxpayer is engaged in sales which are zero-rated (i.e., export sales) or effectively zero-
rated;
2. the taxpayer is VAT-registered;
3. the claim must be filed within two years after the close of the taxable quarter when such sales
were made;
4. the creditable input tax due or paid must be attributable to such sales, except the transitional
input tax, to the extent that such input tax has not been applied against the output tax; and
5. in case of zero-rated sales, the acceptable foreign currency exchange proceeds thereof have
been duly accounted for in accordance with BSP rules and regulations.
Silicon Philippines, Inc. vs. CIR
GR No. 172378, January 12, 2011
Facts:
Silicon Philippines, Inc. is a corporation duly organized and existing under the laws of the Philippines. It is
registered with the BIR das a VAT-taxpayer and with the BOI as a preferred pioneer enterprise. Then, on
May, 1999, Silicon filed with the CIR an application for credit/refund of unutilized input VAT for the
period of Oct. 1, 1998 to Dec. 31, 1998.Due to the inaction of the CIR, Silicon, on Dec. 27, 2000, filed A
petition for Review with the CTA Division. Silicon alleged that the 4th quarter of 1998, it generated and
recorded zero-rated export sales paid to Silicon in acceptable foreign currency and that for the said
period, Silicon paid input VAT in the total amount which have not been applied to any output VAT. The
CIR, on the other hand, raised the defenses that:
1. Silicon did not show that it complied with the provisions of Sec. 229 of the Tax Code;
2. That claims for refund are construed strictly against the claimant similar to the nature of
3. exemption from taxes; and that Silicon failed to prove that is entitled for refund.
The CTA Division granted Silicons claim for refund of unutilized input VAT on capital goods. However, it
denied Silicons claim for credit/refund of input VAT attributable to its zero-rated export sales. It is
because Silicon failed to present an Authority to Print (ATP) from the BIR neither did it print on its export
sales invoices the ATP and the word zero-rated. Silicon moved for reconsideration claiming that it is not
required to secure an ATP since it has a Permit to Adopt Computerized Accounting Documents such as
Sales Invoice and Official Receipts from the BIR. And that the printing of the word zero-rated on its
export sales invoices is not necessary because all its finished products are exported to its mother
company, Intel Corp., a non-resident corporation and a non-VAT registered entity.
continued (Silicon Philippines, Inc. vs. CIR, GR No. 172378, January 12, 2011)
ISSUE:
W/N Silicon entitled to claim from refund of Input VAT attributable to its zero-rated sales.

Ruling: no. There are two types of input VAT credits:1.A credit/refund of input VAT attributable to zero-
rated sales under Sec. 112(A) of the NIRC; and2.A credit/refund of input VAT on capital goods pursuant
to Sec. 112(B) of the same Code. To claim for credit/refund of input VAT attributable to zero-rated sales,
Sec. 112(A) laid down 4 requisites:
1. The taxpayer must be a VAT-registered;
2. The taxpayer must be engaged in sales which are zero-rated or effectively zero-rated;
3. The claim must be filed within 2 years after the close of the taxable quarter when such sales
were made; and
4. The creditable input tax due or paid must be attributable to such sales, except the transitional
input tax, to the extent that such input tax has not been applied against the output tax.

ISSUE:
W/N a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has
secured an ATP from the BIR prior to the printing of its invoices or receipts.

Ruling:
YES. Since ATP is not indicated in the invoices or receipts, the only way to verify whether the invoices or
receipts are duly registered is by requiring the claimant to present its ATP from the BIR. Without which,
the invoices would have no probative value for the purpose of refund. Failure to print the word zero-
rated on the sales invoices is fatal to a claim for refund of input VAT. In compliance with Sec. 4.108-1 of
RR 7-95, requiring the printing of the word zero-rated on the invoice covering zero-rate sales is
essential as this regulation proceeds from the rulemaking authority of the Secretary of Finance under
Sec. 244of the NIRC.
 Renato V. Diaz and Aurora Timbol v. Secretary of Finance
GR No. 193007, July 19, 2011
Facts:
Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for declaratory relief
assailing the validity of the impending imposition of value-added tax (VAT) by the Bureau of Internal
Revenue (BIR) on the collections of toll way operators. Court treated the case as one of prohibition.
Petitioners hold the view that Congress did not, when it enacted the NIRC, intend to include toll fees
within the meaning of "sale of services" that are subject to VAT; that a toll fee is a "user's tax," not a sale
of services; that to impose VAT on toll fees would amount to a tax on public service; and that, since VAT
was never factored into the formula for computing toll fees, its imposition would violate the non-
impairment clause of the constitution. The government avers that the NIRC imposes VAT on all kinds of
services of franchise grantees, including toll way operations; that the Court should seek the meaning
and intent of the law from the words used in the statute; and that the imposition of VAT on toll way
operations has been the subject as early as 2003 of several BIR rulings and circulars. The government
also argues that petitioners have no right to invoke the non-impairment of contracts clause since they
clearly have no personal interest in existing toll operating agreements (TOAs) between the government
and toll way operators.
 Continued (Renato V. Diaz and Aurora Timbol v. Secretary of Finance,
GR No. 193007, July 19, 2011)
Issue:
May toll fees collected by toll way operators be subjected to VAT (Are toll way operations a franchise
and/or a service that is subject to VAT)?

Held:
When a toll way operator takes a toll fee from a motorist, the fee is in effect for the latter's use of the
toll way facilities over which the operator enjoys private proprietary rights that its contract and the law
recognize. In this sense, the toll way operator is no different from the service providers under
Section108 who allow others to use their properties or facilities for a fee. Toll way operators are
franchise grantees and they do not belong to exceptions that Section 119 spares from the payment of
VAT. The word "franchise" broadly covers government grants of a special right to do an act or series of
acts of public concern. Toll way operators are, owing to the nature and object of their business,
"franchise grantees."
 PHILIPPINE AMUSEMENT AND GAMING CORPORATION VS. BIR
GR No. 172087, March 15, 2011

FACTS:
With the passage of Republic Act No. (RA) 9337, the Philippine Amusement and Gaming Corporation
(PAGCOR) has been excluded from the list of government-owned and controlled corporations (GOCCs)
that are exempt from tax under Section27(c) of the Tax Code; PAGCOR is now subject to corporate
income tax.

The Supreme Court (SC) held that the omission of PAGCOR from the list of tax-exempt GOCCs by RA
9337 does not violate the right to equal protection of the laws under Section 1, Article III of the
Constitution, because PAGCORs exemption from payment of corporate income tax was not based on
classification showing substantial distinctions; rather, it was granted upon the corporations own
request to be exempted from corporate income tax. Legislative records likewise reveal that the
legislative intention is to require PAGCOR to pay corporate income tax.
 Ruling, continued (PHILIPPINE AMUSEMENT AND GAMING
CORPORATION VS. BIR, GR No. 172087, March 15, 2011)
ISSUE:
Is Republic Act 9337 constitutional insofar as it excluded PAGCOR from the enumeration of GOCCs
exempt from the payment of corporate income tax?

HELD:
YES. The original exemption of PAGCOR from corporate income tax was not made pursuant to a valid
classification based on substantial distinctions so that the law may operate only on some and not on all.
Instead, the same was merely granted due to the acquiescence of the House Committee on Ways and
Means to the request of PAGCOR.

The argument that the withdrawal of the exemption also violates the non-impairment clause will not
hold since any franchise is subject to amendment, alteration or repeal by Congress.
However, the Court made it clear that PAGCOR remains exempt from payment of indirect taxes and as
such its purchases remain not subject to VAT.
Commissioner of Internal Revenue v. Aichi Forging Company of
Asia, Inc., G.R. No. 184823, 06 October 2010
FACTS:
Respondent Aichi filed a claim for refund/credit of input VAT for the period July 1, 2002 to September
30, 2002, with the petitioner Commissioner of Internal Revenue (CIR), through the Department of
Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center. On even date,
respondent filed a Petition for Review with the CTA for the refund/credit of the same input VAT. The
CTA partially granted the petition. In a Motion for Reconsideration, petitioner argued that the
simultaneous filing of the administrative and the judicial claims contravenes Sections 112 and 229 of the
NIRC and a prior filing of an administrative claim is a condition precedent before a judicial claim can be
filed. The CTA En Banc affirmed the division ruling.

ISSUE:
Whether the respondents judicial and administrative claims for tax refund/credit were filed within the
two-year prescriptive period as provided in Sections 112(A) and 229 of the NIRC.
Ruling, continued (CIR v. Aichi Forging Company of Asia, Inc., G.R.
No. 184823, 06 October 2010)

HELD:
NO. The two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30,
2002 expired on September 30, 2004. Hence, respondents administrative claim was timely filed. The
filing of the judicial claim was premature. However, notwithstanding the timely filing of the
administrative claim, [the Supreme Court is] constrained to deny respondents claim for tax
refund/credit for having been filed in violation of Section 112(D). Section 112(D) of the NIRC clearly
provides that the CIR has 120 days, from the date of the submission of the complete documents in
support of the application [for tax refund/credit], within which to grant or deny the claim. In case of full
or partial denial by the CIR, the taxpayers recourse is to file an appeal before the CTA within 30 days
from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the
application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA
within 30 days.
End of report.