Bar Com Tax
Content
RCBC V. CIR, G.R. NO. 170257– WITHHOLDING TAX Facts:
Petitioner Rizal Commercial Banking Corporation Petitioner Corporation (RCBC) is a corporation engaged in general banking operations. It seasonably filed its Corporation A Annual nnual Income Tax Returns for Foreign Currency eposit !nit for t"e calendar years #$$% and #$$&. 'n August #&( #$$)( RCBC recei*ed +etter of Aut"ority ,o. #--$&$ issued by t"en Commissioner of Internal Re*enue (CIR) +iayay +iayay /inzons0C"a /inzons0C"ato( to( aut"or aut "oriz izing ing a speci special al audit audit team team to ex exam amine ine t"e books books of accou accounts nts and ot"er ot"er accounting records for all internal re*enue taxes from 1anuary #( #$$% to ecember -#( #$$&. RCBC as assessed deficiency ons"ore tax and documentary stamp tax. As regards t"e deficiency FC! ons"ore tax( RCBC contended t"at because t"e ons"ore tax as collected in t"e form of a final it""olding tax( it as t"e borroer( constituted by la as t"e it""olding agent( t"at as primarily liable for t"e remittance of t"e said tax. Issu:
2"et"er or not petitioner is liable for deficiency ons"ore tax for taxable year #$$% and #$$&. Ru!"#$:
3es. RCBC is con*inced t"at it is t"e payor0borroer( 3es. payor0borroer( as it""olding it""olding agent( "o is directly liable for t"e payment of ons"ore tax( citing 4ectio 4ection n 5.&67A8 of Re*enue Regulations ,o. 50$9 "ic" states: 7A8 Final Final 2it" 2it""old "olding ing Tax Tax.. ; !nder !nder t"e final final it""o it""oldin lding g tax system t"e amount of income tax it""eld by t"e it""olding it""olding agent is constituted as a full and final payment of t"e income tax due from t"e payee on t"e said income. T% !"a&"!"t' ()* +a'#t )( t% ta- *sts +*"a*"!' )# t% +a')* as a "t%%)!/"#$ a$#t. T%us, "# cas )( %"s (a"!u* t) "t%%)!/ t% ta- )* "# cas )( u#/* "t%%)!/"#$, t% /("c" /( "c"#c #c' ' ta- s%a!! s%a!! & c)!! c)!!ct ct/ / (* (*) ) t% +a')* +a')*"t "t%%) %%)!/" !/"#$ #$ a$#t. T"e payee is not re<uired to file an income tax return for t"e particular income. 7=mp"asis 7=mp"as is supplied8 T"e petitioner petitioner is mistaken. mistaken. It s"ould be pointed out t"at RCBC erred in citing t"e abo*e abo*eme menti ntione oned d Re*en Re*enue ue Regul Regulati ations ons ,o. ,o. 50 50$9 $9 becau because se t"e t"e same same go*er go*erns ns collection collectio n at source on income paid only on or after 1anuary #( #$$9. T"e deficiency deficiency it""olding tax sub>ect of t"is petition as supposed to "a*e been it""eld on income paid during t"e taxable years of #$$% and #$$&. ?ence( Re*enue Regulations ,o. 50$9 ob*iously does do es not apply in t"is case. cas e. T"ee li T" liab abil ilit ity y of t" t"ee i it" t""o "old ldin ing g ag agen entt is inde indepe pend nden entt fr from om t"at t"at of t"e t"e taxpayer taxp ayer.. T"e former former cannot be made made liable liable for t"e tax due because because it is t"e lat latter ter "o earned t"e income sub>ect to it""olding it""olding tax. T"e it""olding it""olding agent is liable only insofar as "e failed to perform "is duty to it""old t"e tax and remit t"e same to t"e go*ernment. T"e liability for t"e tax( "oe*er( remains it" t"e taxpayer because t"e gain as realized and recei*ed by "im.
CONTX V CIR, G.R. NO. 15115 – CONC3T OF VAT Facts:
Petitioner is a domestic corporation engaged in t"e business of manufacturing "ospital textiles and garments and ot"er "ospital supplies for export. Petitioner@s place of business is at t"e 4ubic Bay Freeport one 74BF8. It is duly registered it" t"e 4ubic Bay etropolitan Aut"ority 74BA8 as a 4ubic Bay Freeport =nterprise( pursuant to t"e pro*isions of Republic Act ,o. 6556. As an 4BA0registered firm( petitioner is exempt from all local and national internal re*enue taxes except for t"e preferential tax pro*ided for in 4ection #5 7c8 of Rep. Act ,o. 6556. Petitioner also registered it" t"e Bureau of Internal Re*enue 7BIR8 as a non0/AT taxpayer under Certificate of Registration R' Control ,o. $&0#90#--. From From 1anuar 1anuary y #( #$$6 #$$6 to ecem ecember ber -#( #$$9( #$$9( petiti petitione onerr purc"a purc"ased sed *ariou *ariouss supplies and materials materials necessary in t"e conduct of its manufacturing business business.. T"e suppliers of t"ese goods s"ifted unto petitioner t"e #D /AT on t"e purc"ased items( "ic" led t"e petitioner to pay input taxes in t"e amounts of P&-$ (%##.99 (%## .99 and an d P&%(& &% (&6.% 6.%$ $ for #$$6 #$ $6 and an d #$$9( #$$ 9( respec res pecti* ti*el ely. y. Acti Ac ting ng on t" t"ee belief belief t"at it as as exemp exemptt fr from om all all na nati tiona onall and local local taxes taxes(( including /AT /AT( pursuant to Rep. Rep . Act ,o. 6556( petitioner petition er filed to applications for tax refund or tax credit of t"e /AT /AT it paid.
Issu:
2"et"er or not t"e exemption from all local and national internal re*enue taxes pro*ided in Republic Act no. 6556 co*ers t"e *alue added tax paid by petitioner( a 4ubic Bay Freeport enterprise on its purc"ases of supplies and materials. Ru!"#$:
,o. T"e petitioner@s claim to /AT exemption in t"e instant case for its purc"ases of supplies and ra materials is founded mainly on 4ection #5 7b8 and 7c8 of Rep. Act ,o. 6556( "ic" basically exempts t"em from all national and local inter int ernal nal re re*en *enue ue taxes taxes(( includ includin ing g /AT and 4ecti 4ection on % 7A87a 7A87a88 of BIR BIR Re*en Re*enue ue Regulations ,o. #0$&. 'n t"is point( petitioner rig"tly claims t"at it is indeed /AT0 =xempt =xem pt and t"is t"is fact fact is not contro*e contro*erted rted by t"e responde respondent. nt. In fact( fact( petitio petitioner ner is register regi stered ed as a ,',0/ ,',0/A AT taxpaye taxpayerr per Certifi Certificate cate of Regist Registrati ration on issued issued by t"e BIR. As suc"( it is exempt from /AT /AT on all its sales and importations importations of goods and ser*ices. Petitioner@s claim( "oe*er( for exemption exemptio n from /A /AT T for its purc"ases of supplies and ra materials is incongruous it" its claim t"at it is /AT0=xempt( for only /AT0 Registered entities can claim Input /AT CreditERefund. T"e point of contention "ere is "et"er or not t"e petitioner may claim a refund on t"e Input /AT erroneously passed on to it by b y its suppliers. 2"ile it is true t"at t"e petitioner s"ould not "a*e been liable for t"e /AT inad*ertently passed on to it by its supplier since suc" is a zero0rated inad*ertently zero0rated sale on t"e part
of t"e supplier( t"e petitioner is not t"e proper party to claim suc" /AT refund. 4ince t"e transaction is deemed a zero0rated sale( petitioner@s supplier may claim an Input /AT credit it" no corresponding corresponding 'utput /AT liability. liability. Congruently( Congruently( no 'utput /AT may be passed on to t"e petitioner. petitio ner.
It must be stressed stressed t"at t"e /A /AT is an indirect tax. As suc"( t"e amount of tax paid on t"e goods( goods ( properties or ser*ices boug"t( transferred( tra nsferred( or leased may be s"ifted or pa pass ssed ed on by t" t"ee sell seller er(( tran transf sfer eror or(( or less lessor or to t"e t"e bu buye yerr( tran transf sfer eree ee or lessee les see.. !nlik !nlikee a di direc rectt tax( tax( suc" suc" as t"e in incom comee tax( tax( "ic "ic" " prima primaril rily y taxes taxes an indi*idual@s ability to pay based on "is income or net ealt"( an indirect tax( suc" as t"e /AT( is a tax on consumption of goods( ser*ices( or certain transactions in*ol*ing t"e same. T"e /A /AT( t"us( forms a substantial portion of consu consumer mer expenditures. Furt"er( in indirect taxation( t"ere is a need to distinguis" beteen t"e liability for t"e tax and t"e burden of t"e tax. As earlier pointed pointed out( t"e amount of tax paid may be s"ifted or passed p assed on by t"e seller to t"e buyer . 2"at is transferred in suc" instances is not t"e liability for t"e tax( but t"e tax burden. In adding or including t"e /AT /AT due to t"e selling price( t"e seller remains t"e person primarily and legally liable for t"e payment of t"e tax. 2"at is s"ifted only to t"e intermediate buyer and ultimately to t"e final purc"aser is t"e burden of t"e tax. 4tated differently( differently( a seller "o is directly and legally liable for payment of an indirect tax( suc" as t"e /AT on goods or ser*ices is not necessarily t"e person "o ultimately ultimately bears t"e burde burden n of t"e same tax. It is t"e final purc"aser purc"aser or consumer of suc" goods or ser*ices "o( alt"oug" not directly and legally liable for t"e payment t"ereof( ultimately bears t"e burden of t"e tax. !nder ero0rating( all /AT is remo*ed from t"e zero0rated goods( acti*ity or firm. In contrast( exemption only remo*es t"e /AT /AT at t"e exempt stage( and it ill actually increase( rat"er t"an reduce t"e total taxes paid by t"e exempt firm@s business or non0r non0ret etail ail custom customers ers.. It is for t"is t"is reaso reason n t"at t"at a s"arp s"arp disti distinct nction ion must must be made beteen zero0rating and exemption in designating a *alue0added tax.
ABA4ADA GRO V R6ITA, G.R. NO. 1805 – VAT Facts:
ounting budget deficit( re*enue generation( inade<uate fiscal allocation for education( increased emoluments for "ealt" orkers( and ider co*erage for full *alue0added tax benefits t"ese are t"e reasons "y Republic Act ,o. $--6 7R.A. ,o. $--68 as enacted. R.A. ,o. $--6 is a consolidation cons olidation of t"ree leg legislati*e islati*e bills namely( ?ouse Bill ,os. -&&& and -6&( and 4enate Bill ,o. #$&. Because of t"e conflicting pro*isions of t"e proposed bills t"e 4enate agreed to t"e re<uest of t"e ?ouse of Representati*es for a committee conference. T"e Conference Committee on t"e isagreeing Pro*isions of ?ouse Bill recommended t"e appro*al of its report( "ic" t"e 4enate and t"e ?ouse of t"e Representati*es did. T"e President signed into la t"e consolidated ?ouse and 4enate *ersions as Republic Act $--6. Before t"e la as to take effect on 1uly #( 5&( t"e Court issued a temporary restraining order en>oining go*ernment from implementing t"e la in response to a sle of petitions for certiorari and pro"ibition <uestioning t"e constitutionality of t"e ne la. Among ot"ers( Petitioners contend t"at 4ections %( &( and ) of R.A. ,o. $--6 constitute an undue delegation of legislati*e poer( in *iolation of Article /I( 4ection 59758 of t"e ConstitutionG
Issu:
2"et"er or not t"ere is an undue delegation of legislati*e poer.
Ru!"#$:
In t"e present case( t"e c"allenged section of R.A. ,o. $--6 is t"e common pro*iso in 4ections %( % ( & and ) "ic" reads as follos: follos : HThat the President, upon the recommendation of the Secretary of Finance, shall, effective January , !""#, raise the rate of value$added ta% to t&elve percent (!'), after any of the follo&in conditions has een satisfied*
(i) +alue$added +alue$added ta% collection collect ion as a percentae of ross -omestic Product (-P) of the previous year e%ceeds t&o and four$fifth percent (! ./0')1 or (ii) 2ational overnment deficit as a percentae of -P of the previous year e%ceeds one and one$half percent ( 3')
In e*ery case of permissible delegation( t"ere must be a s"oing t"at t"e delegation itself is *alid. It is *alid only if t"e la 7a8 is complete in itself( setting fort" t"erein t"e policy to be executed( carried out( or implemented by t"e delegateG and 7b8 fixes a standard ; t"e limits of "ic" are sufficiently determinate and determinable ; to "ic" t"e delegate must conform in t"e performance of "is functions. A sufficient standard is one "ic" defines legislati*e policy( marks its limits( maps out its boundaries and specifies t"e public agency to apply it. It indicates t"e circumstances under "ic" t"e legislati*e command is to be effected. Bot" tests are intended to pre*ent a total transference of legislati*e aut"ority to t"e delegate( "o is not alloed to step into t"e s"oes of t"e legislature and exercise a poer essentially legislati*e. A distinction "as rig"tfully been made beteen delegation of poer to make t"e las "ic" necessarily in*ol*es a discretion as to "at it s"all be( "ic" constitutionally may not be done( and delegation of aut"ority or discretion as to its execution to be exercised under and in pursuance of t"e la( to "ic" no *alid ob>ection can be made. T"e case before t"e Court is not a delegation of legislati*e poer. It is simply a delegation of ascertainment of facts upon "ic" enforcement and administration of t"e increase rate under t"e la is contingent. T"e legislature "as made t"e operation of t"e #5D rate effecti*e 1anuary #( 5)( contingent upon a specified fact or condition. It lea*es t"e entire operation or non0operation of t"e #5D rate upon factual matters outside of t"e control of t"e executi*e. ,o discretion ould be exercised by t"e President. ?ig"lig"ting t"e absence of discretion is t"e fact t"at t"e ord s"all is used in t"e common pro*iso. T"e use of t"e ord s"all connote a mandatory order. Its use in a statute denotes an imperati*e obligation and is inconsistent it" t"e idea of discretion. 2"ere t"e la is clear and unambiguous( it must be taken to mean exactly "at it says( and courts "a*e no c"oice but to see to it t"at t"e mandate is obeyed. T"ere is no undue delegation of legislati*e poer but only of t"e discretion as to t"e execution of a la. T"is is constitutionally permissible. Congress does not abdicate its functions or unduly delegate poer "en it describes "at >ob must be done( "o must do it( and "at is t"e scope of "is aut"orityG in our complex economy t"at is fre<uently t"e only ay in "ic" t"e legislati*e process can go forard.
CO66I99IONR OF INTRNAL RVN V CB TOO COR3ORATION, G.R. NO. 1;<07 – CHARACTR OF VAT Facts:
Respondent Cebu Toyo Corporation is a domestic corporation engaged in t"e manufacture of lenses and *arious optical components used in tele*ision sets( cameras( compact discs and ot"er similar de*ices. Its principal office is located at t"e actan =xport Processing one 7=P8 in +apu0+apu City( Cebu. It is a subsidiary of Toyo +ens Corporation( a non0resident corporation organized under t"e las of 1apan. Respondent is a zone export enterprise registered it" t"e P"ilippine =conomic one Aut"ority 7P=A8( pursuant to t"e pro*isions of Presidential ecree ,o. )). It is also registered regis tered it" t"e t" e Bureau of o f Internal Re*enue 7BIR8 as a /AT /AT taxpayer. As an export enterprise( respondent sells 9D of its products to its mot"er corporation( t"e 1apan0based Toyo +ens Corporation( pursuant to an Agreement of 'ffsetting. T"e rest are sold to *arious enterprises doing business in t"e =P. Inasmuc" as bot" sales are considered consider ed export sales sub>ect to /alue0Added /alue0Added Tax 7/A 7/AT8 at D rate under 4ection #)7A87587a8 of t"e ,ational Internal Re*enue Code( as amended( respondent resp ondent filed its <uarterly <uarterl y /A /AT returns from April #( #$$) to ecember -#( #$$6 s"oing a total input /AT of P%(%)5(%#5.)-. 'n arc" -( #$$9( respondent filed it" t"e Tax and Re*enue roup of t"e 'ne04top Inter0Agency Tax Credit and uty raback Center of t"e epartment of Finance( an application for tax creditErefund of /AT paid for t"e period April #( #$$)
to ecember -#( #$$6 amounting to P%(%-$(956.5# representing excess /AT input payments. Allocating t"e input taxes supported by receipts to t"e export sales( t"e CTA determined t"at t"e refundEcredit amounted to only P5(#&9(6#%.%). Issu:
2"et"er t"e Court of Appeals erred in affirming t"e Court of Tax Appeals resolution granting a refund in t"e amount of P5(#&9(6#%.%) representing unutilized input /AT on goods and ser*ices for t"e period April #( #$$) to ecember -#( #$$6. Ru!"#$:
Petitioner@s contention t"at respondent is not entitled to refund for being exempt from /AT is untenable. T"is argument turns a blind eye to t"e fiscal incenti*es granted to P=A0registered enterprises under 4ection 5- of Rep. Act ,o. 6$#). ,ote t"at under said statute( t"e respondent "ad to options it" respect to its tax burden. It could a*ail of an income tax "oliday pursuant to pro*isions of =.'. ,o. 55)( t"us exempt it from income taxes for a number of years but not from ot"er internal re*enue taxes suc" su c" as /ATG or it could a*ail a*a il of t"e tax exemptions on all taxes( including includ ing /AT /AT under P.. ,o. )) and pay only t"e preferential tax rate of &D under Rep. Act ,o. 6$#). Bot" t"e Court of Appeals and t"e Court of Tax Appeals found t"at respondent a*ailed of t"e income tax "oliday for four 7%8 years starting from August 6( #$$&( as clearly reflected in its #$$) and #$$6 Annual Corporate Income Tax Returns( "ere respondent specified t"at it as a*ailing of t"e tax relief under =.'. ,o. 55). ?ence( respondent is not exempt from /AT and it correctly registered itself as a /AT /AT taxpayer. In fine( it is engaged in taxable rat"er t"an exempt transactions.
Taxable transactions are t"ose transactions "ic" are sub>ect to *alue0added tax eit"er at t"e rate of ten percent 7#D8 or zero percent 7D8. In taxable transactions( t"e seller s"all be entitled to tax credit for t"e *alue0added tax paid on purc"ases and leases lea ses of goods( propertie propertiess or ser*ices. An exemption means t"at t"e sale of goods( properties or ser*ices and t"e use or lease of properties is not sub>ect to /AT 7output tax8 and t"e seller is not alloed any tax credit on /AT 7input tax8 pre*iously paid. T"e person making t"e exempt sale of goods( properties or ser*ices s"all not bill any output tax to "is customers because t"e said transaction is not sub>ect to /AT. T"us( a /AT0registered purc"aser of goods( properties or ser*ices ser* ices t"at are /AT /AT0exempt( is not entitled to any input tax on suc" purc"ases despite despit e t"e issuance of a /AT /AT in*oice or receipt. ,o( "a*ing determined t"at t"a t respondent is engaged enga ged in taxable transac transactions tions sub>ect to /AT( let us t"en proceed to determine "et"er it is sub>ect to #D or zero 7D8 rate of /AT /AT. To To begin it"( it must be recalled rec alled t"at generally( sale of goods goo ds and supply of ser*ices performed in t"e P"ilippines are taxable at t"e rate of #D. ?oe*er( export sales( or sales outside t"e P"ilippines( s"all be sub>ect to *alue0added tax at D D if made by a /AT /AT0registered person. !nder !nd er t"e *alue0added * alue0added tax system( a zero0rated sale by b y a /AT0registered person( person ( "ic" is a taxable transaction for /AT /AT purposes( s"all not result in any output tax. tax . ?oe*er( t"e input tax on "is purc"ase of
goods( properties or ser*ices related to suc" zero0rated sale s"all be a*ailable as tax credit or refund. In principle( t"e purpose of applying a zero percent 7D8 rate on a taxable transaction is to exempt t"e transaction completely from /AT pre*iously collected on inputs. It is t"us t"e only true ay to ensure t"at goods are pro*ided free of /AT. 2"ile t"e zero rating and t"e exemption are computationally t"e same( t"ey actually differ in se*eral aspects( to it: 7a8 A zero0rated sale is a taxable transaction but does not result in an output tax "ile an exempted transaction is not sub>ect to t"e output taxG 7b8 T"e input /AT on t"e purc"ases of a /AT0registered person it" zero0rated sales may be alloed as tax credits or refunded "ile t"e seller in an exempt transaction is not entitled to any input tax on "is purc"ases despite t"e issuance of a /AT in*oice or receipt. 7c8 Persons engaged in transactions "ic" are zero0rated( being sub>ect to /AT( are re<uired to register "ile registration is optional for fo r /A /AT0exempt persons. In t"is case( it is undisputed t"at respondent is engaged in t"e export business and is registered as a /AT taxpayer per Certificate of Registration of t"e BIR. Furt"er( t"e records s"o t"at t"e respondent is sub>ect to /AT as it a*ailed of t"e income tax "oliday under =.'. ,o. 55). Perforce( respondent is sub>ect to /AT at D rate and is entitled to a refund or credit of t"e unutilized input taxes( "ic" t"e Court of Tax Appeals computed atP5(#&9(6#%.%)( but "ic" e find;after recomputation;s"ould be P5(#&9(6#%.&5.
CIR V 6AG9A9A LIN9, G.R. NO. 1;<8; – 3R9ON9 LIABL FOR VAT
Facts:
Pursuant to a go*ernment program of pri*atization( t"e ,ational e*elopment Company 7,C8 decided to sell in one lot its ,ational arine Corporation 7,C8 s"ares and fi*e 7&8 of its s"ips( "ic" are -(6 2T Teen0ecker( JKloecknerJ type *essels.T"e *essels ere constructed for t"e ,C beteen #$9# and #$9%( t"en initially leased to +uzon 4te*edoring Company( also its "olly0oned subsidiary. 4ubse<uently( t"e *essels ere transferred and leased( on a bareboat basis( to t"e ,C. T"e ,C s"ares and t"e *essels ere offered o ffered for public bidding bidding.. Among Among t"e stipulated terms and conditions for t"e public auction as t"at t"e inning bidder as to pay Ja *alue added tax of #D on t"e *alue of t"e *essels.J 'n - 1une #$99( pri*ate respondent agsaysay +ines( Inc. offered to buy t"e s"ares and t"e *essels for P#)9((.. T"e bid as made by agsaysay +ines( purportedly for a ne company still to be formed composed of itself and as appro*ed by t"e Committee on Pri*atization( and a ,otice of Aard dated # 1uly #$99 as issued to agsaysay +ines "o in turn as assessed of /AT t"roug" /AT Ruling ,o. &)9099 dated #% ecember #$99 from t"e BIR( "olding t"at t"e sale of t"e *essels as sub>ect to t"e #D /AT. T"e ruling cited t"e fact t"at ,C as a /AT0registered enterprise( and t"us its Jtransactions incident to its normal /AT registered acti*ity of leasing out personal property proper ty including sale of its on o n assets t"at are mo*able( tan tangible gible ob>ects "ic" are appropriable or transferable are sub>ect to t"e #D L/ATM. CTA ruled t"at t"e sale of a *essel as an Jisolated transaction(J not done in t"e ordinary ordinar y course of ,C@s business( and as t"us not no t sub>ect to /A /AT( "ic" under 4ection $$ of t"e Tax Code( as applied only to sales in t"e course of trade or business. T"e CTA furt"er "eld t"at t"e sale sa le of t"e *essels could not n ot be Jdeemed sale(J and t"us sub>ect to /AT( as t"e transaction did not fall under t"e enumeration of transactions deemed sale as listed eit"er in 4ection #7b8 of t"e Tax Code( or 4ection % of R.R. ,o. &096. Finally( t"e CTA ruled t"at any case of doubt s"ould be resol*ed in fa*or of pri*ate respondents since 4ection $$ of t"e Tax Code( "ic" implemented /AT is not an exemption pro*ision( but a classification pro*ision "ic" arranted t"e resolution of doubts in fa*or of t"e taxpayer. ?ence CIR appealed t"e CTA ecision. Issu:
2"et"er t"e sale by t"e ,C of fi*e 7&8 of its *essels to t"e pri*ate respondents is sub>ect to /AT under t"e ,ational Internal Re*enue Code of #$9) t"en pre*ailing at t"e time ti me of t"e sale. Ru!"#$: ,'T 4!B1=CT T' /A /AT. /A /AT is ultimately a tax on consumption( consu mption( e*en t"oug" it is assessed on many le*els of transactions on t"e basis of a fixed percentage. It is t"e end user of consumer goo goods ds or ser*ices( "ic" ultimately ultimate ly s"oulders t"e tax( as t"e liability t"erefrom is passed on to t"e end users by t"e pro*iders of t"ese t"es e goods or ser*ices "o " o in turn may credit t"eir on /A /AT T liability 7or input /AT /AT8 from t"e /AT /AT payments t"ey recei*e rec ei*e from t"e final consumer 7or output outpu t /AT8. T"e final purc"ase by t"e end consumer represents t"e final link in a production c"ain c"a in t"at itself in*ol*es se*eral s e*eral transactions and an d se*eral acts of consumption. T"e /AT system assures fiscal ade<uacy t"roug" t"e collection of taxes on e*ery le*el of consumption( yet assuages t"e manufacturers or pro*iders of goods
and ser*ices by enabling t"em to pass on t"eir respecti*e /AT liabilities to t"e next link of t"e c"ain until finally t"e end consumer s"oulders t"e entire tax liability.
3et /A 3et /AT is not a singular0minded tax on e*ery transactional le*el. Its assessment bears direct rele*ance to t"e taxpayer@s role or link in t"e production c"ain. ?ence( as affirmed by 4ection $$ of t"e Tax Code and its subse<uent incarnations( t"e tax is le*ied only on t"e sale( barter or exc"ange of goods or ser*ices by persons "o engage eng age in suc" acti*ities( in t"e t" e course of trade or business. busin ess. T"ese transactions outside t"e course of trade or business may in*ariably contribute to t"e production c"ain( c"a in( but t"ey do so only as a matter matte r of accident or incide incident. nt. As As t"e sales of goods or ser*ices do not occur it"in t"e course of trade or business( t"e pro*iders of suc" goods or ser*ices ould "ardly( if at all( "a*e t"e opportunity to appropriately credit any an y /A /AT liability as against again st t"eir on accumulated accu mulated /AT /AT collections since t"e accumulation of output /AT arises in t"e first place only t"roug" t"e ordinary course of trade or business. T"at t"e sale of t"e *essels as not in t"e ordinary course of trade or business of ,C as appreciated by bot" t"e CTA and t"e Court of Appeals( t"e latter doing so e*en in its first decision( "ic" it e*entually reconsidered. 2e cite it" appro*al t"e CTA@ CTA@s explanation on t"is point: T"e Court explained t"at Jcourse of businessJ or Jdoing businessJ connotes regularity of acti*ity. In t"e instant case( t"e sale as an isolated transaction. T"e sale( "ic" as in*oluntary and made pursuant to t"e declared policy of o*ernment for pri*atization could co uld no longer be repeated repea ted or carried on it" regularity. regu larity. It s"ould be emp"asized t"at t"e normal n ormal /A /AT0registered acti*ity of ,C is leasing lea sing personal person al property. T"is finding is confirmed by t"e Re*ised C"arter of t"e ,C( "ic" bears no indication t"at t"e ,C as created for t"e primary purpose of selling real property. T"e conclusion t"at t"e sale as not in t"e course of trade or business( "ic" t"e CIR does not dispute before t"is Court( s"ould "a*e definiti*ely settled t"e matter. Any sale( barter or exc"ange of goods or ser*ices not in t"e course of trade or business is not sub>ect sub>ec t to /AT /AT. Accordingly( Accordingly( t"e Court rules ru les t"at gi*en g i*en t"e undisputed finding t"at t"e transaction in <uestion as not made in t"e course of trade or business of t"e seller( ,C t"at is( t"e sale is not sub>ect s ub>ect to /AT /AT pursuant to 4ection $$ of t"e Tax Code( no matter "o t"e said sale may "e to t"ose transactions deemed sale as defined under 4ection #.
CIR V GOTA6CO, G.R. NO. L=10<2 – 3R9ON9 LIABL FOR VAT
Facts:
T"e 2orld ?ealt" 'rganization is an international organization( "ic" "as a regional office in anila. An agreement as entered into beteen t"e Republic of t"e P"ilippines and t"e said 'rganization on 1uly 55( #$&#. 4ection ## of t"at Agreement pro*ides( inter alia( t"at t" at Jt"e 'rganization( its assets( inc income ome and ot"er properties s"all be: 7a8 exempt from all direct and indirect taxes.N T"e 2?' decided to construct a building to "ouse its on offices( as ell as t"e ot"er !nited ,ations offices stationed in anila. A bidding as "eld for t"e building construction. T"e 2?' informed t"e bidders t"at t"e building to be constructed belonged to an international organization exempted from t"e payment of all fees( licenses( and taxes( and t"at t"erefore t"eir bids Jmust take t"is into account and s"ould not include items for suc" taxes( licenses and ot"er payments to o*ernment agencies.J T"ereafter( t"e construction contract as aarded to 1o"n otamco O 4ons( Inc. 4ubse<uently( t"e Commissioner of Internal Re*enue sent a letter of demand to otamco demanding payment of for t"e -D contractors tax plus surc"arges on t"e gross receipts it recei*ed from t"e 2?' in t"e construction of t"e latters building. 2?'. T"e 2?' issued a certification t"at t"e bid of 1o"n otamco O 4ons( s"ould be exempted from any an y taxes in connection it" t"e construction of t"e t" e 2 2orld orld ?ealt" 'rganization office building because suc" can be considered as an indirect tax to 2?'. ?oe*er( T"e Commissioner of Internal Re*enue contends t"at t"e -D contractors tax is not a direct nor an indirect tax on t"e 2?'. It is a tax t"at is primarily due from t"e contractor( co ntractor( t"us not co*ered by t"e tax exemption agreement. Issu:
2"et"er or not t"e said -D contractor@s tax imposed upon petitioner is co*ered by t"e Hdirect and indirect tax exemptionN granted to 2?' by t"e go*ernment. Ru!"#$: 3es. T"e -D contractor@s tax imposed upon petitioner is co*ered by t"e Hdirect and indirect tax exemptionN granted to 2?'. ?ence( petitioner cannot be "eld liable
for suc" contractor@s tax. T"e 4upreme Court explained t"at direct taxes are t"ose t"at are demanded from t"e *ery person "o( it is intended or desired( s"ould pay t"emG
"ile indirect taxes are t"ose t"at are demanded in t"e first instance from one person in t"e expectation and intention t"at "e can s"ift t"e burden to someone else. 2"ile it is true t"at t"e contractors tax is payable by t"e contractor( ?oe*er in t"e last analysis it is t"e oner of t"e building t"at s"oulders t"e burden of t"e tax because t"e same is s"ifted by t"e contractor to t"e oner as a matter of self0preser*ation. T"us( it is an indirect tax against t"e 2?' because( alt"oug" it is payable by t"e petitioner( t"e latter can s"ift its burden on t"e 2?'.
3ANA9ONIC V CIR, G.R. NO. 1780<0 – >RO=RATD TRAN9ACTION9 Facts:
Petit itiioner ner Panaso nason nic Comm ommunic unicat atiions Ima Imagin ging Cor orpo porrati ation of t"e P"ilippines 7Panasonic8 produces and exports plain paper copiers and t"eir sub0 assemblies( parts( and components. It is registered it" t"e Board of In*estments as a preferred pioneer enterprise under t"e 'mnibus In*estments Code of o f #$96. #$ 96. It is also a registered *alue0added tax 7/AT 7/AT8 enterprise. From April # to 4eptember -( #$$9 and from 'ctober #( #$$9 to arc" -#( #$$$( petitioner Panasonic generated export sales amounting to !4Q#5(9#$(%6&.#& and !4Q##(9&$(%9$.69( respecti*ely( for a total of !4Q5%()69($)%.$-. Belie*ing t"at t"ese export sales ere zero0rated for /AT under 4ection #)7A87587a87#8 of t"e #$$6 ,ational Internal Re*enue Code as amended by R.A. 9%5% 7#$$6 ,IRC8( Panasonic paid input /AT of P%($9(5&%.5) and P%(-99(559.#% for t"e to periods or a total of P$(-)9(%95.% attributable to its zero0rated sales. Claiming t"at t"e input /AT it paid remained unutilized or unapplied( on arc" #5( #$$$ and 1uly 5( #$$$ petitioner Panasonic filed it" t"e BIR to separate applications for refund or tax credit of "at it paid. Issu:
2"et"er or not t"e CTA en anc correctly denied petitioner Panasonic@s claim for refund of t"e /AT it paid as a zero0rated taxpayer on t"e ground t"at its sales in*oices did not state on t"eir faces t"at its sales ere Hzero0rated.N Ru!"#$: 3es. For t"e effecti*e zero rating of suc" transactions( t"e taxpayer "as to be /AT0registered 0registered and must comply it" in*oicing re<uirements. re<uirements. Interpreting Interpreting t"ese re<uirem re<u irements ents(( responde respondent nt CIR ruled ruled t"at under under Re*enue Re*enue emoran emorandum dum Circul Circular ar 7RC8 %505-( t"e taxpayer@s failure to comply it" in*oicing re<uirements ill result in t"e disalloance of "is claim for refund. Petitioner@s failure to print t"e ord Hzero0ratedN on t"e in*oices co*ering zero0rated sales >ustifies t"e denial of its claim for refund. T"e /AT is a tax on consumption( an indirect tax t"at t"e pro*ider of goods or
ser*ices may pass on to "is customers. customers. !nder t"e /AT /AT met"od met"od of taxation( taxation( "ic" is "#?)"c=&as/( an entity can subtract from t"e /AT c"arged on its sales or outputs t"e
/AT it paid on its purc"ases( inputs and imports. For For example( "en a seller c"arges /AT on its sale( it issues an in*oice to t"e buyer( indicating t"e amount of /AT "e c"arged. For "is part( if t"e buyer is also a seller sub>ected to tt"e "e payment of /A /AT on "is sales( "e can use t"e in*oice issued to "im by "is supplier to get a reduction of "is on /AT liability. T"e difference in tax s"on on in*oices passed and in*oices recei*ed is t"e tax paid to t"e go*ernment. In case t"e tax on in*oices recei*ed exceeds t"at on in*oices passed( a tax refund may be claimed. ero0 e ro0ra rate ted d transa transacti ctions ons gener generall ally y refer refer to t"e expor exportt sale sale of goods goods and ser*ices. T"e tax rate rate in t"is case is set set at zero. 2"en applied applied to t"e tax base or t"e t"e selling price of t"e goods or ser*ices sold( suc" zero rate results in no tax c"argeable against t"e foreign buyer or customer. But( alt"oug" t"e seller in suc" transactions c"arges no output tax( "e can claim a refund of t"e /AT t"at "is suppliers c"arged "im. T"e seller t"us en>oys automatic zero rating( "ic "ic" " allos "im to reco*er t"e inpu inputt taxe taxess "e pa paid id rela relati ting ng to t" t"ee ex expo port rt sale sales( s( maki making ng "im "im inte intern rnat atio iona nall lly y competiti*e. W9T 9TRN RN 6INDAN NDANAO AO V CIR CIR, G.R G.R. NO. NO. 181 811 1 – >RO=R RO=RA ATD TRAN9ACTION9 Facts:
Petitioner 2PC is a domestic corporation engaged in t"e production and sale of electricity. It is registered register ed it" t"e t" e BIR as a /A /AT taxpayer. Petitioner alleges t"at it sells electricity solely to t"e ,ational Poer Corporation 7,PC8( "ic" is in turn exempt from t"e payment of all forms of taxes( duties( fees and imposts( pursuant to 4ection #- of R.A. ,o. )-$& 7An Act Re*ising t"e C"arter of t"e ,ational Poer Corporation8. In *ie t"ereof and pursuant to 4ection #97B8 7-8 of t"e ,IRC petitioner@s poer generation generatio n ser*ices to ,PC is zero0rated. !nder 4ection 4ectio n ##57A8 of t"e ,IRC( a /A /AT0registered taxpayer may( it"in to years after t"e close of t"e taxable <uarter( apply for t"e issuance of a tax credit or refund of creditable input tax due or paid and attributable to zero0rated or effecti*ely zero0rated sales. ?ence( on 5 1une 5 and #- 1une 5#( 2PC filed it" t"e Commissioner of Internal Re*enue 7CIR8 applications for a tax credit certificate of its input /AT co*ering t"e taxable -rd and %t" <uarters of #$$$ 7amounting to ₱-()6&(5).)68 and all t"e taxable <uarters of 5 7amounting to ₱&()%$(5&).9#8. Issu:
2"et"er t"e CTA =n Banc seriously erred in dismissing t"e claim of petitioner for a refund or tax credit on input tax on t"e ground t"at t"e latter@s 'fficial Receipts do not contain t"e p"rase Hzero0ratedN Ru!"#$: ,o. A taxpayer taxpa yer engaged engag ed in zero0rated or effecti*ely effecti* ely zero0rated zero0 rated sale sa le may apply for t"e issuance of a tax credit certificate( or refund of creditable input tax due or paid( attributable to t"e sale. In a claim for tax refund or tax credit( t"e applicant must pro*e not only entitlement to t"e grant of t"e claim under substanti*e la. It must also s"o satisfaction satisfact ion of all t"e documentary documentary and e*identiary e*identiary re<uirements for an administrati*e administrati*e claim for a refund or tax credit. ?ence( t"e mere fact t"at petitioner@s application for zero0rating "as been appro*ed by t"e CIR does not( by itself( >ustify t"e grant of a refund or tax credit. T"e taxpayer claiming t"e refund must furt"er comply it" t"e
in*oicing and accounting re<uirements re<uirements mandated by t"e ,IRC( as ell as by re*enue regulations implementing t"em.
!nder t"e ,IRC( a creditable input tax s"ould be e*idenced by a /AT in*oice or official receipt( "ic" may only be considered as suc" "en it complies it" t"e re<uirements of RR 60$&( particularly 4ection %.#90#. T"is section re<uires( among ot"ers( t"at H7i8f t"e sale is sub>ect to zero percent 7D8 *alue0added tax( t"e term zero0rated sale@ s"all be ritten or printed prominently on t"e in*oice or receipt.N 2e are not persuaded by petitioner@s argument t"at RR 60$& constitutes undue expansion of t"e scope of t"e legislation legislation it seeks to implement on t"e ground t"at t"e statutory re<uirement for imprinting t"e p"rase Hzero0ratedN on /AT official receipts appears only in Republic Act ,o. $--6. T"is la took effect on # 1uly 5&( or long after petitioner "ad filed its claim for a refund. RR 60$&( "ic" took effect on # 1anuary #$$)( proceeds from t"e rule0making aut" aut"or orit ity y gran grante ted d to t" t"ee 4ecr 4ecret etar ary y of Fi Fina nanc ncee by t"e t"e ,IRC ,IRC fo forr t"e t"e ef effi fici cien entt enforcement of t"e same Tax Code and its amendments. In Panasonic Communications Communications Imain Corporation of the Philippines v4 Commissioner of Internal Revenue( e ruled t"at t"is pro*ision is Hreasonable and is in accord it" t"e efficient collection of /AT from t"e co*ered sales of goods and se ser* r*ic ices es..N ore oreo* o*er er(( e "a*e "a*e "eld "eld in 5epco Philippines Corporation v4 Commis Com missio sioner ner of Intern Internal al Revenue Revenue t"at t"e subse<ue subse<uent nt incorpor incorporatio ation n of 4ection 4ection %.#90# of RR 60$& in 4ection ##- 7B8 758 7c8 of R.A. $--6 actually confirmed t"e *alidity of t"e imprinting re<uirement on /AT in*oices or official receipts a case falling under t"e principle of legislati*e appro*al of administrati*e interpretation by reenactment. In fact( t"is Court "as consistently "eld as fatal t"e failure to print t"e ord Hzero0ratedN on t"e /AT in*oices or official receipts in claims for a refund or credit of input /AT on zero0rated sales( e*en if t"e claims ere made prior to t"e effecti*ity of R.A. $--6.
CIR V 6AG9A9A LIN9, G.R. NO. 1;<8; – TRAN9ACTION9 D6D 9AL
Facts:
Pursuant to a go*ernment program of pri*atization( t"e ,ational e*elopment Company 7,C8 decided to sell in one lot its ,ational arine Corporation 7,C8 s"ares and fi*e 7&8 of its s"ips( "ic" are -(6 2T Teen0ecker( JKloecknerJ type *essels.T"e *essels ere constructed for t"e ,C beteen #$9# and #$9%( t"en initially leased to +uzon 4te*edoring Company( also its "olly0oned subsidiary. 4ubse<uently( t"e *essels ere transferred and leased( on a bareboat basis( to t"e ,C. T"e ,C s"ares and t"e *essels ere offered o ffered for public bidding bidding.. Among Among t"e stipulated terms and conditions for t"e public auction as t"at t"e inning bidder as to pay Ja *alue added tax of #D on t"e *alue of t"e *essels.J 'n - 1une #$99( pri*ate respondent agsaysay +ines( Inc. offered to buy t"e s"ares and t"e *essels for P#)9((.. T"e bid as made by agsaysay +ines( purportedly for a ne company still to be formed composed of itself and as appro*ed by t"e Committee on Pri*atization( and a ,otice of Aard dated # 1uly #$99 as issued to agsaysay +ines "o in turn as assessed of /AT t"roug" /AT Ruling ,o. &)9099 dated #% ecember #$99 from t"e BIR( "olding t"at t"e sale of t"e *essels as sub>ect to t"e #D /AT. T"e ruling cited t"e fact t"at ,C as a /AT0registered enterprise( and t"us its Jtransactions incident to its normal /AT registered acti*ity of leasing out personal property proper ty including sale of its on o n assets t"at are mo*able( tan tangible gible ob>ects "ic" are appropriable or transferable are sub>ect to t"e #D L/ATM. CTA ruled t"at t"e sale of a *essel as an Jisolated transaction(J not done in t"e ordinary ordinar y course of ,C@s business( and as t"us not no t sub>ect to /A /AT( "ic" under 4ection $$ of t"e Tax Code( as applied only to sales in t"e course of trade or business. T"e CTA furt"er "eld t"at t"e sale sa le of t"e *essels could not n ot be Jdeemed sale(J and t"us sub>ect to /AT( as t"e transaction did not fall under t"e enumeration of transactions deemed sale as listed eit"er in 4ection #7b8 of t"e Tax Code( or 4ection % of R.R. ,o. &096. Finally( t"e CTA ruled t"at any case of doubt s"ould be resol*ed in fa*or of pri*ate respondents since 4ection $$ of t"e Tax Code( "ic" implemented /AT is not an exemption pro*ision( but a classification pro*ision "ic" arranted t"e resolution of doubts in fa*or of t"e taxpayer. ?ence CIR appealed t"e CTA ecision.
Issu:
2"et"er or not 4ection # on Htransactions deemed saleN is applicable in t"is case.
Ru!"#$:
,o. 4ection # of t"e Tax Code( "ic" is implemented by 4ection %7=87i8 of R.R. ,o. &096 no relied upon by t"e CIR( is captioned J/alue0added tax on sale of goods(J and it expressly states t"at JLtM"ere s"all be le*ied( assessed and collected on e*ery sale( barter or exc"ange of goods( a *alue added tax x x x.J 4ection # s"ould be read in lig"t of 4ection 4ectio n $$( "ic" lays don t"e gener general al rule on "ic" persons person s are liable for /AT in t"e first place and on "at transaction if at all. It may e*en be noted t"at 4ection $$ is t"e *ery first pro*ision in Title I/ of t"e Tax Code( t"e Title t"at co*ers /AT in t"e la. Before any portion of 4ection #( or t"e rest of t"e la for t"at matter( may be applied in order to sub>ect a transaction to /AT( it must first be satisfied t"at t"e taxpayer and transaction in*ol*ed is liable for /AT in t"e first place under 4ection $$. It ould "a*e been a different matter if 4ection # purported to define t"e p"rase Jin t"e course cours e of trade or businessJ business J as expressed in 4ection $$. $$ . If t"at ere so( reference to 4ection # ould "a*e been necessary as a means of ascertaining "et"er t"e sale of t"e *essels as Jin t"e course of trade or business(J and t"us sub>ect to /AT. But t"at is not n ot t"e case. ca se. 2"at 4ection # and 4ection %7=87i8 of R.R. ,o. &096 elaborate on is not t"e meaning of Jin t"e co course urse of trade or business(J busines s(J but instead t"e identification of t"e transactions "ic" may be deemed as sale. It ould become necessary necessar y to ascertain "et"er und under er t"ose to pro*isions t"e t" e transaction may be deemed a sale( only if it is settled t"at t"e transaction occurred in t"e course of trade or business in t"e first place. If t"e transaction transpired outside t"e course of trade or business( it ould be irrele*ant for t"e purpose of determining /AT liability "et"er t"e transaction may be deemed sale( since it anyay is not sub>ect to /AT. Accordingly( t"e Court rules t"at gi*en t"e undisputed finding t"at t"e transaction in <uestion as not made in t"e course of trade or business of t"e seller( ,C t"at is( t"e sale is not sub>ect to /A /AT pursuant to 4ection $$ of t"e t" e Tax Tax Code( no matter "o t"e said sale may "e to t"ose transactions deemed sale as defined under 4ection #. In any e*ent( e*en if 4ection # or 4ection % of R.R. ,o. &096 ere to find application in t"is case( t"e Court finds t"e discussions offered on t"is point by t"e CTA and t"e Court of Appeals 7in its subse<uent Resolution8 essentially correct. 4ection % 7=87i8 of R.R. ,o. &096 does classify as among t"e transactions deemed sale t"ose in*ol*ing Jc"ange of oners"ip of business.J ?oe*er( 4ection %7=8 of R.R. ,o. &096( reflecting 4ection # of t"e Tax Tax Code( clarifies t"at suc" Jc"ange of oners"ipJ is only an attending circumstance to Jretirement from or cessation of businessL( M it" respect respec t to all goods on "and LasM La sM of t"e date of suc" retirement retir ement or cessation.J Indeed( 4ection %7=8 of R.R. ,o. &096 expressly c"aracterizes t"e Jc"ange of oners"ip of businessJ as only a JcircumstanceJ t"at attends t"ose transactions Jdeemed sale(J "ic" are ot"erise stated in t"e same section.
