TABLE OF CONTENTS

CASES ON ESTATE TAX 2

1. BARRIOS vs. ENRIQUEZ 2
2. LORENZO vs. POSADAS 3
3. WELLS FARGO BANK vs. COLL 5
4. VIDAL DE ROCES vs. POSADAS 5
5. DIZON vs. POSADAS 7
6. LORENZO vs. POSADAS 7
7. DIZON vs CTA 8
8. GREGG VS. COMMISSIONER 9
9. COLLECTOR vs. LARA 10
10. VELILLA VS. POSADAS 10
11. VITUG VS. CA 12
12.CIR v. CAMPOS RUEDA 12
13. PALANCA v. CIR 13
14. FERDINAND MARCOS II vs. CA, CIR 14
15. REVENUE REGULATION NO. 10-2023 15
CASES ON DONOR’S TAX 19
1. EDUARTE vs. CA 19
2. REPUBLIC v. GUZMAN 20
3. LLADOC v. CIR 20
3A. RMC NO. 31-2019 21
3B1. BIR RULING NO: 076-89 22
3B2. BIR RULING DA- (005) 023 23
3C. BIR RULING NO: DA-419-04 23
3D1. SEC 11, PAR 4 RR 2-2003 24
3D2. SECTION 12 PAR 4, RR 8-2018 24
4. PHILAM LIFE vs. SEC. OF FINANCE 25
4.1 RR NO. 12-2018 26
5. TANG HO VS. BOARD OF ASSESSMENT APPEALS & CIR 27
CASES ON VAT TAX 28
1. EXECUTIVE ORDER 273, JULY 25, 1987 28
2. TOLENTINO VS. SECRETARY OF FINANCE 54
3. CIR VS. AMEXPRESS INTERNATIONAL INC. 54
4.COMMISSIONER OF INTERNAL REVENUE VS. PLACER DOME TECHNICAL SERVICES PHIL 56
5. TOSHIBA VS. CIR 58
6. CIR VS. PLDT 59
7. MALAYAN INSURANCE COMPANY, INC., VS. ST. FRANCIS SQUARE REALTY CORPORATION 62
8. PANASONIC COMMUNICATION IMAGING CORP. VS. CIR 63
9. CIR VS. MAGSAYSAY LINES 65
10. MINDANAO II GEOTHERMAL PARTNERSHIP VS. CIR 65
 11. PSALM CORP VS. CIR 67
12. RR NO. 16-2005, SEC 4.106-7 ( DEEMED SALE) 68
13. RR NO. 16-2005, SEC 4.106-2 69
14. FORT BONIFACIO VS. CIR 69
15. CIR VS. PAGBILAO CORP 72
16. CIR VS. TEAM SUAL CORP 73
17. CIR VS. SILICON PHIL 75
18. PADLAN VS. DINGLASAN 77
19. AICHI FORGING CO. V. CTA & CIR 77
20. SAN ROQUE VS. CIR 78
21. TAGANITO MINING VS. CIR 79
22. BIR RULING NO: DA 489-03 81
ADDED CASES ON VAT TAX 83
1. SITEL PHILS. CORP. VS. CIR 83
2. VISAYAS GEOTHERMAL POWER CO. VS. CIR 84
3. MARUBENI VS. CIR 85
4. LUZON GEOTHERMAL POWER CO. VS. CIR 86
5. PROCTER & GAMBLE ASIA VS. CIR 86
6. NIPPON EXPRESS VS. CIR 88
7. TEAM SUAL VS. CIR 91
8. KEPCO ILIJAN VS. CIR 92
9. STEAG STATE POWER, INC. VS. CIR 93
VAT REFUND IN TRAIN 96
10. STEAG STATE POWER, INC. VS. CIR 96
11. CIR VS. TEAM ENERGY CORP. (MIRANT PAGBILAO CORP.) 97
12. MEDICARD PHILS. VS. CIR 98
13. POWER SECTOR ASSETS & LIABILITIES MANAGEMENT CORP. (PSALM) VS. CIR 100
14. CIR VS. EURO-PHIL AIRLINE SERVICES 102
15. CIR VS. NEGROS CONSOLIDATED FARMERS MULTI-PURPOSE COOPERATIVE 105
16. COCA COLA BOTTLERS PHILS., INC. VS. CIR 105
 CASES ON ESTATE TAX

1. BARRIOS vs. ENRIQUEZ

G.R. No. 29789 | December 22, 1928

DOCTRINE: If the law permits a testator to dispose of the free third of his hereditary estate in favor of a stranger
(art. 808, Civil Code), there is no legal, moral or social reason to prevent him from making over that third to his
illegitimate son who is not a natural son.

FACTS: This is an appeal taken by Eduarda Enriquez, surviving spouse of the deceased Jose Macrohon Tiahua,
and the latter's legitimate children on the one side, and Ignacio Macrohon, his adulterous son, on the other,
from an order of the CFI of Zamboanga, laying down the following conclusions of law:

1. That an adulterous child may be instituted heir within the limits provided by law;

2. That in making Ignacio Macrohon an heir under his will, the testator did not observe the limitations
prescribed by law;

3. That the institution of Ignacio Macrohon as heir under the will ought not to be declared absolutely
void, but he should so share in the inheritance as not to prejudice the legitime of the other heirs; and

4. That as Exhibit 1 deals with certain acts contrary to law, such as not presenting the will to the court, and
as some minors took part in it through their guardian without the latter being authorized by the court to
enter into the transaction in their behalf, said exhibit cannot bind the parties, nor do the admissions
made by them therein constitute estoppel; whereupon it disapproved the scheme of partition presented
by the administrator and ordered him to file another in consonance with the conclusions therein laid
down.

On the other hand, Ignacio Macrohon, the adulterous son of the deceased, assigns the following
alleged errors as committed by the trial court in its judgment, in support of his appeal, to wit:

1. In holding that its order dated November 10, 1926, did not constitute res adjudicata as to question of
the right of the appellant Ignacio Macrohon to inherit from his deceased father under and in accordance
with the will of the latter;

2. In not holding that the right of the said Ignacio Macrohon as heir of said deceased cannot, by reason of
the doctrine of estoppel, be questioned by the other heirs;

3. In holding that the manner the institution of the heirs was made in the will of the testator herein falls
under, or is the case contemplated by, Article 765 of the Civil Code; and

4. In not allowing said Ignacio Macrohon the full share allotted to him in and by the will of the testator,
that is, a portion equal to that granted in said will to each of the legitimate children of the deceased, or
one-tenth of the whole hereditary estate.

ISSUE 1: Whether the deceased Jose Macrohon Tiahua has a right to dispose of a part of his estate by will in
favor of his adulterous son. YES.

RULING 1: While it is true that Article 845 of the Civil Code provides that "illegitimate children who have not
the status of natural children shall be entitled to support only," and therefore cannot demand anything more of
those bound by law to support them, it does not prohibit said illegitimate children from receiving, nor their
parents from giving them, something more than support, so long as the legitimate children are not prejudiced.

If the law permits a testator to dispose of the free third of his hereditary estate in favor of a stranger (Art. 808 of
the Civil Code), there is no legal, moral or social reason to prevent him from making over that third to his
illegitimate son who has not the status of a natural son. On the contrary, by reason of blood, the son, although
illegitimate, has a preferential right over a stranger unless by his behaviour he has become unworthy of such
consideration.

For these reasons, Jose Macrohon Tiahua could dispose of the free third of his estate in favor of his adulterous
son, Ignacio Macrohon.

ISSUE 2: Has the deceased Jose Macrohon Tiahua infringed the limitations prescribed by the law in putting his
adulterous son Ignacio Macrohon on the same footing as his legitimate children by giving him a share equal to
that of each of the latter? NO.

RULING 2: According to Article 808 of the Civil Code, the legitime of legitimate children and descendants
consists of two-thirds of the hereditary estate of the father and of the mother, the latter being allowed to
dispose of one of said two parts in order to give it as a betterment to their legitimate children or descendants.

Included among the children mentioned by the testator in said will, and to whom he gave the one-half of the
property corresponding to him from the conjugal partnership, is the herein appellant Ignacio Macrohon, his
adulterous son. Dividing this half, that is ten-twentieth parts (10/20), among his nine legitimate children and his
adulterous son, Ignacio Macrohon, into equal parts, each of them will be entitled to one-twentieth of the whole
estate.

In the present case, the testator has not disposed of any of the two parts forming the legitime in order to give it
as betterment to any of his children, and the said legitime therefore remains intact, and according to Article 806
of the same Code, is by the law reserved for the forced heirs and the testator cannot dispose of it in any other
way.

Hence, the nine legitimate children are entitled to two thirds of said half, or two-sixths of the whole, which,
divided equally among them would give to each, two fifty fourths or one twenty-seventh of the whole estate.
When Jose Macrohon Tiahua, therefore, provided in his will that the one-half of the conjugal property belonging
to him was to be divided equally among his nine legitimate children and one adulterous son, each to receive
one-twentieth part, he did not go beyond the limits provided by law for such cases, because, one-twentieth for
each of his legitimate children is more than each of his legitimate children should receive as his legitime, which
only amounts to one twenty-seventh.

In other words, since Jose Macrohon Tiahua could dispose of the free third of his hereditary estate in favor of
his adulterous son, Ignacio Macrohon, and as he only gave a part of said free third to the latter, he did not
infringe any legal prohibition and his testamentary disposition to this effect is valid and effective.
 2. LORENZO vs. POSADAS
G.R. No. L-43082 | June 18, 1937

DOCTRINE: The rights to the succession of a person are transmitted from the moment of his death. The property
belongs to the heirs at the moment of the death of the ancestor as completely as if the ancestor had executed
and delivered to them a deed for the same before his death.

If death is the generating source from which the power of the estate to impose inheritance taxes takes its being
and if, upon the death of the decedent, succession takes place and the right of the estate to tax vests instantly,
the tax should be measured by the value of the estate as it stood at the time of the decedent's death, regardless
of any subsequent contingency value of any subsequent increase or decrease in value.

It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of the
decedent.

FACTS: On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas
Hanley, deceased, brought this action in the Court of First Instance of Zamboanga against the defendant, Juan
Posadas, Jr., then the Collector of Internal Revenue, for the refund of the amount of P2,052.74, paid by the
plaintiff as inheritance tax on the estate of the deceased.

On May 27, 1922, one Thomas Hanley died in Zamboanga. On June 14, 1922, proceedings for the probate of his
will and the settlement and distribution of his estate were begun in the Court of First Instance of Zamboanga.
The will was admitted to probate.

The CFI considered it proper for the best interests of their estate to appoint a trustee to administer the real
properties. Moore took his oath of office and gave bond on March 10, 1924. He acted as trustee until February
29, 1932, when he resigned and the plaintiff herein was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, assessed against
the estate an inheritance tax in the amount of P1,434.24 together with the penalties for delinquency in
payment. On September 15, 1932, the plaintiff paid said amount under protest. The defendant overruled the
plaintiff's protest and refused to refund the said amount instead, the plaintiff went to court.
ISSUE 1: Whether the inheritance tax be computed on the basis of the value of the estate at the time of the
testator's death. YES.

RULING 1: If death is the generating source from which the power of the estate to impose inheritance taxes
takes its being and if, upon the death of the decedent, succession takes place and the right of the estate to tax
vests instantly, the tax should be measured by the value of the estate as it stood at the time of the decedent's
death, regardless of any subsequent contingency value of any subsequent increase or decrease in value.

The right of the state to an inheritance tax accrues at the moment of death, and hence is ordinarily measured as
to any beneficiary by the value at that time of such property as passes to him. Subsequent appreciation or
depreciation is immaterial.

The Court held that a transmission by inheritance is taxable at the time of the predecessor's death,
notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary, and
the tax measured by the value of the property transmitted at that time regardless of its appreciation or
depreciation.

ISSUE 2: Whether it is proper to deduct the compensation due to trustees in determining the net value of the
estate subject to tax. NO.

RULING 2: A trustee, no doubt, is entitled to receive a fair compensation for his services. But from this it does
not follow that the compensation due him may lawfully be deducted in arriving at the net value of the estate
subject to tax. There is no statute in the Philippines which requires trustees' commissions to be deducted in
determining the net value of the estate subject to inheritance tax. The compensation of a trustee, earned, not in
the administration of the estate, but in the management thereof for the benefit of the legatees or devises.

No sound reason is given to support the contention that such expenses should be taken into consideration in
fixing the value of the estate for the purpose of this tax.

ISSUE 3: Whether the provisions of Act No. 3606 which is favorable to the tax-payer be given retroactive effect.
NO.

RULING 3: Act No. 3606 went into effect on January 1, 1930. It, therefore, was not the law in force when the
testator died on May 27, 1922. The law at the time was section 1544 above-mentioned, as amended by Act No.
3031, which took effect on March 9, 1922. It is well-settled that inheritance taxation is governed by the statute
in force at the time of the death of the decedent.

ISSUE 4: Whether there has been delinquency in the payment of the inheritance tax. YES.

RULING 4: P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him. The mere
fact that the estate of the deceased was placed in trust did not remove it from the operation of our inheritance
tax laws or exempt it from the payment of the inheritance tax. The corresponding inheritance tax should have
been paid on or before March 10, 1924, to escape the penalties of the laws.

The appointment of Moore as trustee was made by the trial court in conformity with the wishes of the testator
as expressed in his will. It is true that the word “trust” is not mentioned or used in the will but the intention to
create one is clear. No particular or technical words are required to create a testamentary trust. The words
“trust” and “trustee”, though apt for the purpose, are not necessary. In fact, the use of these two words is not
conclusive on the question that a trust is created.” To constitute a valid testamentary trust there must be a
concurrence of three circumstances:
1. Sufficient words to raise a trust;
2. a definite subject; and
3. a certain or ascertain object; statutes in some jurisdictions expressly or in effect so providing.

There is no doubt that the testator intended to create a trust. He ordered in his will that certain of his properties
be kept together undisposed during a fixed period, for a stated purpose. The probate court certainly exercised
sound judgment in appointing a trustee to carry into effect the provisions of the will. As the existence of the
trust was already proven, it results that the estate which plaintiff represents has been delinquent in the
payment of inheritance tax and, therefore, liable for the payment of interest and surcharge provided by law in
such cases.

It results that the estate which plaintiff represents has been delinquent in the payment of inheritance tax and,
therefore, liable for the payment of interest and surcharge provided by law in such cases.

The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. On that date
the trust estate vested in him. The interest due should be computed from that date.
 3. WELLS FARGO BANK vs. COLL
70 Phil 505 | June 28, 1940

DOCTRINE: When the taxpayer extends his activities with respect to his intangibles, so as to avail himself of the protection and
benefit of the laws of another state, he brings his person or property within the reach of the tax gatherer therein and the
constitutional power to tax of such state is upheld.

FACTS: Birdie Lillian Eye died in Los Angeles, California, the place of her alleged last residence and domicile. Among the properties
she left was 35,000 shares of stock in the Benguet Consolidated Mining Company, an anonymous partnership, organized and
existing under Philippine laws.

CIR sought to subject the said shares of stock to the Philippine inheritance tax, to which Wells Fargo objected. It contends that as
to intangibles, like the shares of stock in question, their situs is in the domicile of the owner thereof.

ISSUE: Whether the shares are subject to inheritance tax.

RULING: YES. Originally, the settled law in the United States is that intangibles have only one situs for the purpose of inheritance
tax, and such situs is in the domicile of the decedent at the time of his or her death. But the rule has been relaxed.

The maxim “mobilia sequuntur personam” upon which the rule rests, has been criticized as a mere fiction of law having its origin
in considerations of general convenience and public policy and cannot be applied to limit or control the right of the state to tax
properly within its jurisdiction and must yield to established fact of legal ownership, actual presence and control elsewhere, and
cannot be applied if to do so would result in inescapable and patent injustice.

This rests on either of two fundamental considerations:

(1) Upon the recognition of the inherent power of each government to tax persons, properties and rights within its
jurisdiction and enjoying, thus, the protect of its laws; and

(2) Upon the principle that as to intangibles, a single location in space is hardly possible, considering the multiple, distinct
relationships which may be entered into with respect thereto.

Herein, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled therein.

Besides, the certificates of stock have remained in this country up to the time when the deceased died in California, and they were
in possession of one Syrena McKee, secretary of the Benguet Consolidated Mining Company, to whom they have been delivered
and endorsed in blank. This indorsement gave Syrena McKee the right to vote the certificates at the general meetings of the
stockholders, to collect dividends thereon, and dispose of the shares in the manner she may deem fit, without prejudice to her
liability to the owner for violation of instructions. For all practical purposes, then, Syrena McKee had the legal title to the
certificates of stock held in trust for the true owner thereof.

In other words, the owner residing in California has extended here her activities with respect to her intangibles so as to avail
herself of the protection and benefit of the Philippine laws. Accordingly, the jurisdiction of the Philippine Government to tax must
be upheld.

4. VIDAL DE ROCES vs. POSADAS

G.R. No. 34937 | March 13, 1933

DOCTRINE: "Property Subject to Inheritance Tax.—The inheritance tax ordinarily applies to all property within the power of the
state to reach passing by will or the laws regulating intestate succession or by gift inter vivos in the manner designated by statute,
whether such property be real or personal, tangible or intangible, corporeal or incorporeal."

Plaintiffs-appellants: Concepcion Vidal de Roces & her husband, Marcos Roces, and Elvira Vidal de Richards

Defendant-appellee: Juan Posadas, Jr. (Collector of Internal Revenue)

FACTS: The plaintiffs herein brought this action to recover from the defendant, Collector of Internal Revenue, certain sums of
money paid by them under protest as inheritance tax.

On March 10 and 12, 1925, Esperanza Tuazon, by means of public documents, donated certain parcels of land situated in Manila
to the plaintiffs herein, who, with their respective husbands, accepted them in the same public documents, which were duly
recorded in the registry of deeds. By virtue of said donations, the plaintiffs took possession of the said lands, received the fruits
thereof and obtained the corresponding transfer certificates of title.

On January 5, 1926, the donor died in the City of Manila without leaving any forced heir and in her will which was admitted to
probate, she bequeathed to each of the donees the sum of P5,000. After the estate had been distributed among the instituted
legatees and before delivery of their respective shares, the appellee herein, as Collector of Internal Revenue, ruled that the
appellants, as donees and legatees, should pay as inheritance tax the sums of P16,673 and P13,951.45, respectively. The
appellants paid the aforementioned taxes under protest.

The judgment appealed from was based on the provisions of section 1540 of the Administrative Code which reads as follows:

"SEC. 1540. Additions of gifts and advances.—After the aforementioned deductions have been made, there shall be
added to the resulting amount the value of all gifts or advances made by the predecessor to any of those who, after his
death, shall prove to be his heirs, devisees, legatees, or donees mortis causa."

The appellants contend that the above-mentioned legal provision does not include donations inter vivos and if it does, it is
unconstitutional, null and void for the following reasons: (1) that the Legislature has no authority to impose inheritance tax on
donations inter vivos; and (2), because a legal provision of this character contravenes the fundamental rule of uniformity of
taxation.

The appellee, in turn, contends that the words "all gifts" refer clearly to donations inter vivos and, in support of his theory, cites
the doctrine laid down in the case of Tuason and Tuason vs. Posadas.

ISSUE: W/N the tax collected by the appellee on the properties donated in 1925 constitutes an inheritance tax imposed on the
transmission of said properties in contemplation or in consideration of the donor's death.

RULING: YES. The gifts referred to in section 1540 of the Revised Administrative Code are those donations inter vivos that take
effect immediately or during the lifetime of the donor but are made in consideration or in contemplation of death. Gifts inter
vivos, the transmission of which is not made in contemplation of the donor's death should not be understood as included within
the said legal provision for the reason that it would amount to imposing a direct tax on property and not on the transmission
thereof, which act does not come within the scope of the provisions contained in Article XI of Chapter 40 of the Administrative
Code which deals expressly with the tax on inheritances, legacies and other acquisitions mortis causa.

Our interpretation of the law is not in conflict with the rule laid down in the case of Tuason and Tuason vs. Posadas. We said
therein that the expression "all gifts" refers to gifts inter vivos inasmuch as the law considers them as advances on inheritance, in
the sense that they are gifts inter vivos made in contemplation or in consideration of death. In that case, it was not held that that
kind of gifts consisted in those made completely independent of death or without regard to it.

The tax collected by the appellee on the properties donated in 1925 really constitutes an inheritance tax imposed on the
transmission of said properties in contemplation or in consideration of the donor's death and under the circumstance that the
donees were later instituted as the former's legatees. For this reason, the law considers such transmissions in the form of gifts
inter vivos, as advances on inheritance and nothing therein violates any constitutional provision, inasmuch as said legislation is
within the power of the Legislature.

"Property Subject to Inheritance Tax.—The inheritance tax ordinarily applies to all property within the power of the state to reach
passing by will or the laws regulating intestate succession or by gift inter vivos in the manner designated by statute, whether such
property be real or personal, tangible or intangible, corporeal or incorporeal."

In the case of Tuason and Tuason vs. Posadas, it was also held that section 1540 of the Administrative Code did not violate the
constitutional provision regarding uniformity of taxation. It cannot be null and void on this ground because it equally subjects to
the same tax all of those donees who later become heirs, legatees or donees mortis causa by the will of the donor.

It may be inferred from the allegations contained in paragraphs 2 and 7 thereof that said donations inter vivos were made in
consideration of the donor's death. We refer to the allegations that such transmissions were effected in the month of March,
1925, that the donor died in January, 1926, and that the donees were instituted legatees in the donor's will which was admitted
to probate. It is from these allegations, especially the last, that we infer a presumption juris tantum that said donations were
made mortis causa and, as such, are subject to the payment of inheritance tax.

5. DIZON vs. POSADAS

57 Phil 465 57 Phil 465 | November 4, 1932

DOCTRINE: Section 1540 of the Admin Code plainly does not tax gifts per se but only when those gifts are made to those who shall
prove to be the heirs, devisees, legatees or donees mortis causa of the donor.

FACTS: Luis Dizon is the legitimate and only son of Don Felix Dizon. Don Felix died but before his death, he made a gift inter vivos
in favor of Luis according to a deed of a gift of which includes all the property of Don Felix.

The Collector of Internal Revenue (CIR) assessed an inheritance tax of Php2,808.73 which Luis paid under protest. Thereafter, Luis
filed an action to recover the sum of money thus paid.

Argument of Luis
Luis argued that he received and holds the property mentioned by a consummated gift and that Act No. 2601 being the
inheritance tax statute, does not tax gifts.

ISSUE: Does Section 1540 of the Administrative Code subject Luis Dizon to the payment of an inheritance tax?

RULING: YES. Section 1540 of the Administrative Code provides:

“Additions of Gifts and Advances. — After the aforementioned deductions have been made, there shall be added to the
resulting amount the value of all gifts or advances made by the predecessor to any of those who, after his death, shall
prove to be his heirs, devises, legatees, or donees mortis causa.”

In the present case, inheritance tax is imposed upon the gift inter vivos that Luis received from his father, Don Felix, as this was
really an advancement upon the inheritance to which he would be entitled upon the death of the latter. The donation was
acknowledged by Don Felix before his death and accepted by Luis one day before the former’s death. Clearly, this was
fraudulently made for the purpose of evading the inheritance tax.

Sec. 1540 of the Administrative Code did not tax gifts per se but only those which are made to those who shall prove to be heirs,
devisees, legatees and donees mortis causa of the donor. The term 'heirs' include those given the status of heirs irrespective of
the quantity of property they may receive as such.

6. LORENZO vs. POSADAS

G.R. No. 43082 | June 18, 1937

DOCTRINE: The accrual of the inheritance tax is distinct from the obligation to pay the same. Section 1536 as amended, of the
Administrative Code, imposes the tax upon "every transmission by virtue of inheritance, devise, bequest, gift mortis causa, or
advance in anticipation of inheritance, devise, or bequest." The tax therefore is upon transmission or the transfer or devolution of
property of a decedent, made effective by his death.

If death is the generating source from which the power of the state to impose inheritance taxes takes its being and if, upon the
death of the decedent, succession takes place and the right of the state to tax vests instantly, the tax should be measured by the
value of the estate as it stood at the time of the decedent's death, regardless of any subsequent contingency affecting value or any
subsequent increase or decrease in value.

The right of the state to an inheritance tax accrues at the moment of death, and hence is ordinarily measured as to any beneficiary
by the value at that time of such property as passes to him. Subsequent appreciation or depreciation is immaterial.

FACTS: On May 27, 1922, one Thomas Hanley died in Zamboanga, leaving a will and considerable amount of real and personal
properties. On June 14, 1922, proceedings for the probate of his will and the settlement and distribution of his estate begun in the
Court of First Instance of Zamboanga. The will was admitted to probate.

The Court of First Instance of Zamboanga considered it proper for the best interests of their estate to appoint a trustee to
administer the real properties which, under the will, were to pass to Matthew Hanley ten years after the two executors named in
the will, was, on March 8, 1924, appointed trustee.
Moore took his oath of office and gave bond on March 10, 1924. He acted as trustee until February 29, 1932, when he resigned
and the plaintiff herein was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, alleging that the estate left by the
deceased at the time of his death consisted of realty valued at P27,920 and personalty valued at P1,465, and allowing a deduction
of P480.81, assessed against the estate an inheritance tax in the amount of P1,434.24 which, together with the penalties for
delinquency in payment consisting of a 1 percent monthly interest from July 1, 1931 to the date of payment and a surcharge of 25
per cent on the tax, amounted to P2,052.74.

On March 15, 1932, the defendant filed a motion in the testamentary proceedings pending before the Court of First Instance of
Zamboanga praying that the trustee, plaintiff herein, be ordered to pay to the Government the said sum of P2,052.74. The motion
was granted.

On September 15, 1932, the plaintiff paid said amount under protest, notifying the defendant at the same time that unless the
amount was promptly refunded suit would be brought for its recovery. The defendant overruled the plaintiff's protest and refused
to refund the said amount exhausted, plaintiff went to court with the result herein above indicated.

ISSUES:
1. When does the inheritance tax accrue and when must it be satisfied?
2. Should the inheritance tax be computed on the basis of the value of the estate at the time of the testator's death, or on
its value ten years later?
3. Has there been delinquency in the payment of the inheritance tax? (NO)
RULING:
1. The accrual of the inheritance tax is distinct from the obligation to pay the same.

Section 1536 as amended, of the Administrative Code, imposes the tax upon "every transmission by virtue of inheritance, devise,
bequest, gift mortis causa, or advance in anticipation of inheritance, devise, or bequest."

The tax therefore is upon transmission or the transfer or devolution of property of a decedent, made effective by his death. It is in
reality an excise or privilege tax imposed on the right to succeed to, receive, or take property by or under a will or the intestacy
law, or deed, grant, or gift to become operative at or after death.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to pay the tax arose as of
the date. The time for the payment on inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code as
amended by Act No. 3031, in relation to section 1543 of the same Code.

2. If death is the generating source from which the power of the estate to impose inheritance taxes takes its being and if,
upon the death of the decedent, succession takes place and the right of the estate to tax vests instantly, the tax should
be measured by the value of the estate as it stood at the time of the decedent's death, regardless of any subsequent
contingency value of any subsequent increase or decrease in value.

3. The plaintiff correctly states that the liability to pay a tax may arise at a certain time and the tax may be paid within
another given time.

As stated by this court, "the mere failure to pay one's tax does not render one delinquent until and unless the entire period has
elapsed within which the taxpayer is authorized by law to make such payment without being subjected to the payment of
penalties for failure to pay his taxes within the prescribed period." (U. S. vs. Labadan, 26 Phil., 239.)

7. DIZON vs CTA
G.R. No. 140944 | April 30, 2008

DOCTRINE: The value of an estate of a decedent is based on its value at the time of his death regardless of any post-death
development affecting its value (Date-of-Death Valuation Rule)

FACTS: On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will was filed with Branch
51 of the Regional Trial Court (RTC) of Manila (probate court). The probate court then appointed retired Supreme Court Justice
Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special
Administrator, respectively, of the Estate of Jose (Estate). Petitioner alleged that several requests for extension of the period to
file the required estate tax return were granted by the BIR since the assets of the estate, as well as the claims against it, had yet to
be collated, determined and identified.

ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were not formally
offered by the BIR; and

2. Whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose
despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with
its creditors Or Whether or not the CA erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed
against the Estate.

RULING:
1. Yes. While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in themselves and
are primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural
technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of
BIR's claims against the Estate. The BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its
cause.

2. Yes. The claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable
deductions. Also, as held in Propstra v. U.S., where a lien claimed against the estate was certain and enforceable on the date of
the decedent's death, the fact that the claimant subsequently settled for lesser amount did not preclude the estate from
deducting the entire amount of the claim for estate tax purposes. This is called the date-of-death valuation rule.

8. GREGG VS. COMMISSIONER

315 Mass 2000

DOCTRINE: The receipt of the benefits under the retirement annuity contract is subject to succession tax since the enjoyment arises
at or after the death of the grantor or donor. Even if the recipient had acquired an interest in the property by a transfer inter vivos
from the owner, it is still subject to estate tax if it is dependent upon and brought about by the death of the owner.

FACTS: Barbara C. Gregg filed an appeal from a decree of probate court of Norfolk County dismissing her petition seeking an
abatement of succession tax assessed by respondent Commissioner of Corporations and Taxations, with respect to the death
benefit, accumulated interest and dividends received by her as beneficiary under a retirement annuity contract of her husband
Donald Gregg, obtained from the Equitable Life Assurance Society of the United States.

The Society in consideration of $2,400 paid annually by Gregg until due date of the first annuity payment or until his death prior
thereto, agreed to pay him a fixed annuity for life when he reached 65 years old or in case he died before that age, to pay his wife
who had been named as beneficiary.

Gregg died in the eighth year of the contract after having paid Society $19,2000 in premiums. The cash surrender value of the
contract was $ 19,632. The value of the death benefit was $ 19,680.

ISSUE: Whether the receipt of the benefits under the retirement annuity contract is subject to succession tax.

RULING: Yes, since the enjoyment arises at or after the death of the grantor or donor.

“All property within the jurisdiction of the commonwealth, corporeal or incorporeal, and any interest therein, belonging to the
inhabitants of the commonwealth, which shall pass by deed, grant or gift, made or intended to take effect in possession or
enjoyment after death shall be subject to a tax.”

A succession tax is imposed upon property passing by deed, grant or gift, except in cases of a bona fide purchase for full
consideration, made and intended to take effect in possession or enjoyment at or after the death of the grantor or donor. The
object of the statute is to tax the shifting of the economic benefits and enjoyment of property from the dead to the living. The fact
that the recipient had acquired an interest in the property by a transfer inter vivos from the owner does not bring the transfer
beyond the reach of the statute if the possession and enjoyment of the property is dependent upon and brought about by the
death of the owner.

An annuity is not an indemnity against loss by death like a life policy. A man purchases an annuity for his own benefit but one
usually obtains life insurance for the protection of his dependents. While it may be that the annuitant pays a higher premium to
secure a provision for the payment of a death benefit, and this provision, considered by itself, somewhat resembles life insurance,
yet the annuity contract was not divisible, and the fact that the contract contained such a provision [for payment of death
benefit], or any other similar provision calling for refunded annuities in the event of the death of the annuitant before he has
enjoyed the full benefit of his investment, does not convert the annuity contract into a life insurance policy or exempt those who
receive the death benefit or further annuities subsequent to the death of the annuitant from a succession tax.

9. COLLECTOR vs. LARA

G.R. No. 9456 & 9481 | January 06, 1958.

DOCTRINE: For estate and inheritance tax purposes, the term "residence" is synonymous with the term "domicile". The two terms
may be used interchangeably without distinction.

FACTS: Hugo H. Miller is an American citizen born in Santa Cruz, California, USA. In 1905, he came to the Philippines to work as a
public school teacher and later as a division superintendent. After his retirement, he accepted an executive position in a US-based
book publishing company (Gin & Co.) where he was stationed in the Philippines as the Oriental representative.

In 1941, Hugo executed his last will and testament in Santa Cruz, California, in which he declared that he was "of Santa Cruz,
California". At the time of his death allegedly by execution by the Japanese forces in Leyte during the Pacific War, he owned
several real and personal properties situated in California and shares of stocks in Philippine corporations.

Testate proceedings were instituted before a California court which admitted the will to probate and wherein it was found that
Hugo Miller was a resident of the Santa Cruz County, California at the time of his death. Subsequently, ancillary proceedings were
also filed by the executors before the CFI of Manila, which also admitted the will to probate. The co-executor named in the will
filed an estate and inheritance tax return with the CIR, covering only the shares of stocks issued by Philippine corporations. The
CIR made an assessment of the liability for estate and inheritance taxes. The estate of Miller protested but to no avail. The
ancillary administrator (private respondent) appealed the same up to the CT which rendered a decision ordering private
respondent to pay the assessed estate taxes. Hence, this appeal.

ISSUE: Whether or not the decedent was a resident of the Philippines at the time of his death for the purpose of determining his
gross estate. NO.

RULING: At the time of the promulgation of the NIRC, the prevailing construction given by the courts to the term "residence" was
synonymous with domicile, and that the two were used interchangeably. In the United States, for estate tax purposes, a resident
is considered one who at the time of his death had his domicile in the United States.

Miller had his residence or domicile in Santa Cruz, California at the time of his death.

During his long stay in this country, Miller never acquired a house for residential purposes for he stayed at the Manila Hotel and
later on at the Army and Navy Club. The bulk of his savings and properties were in the United States.

It is clear that as a non-resident of the Philippines, the only properties of his estate subject to estate and inheritance taxes are
those shares of stock issued by Philippine corporations, valued at P51,906.45. It is true, as stated by the Tax Court, that while it
may be the general rule that personal property, like shares of stock in the Philippines, is taxable at the domicile of the owner
Miller) under the doctrine of mobilia secuuntur personam, extended his activities with respect to his intangibles, so as to avail
himself of the protection and benefits of the laws of the Philippines, in such a way as to bring his person or property within the
reach of the Philippines, the reason for a single place of taxation no longer obtains protection, benefit, and power over the subject
matter are no longer confined to California, but also to the Philippines.
 10. VELILLA VS. POSADAS
G.R. No.43314 | December 19, 1935

DOCTRINE: To effect the abandonment of one’s domicile, there must be a deliberate and provable choice of a new domicile,
coupled with actual resident in the place chosen, with a declared or provable intent that it should be one’s foxed and permanent
place of abode, one’s home.

FACTS: Arthur G. Moody, an American citizen, came to the Philippine Islands and engaged actively in business in these Islands up
to the time of his death in Calcutta, India. He had no business elsewhere and at the time of his death left an estate consisting
principally of bonds and shares of stock of corporations organized under the laws of the Philippine Islands, bank deposits and
other intangibles and personal property valued by the commissioners of appraisal and claims at P609,767.58 and by the Collector
of Internal Revenue for the purposes of inheritance tax at P653,657.47.

All of said property at the time of his death was located and had its situs within the Philippine Islands. So far as this record shows,
he left no property of any kind located anywhere else.

A will is executed in Manila in accordance with the formalities of the Philippine law, in which he bequeathed all his property to his
sister, Ida M. Palmer.

The BIR prepared an income tax return where they paid under protest the sum of P50,000 and the other sum of P40,019.75 on
January 19, 1932, making assessment for inheritance tax and the sum of P13,001.41 covers the assessment for income tax against
said estate.

ISSUE 1: Whether or not the collector illegally assessed the income tax against the estate of Arthur Moody? NO.

RULING 1: The amount of income tax of P13,001.41 was legal because the amount of P59,986.69 was received by the estate of
Moody as dividends declared out of surplus by the Camera Supply Company.

The only income tax assessed against the estate was the additional tax or surtax that had not been paid by the Camera Supply
Company is liable.

There is no double taxation because the inheritance tax and the additional income tax in question are entirely distinct. They are
assessed under different statutes and we are not convinced by the appellant's argument that the estate which received these
dividends should not be held liable for the payment of the income tax thereon because the operation was simply the conversion
of the surplus of the corporation into the property of the individual stockholders.

ISSUE 2: Whether Arthur G. Moody was legally domiciled in the Philippine Islands on the day of his death?

RULING 2: Moody made his business in the Philippines and that he lived in the Elks’ Club in Manila for many years and was living
there up to the date he left Manila the latter part of February, 1928 proved that his domicile at the time of his death was in the
Philippines.

He only left Manila because he had leprosy in an advanced stage and had been informed that he would be reported to the
Philippine authorities for confinement in the Culion Leper Colony as required by the law. Because he did not want to be confided
he left Manila and lived in Paris with his friend.

While he was there he offered to sell to his friend Harry, Wendt, interest in the Camera Supply Company, a Philippine
corporation, in which Moody owned 599 out of 603 shares.

There is no evidence of any affirmative factors that prove the establishment of a legal domicile in Paris.
Article 40 of the Civil Code defines the domicile of natural persons as "the place of their usual residence." The record before us
leaves no doubt in our minds that the "usual residence" of this unfortunate man, whom appellant describes as a "fugitive" and
"outcast", was in Manila where he had lived and toiled for more than a quarter of a century, rather than in any foreign country he
visited during his wanderings up to the date of his death in Calcutta.

To effect the abandonment of one’s domicile, there must be a deliberate and provable choice of a new domicile, coupled with
actual residence in the place chosen, with a declared or provable intent that it should be one’s fixed and permanent place of
abode, one’s home. There is a complete dearth of evidence in the record that Moody ever established a new domicile in a foreign
country.

11. VITUG VS. CA

G.R. No. 82027 | March 29, 1990

DOCTRINE: Insert here

FACTS: Romarico G. Vitug filed a motion asking for authority from the probate court to sell certain shares of
stock and real properties belonging to the estate of his late wife to cover his advances to the estate.

Rowena Corona opposed the motion to sell on the ground that the same funds withdrawn from the savings
account with Bank of America were conjugal partnership properties and part of the estate.

Vitug insists that the said funds are his exclusive property having acquired the same through a survivorship
agreement executed with his late wife and the bank.

The Survivorship Agreement Reads:

We hereby agree with each other and with the BANK OF AMERICAN NATIONAL TRUST AND SAVINGS
ASSOCIATION (hereinafter referred to as the BANK), that all money now or hereafter deposited by us or any or
either of us with the BANK in our joint savings current account shall be the property of all or both of us and shall
be payable to and collectible or withdrawable by either or any of us during our lifetime, and after the death of
either or any of us shall belong to and be the sole property of the survivor or survivors, and shall be payable to
and collectible or withdrawable by such survivor or survivors.

ISSUE: Is the survivorship agreement valid? YES

RULING:

The conveyance in question is not, first of all, one of mortis causa, which should be embodied in a will. There is
no showing that the funds exclusively belonged to one party, and hence it must be presumed to be conjugal,
having been acquired during the existence of the marital relations. To be a conveyance mortis causa, the
bequest or device must pertain to the testator. Neither is the survivorship agreement a donation inter vivos
because it was to take effect after the death of one party.

Secondly, it is not a donation between the spouses because it involved no conveyance of a spouse's own
properties to the other. The validity of the contract seems debatable by reason of its "survivor-take-all" feature,
but in reality, that contract imposed a mere obligation with a term, the term being death. Such agreements are
permitted by the Civil Code.
 Thus, contrary to the contention of the respondents that no refund should be made as the payment for the
taxes were taken out of the conjugal partnership of properties which forms part of the estate, the subject
savings account is the sole property of the petitioner vitug

Having paid the taxes of his late wife’s estate out of his own/exclusive property/money, petitioner Romarico G.
Vitug must be reimbursed.

12.CIR v. CAMPOS RUEDA

G.R. No. L-13250 | October 29,1971

DOCTRINE: The requisites of statehood, or at least so much thereof as may be necessary for the acquisition of an international
personality, need not be satisfied for a "foreign country" to fall within the exemption of Section 122 of the National Internal
Revenue Code on exemption from Estate Tax based on reciprocity rule.

FACTS: The CIR held respondent Antonio Campos Rueda, as administrator of the estate of the late Estrella Soriano Vda. de
Cerdeira, liable for the sum of P161,874.95 as deficiency estate and inheritance taxes for the transfer of intangible personal
properties in the Philippines, the deceased, a Spanish national having been a resident of Tangier, Morocco from 1931 up to the
time of her death in 1955.

On September 29, 1955, Rueda filed a provisional estate and inheritance tax return on all the properties of the late Maria
Cerdeira. On the same date, CIR, pending investigation, issued an assessment for state and inheritance taxes in the respective
amounts of P111,592.48 and P157,791.48, or a total of P369,383.96 which tax liabilities were paid by Rueda. On November 17,
1955, an amended return was filed wherein intangible personal properties with the value of P396,308.90 were claimed as
exempted from taxes. On November 23, 1955, CIR, pending investigation, issued another assessment for estate and inheritance
taxes in the amounts of P202,262.40 and P267,402.84, respectively, or a total of P469,665.24. In a letter dated January 11, 1956,
CIR denied the request for exemption on the ground that the law of Tangier is not reciprocal to Section 122 of the National
Internal Revenue Code. Hence, CIR demanded the payment of the sums of P239,439.49 representing deficiency estate and
inheritance taxes including ad valorem penalties, surcharges, interests and compromise penalties. In a letter dated February 8,
1956, and received by Rueda on the following day, he requested for the reconsideration of the decision denying the claim for tax
exemption of the intangible personal properties and the imposition of the 25% and 5% ad valorem penalties. However, CIR denied
the request. The CIR premised the denial on the grounds that there was no reciprocity [with Tangier, which was moreover] a mere
principality, not a foreign country. Consequently, CIR demanded the payment of the sums of P73,851.21 and P88,023.74
respectively, or a total of P161,874.95 as deficiency estate and inheritance taxes including surcharges, interests and compromise
penalties.

ISSUE: Whether or not for the exemption from estate tax in Section 122 of NIRC on reciprocity to take effect, the foreign country,
Tangier in this case, where the deceased foreigner is citizen, should be a recognized state with international personality. NO.

RULING: The CIR did not consider Tangier, Morocco as foreign country within the bounds of Section 122 of NIRC. But the Court
says otherwise.

Section 122 reads:

“That no tax shall be collected under this Title in respect of intangible personal property

(a) if the decedent at the time of his death was a resident of a foreign country which at the time of his death did not impose a
transfer tax or death tax of any character in respect of intangible person property of the Philippines not residing in that foreign
country, or
(b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in respect of intangible personal property owned by citizens of the Philippines not
residing in that foreign country."

There was no dispute between the parties regarding the values of the properties and the mathematical correctness of the
deficiency assessments, the principal question as noted dealt with the reciprocity aspect as well as the insisting by the Collector of
Internal Revenue that Tangier was not a foreign country within the meaning of Sec. 122.

In CIR v. De Lara, it was specifically held by the Court: "Considering the State of California as a foreign country in relation to section
122 of our Tax Code we believe and hold, as did the Tax Court, that the Ancilliary Administrator is entitled the exemption from the
inheritance tax on the intangible personal property found in the Philippines." It was held to be a foreign country within the
meaning of Section 122 of the National Internal Revenue Code.

In Kiene v. CIR, this Court did commit itself to the doctrine that even a tiny principality, that of Liechtenstein, hardly an
international personality in the sense, did fall under this exempt category.

Even on the assumption then that Tangier is bereft of international personality, CIR has not successfully made out a case.

Nevertheless our Congress chose to make an exemption where conditions are such that demand reciprocity — as in this case. And
the exemption must be honored.

13. PALANCA v. CIR

G.R. No. L-16661 | January 31, 1962.

DOCTRINE: Under the law, it is not essential that the warrant of distraint and levy be fully executed in order that
it may have the effect of suspending the running of the statute of limitation upon collection of the tax. It is
enough that the proceeding be validly begun or commenced and that its execution has not been suspended by
reason of the voluntary desistance of the respondent.

FACTS: Gliceria Diluangco died on April 18, 1947 and testate proceedings were filed with the CFI of Manila.
Upon discovering that the executor failed to file a return, the CIR required the executor to file a return. On
March 27, 1951, the executor filed a return. The estate was tentatively assessed in the total sum of P9,705.61,
including 25% surcharge for failure to file the return on time. The executor, an Atty. San Jose, requested
reconsideration of the imposition of the 25%, which the Commissioner denied. Subsequently, Atty. San Jose
again requested reconsideration of the imposition of the same surcharge.

In a report submitted by the examiner Testa an assessment notice was issued for payment of P22,533.46 as
deficiency taxes. Atty. San Jose requested a reinvestigation of this assessment. The CIR issued a warrant of
distraint and levy for the satisfaction of the deficiency, estate and inheritance taxes in the total amount of
P24,790.21. However, the warrant of distraint and levy was not executed because the executor of the estate
asked for a reinvestigation of the case and for the placing of the real properties left by the deceased under
constructive levy in order to obviate the necessity of having to file surety bond to guarantee the payment of the
assessed taxes. This request was granted and the case was again referred to examiner Testa for comment and
recommendation.

The heirs but before such request could be acted upon which they assured was not intended for delay, the heirs,
thru counsel, requested a revaluation of the properties made a turn-about by raising this time the defense of
prescription alleging that the right of the Government to collect by summary method the estate and inheritance
 taxes in question had already prescribed. The answer of the Commissioner was that the right of the Government
to collect has not as yet prescribed and that steps would be taken to sell the properties left by the deceased. On
March 3, 1958, the heirs filed a petition for review with the Court of Tax Appeals disputing the right of the
Government to collect the taxes in question on the ground of prescription.

ISSUE: Whether or not the collection period of taxes has prescribed. NO.

RULING: The right of the Government to collect the estate and inheritance taxes in question has not yet
prescribed because the warrant of distraint and levy for their collection was begun within the 5-year period
prescribed by law from the date of the assessment of said taxes.

Section 332 of the Revenue Code provides that the collection of an internal revenue tax may be made by
distraint and levy if the proceeding is begun within five years after assessment. In this case, the distraint and
levy and the service thereof to Attorney Manuel V. San Jose. It is true that the warrant has not been fully
executed with the seizure and sale of any property subject to the lien, but it was not due to the voluntary
desistance of respondent; rather it was because of the request of the then counsel for petitioners for a
statement of the amount due from each heir and for an opportunity to make arrangement for the settlement of
the obligation, which request was considered reasonable by respondent.

Under the law, it is not essential that the warrant of distraint and levy be fully executed in order that it may
have the effect of suspending the running of the statute of limitation upon collection of the tax. It is enough that
the proceeding be validly begun or commenced and that its execution has not been suspended by reason of the
voluntary desistance of the respondent. In our opinion, the warrant of distraint and levy of June 23, 1955 was
validly issued and was duly served upon counsel for petitioners, and therefore, the five-year period for
collection of the estate and inheritance taxes in question was suspended. And it continued to be suspended up
to the date when the present appeal was filed by petitioners on May 3, 1958.

Accordingly, the right to collect said taxes has not prescribed.

14. FERDINAND MARCOS II vs. CA, CIR

G.R. No. 120880 | June 5, 1997
Torres, Jr. J.

DOCTRINE: In the case of notices of levy issued to satisfy the delinquent estate tax, the delinquent taxpayer is the Estate of the
decedent, and not necessarily, and exclusively, the heir of the deceased.

FACTS: On September 29, 1989, former President Ferdinand Marcos died in Hawaii, USA. In 1990, a Special Tax Audit Team found
that the Marcoses failed to file, in violation of the NIRC, a written notice of the death of the decedent, an estate tax return, and
several income tax returns covering the years 1982-1986.

The BIR then issued a deficiency estate tax assessment against the estate of the late president Ferdinand Marcos in the amount of
P23,293,607,638.00), among others.

The deficiency tax assessments were not protested administratively, within 30 days from service.

In 1993, the CIR then issued 22 notices of levy on real property against certain parcels of land to satisfy the alleged estate tax and
deficiency income taxes.

Bongbong Marcos questions the CIR in assessing, and collecting through the summary remedy of Levy on Real Properties, estate
and income tax delinquencies upon the estate of his father, despite the pendency of the proceedings on probate of his will.

CA Ruling - the deficiency assessments for estate and income tax made upon the estate have already become final and
unappealable, and may thus be enforced by the summary remedy of levy, as was done by the CIR.

ISSUE: Whether it was proper for CIR to levy the properties and estate of the decedent in order to satisfy the estate taxes. YES

RULING: The approval of the probate court, as a settlement tribunal over the deceased, is not a mandatory requirement in the
collection of estate taxes.

The nature of the process of estate tax collection

The enforcement and collection of estate tax, is executive in character; this task is ascribed to the BIR.

Sec. 3 (NIRC) Powers and duties of the Bureau. — The powers and duties of the Bureau of Internal Revenue shall comprehend the
assessment and collection of all national internal revenue taxes xxx and administer the supervisory and police power conferred to
it by this Code or other laws.

Liberal treatment of claims for taxes charged against the estate of the decedent
In Vera vs. Fernandez, the Court held that such taxes were exempted from the application of the statute of non-claims, and this is
justified by the necessity of government funding; taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae —
taxes are the sinews of the state.

Such liberal treatment of internal revenue taxes in the probate proceedings extends so far, even to allowing the enforcement of
tax obligations against the heirs of the decedent, even after distribution of the estate's properties.

Two ways of collecting estate taxes

Thus, there are two ways of collecting estate taxes:
1. by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance
received;
2. pursuant to the lien created by Sec. 315, Tax Code, by subjecting said property of the estate which is in the hands of an
heir or transferee, to the payment of the tax due the estate.

Since the estate tax assessment had become final and unappealable by the Marcos Jr.’s default as regards protesting the validity
of the said assessment, there is now no reason why the BIR cannot continue with the collection of the said tax.

Marcos Jr.’s last ditch effort: assailing the total assessment of P23B estate tax due
Marcos Jr., also expresses his reservation as to the propriety of the BIR's total assessment of P23,292,607,638.00, stating that this
amount deviates from the findings of the DOJ’s Panel of Prosecutors.

It is not the DOJ which is tasked to determine the amount of taxes due upon the subject estate, but the BIR, whose
determinations and assessments are presumed correct and made in good faith. The taxpayer has the duty of proving otherwise. In
the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. Even an
assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or
capriciously.
Here, Marcos Jr. has not pointed out one single provision in the Memorandum of the Special Audit Team which gave rise to the
questioned assessment, which bears a trace of falsity.

Notices of Levy are valid despite not having served them to the heirs
Bongbong also argues that all the questioned Notices of Levy, however, must be nullified for having been issued without validly
serving copies thereof to them. As a mandatory heir of the decedent, he avers that he has an interest in the subject estate, and
notices of levy upon its properties should have been served upon him.

The Supreme Court does not agree. In the case of notices of levy issued to satisfy the delinquent estate tax, the delinquent
taxpayer is the Estate of the decedent, and not necessarily, and exclusively, the petitioner as heir of the deceased. Thus, it follows
that service of notices of levy in satisfaction of these tax delinquencies upon the petitioner is not required by law.

The foregoing notwithstanding, the record shows that notices of warrants of distraint and levy of sale were furnished to the
counsel of Bongbong on April 7, 1993, and June 10, 1993, and Bongbong himself on April 12, 1993 at his office at the Batasang
Pambansa.
 15. REVENUE REGULATION NO. 10-2023
September 8, 2023

SUBJECT: Amending certain provisions of R.R. No. 6-2019, as amended, to implement the extension on the period of availment
of the Estate Tax Amnesty pursuant to R.A. 11956, further amending R.A. 11213 (Tax Amnesty Act), as amended by R.A. 11569

Section 1. Scope. – Pursuant to Sections 244 and 245 of the National Internal Revenue Code of 1997 (Tax Code), as amended, in
relation to Section 4 of R.A. 11213[1], as amended by R.A. 11569[2], these Regulations are hereby promulgated to implement the
extension on the period of availment of the Estate Tax Amnesty provided for in R.A. 11956 by amending certain provisions of
Revenue Regulations (RR) No. 6-2019, as amended.

Section 2. Amendment. – Section 2, 9, 13, and 16 of R.R. No. 6-2019, as amended by R.R. No. 17-2021, are hereby amended as
follows:

Section 2. Coverage. – The estate tax amnesty shall cover the estate of decedents who died on or before May 31, 2022,
with or without assessments duly issued therefor, whose estate taxes have remained unpaid or have accrued as of May
31, 2022.

Section 9. Time and Place of Filing Estate Tax Amnesty Return (BIR Form 2118-EA) and Payment of Estate Tax Due.– For
purposes of these Regulations, the Estate Tax Amnesty Return (ETAR) (BIR Form No. 2118-EA) (Annex B) shall be filed
and paid, either electronically or manually, by the:

· executor or
· administrator,
· legal heirs,
· transferees, or
· beneficiaries,

who wish to avail of the Estate Tax Amnesty within June 15, 2023 until June 14, 2025

· with any authorized agent bank,

· through revenue collection officer of any Revenue District Office (RDO) or

· authorized tax software provider as defined in Revenue Memorandum Order (RMO) No. 8-2019.

The duly accomplished and sworn ETAR, together with the Acceptance Payment Form (APF-BIR Form No. 0621-EA)
(Annex C) and the complete documents shall be presented to the concerned RDO.

The documents to be submitted shall be limited to the following:

A. Mandatory Requirements:

1. Certified True Copy of the Death Certificate (DC) or if not available the Certificate of No Record of Death from
the Philippine Statistics Authority and any valid secondary evidence including but not limited to those issued by any
government agency/office sufficient to establish the fact of death of the decedent;

2. Taxpayer Identification Number (TIN) of decedent and heir/s;

3. For “Claims Against the Estate” arising from contract of loan, notarized promissory note, if applicable;

4. Proof of the claimed “Property Previously Taxed”, if any;

5. Proof of the claimed “Transfer for Public Use”, if any; and

6. At least one (1) government issued identification card (ID) of the Executor/Administrator of the Estate, or if
there is no executor or administrator appointed, the heirs, transferees, beneficiaries or authorized representative.

B. For Real Property/ies, if any

1. Certified true copy/ies of the transfer/original condominium certificates of title of real property/ies;

2. Certified true copy of the tax declaration of real property/ies, if untitled, including the improvements at the time
 CASES ON DONOR’S TAX

1. EDUARTE vs. CA
G.R. No. 105944 | February 9, 1996

DOCTRINE: Insert here.

FACTS: In 1984, Pedro Calapine executed a deed entitled "Pagbibigay-Pala (Donacion Inter Vivos)" ceding one-half portion of a
parcel of land to his niece Helen S. Doria. Three months later, another deed identically entitled was purportedly executed by
Pedro Calapine ceding unto Helen S. Doria the whole of the parcel of the same land.

Helen S. Doria donated a portion of the parcel of land to the Calauan Christian Reformed Church, Inc. and sold, transferred and
conveyed unto the spouses Romulo and Sally Eduarte the remaining portion of the parcel of land, save the portion on which her
house had been erected.

Claiming that his signature to the deed of donation was a forgery and that she was unworthy of his liberality, Pedro Calapine
brought suit against Helen S. Doria, the Calauan Christian Reformed Church, Inc. and the Spouses Romulo and Sally Eduarte to
revoke the donation made in favor of Helen S. Doria, to declare null and void the deeds of donation and sale.

The Court of Appeals affirmed the revocation of the donation and declared Spouses Romulo and Sally Eduarte as purchasers in
bad faith of the property donated.

ISSUE (1): Where or not Helen Doria, donee, was unworthy of the donor’s liberality due to acts of ingratitude. - YES

Petitioners submit that paragraph (1) of Article 765 of the Civil Code does not apply in this case because the acts of ingratitude
referred to therein pertain to offenses committed by the donee against the person or property of the donor. Petitioners argue
that as the offense imputed to herein donee Helen Doria - falsification of a public document - is neither a crime against the person
nor property of the donor but is a crime against public interest under the Revised Penal Code, the same is not a ground for
revocation.

RULING (1): This assertion, however, deserves scant consideration. The full text of the very same commentary cited by petitioners
belies their claim that falsification of the deed of donation is not an act of ingratitude.

Offense Against Donor. - All crimes which offend the donor show ingratitude and are causes for revocation. There is no
doubt, therefore, that the donee who commits adultery with the wife of the donor, gives cause for revocation by reason of
ingratitude. The crimes against the person of the donor would include not only homicide and physical injuries, but also
illegal detention, threats, and coercion; those against honor include offenses against chastity; and those against the
property, include robbery, theft, usurpation, swindling, arson, damages, etc.

Obviously, the first sentence was deleted by petitioners because it totally controverts their contention. As noted in the aforecited
opinion "all crimes which offend the donor show ingratitude and are causes for revocation." Petitioners' attempt to categorize the
offenses according to their classification under the Revised Penal Code is therefore unwarranted considering that illegal detention,
threats and coercion are considered as crimes against the person of the donor despite the fact that they are classified as crimes
against personal liberty and security under the Revised Penal Code.
The second deed of donation was found to be falsified.

ISSUE (2): Whether or not petitioners are buyers in good faith of the donated property. - YES.

RULING (2): The rule is well-settled that mere possession cannot defeat the title of a holder of a registered torrens title to real
property. Moreover, reliance on the doctrine that a forged deed can legally be the root of a valid title is squarely in point in this
case.

When petitioners purchased the subject property from Helen Doria, the same was already covered by TCT No. T-23205 under the
latter's name. And although Helen Doria's title was fraudulently secured, such fact cannot prejudice the rights of herein
petitioners absent any showing that they had any knowledge or participation in such irregularity. Thus, they cannot be obliged to
look beyond the certificate of title which appeared to be valid on its fade and sans any annotation or notice of private
respondents' adverse claim. Contrary therefore to the conclusion of respondent Court, petitioners are purchasers in good faith
and for value as they bought the disputed property without notice that some other person has a right or interest in such property,
and paid a full price for the same at the time of the purchase or before they had notice of the claim or interest of some other
person in the property.

2. REPUBLIC v. GUZMAN
GR. No. 132964 | February 18, 2000

DOCTRINE: Payment of donor's tax is not sufficient to show intent to transfer the property as a gift or donation.

FACTS:
David Rey Guzman (David) is a natural-born American citizen. He is the son of spouses Simeon Guzman, naturalized American
citizen, and Helen Meyers Guzman (Helen), an American citizen. Upon the death of Simeon, he left Helen and David an estate
consisting of several real properties in Bulacan.

Helen and David executed a deed of Extrajudicial Settlement to divide the estate among themselves. This was registered to the
Office of Register of Deeds. Helen also executed a Quitclaim Deed assigning, transferring and conveying to David her undivided
one-half interest of the properties. David then executed a Special Power of Attorney acknowledging that he became the owner of
the subject properties. Atty Abela was tasked to pay the donor's taxes to facilitate the registry of the parcels of land in the name
of David.

Atty. Mario Batongbacal contested this. He anchored his argument on the rule that only Filipino citizens can acquire private lands
in the country save for two exceptions: 1) by hereditary succession and 2) if he was formerly a natural-born PH citizen who lost his
PH citizenship. Batongbacal asserted that David, an American citizen, could not have validly acquired the one-half interest by way
of the quitclaim which were in reality donations inter vivos. Batongbacal further argued there was valid donation and that the
payment of the donor's taxes on the property proved the intended transfer as donation inter vivos.

David meanwhile maintained that he acquired the property by right of accretion and not donation.

ISSUE: Whether there was a valid donation. NO.

RULING: There was none because the element of animus donandi was missing.

The three (3) elements of donation are as follows:

1. reduction of the patrimony of the donor;
2. increase in the patrimony of the donee; and
 3. intent to do an act of liberality or animus donandi.

For donation of an immovable property, the law requires that it be made in a public document and that there should be an
acceptance made in the same deed of donation or a separate public document.

Helen's intention to perform an act of liberality (animus donandi) was not sufficiently established. The deeds of quitclaim reveals
that she merely contemplated a waiver of her rights, title and interest over the lands in favor of David, and not a donation. She
was also aware that donation of the property was not possible due to Philippine law.

Further, there was no acceptance made in a public document. The Special Power of Attorney executed by David did not show that
the acquisition of the property was by virtue of Helen’s possible donation.

3. LLADOC v. CIR
G.R. No. L-19201 | June 16, 1965

DOCTRINE: A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the
imposition of which on property used exclusively for religious purposes, does not constitute an impairment of the Constitution.

FACTS: M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest of Victorias,
Negros Occidental, and predecessor of REV. FR. CASIMIRO LLADOC, for the construction of a new Catholic Church in the locality.
The total amount was actually spent for the purpose intended.

On March 3, 1958, M.B. Estate, Inc., filed the donor's gift tax return. On April 29, 1960, the Commissioner of Internal Revenue
(CIR) issued an assessment for donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which LLADOC was
the priest.

LLADOC lodged a protest to the assessment and requested the withdrawal thereof. However, the protest and the motion for
reconsideration were denied. LLADOC appealed to the Court of Tax Appeals, claiming, among others, that at the time of the
donation, he was not the parish priest in Victorias; that there is no legal entity or juridical person known as the "Catholic Parish
Priest of Victorias," and, therefore, he should not be liable for the donee's gift tax. It was also asserted that the assessment of the
gift tax, even against the Roman Catholic Church, would not be valid, for such would be a clear violation of the provisions of the
Constitution.

ISSUE: Is the Catholic Parish of Victorias exempt from the payment of the assessed donee's gift tax? NO.

RULING: Section 22 (3), Art. VI of the Constitution of the Philippines exempts from taxation cemeteries, churches and parsonages
or convents, appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious purposes. The
exemption is only from the payment of taxes assessed on such properties enumerated, as property taxes, as contra
distinguished from excise taxes.

In the present case, what the Collector assessed was a donee's gift tax; the assessment was not on the properties themselves. It
did not rest upon general ownership; it was an excise upon the use made of the properties, upon the exercise of the privilege of
receiving the properties. Manifestly, gift tax is not within the exempting provisions of the section just mentioned. A gift tax is not
a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on
property used exclusively for religious purposes, does not constitute an impairment of the Constitution. As well observed by the
CTA, the phrase "exempt from taxation," as employed in the Constitution should not be interpreted to mean exemption from all
kinds of taxes. And there being no clear, positive or express grant of such privilege by law, in favor of the Catholic Parish of
Victorias to which LLADOC is the priest, the exemption herein must be denied.

Nevertheless, LLADOC should not be personally liable because at the time of the donation, he was not the priest of Victorias. It
appearing that the Head of such Diocese is the real party in interest, it is therefore liable for the payment thereof.

Considering that the assessment at bar had been properly made, and the imposition of the tax is not a violation of the
constitutional provision exempting churches, parsonages or convents, etc. (Art VI, sec. 22 [3], Constitution), the Head of the
Diocese, to which the Parish Victorias pertains, is liable for the payment thereof.

3A. RMC NO. 31-2019

March 7, 2019

Tax compliance requirements of candidates, political parties/party list groups and campaign contributors on their registration,
update and other tax compliance requirements:

All candidates, political parties/party list groups and campaign contributors are required to register or update their registration
with the Revenue District Office (RDO) having jurisdiction over their respective residence address, or head/principal office
following the guidelines and procedures enumerated in Revenue Memorandum Circular No. 38-2018. Individual candidates shall
be registered as “Professional” in order to be issued an Authority to Print Receipts/Invoices.

All candidates and political parties/party list groups shall undertake the following:

a. Pay an Annual Registration Fee in the amount of Five Hundred Pesos (P500.00). Certificate of Registration is no longer required
to be issued to individual candidates who are not engaged in business;
b. Register Non-VAT Official Receipts to be issued for every contribution received, whether in cash or in kind valued at Fair Market
Value;
c. Preserve records of contributions and expenditures, together with all pertinent documents, for a period of three (3) years from
the close of the taxable year during which the election was held.
All political parties/party list groups shall register and keep adequate books and other accounting records such as Cash Receipts
Journal, Cash Disbursements Book or their equivalent. Individual candidates may opt to use a simplified set of bookkeeping
records as long as it can provide accurate information.

Income payments made by political candidates and political parties/party list groups on their purchases of goods and services as
campaign expenditures, and income payments made by individuals or juridical persons for their purchases of goods and services
intended to be given as campaign contribution to political parties and candidates shall be subject to five percent (5%) Creditable
Withholding Tax (CWT). BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source) shall be issued to the payee.

All political parties/party list groups and candidates shall:

a. Remit five percent (5%) CWT for the first two months of the quarter on or before the 10th day of the following month in which
the withholding was made using BIR Form No. 0619-E.
b. File and pay the quarterly Withholding Tax return using BIR Form No. 1601-EQ not later than the last day of the month following
the close of the quarter during which the withholding was made, together with the submission of the Quarterly Alphalist of Payees
through the eSubmission facility of the BIR.
c. File the Annual Information Return of Creditable Taxes Withheld [(Expanded)/Income Payments Exempt from Withholding Tax
(BIR Form No. 1604-E)] as well as the Statement of Contributions and Expenditures duly stamped “Received” by the Commission
on Elections (COMELEC) on or before March 1 following the year of election.

Expenses that were not subjected to the 5% CWT are not considered utilized campaign funds, and the candidates, political parties,
party list groups are precluded from claiming such expenditures as deductions from his/her/its campaign contributions. As such,
the full amount corresponding to said expense shall be reported as unutilized campaign funds subject to Income Tax.

Only those donations/contributions that have been utilized/spent during the campaign period as set by the COMELEC are exempt
from Donor’s Tax. Donations utilized before or after the campaign period are subject to Donor’s Tax and not deductible as political
contribution on the part of the donor.

Unutilized/excess campaign funds net of the candidate’s or political party’s/party list’s campaign expenditures, shall be considered
as subject to Income Tax and, as such, must be included in their/his taxable income as stated in their/his Income Tax Return (ITR).
No further deduction, either itemized or optional, shall be made against the said taxable income.

Any candidate or political party/party list group, whether winner or loser, who fails to file with the COMELEC the Statement of
Contributions and Expenditures required under the Omnibus Election Code shall be automatically precluded from claiming such
expenditures as deductions from the campaign contributions making the entire amount directly subject to Income Tax.

Every candidate and Treasurer of the political parties/party list groups shall submit the Statement of Contributions and
Expenditures to COMELEC and RDO where the candidates/political parties/party list groups are registered within thirty (30) days
after the election.

The RDO shall maintain the list of all registered candidates and political parties/party list groups for monitoring and updating of its
registration record after election.

The registration of individuals in their capacity as candidates shall automatically end ten (10) days after the deadline of filing the
Quarterly Remittance Return of Creditable Income Taxes Withheld (BIR Form No. 1601EQ).

The Client Support Section Chiefs of the concerned RDOs shall end-date the Form Type 1601EQ and Tax Type WE of individual
candidates that were registered and/or updated, and cancel the Branch code of those that were registered as Branch for purposes
of election. Those candidates who are not engaged in business shall be reverted to its previous taxpayer type, e.g. Executive Order
No. 98 or Local Employee. However, the political parties including party list groups shall subsist, unless they opt to update their
registration.

3B1. BIR RULING NO: 076-89

April 17, 1989

DOCTRINE: If an individual performs services for a creditor who, in consideration thereof cancels the debt, income to that amount
is realized by the debtor as compensation for his services. If, however, a creditor merely desires to benefit a debtor and without
any consideration thereof cancels the debt, the amount of the debt is a gift from the creditor to the debtor and need not be
included in the latter’s gross income. If a corporation to which a stockholder is indebted forgives the debt, the transaction has the
effect of payment of a dividend.

FACTS: General Motors Pilipinas, Inc. (GMPI), a domestic, joint venture corporation, owned 60% by General Motors Overseas
Distribution Corporation (GM-US) and 40% Isuzu Motors Limited of Japan (Isuzu), was engaged in manufacture of transmissions
and components as well as assembly of cars and trucks. Due to economic recession in the Philippines and the depressed
automotive market, plus the non-availability of foreign exchange for the importation of parts for car and truck assemblies, GMPI
ceased its manufacturing and assembly operations; the latter became insolvent and continued to be one, which led to shortening
of its corporate life. A liquidating trustee was designated to dispose of its remaining assets, satisfy obligations, and wind up
company affairs.

GM-US has no further interest to continue its ownership in the inactive corporate shell of GMPI; thus, it will assign its 60%
shareholdings to Isuzu. It was agreed that GMPI would clean up the liabilities shown in financial statements and would have no
major current outstanding liabilities except the liability to Isuzu. To accomplish this, it was proposed that shares are transferred in
three steps:
1. By having GMPI’s creditor banks waive accrued interest on the non-trade and trade related debts;
2. By having these banks assign to GM-US its GMPI non-trade related receivables. At that time, GM-US will
 condone GMPI indebtedness due to it including the aforementioned non-trade debt as well as other non-trade liabilities
due GMC;
3. By having the banks grant a participation to GM-US in GMPI trade related receivables; GM-US would then assign
these to Isuzu.

As approved by the Central Bank of the Philippines and Securities and Exchange Commission, Isuzu would accept pesos from GMPI
in repayment of the trade debt and simultaneously reinvest the pesos in GMPI as paid-in surplus. Isuzu, as the new 100% parent
company, may consider infusing additional capital to restore the business into a viable operation and eliminate the capital
deficiency.

ISSUE: Whether the bank’s waiver of accrued interest on the non-trade and trade related indebtedness of GMPI and GM-US
condonation or forgiveness of GMPI’s non-trade related indebtedness are not subject to income nor gift tax.

RULING: YES. Sec. 50 of Revenue Regulations No. 2 provides that if an individual performs services for a creditor who, in
consideration thereof cancels the debt, income to that amount is realized by the debtor as compensation for his services. If,
however, a creditor merely desires to benefit a debtor and without any consideration thereof cancels the debt, the amount of the
debt is a gift from the creditor to the debtor and need not be included in the latter’s gross income. If a corporation to which a
stockholder is indebted forgives the debt, the transaction has the effect of payment of a dividend.

The waiver of interest by the banks on non-trade or trade related indebtedness of GMPI is not subject to income tax considering
that the deduction of said interest as expense in prior years did not offset nor reduce the taxable income of GMPI since it was in a
financial loss position even without the deduction. Accordingly, the condonation of GMPI’s indebtedness by GM-US is not subject
to income tax since before and after the condonation, GMPI remains insolvent. The condonation is likewise not subject to gift tax
since there is no donative interest on the part of GM-US but solely for business consideration since Isuzu will only acquire GMPI
shares from GM-US if the former has a clean balance sheet with no outstanding liabilities except those to Isuzu. Moreover, a
return to solvency due to possible future additional capital infusion and/or subsequent profitability in a different taxable year will
not affect the non-taxability of the condonation.

3B2. BIR RULING DA- (005) 023

July 10, 2008
Doctrine: A transaction whereby nothing of exchangeable value comes to or is received by a taxpayer does not give rise to or
create taxable income.

FACTS: Lepanto Ceramic Tiles (LCI) is a duly organized corporation under the Philippine laws. In 2007, it has reflected a capital
deficit of about 3.5Billion. A part of the liability pertains to a loan amounting Php296million taken from third party creditors. In
view of the said liabilities, LCI offered a compromise agreement to the amount of P180 million and requested a cancellation and
condonation of the remaining portion of the loan. The BIR issued a ruling that the condonation of the LCI’s debts shall not be
subject to income tax considering that it is in a capital deficiency position and will remain insolvent before and after the
condonation.

ISSUE: WON the condonation of the loan amount plus interest and penalties shall be subject to the income tax? [NO]

RULING: It is clear from the foregoing that the condonation of LCI's indebtedness is not subject to income tax if nothing of
exchangeable value comes to or is received by LCI. This is based on the basic and generally accepted principle of taxation that
taxable income is created from the inflow of wealth. Therefore, if after the condonation of the liability, LCI will remain insolvent or
in a capital deficit position, then the cancellation of the indebtedness is not subject to any tax. The said condonation is also not
subject to donor's tax in the hands of LCI, for lack of donative intent on the part of its creditor.

3C. BIR RULING NO: DA-419-04

 August 4, 2004

Thus, the condonation of the CPI's debt to SJ shall not be subject to income tax considering that CPI is in a capital deficiency
position and will remain insolvent before and after the said condonation considering that theamount to be condoned would only
be P84,198,555.20. Moreover, the condonation is likewise not subject to gift tax since there is no donative intenton the part of SJ
but solely for business consideration.

The above ruling was issued by the BIR on the basis of the discussions statedin BIR Ruling No. 076-89 dated April 17, 1989 which
states as follows:

"Cancellation and forgiveness of indebtedness may amount to a payment of income, to a gift, or to a capital transaction,
dependent upon thecircumstances. If for example, an individual performs services for a creditor who, in consideration thereof
cancels the debt, income to that amount is realized by the debtor as compensation for his services. If, however, a creditor merely
desires to benefit a debtor and without any consideration therefor cancels the debt, the amount of the debt is a gift from the
creditor to the debtor and need not be included in the latter's gross income. If a corporation to which a stockholder is indebted
forgives the debt, the transaction has the effect of the payment of a dividend. (Sec. 50 Revenue Regulations No. 2) The waiver of
interest by the banks on non-trade and trade related indebtedness of GMPI is not subject to income tax considering that the
deduction of said interest as expense in prior years did not offset nor reduce the taxable income of GMPI since it was in a financial
loss position even without the deduction. (See Barnhart-Marrow Consolidated v. Commissioner of Internal Revenue, 47 BTA 590)
Moreover, when a creditor cancels a debt as part of a businesst ransaction, the debtor is enriched or its net assets has been
increased and,therefore, he realized taxable income (Philippine Fiber Processing Co. v. CIR,CTA Case No. 1407 Dec. 29, 1966).
However, a transaction whereby nothing of exchangeable value comes to or is received by a taxpayer does not give rise to or
create taxable income. (See Dallas Transfer and Terminal WarehouseCo. v. Commissioner of Internal Revenue,5 Cir. 70 F 2d 95, 13
AFTR 930) Accordingly, the condonation of GMPI's indebtedness by GM-US is not subject to income tax since before and after the
condonation GMPI remains insolvent, i.e, in a capital efficiency position. The condonation is likewise notsubject to gift tax since
there is no donative interest on the part of GM-US but solely for business consideration since Isuzu will only acquire the GMPI
shares from GM-US if GMPI has a "clean" balance sheet with no outstanding liabilities except those to Isuzu."

3D1. SEC 11, PAR 4 RR 2-2003

February 1, 2003

Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of
the marriage in favor of the heirs of the deceased spouse or any other person/s is subject to donor’s tax whereas general
renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent is not
subject to donor’s tax, unless specifically and categorically done in favor of identified heir/s to the exclusion or disadvantage of
the other co-heirs in the hereditary estate.

3D2. SECTION 12 PAR 4, RR 8-2018

January 1, 2018

SECTION 12. REGISTRATION UPDATES. – In relation to Sections 24(A)(2)(b) and 24(A)(2)(c)(2) of the Tax Code, as amended,
relative to the option of self-employed individuals and/or professionals to avail of an 8% income tax rate based on gross
sales/receipts and other non-operating income, the existing non-VAT taxpayer who is contemplating to avail of the 8% income tax
rate at the beginning of the taxable year or before the due date for filing and/or payment of the percentage tax shall file an
Application for Registration Information Update (BIR Form No. 1905) to end-date the registered tax type of percentage tax. If the
taxpayer is unable to timely update the required registration, s/he shall continue to file the percentage tax return reflecting a
zero-amount of tax with a notation that s/he is availing of the 8% income tax rate option for the taxable year. S/he is still required
to signify the intention to avail the option on the initial quarterly income tax return for income tax purposes.
On the other hand, if the non-VAT taxpayer opted to be taxed under the graduated income tax rates s/he shall continue to pay the
required percentage tax under Sec. 116 of the Tax Code, as amended.

A taxpayer who initially presumed that the gross sales/receipts and other non-operating income for the taxable year will not
exceed the P3,000,000.00 VAT threshold but has actually exceeded the same during the taxable year, shall immediately update
his/her registration to reflect the change in tax profile from non-VAT to a VAT taxpayer. S/he shall be required to update
registration immediately within the month following the month s/he exceeded the VAT threshold. S/he shall be liable to VAT
prospectively starting on the first day of the month following the month when the threshold is breached. The taxpayer shall pay
the required percentage tax covering the sales/receipts and other non-operating income, from the beginning of the taxable year
or commencement of business/practice of profession until the time the taxpayer becomes liable for VAT, without imposition of
penalty if timely paid on the immediately succeeding month/quarter. Thus, there may be an instance when a taxpayer files two (2)
business tax returns in a month/quarter - i.e., percentage and VAT returns.

A VAT taxpayer who did not exceed the VAT threshold within the immediately preceding three (3) year period, may opt to be a
non-VAT taxpayer and avail of the 8% income tax rate option. S/he shall update the registration records on or before the first
quarter of a taxable year to reflect the change in registration. However, s/he shall remain liable for VAT for as long as there is no
update of registration and VAT-registered invoices/receipts are continuously issued. Registration updates shall be subject to
existing rules and regulations on updates, verification, inventory and surrender/cancellation of unused VAT-invoice/receipts.

A non-VAT taxpayer who volunteers to be a VAT taxpayer knowing that sales/receipts and other non-operating income will exceed
the VAT threshold within the taxable year, shall update the registration records. Such taxpayer becomes liable to VAT on the day
when such updating is made. In this case, the taxpayer shall automatically be subject to the graduated income tax rates if the 8%
income tax rate option is initially selected. Any income tax paid under the said flat 8% income tax rate shall be deducted from the
income tax due under the graduated income tax rates. The percentage tax due from the beginning of the taxable year or
commencement of business/practice of profession shall be paid on the month/quarter immediately following such registration
update. However, if the graduated income tax rates is chosen from the beginning, then taxpayer ceases to be liable to percentage
tax upon registration updates and instead is now liable to VAT.

4. PHILAM LIFE vs. SEC. OF FINANCE

G.R. No. 210987 | November 24, 2014

DOCTRINE: The absence of donative intent, if that be the case, does not exempt the sales of stock transaction from donor’s tax
since Sec. 100 of the National Internal Revenue Code (NIRC) categorically states that the amount by which the fair market value of
the property exceeded the value of the consideration shall be deemed a gift.

FACTS: Petitioner The Philippine American Life and General Insurance Company (Philamlife) used to own 498,590 Class A shares in
PhilamCare Health Systems, Inc. (PhilamCare), representing 49.89% of the latter's outstanding capital stock.

In 2009, Philamlife, in a bid to divest itself of its interests in the health maintenance organization industry, offered to sell its
shareholdings in PhilamCare through competitive bidding. Petitioner's Class A shares were sold for USD 2,190,000, or PhP
104,259,330 based on the prevailing exchange rate at the time of the sale, to STI Investments, Inc., who emerged as the highest
bidder.

After the sale was completed and the necessary documentary stamp and capital gains taxes were paid, Philamlife filed an
application for a certificate authorizing registration/tax clearance with the BIR Large Taxpayers Service Division to facilitate the
transfer of the shares.

Months later, Philamlife was informed that it needed to secure a BIR ruling in connection with its application due to potential
donor’s tax liability. In compliance, petitioner requested a ruling to confirm that the sale was not subject to donor’s tax, pointing
out, in its request, the following:

a. That the transaction cannot attract donor’s tax liability since there was no donative intent and,ergo, no taxable
donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009;

b. That the shares were sold at their actual fair market value and at arm’s length;

c. That as long as the transaction conducted is at arm’s length––such that a bona fide business arrangement of the dealings
is done in the ordinary course of business––a sale for less than an adequate consideration is not subject to donor’s tax;
and

d. That donor’s tax does not apply to sale of shares sold in an open bidding process.

Respondent Commissioner on Internal Revenue denied Philamlife’s request through BIR Ruling No. 015-12. As determined by the
Commissioner, the selling price of the shares thus sold was lower than their book value based on the financial statements of
PhilamCare as of the end of 2008. As such, the Commissioner held, donor’s tax became imposable on the price difference
pursuant to Sec. 100 of the NIRC.

Furthermore, the Commissioner ruled that the difference between the book value and the selling price in the sales transaction is
taxable donation subject to a 30% donor’s tax under Section 99(B) of the NIRC. Respondent Commissioner likewise held that BIR
Ruling [DA-(DT-065) 715-09], on which petitioner anchored its claim, has already been revoked by Revenue Memorandum Circular
(RMC) No. 25-2011.

Aggrieved, petitioner requested respondent Secretary of Finance to review BIR Ruling No. 015-12, but to no avail. Not contented
with the adverse results, petitioner elevated the case to the CA to which it was dismissed.

ISSUE: Whether or not the price difference in petitioner’s adverted sale of shares inPhilamCare attracts donor’s tax.

RULING: YES. The price difference is subject to donor's tax.

Petitioner's substantive arguments are unavailing. The absence of donative intent, if that be the case, does not exempt the sales
of stock transaction from donor's tax since Sec. 100 of the NIRC categorically states that the amount by which the fair market
value of the property exceeded the value of the consideration shall be deemed a gift.Thus, even if there is no actual donation,
the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for determining the "fair
market value" of a sale of stocks. Such issuance was made pursuant to the Commissioner's power to interpret tax laws and to
promulgate rules and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied retroactively in
contravention to Sec. 246 of the NIRC.26 Instead, it merely called for the strict application of Sec. 100, which was already in force
the moment the NIRC was enacted.

Therefore, Philamlife is still liable for Donor’s Tax.

 4.1 RR NO. 12-2018
Section 13 of RR No. 12-2018, as amended

Section 13. Valuation of gifts made in property. - The valuation of gifts in the form of property shall follow the rules set forth in
Section 5 of these regulations: Provided, That the reckoning point for valuation shall be the date when the donation is made.

SECTION 5 OF RR NO. 12-2018

Section 5. Valuation of the Gross Estate. – The properties comprising the gross estate shall be valued according to their fair
market value as of the time of decedent’s death.

If the property is a real property, the appraised value thereof as of the time of death shall be, whichever is the higher of –

1. The fair market value as determined by the Commissioner, or

2. The fair market value as shown in the schedule of values fixed by the provincial and city assessors, whichever is higher.

For purposes of prescribing real property values, the Commissioner is authorized to divide the Philippines into different zones or
areas and shall, upon consultation with competent appraisers, both from the private and public sectors, determine the fair market
value of real properties located in each zone or area.

In case of shares of stocks, the fair market value shall depend on whether the shares are listed or unlisted in the stock exchanges.
Unlisted common shares are valued based on their book value while unlisted preferred shares are valued at par value. In
determining the book value of common shares, appraisal surplus shall not be considered as well as the value assigned to
preferred shares, if there are any. On this note, the valuation of unlisted shares shall be exempt from the provisions of RR No. 06-
2013, as amended.

For shares which are listed in the stock exchanges, the fair market value shall be the arithmetic mean between the highest and
lowest quotation at a date nearest the date of death, if none is available on the date of death itself.

The fair market value of units of participation in any association, recreation or amusement club (such as golf, polo, or similar
clubs), shall be the bid price nearest the date of death published in any newspaper or publication of general circulation.

To determine the value of the right to usufruct, use or habitation, as well as that of annuity, there shall be taken into account the
probable life of the beneficiary in accordance with the latest basic standard mortality table, to be approved by the Secretary of
Finance, upon recommendation of the Insurance Commissioner.
 5. TANG HO VS. BOARD OF ASSESSMENT APPEALS & CIR
G.R. No. L-5949 | November 19, 1955.

DOCTRINE: Under the old Civil Code, a donation by the husband alone does not become in law a donation by both spouses merely
because it involves property of the conjugal partnership. A donation of property belonging to the conjugal partnership, made
during its existence, by the husband alone in favor of the common children, is taxable to him exclusively as sole donor.

FACTS: Li SengGiap (who died during the pendency of this appeal) and his wife Tang Ho and their thirteen children appear to be
the stockholder of two close family corporations named Li SengGiap& Sons, Inc. and Li SengGiap& Co. The examiners of the
Bureau of Internal Revenue found that each of Li SengGiap's 13 children had a total investment therein of approximately
P63,195.00, in shares issued to them by their father Li SengGiap.

The Collector of Internal Revenue regarded these transfers as undeclared gifts made in the respective years, and assessed against
Li SengGiap and his children donor's and donee's taxes in the total amount of P76,995.31, including penalties, surcharges,
interests, and compromise fee due to the delayed payment of the taxes.

The petitioners paid the sum of P53,434.50, representing the amount of the basic taxes, and put up a surety bond to guarantee
payment of the balance demanded. And on June 25, 1951, they requested the Collector of Internal Revenue for a revision of their
tax assessments, alleging that the children's stockholding in the two family corporations were purchased by them with savings
from the aforesaid cash donations received from their parents.

Claiming the benefit of gift tax exemptions (under section 110 and 112 of the Internal Revenue Code) at the rate of P2,000 a year
for each donation, plus P10,000 for each gift propter nuptias made by either parent, and appellants' aggregate tax liability,
according to their returns, would only be P4,599.94 for the year 1949, and P228.28 for the year 1950, or a total of P4,838.22 The
Collector refused to revise his original assessments.

ISSUE 1: Whether or not the dates and amounts of the donations taxable against petitioners were as found by the Collector of
Internal Revenue from the books of the corporations Li SengGiap& Sons, Inc. and Li SengGiap& Co., or as set forth in petitioners'
gift tax returns. YES.

RULING 1: The CIR is affirmed. The filing of the gift tax returns only after assessments and part payment of the taxes demanded by
the Collector, and the lack of corroboration of the alleged donations in cash, amply justify the Tax Board's distrust of the veracity
of the appellants' belated tax returns "on or before the first of March following the close of the calendar year" when the gifts
were made. Any other view would leave the collection of taxes at the mercy of explanations concocted ex post facto by evading
taxpayers, drafted to suit any facts disclosed upon investigation, and safe from contradiction because the passing years have
erased all trace of the truth.

ISSUE 2: Whether or not the donations made by petitioner Li SengGiap to his children from the conjugal property should be taxed
against husband and wife. NO.

RULING 2: Under the Old Civil Code, to be a donation by both spouses, taxable to both, the wife must expressly join the husband
in making the gift; her participation therein cannot be implied. The consequence of the husband's legal power to donate
community property is that, where made by the husband alone, the donation is taxable as his own exclusive act.

ISSUE 3: Whether or not petitioners should be allowed the tax deduction claimed by them. NO.

RULING 3: Only one exemption or deduction (from their father) can be claimed for every such gift, and not two, as claimed by
appellants herein.
 CASES ON VAT TAX

1. EXECUTIVE ORDER 273, JULY 25, 1987

ADOPTING A VALUE-ADDED TAX, AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL
REVENUE CODE, AND FOR OTHER PURPOSES

WHEREAS, there is a need to rationalize the present system of taxing goods and services by imposing a multi-stage value-added
tax to replace the tax on original and subsequent sales tax and percentage tax or certain services;

WHEREAS, the adoption of value-added tax is one of the structural reforms provided in the 1986 Tax Reform Program which is
designed to simplify tax administration and make the tax system more equitable; and

WHEREAS, it is also necessary to amend, revise and renumber the provisions of the National Internal Revenue Code and to
transfer the collection of certain taxes as a consequence of these and previous amendments in order to strengthen and improve
tax administration and facilitate compliance thereof;

NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do hereby order:

Sec. 1. The provisions of Title IV governing excise taxes are hereby transferred to Title VI and replaced with new provisions
imposing a value-added tax to read as follows:

"TITLE VI. VALUE-ADDED TAX

"Chapter 1. IMPOSITION OF TAX

"Sec. 99. Persons liable. Any person who, in the course of trade or business, sells, barters or exchanges goods, renders services, or
engages in similar transactions and any person who imports goods shall be subject to the value-added tax (VAT) imposed in
Sections 100 to 102 of this Code.

"Sec. 100. Value-added tax on sale of goods. (a) Rate and base of tax. There shall be levied, assessed and collected on every sale,
barter, or exchange of goods, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods
sold, bartered or exchanged, such tax to paid by the seller or transferor: Provided, That the following sales by VAT-registered
persons shall be subject to 0%:

"(1) export sales; and

"(2) sales to persons or entities whose exemption under or special laws or international agreements to which the Philippines is a
signatory effectively subjects such sales to zero rate.

"'Export sales' means the sale and shipment or exportation of goods in the Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so
exported, or foreign currency denominated sales. 'Foreign currency denominated sales' means sales to nonresidents of goods
assembled or manufactured in the Philippines, for delivery to residents in the Philippines and paid for in convertible foreign
currency remitted through the banking system in the Philippines.

"(b) Transactions deemed sale. The following transactions shall be deemed sale:

"(1) Transfer, use or consumption not in the course of business of goods originally intended for sale or for use in the course of
business.
"(2) Distribution or transfer to:

"(A) shareholders or investors as share in the profits of the VAT-registered person; or

"(B) creditors in payment of debt.

"(3) Consignment of goods if actual sale is not made within 60 days from the date such goods were consigned.

"(4) Retirement from or cessation of business, with respect to inventories or taxable goods existing as of such retirement or
cessation.

"(c) Changes in or cessation of status of a VAT-registered person. The tax imposed in paragraph (a) in this section shall also apply
to goods disposed of or existing as of a certain date if under circumstances to be prescribed in Regulations to be promulgated by
the Secretary of Finance, the status of a person as a VAT-registered person changes or is terminated.

"(1) Determination of the tax. (1) Tax billed as a separate item in the invoice. If the tax is billed as a separate item in the invoice,
the tax shall be based on the gross selling price, excluding the tax. 'Gross selling price' means the total amount of the money or its
equivalent which the purchasers pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of goods,
excluding the value-added tax. The excise tax, if any, on such goods shall form part of the gross selling price.

"(2) Tax not billed separately or is billed erroneously in the invoice. In case tax is not billed separately or billed erroneously in the
invoice, the tax shall be determined by multiplying the gross selling price, including the amount intended by the seller to cover the
tax or the billed erroneously, by the factor 1/11 or such factor as may be prescribed by regulations in case of persons partially
exempt under special laws.

"(3) Sales, returns, allowances and sales discounts. The value of goods sold and subsequently returned or for which allowances
were granted by a VAT-registered person may be deducted from the gross sales or receipts for the quarter in which a refund is
made or a credit memorandum or refund is issued. Sales discounts granted and indicated in the invoice at the time of sale may be
excluded from the gross sales within the same quarter.

"(4) Authority of the Commissioner to determine the appropriate tax base. The Commissioner shall, by regulations, determine the
appropriate tax base in cases where a transaction is deemed a sale, barter or exchange of goods under paragraph (b) hereof, or
where the gross selling price is unreasonably lower than the actual market value.

"Sec. 101. Value-added tax on importation of goods. (a) In general. There shall be levied, assessed and collected on every
importation of goods a value-added tax equivalent to 10% based on the total value used by the Bureau of Customs in determining
tariff and customs duties, plus customs duties excise taxes, if any, and other charges, such tax to be paid by the importer prior to
the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the
quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise tax, if any.

"(b) Transfer of goods by tax exempt persons. In the case of tax-free importation of goods into the Philippines by persons entities,
or agencies exempt from tax where such goods are subsequently sold, transferred or exchanged in the Philippines to non-exempt
persons or entities, the purchasers, transferees or recipients shall be considered the importers thereof who shall be liable for any
internal revenue tax on such importation. The tax due on such importation shall constitute a lien on the goods superior to all
charges or liens on the goods, irrespective of the possessor thereof.

"Sec. 102. Value-added tax on sale of services. (a) Rate and base of tax. There shall be levied, assessed and collected, a value-
added tax equivalent to 10% percent of gross receipt derived by any person engaged in the sale of services. The phrase 'sale of
services' means of performance of all kinds of services for others for a fee, renumeration or consideration, including those
performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers;
lessors of personal property; lessors or distributors of cinematographic films; persons engaged in milling, processing ,
manufacturing or repacking goods for others; and similar services, regardless of whether or not the performance thereof calls for
the exercise or use of the physical or mental faculties: Provided, That the following services performed in the Philippines by VAT-
registered persons shall be subject to 0%.

"(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in acceptable foreign currency, inwardly remitted to the Philippines and
accounted for in accordance with the rules and regulations of the Central Bank of the Philippines.

"(2) Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid for in acceptable
foreign currency which is remitted inwardly to the Philippines and accounted for in accordance with the rules and regulations of
the Central Bank of the Philippines.

"(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such services to zero rate.

" 'Gross receipts' means the total amount of money or its equivalent representing the contract price, compensation of service fee,
including the amount charged for materials supplied with the services and deposits of advance payments actually or
constructively receive during the taxable quarter for the services performed or to be performed for another person, excluding the
value-added tax.

"(b) Determination of the tax. (1) Tax billed as a separate item in the invoice. If the tax is billed as a separate item in the invoice,
then tax shall be based on the gross receipt, excluding the tax.

"(2) Tax not billed separately or is billed erroneously in the invoice. If the tax is not billed separately or is billed erroneously in the
invoice, the tax shall be determined by multiplying the gross receipts (including the amount intended to cover the tax or the tax
billed erroneously) by 1/11.

"Sec. 103. Exempt Transactions. The following shall be exempt from the value-added tax;

"(a) Sale of non-food agricultural, marine and forest products in their original state by the primary producer or the owner of the
land where the same are produced.

"(b) Sale or importation in their original state of agricultural and marine food products; livestock and poultry of a kind generally
used as, or yielding or producing food for human consumption; and breeding stock and genetic materials therefor.

"Products classified under this Paragraph and paragraph (a) shall be considered in their original state even if they undergone the
simple processes of preparation or preservation for the market, such as freezing, drying, salting, smoking or stripping. Polished
and/or husked rice, corn grits and raw cane sugar shall be considered in their original state for purposes of this paragraph.

"(c) Sale or importation of fertilizers, pesticides and herbicides; chemicals for the formulation of pesticides; seeds, seedlings and
fingerlings; fish, animal and poultry feeds; and soya bean and fish meals;

"(d) Sale or importation of petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to
excise tax imposed under Title VI;

"(e) Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products
(except lubricating oil and grease) subject to excise tax;

"(f) Printing, publication, importation or sale of books and any newspaper, magazine, review or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of advertisements;

"(g) Importation of passenger and/or cargo vessel of more than ten thousand tons, whether coastwise or ocean-going, including
engine and spare parts of said vessel, to be used by the importer himself as operator thereof;

"(h) Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-
resident citizens coming to settle in the Philippines: Provided, That such goods are exempt from customs duty under the Tariff and
Customs Code of the Philippines;

"(i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects
(except any vehicle, vessel, aircraft, machinery, other goods for use in manufacture and merchandise or any kind in commercial
quantity) belonging to persons coming to settle for the first time in the Philippines, for their own use and not for sale, barter or
exchange, accompanying such persons, or arriving within ninety days before and after their arrival, upon the production of
evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines
and that the change of residence is bona fide;

"(j) Services rendered by persons subject to percentage tax under Title V;

"(k) Services by agricultural contract growers and milling for others of palay into rice, corn into grits or sugar cane into raw sugar;

"(l) Medical, dental, hospital and veterinary services;

"(m) Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture
and Sports, and those rendered by government educational institution;

"(n) Sale by the artist himself of his works of art, literary works, musical compositions and similar creations, or his services
performed for the production of such works;

"(o) Services performed as actors or actresses, talents, singers and emcees; radio and television broadcasters, choreographers;
musical, radio, movie, television and stage directors;

"(p) Services performed as professional athletes;

"(q) Leasing of real property;

"(r) Services performed in the exercise of profession or calling (except customs brokers) subject to the occupation tax under the
Local Tax Code, and professional services performed by registered general professional partnerships;

"(s) Services rendered by individuals pursuant to an employer-employee relationship;

"(t) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as
supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and
do not earn or derive income from the Philippines;

"(u) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory;

"(v) Export sales by persons who are not VAT-registered; and

"(w) Sales and/or services performed by persons other than those mentioned in the preceding paragraphs whose annual gross
sales and/or receipts do not exceed the amount prescribed in regulations to be promulgated by the Secretary of Finance which
shall not be less than P100,000 or higher than P500,000.

"Sec. 104. Tax Credits. (a) Creditable input tax. Any input tax on the

(1) purchase or importation of goods:

"(A) for sale or for conversion into or intended to form part of a finished products for sale or for use in the course of business; or
sale or for use in the course of business; or

"(B) for use as supplies in the course of business; or

"(C) for use as materials supplied in the sale or service; or

"(D) for use in trade or business for which deduction for depreciation is allowed under Section 29(f) of this Code; and

(2) service performed by a VAT-registered person which shall be credited against the output tax payable by the VAT-registered
person: Provided, That in the case of domestic purchase of goods or services, the invoice or receipt was issued therefore by a VAT-
registered person in a manner prescribed in Section 108.

"A VAT-registered person who is also engaged in transactions not subject to the value added tax shall be allowed tax credit as
follows:

"(A) Total input tax which can be directly attributed to transactions subject to value-added tax; and

"(B) A ratable portion of any input tax which cannot be directly attributed to either activity.

" 'Input tax' means the value-added tax paid by a VAT-registered person in the course of his trade or business on importation of
goods or local purchases of goods or services from a VAT-registered person. It shall also include the transitional input tax
determined in accordance with Section 105 of this Code and other transitional input taxes as prescribed by regulations.

"In case tax exempt products of a pioneer enterprise registered with the BOI as of August 1, 1986 are sold domestically to value-
added tax registered person, the value-added tax otherwise due on such products shall also be considered as input tax creditable
against his output tax payable.

"The term 'output tax' means the value-added tax due on the sale of taxable goods or services by any person registered or
required to register under Section 107 of this Code.

"(b) Excess output or input tax. If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid
by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or
quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his
own option be refunded or credited against other internal revenue taxes, subject to the provisions of Sec. 106.

"Sec. 105. Transitional input tax credits. A person who becomes liable to value-added tax or any person who elects to be a VAT-
registered person shall, subject to the filing of an inventory as prescribed by regulations, be allowed input tax on his beginning
inventory of goods, materials and supplies equivalent to 8% of the value of such inventory or the actual value-added tax paid on
such goods, materials and supplies, whichever is higher, which shall be credible against the output tax.

"Sec. 106. Refunds or tax credits of input tax. (a) Export Sales. An exporter who is a VAT-registered person may, within two years
from the date of exportation, apply for the issuance of a tax credit certificate or refund of the input tax attributable to the goods
exported, to the extent that such input tax has been applied to output tax and upon presentation of proof that the foreign
exchange proceeds has been accounted for in accordance with the regulations of the Central Bank of the Philippines.

"(b) Zero-rated or effectively zero-rated sales. Any person, except those covered by paragraph (a) above, whose sales are zero-
rated or are effectively zero-rated may, within two years after the close of the quarter when such sales were made, apply for the
issuance of a tax credit certificate or refund of the input taxes attributable to such sales to the extent that such input tax has not
been applied against output tax.

"(c) Capital goods. A VAT-registered person may apply for the issuance of the tax credit certificate or refund of input taxes paid on
capital goods imported or locally purchased, to the extent that such input tax has not been applied against output taxes. The
application for refund may be made only after the expiration of two succeeding quarters following the quarter in which the
importation or local purchase was made: Provided, That a VAT- registered person who is just commencing business may apply for
refund of input taxes under this paragraph not earlier than 180 days from the date of registration or actual start of business
operations, whichever comes later: Provided, however, That the application is filed not later than two (2) years from the date
herein prescribed.

"(d) Cancellation of VAT registration. A person whose registration has been cancelled due to retirement from or cessation of
business, or due to changes in or cessation of status under Section 100 (c) of this Code may, within 2 years form the date of
cancellation, apply for the issuance of a tax credit certificate for any unused input tax which he may use in payment of his other
internal revenue taxes.

"(e) Period within which refund or input taxes may be made by the Commissioner. The Commissioner shall refund input taxes
within 60 days from the date the application for refund was filed with him or his duty authorized representative. No refund or
input taxes shall be allowed unless the VAT-registered person files an application for refund within the period prescribed in
paragraphs (a), (b) and (c), as the case may be.

(f) Manner of giving refund. Refunds shall be made upon warrants drawn by the Commissioner or by his duly authorized
representative without the necessity of being counter-signed by the Chairman, Commission on Audit, the provisions of the
Revised Administrative Code to the contrary not withstanding: Provided, That refunds under this paragraph shall be subject to
post audit by the Commission on Audit.

Chapter 2. COMPLIANCE REQUIREMENTS

"Sec. 107. Registration of value-added taxpayers. (a) In general. Any person subject to a value-added tax under Sections 100 and
102 of this Code shall register with the appropriate Revenue District Officer. A person who maintains a head or a main office and
branches in different places shall register with the revenue district office which has jurisdiction over the place where the main or
head office is located.

"(b) Persons commencing a business. Any person who expects to realize gross sales or receipts subject to value-added tax in
excess of the amount prescribed by the Secretary of Finance for the next 12-month period from the commencement of the
business, shall, within 30 days before the start of the said business, register with the Revenue District Officer who has jurisdiction
over his principal place of business.

"(c) Persons becoming liable to value-added tax. Any person whose gross sales or receipts in any 12-month period exceeds the
amount prescribed by regulations for exemption from value-added tax shall register within 30 days after the end of the last month
of that period, and shall be liable to the value-added tax commencing from the first day of the month following his registration.

"(d) Optional registration of exempt person. Any person whose transactions are exempt from value-added tax under Section 103
(a), (b), (c), (f), and (w) of this Code, may apply for registration as a VAT-registered person not later than 10 days before the
beginning of a taxable quarter.

"A VAT-registered person who is, at the same time, engaged in activities exempted under Section 103 (a), (b), (c), and (f) of this
Code may register any or all of his exempt activities within the same period provided for in this paragraph.

"In any case, the Commissioner may, for administrative reasons, deny any application for registration.

"For purposes of this Title, any person registered in accordance with the provisions of this section shall be referred to as a 'VAT-
registered person'. Each VAT-registered person shall be assigned only one registration number.

"(e) Cancellation of Registration. The registration of any person who ceases to be liable to value-added tax shall be cancelled by
the Commissioner upon filing of an application for cancellation of registration. Any person who opted to be registered under
paragraph (d) of this section may, under regulations of the Secretary of Finance, apply for cancellation of such registration.

"Sec. 108. Invoicing and accounting requirements for VAT-registered persons. (a) Invoicing requirements. A VAT-registered person
shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 238, the following
information shall be indicated in the invoice or receipt:

"(1) The VAT registration number.

"(2) If the seller bills the tax as a separate item in the invoice:

"(A) the amount of gross selling price or gross receipts on which the value-added tax is based;

"(B) the amount of value added tax determined by multiplying the amount of gross selling price or gross receipts by the rate of
tax; and

"(C) the sum of (i) the gross selling price or gross receipts and (ii) the value-added tax which the purchaser pays or is obligated to
pay to the vendor.

"(3) If the seller elects not to bill the tax as a separate item in the invoice or receipt, the total amount charged against the buyer.

"(b) Accounting requirements. Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under
Sections 100 and 102 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and
subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such
information as may be required by the Secretary of Finance.

"Sec. 109. Notification requirements. (a) Change of place of business. It shall be the duty of every VAT-registered person to file a
notice of change of his principal place of business or any of his branches or offices. Such notification shall be filed within 15 days
from the date of such date with the Revenue District Officers who has jurisdiction of his former and new place of business.

"(b) Other changes. Any person registered in accordance with Section 107 shall notify the Revenue District Officer of the change or
termination of his status as a VAT-registered person.

"Sec. 110. Return and payment of value-added tax. (a) Where to file the return and pay the tax. Every person subject to value-
added tax shall file a quarterly return of his gross sales or receipts and pay the tax due thereon to a bank duly accredited by the
Commissioner located in the revenue district where such person is registered or required to be registered. However, in due shall
be paid to any duly accredited agent banks within the city or municipality the return shall be filed and any amount due shall be
paid to any duly accredited bank within the district, or to the Revenue District Officer, Collection Agent or duly authorized
Treasurer of the city or municipality where such taxpayer has his principal place of business. Only one consolidated return shall be
filed by the taxpayer for all the branches and lines of business subject to value-added tax. If no tax is payable because the amount
of input tax and any amount authorized to be offset against the output tax is equal to or is in excess of the output tax due on the
return, the taxpayer shall file the return with the Revenue District Officer, Collection Agent or authorized municipal treasurer
where the taxpayer's principal place of business is located.

"(b) Time for filing of return and payment of tax. The return shall be filed and the tax paid within 20 days following the end of each
quarter specifically prescribed for a VAT-registered person under regulations to be promulgated by the Secretary of Finance:
Provided, however, That any person whose registration is cancelled in accordance with paragraph (e) of Section 107 shall file a
return within 20 days from the cancellation of such registration.

"(c) Initial returns. The Commissioner may prescribe an initial taxable period for any VAT- registered person for his first return,
which in no case shall exceed 5 months.

"Sec. 111. Power of the Commissioner to suspend the business operations of a taxpayer. The Commissioner or his authorized
representative is hereby empowered to suspend the business operations and temporarily close the business establishment of any
person for any of the following violations:

"(a) In the case of a VAT-registered person.

"(1) Failure to issue receipts or invoices.

"(2) Failure to file a value-added tax return as required under Section 110.

"(3) Understatement of taxable sales or receipts by 30% or more of his correct taxable sales or receipt for the taxable quarter.

"(b) Failure of any person to register as required under Section 107.

"The temporary closure of the establishment shall be for a duration of not less than five(5) days and shall be lifted only upon
compliance with whatever requirements prescribed by the Commissioner in the closure order."

"Sec. 2. A new section, to be known as Section 112 of the National Internal Revenue Code, is hereby provided under Title V
imposing a percentage tax on persons exempt from a value-added tax to read as follows:

"Sec. 112. Tax on persons exempt from value-added tax (VAT). Any persons whose sales or receipts are exempt under Section 103
(w) of this Code from payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to two (2)
percent of his gross quarterly sales or receipts."

Sec. 3. Section 6 of the National Internal Revenue Code is hereby amended to read as follows:

"Sec. 6. Agents and deputies for collection of national internal revenue taxes. The following are hereby constituted agents of the
Commissioner of Internal Revenue:

"(a) The Commissioner of Customs and his subordinates with respect to the collection of national internal revenue taxes on
imported goods;

"(b) The head of the appropriate government office and his subordinates with respect to the collection of energy tax; and

"(c) Banks duly accredited by the Commissioner with respect to receipt of payments of internal revenue taxes authorized to be
made thru banks.

"Any officer or employee of duly accredited bank assigned to receive internal revenue tax payments and transmit tax returns or
documents to the Bureau of Internal Revenue shall be subject to the same sanctions and penalties prescribed in Sections 268 and
269 of this Code."

Sec. 4. Section 16 of the National Internal Revenue Code is hereby amended to read as follows:

"Sec. 16. Power of the Commissioner to make assessment and prescribed additional requirements for tax administration or
enforcement.

"(a) Examination of returns and determination of tax. After a return is filed as required under the provisions of this Code, the
Commissioner shall examine it and assess the correct amount of tax. The tax or deficiency tax so assessed shall be paid upon
notice and demand from the Commissioner. Any return, statement or declaration filed in any office authorized to receive the
same shall not be withdrawn: Provided, That the same may be modified or changed by filing an amended return, statement or
declaration.

"(b) Failure to submit required returns, statements, reports and other documents. When a report required by law as a basis for
the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation or when
there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax on
the best evidence obtainable.

"In case a person fails to file a required return or other document at the time prescribed by law, or willfully or otherwise files a
false or fraudulent return or other document, the Commissioner shall make or amend the return from his own knowledge and
from such information as he can obtain through testimony or otherwise, which testimony or otherwise, which shall be prima facie
correct and sufficient for all legal purposes.

"(c) Authority to conduct inventory-taking, surveillance and to describe presumptive gross sales and receipts. The Commissioner
may, at any time during the taxable year, order an inventory-taking of goods of any taxpayer as a basis for determining his internal
revenue tax liabilities, or may place the business operations of any person, natural or juridical, under observation or surveillance if
there is reason to believe that such person is not declaring his correct income, sales or receipts for internal revenue tax purposes.
The findings may be used as the basis for assessing the taxes for the other months or quarters of the same or different taxable
years and such assessment shall be deemed prima facie correct.

"When it is found that a person has failed to issue receipts and invoices in violation of the requirements of Sections 108 and 238
of this Code, or when there is reason to believe that the books of accounts or other records do not correctly reflect the
declaration made or to be made in the return required to be filed under the provisions of this Code, the Commissioner, after
taking into account the sales, receipts, income or other taxable base of other persons engaged in similar businesses under similar
situations or circumstances or after considering other relevant information, may prescribe a minimum amount of such gross
receipts, sales, and taxable base and such amount so prescribed shall be prima facie correct for purposes of determining the
internal revenue tax liabilities of such person.

"(d) Authority to terminate taxable period. When it shall come to the knowledge of the Commissioner that a taxpayer is retiring
from any business subject to tax or intends to leave the Philippines, or remove his property therefrom, or hide or conceal his
property, or perform any act tending to obstruct the proceedings for the collection of the tax for the past or current quarter or
year, or render the same totally or partly ineffective unless such proceedings are begun immediately, the Commissioner shall
declare the tax period of such taxpayer terminated at any time and shall send the taxpayer a notice of such decision, together
with a request for the immediate payment of the tax for the period so declared terminated and the tax for the preceding year or
quarter or such portion thereof as may be unpaid, and said taxes shall be due and payable immediately and shall be subject to all
the penalties hereafter prescribed, unless paid within the time fixed in the demand made by the Commissioner.

"(e) Authority of the Commissioner to prescribe real property values. The Commissioner is hereby authorized to divide the
Philippines into different zones or areas and shall, upon consultation with competent appraisers both from the private and public
sectors, determine the fair market value of real properties located in each zone or area. For purposes of computing any internal
revenue tax, the value of the property shall be whichever is the higher of:

"(1) the fair market value as determined by the Commissioner; or

"(2) the fair market value as shown in the schedule of the values of the Provincial and City Assessors.

"(f) Authority of the Commissioner to inquire into bank deposit accounts. The provisions of Republic Act No. 1405 to the contrary
notwithstanding, the Commissioner is hereby authorized to inquire into the bank deposits of a decedent for the purpose of
determining the gross estate of such decedent.

"In case a taxpayer offers to compromise the payment of his tax liabilities on the ground that his financial position demonstrates a
clear inability to pay the tax assessed, his offer shall not be considered unless he waives his privilege under the said law and such
waiver shall serve as authority of the Commissioner to inquire into the bank deposits of said taxpayer.

"(g) Authority to accredit and register tax agents. The Commissioner may require prior accreditation and registration, based on
competence and moral fitness, of persons and general professional partnerships or their representatives in the preparations and
lading of required tax returns, statements, reports, memoranda, or in appearing or in filing protests or papers with the Bureau for
the taxpayers. For this purpose, the Commissioner is empowered to create national and regional accreditation boards, to
designate from among the ranks of senior officials of the Bureau, one chairman and two members in each board and to issue the
necessary rules and regulations subject to the approval of the Secretary of Finance.

"(h) Authority of the Commissioner to prescribe additional procedural or documentary requirements. The Commissioner may
prescribe the manner of compliance with any documentary or procedural requirements in connection with the submission or
preparation of financial statements accompanying the tax returns."

Sec. 5. Section 226 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 122. Tax on agents of foreign insurance companies. Every fire, marine, or miscellaneous insurance agent authorized under
the Insurance Code to procure policies of insurance as he may have previously been legally authorized to transact on risks located
in the Philippines for companies not authorized to transact business in the Philippines shall pay a tax equal to twice the tax
imposed in Section 121: Provided, That the provisions of this section shall not apply to reinsurance: Provided, however, That the
provisions of this section shall not affect the right of an owner of property to apply for and obtain for himself policies in foreign
companies in cases where said owner does not make use of the services of any agent, company or corporation residing or doing
business in the Philippines. In all cases where owners of property obtain insurance directly with foreign companies, it shall be the
duty of said owners to report to the Insurance Commissioner and to the Commissioner of Internal Revenue each case where
insurance has been so effected, and shall pay the tax of five per cent on premiums paid, in the manner required by Section 121."

Sec. 6. Section 162 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 125. Returns and payment of percentage taxes. (a) Return of gross sales, receipts or earnings and payment of tax.

"(1) Persons liable to pay percentage taxes. Every person subject to the percentage taxes imposed under this Title shall file a
quarterly return of the amount of his gross sales, receipts, or earnings and pay the tax due thereon within 20 days after the end of
each taxable quarter. Provided, That in the case of a person whose VAT-registration is cancelled and who becomes liable to the
tax imposed in Section 112 of this Code, the tax shall accrue from the date of cancellation and shall be paid in accordance with
provisions of this Section.

"(2) Person retiring from business. Any person retiring from a business subject to percentage tax shall notify the nearest internal
revenue officer, file his return and pay the tax due thereon within twenty days after closing his business.

"(3) Exceptions. The Commissioner may, by regulations prescribe:

"(A) The time for filing the return at intervals other than the time prescribed in the preceding paragraphs for a particular class or
classes of taxpayers after considering such factors as volume of sales, financial condition, adequate measures of security; and such
other relevant information required to be submitted under the pertinent provisions of this Code; and

"(B) The manner and time of payment of percentage taxes other than as hereinabove prescribed, including a scheme of tax
prepayment.

"(4) Determination of correct sales or receipts. When it is found that a person has failed to issue receipts or invoices, or when no
return is filed, or when there is reason to believe that the books of accounts or other records do not correctly reflect the
declarations made or to be made in a return required to be filed under the provisions of this Code, the Commissioner, after taking
into account the sales, receipts or other taxable base of other persons engaged in similar business under similar situations or
circumstances, or after considering other relevant information, may prescribe a minimum amount of such gross receipts, sales and
taxable base and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax
liabilities of such person.

"(b) Where to file. Every person liable to the percentage tax under this Title may, at his option, file a separate return for each
branch or place of business or a consolidated return for all branches or places of business with the Revenue District Officer,
Collection agent or duly authorized Treasurer of the City or Municipality where said business or principal place of business is
located, as the case may be."

Sec. 7. Section 109 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 126. Goods subject to excise taxes. Excise taxes apply to goods manufactured or produced in the Philippines for domestic
sale or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the
value-added tax imposed under Title IV.

"For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of
measurement shall be referred to as specific tax and an excise tax herein imposed and based on selling price or other specified
value of the good shall be referred to as `ad valorem tax'"

Sec. 8. Section 110 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 127. Payment of excise taxes on domestic products. (a) Person liable; time for payment. Unless otherwise especially allowed,
excise taxes on domestic products shall be paid by the manufacturer or producer before removal from the place of production:
Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 145
and 151 (a) (4), respectively, of this Title shall be paid within 15 days from the date of removal thereof from the place of
production. Should domestic products be removed from the place of production without the payment of the tax, the owner or
person having possession thereof shall be liable for the tax due thereon.

"(b) Determination of gross selling price of goods subject to ad valorem tax. Unless otherwise provided, the price, excluding the
value-added tax, at which the goods are sold at wholesale in the place of production or through their sales agents to the public
shall constitute the gross selling price. If the manufacturer also sells or allows such goods to be sold at wholesale in another
establishment of which he is the owner or in the profits at which he has an interest, the wholesale price in such establishment
shall constitute the gross selling price. Should such price be less than the cost of manufacture plus expenses incurred until the
goods are finally sold, then a proportionate margin of profit, not less than 10% of such manufacturing cost and expenses, shall be
added to constitute the gross selling price.

"(c) Manufacturer's or producer's sworn statement. Every manufacturer or producer of goods or products subject to excise taxes
shall file with the Commissioner on the date or dates designated by the latter and as often as may be required, a sworn statement
showing among other information, the different goods or products manufactured or produced and their corresponding gross
selling price or market value, together with the cost of manufacture or production plus expenses incurred or to be incurred until
the goods or products are finally sold.

"(d) Credit for excise tax on goods actually exported. When goods locally produced or manufactured are removed or actually
exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any
manufactured goods as products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual
exportation and upon receipt of corresponding foreign exchange payment: Provided, That the excise tax on mineral products,
except coal and coke, imposed under Section 151, shall not be creditable or refundable even if the mineral products are actually
exported."

Sec. 9. Section 121 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 138. Distilled spirits. On distilled spirits, there shall be collected, subject to the provisions of Section 130 of this Code, specific
taxes as follows:

"(a) If produced from sap of nipa, coconut, cassava, camote or buri palm or from the juice, syrup or sugar of the cane, provided
such materials are produced commercially in the country where they are processed into distilled spirits, per proof liter three pesos
and twenty centavos: Provided, That if produced in a pot still or other similar primary distilling apparatus by a distiller producing
not more than 100 liters a day, containing not more than fifty percent of alcohol by volume, per proof liter one peso;

"(b) If produced from raw materials other than those enumerated in the preceding paragraph, per proof liter, twenty-five pesos;
and

"(c) Medicinal preparations, flavoring extracts, and all other preparations, except toilet preparations, of which, excluding water,
distilled spirits form the chief ingredient, shall be subject to the same tax as such chief ingredient.

"This tax shall be proportionally increased for any strength of the spirits taxed over proof spirits, and the tax shall attach to this
substance as soon as it is in existence as such, whether it be subsequently separated as pure or impure spirits, or transformed into
any other substance either in the process of original production or by any subsequent process.

" 'Spirits or distilled spirits' is the substance known as ethyl alcohol, ethanol or spirit of wine, including all dilutions, purifications
and mixtures thereof, from whatever sources by whatever process produced and shall include whisky, brandy, rum, gin and
vodka, and other similar products or mixtures.

" 'Proof spirits' is liquor containing 1/2 of its volume of alcohol of a specific gravity of seven thousand nine hundred and thirty-nine
ten thousand (0.7939) at fifteen degrees centigrade. A proof liter means a liter of proof spirits."

Sec. 10. Section 123 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 139. Wines. On wines, there shall be collected per liter of volume capacity, the following taxes;

"(a) Sparkling wines regardless of proof, sixteen pesos;

"(b) Still wines containing fourteen percent of alcohol by volume or less, one peso and;

"(c) Still wines containing more than fourteen percent of alcohol by volume, four pesos.

"Fortified wines containing more than twenty-five percent of alcohol by volume shall be taxed as distilled spirits. Fortified wines
shall mean natural wines to which distilled spirits are added to increase their alcohol strength."

Sec. 11. Section 124 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 140. Fermented liquor. There shall be levied, assessed and collected an ad valorem tax equivalent to thirty-seven percent
(37%) of the brewer's wholesale price, excluding the ad valorem tax imposed under this section and the value added tax imposed
under Title IV, on beer, lager beer, ale, porter and other fermented liquors except tuba, basi, tapuy and similar domestic
fermented liquors, but in no case shall the sum total of the ad valorem tax and value-added tax be less than P1.00 per regular 320
ml. bottle."

Sec. 12. Section 126 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 142. Cigar and cigarettes (a) Cigars. There shall be levied, assessed and collected on cigars an ad valorem tax of five percent
(5%) of the manufacturer's or importer's registered wholesale price.

"(b) Cigarettes packed in thirties. There shall be levied, assessed and collected on cigarettes packed on thirties an ad valorem tax
of fifteen percent (15%) of the manufacturer's registered wholesale price.

"(c) Cigarettes packed in twenties. There shall be levied, assessed and collected on cigarettes packed on twenties an ad valorem
tax at the rates prescribed below based on the manufacturer's registered wholesale price:

"(1) On locally manufactured cigarettes bearing a foreign brand, fifty percent (50%): Provided, That this rate shall apply regardless
of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer.
Whenever it has to be determined whether or not the cigarette bears a foreign brand, the listing of brands manufactured in
foreign countries appearing in the current World Tobacco Directory shall govern.

"(2) On other locally manufactured cigarettes, forty percent (40%).

"Duly registered or existing brands of cigarettes packed in twenties shall not be allowed to be packed in thirties.

"When the existing registered wholesale price, including tax, of cigarettes packed in twenties does not exceed P3.60 per pack the
rate for cigarettes packed in thirties shall apply.

"(d) Imported cigarettes. If the cigarettes are of foreign manufacture, regardless of the contents per pack there shall be levied,
assessed and collected an ad valorem tax of sixty-five percent (65%) of the importer wholesale price.

"For the purpose of this section, `manufacturer's or importer's registered wholesale price' shall include the ad valorem tax
imposed in paragraphs (a), (b), (c) or (d) hereof and the amount intended to cover the value-added tax imposed under Title IV of
this Code."

Sec. 13. Section 129 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 145. Manufactured oils and other fuels. There shall be collected on refined and manufactured mineral oils and motor fuels,
the following excise taxes which shall attach to the goods hereunder enumerated as soon as they are in existence as such:

"(a) For products subject to specific tax only:

"(1) Lubricating oils and greases including not limited to basestock for lube oils and greases, high vacuum distillates, aromatic
extracts and other similar preparations, and additives for lubricating oils and greases whether such additives are petroleum based
or not, per liter of volume or capacity, four pesos and fifty centavos (P4.50): Provided, however, That the excise taxes paid on the
purchased feedstock (bunker) used in the manufacture of exciseable articles and forming part thereof shall be credited against the
excise tax due therefrom: Provided, further, That lubricating oils and greases produced from basestocks and additives on which
the specific tax has already been paid, shall no longer be subject to specific tax;

"(2) Processed gas, per liter of volume capacity, five centavos;

"(3) Waxes and petrolatum per kilogram, three pesos and fifty centavos; and

"(4) On denatured alcohol to be used for motive power, per liter of volume capacity, five centavos: Provided, That unless
otherwise provided by special laws, if denatured alcohol is mixed with gasoline, the excise tax on which has already been paid,
only the alcohol content shall be subject to the tax herein prescribed. For purposes of this subsection, the removal of denatured
alcohol of not less than one hundred eighty degrees proof (ninety percent absolute alcohol) shall be deemed to have been
removed for motive power, unless shown otherwise.

"(b) For products subject to ad valorem tax only:

Ad Valorem

Tax Rate

"(1) Naptha, gasoline and

other similar products of

distillation; and aviation

turbo jet fuel 48%

"(2) Fuel oil, commercially

known as diesel fuel oil,

and on similar fuel oils

having more or less the

same generating power;

kerosene, liquified petro-

leum gas; asphalts; and

thinners 24%

"(3) Fuel oil, commercially

known as bunker fuel and

on similar fuel oils having

more or less the same

generating power 0%

"The ad valorem tax imposed in this paragraph shall be based on the company take or netback on the product as approved by the
Energy Regulatory Board including the said ad valorem tax."

Sec. 14. Section 135 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 148. Saccharine. There shall be collected on saccharine, sodium succharine and all its derivatives on salts of saccharine and
other artificial sweetening agents, a tax of sixty pesos (P60) per kilogram."

Sec. 15. Section 135-A of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 149. Automobiles. There shall be levied, assessed and collected an ad valorem tax on automobiles based on the
manufacturer's or importer's selling price; net of excise and value-added tax, in accordance with the following schedule:

"Engine displacement (in cc)

Gasoline Diesel Tax Rate

"up to 1600 up to 1800 15%

"1601 to 2000 1801 to 2300 35%

"2001 to 2700 2301 to 3000 50%

"2701 or over 3001 or over 100%

Provided, That in the case of imported automobiles not for sale, the tax imposed herein shall be based on the total value used by
the Bureau of Customs in determining tariff and customs duties, including customs duty and all other charges, plus (10%) of the
total thereof.

Sec. 16. Paragraphs (1) (a), (b) and (g) of Section 163 of the National Internal Revenue Code are hereby renumbered and amended
to read as follows:

"Sec. 150. Non-essential goods. There shall be levied, assessed and collected a tax equivalent to 20% based on the wholesale price
or the value of importation used by the Bureau of Customs in determining tariff and customs duties; net of excise tax and value-
added tax, of the following goods:

"(a) All goods commonly or commercially known as jewelry, whether real or imitation, pearls, precious and semi-precious stones
and imitations thereof; goods made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not
including surgical and dental instruments, silver-plated wares, frames or mountings for spectacles or eyeglasses, and dental gold
or gold alloys and other precious metals used in filing, mounting or fitting of the teeth); opera glasses and lorgnettes. The term
`precious metals' shall include platinum, gold, silver, and other metals of similar or greater value. The terms 'imitations thereof'
shall include platings and alloys of such metals;

"(b) Perfumes and toilet waters;

"(c) Yachts and other vessels intended for pleasure or sports."

Sec. 17. Sections 129 and 132; Paragraph (b) of Section 216, Sections 217, 218 and 219 of the National Internal Revenue Code are
hereby integrated, renumbered and amended to read as follows:

"Sec. 151. Mineral Products. (a) Rates of Tax. There shall be levied, assessed and collected on mineral, mineral products and
quarry resources, excise tax as follows:

"(1) On coal and coke, a tax of ten pesos (P10.00) per metric ton.

"(2) On all non-metallic minerals and quarry resources, a tax of three percent (3%) based on the actual market value of the annual
gross output thereof at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of
Customs in determining tariff and customs duties, net of excise tax and value-added tax in the case of importation.

"(3) On all metallic minerals, a tax of five percent (5%) based on the actual market value of the gross output thereof at the time of
removal, in the case of those locally extracted or produced; or the value used by the Bureau of Customs in determining tariff and
customs duties, net of excise tax and value-added tax, in the case of importation.

"(4) On indigenous petroleum, a tax of twenty-two percent (22%) of the fair international market price thereof, on the first
taxable sale, such tax to be paid by the buyer or purchaser within 15 days from the date of actual or constructive delivery to the
said buyer or purchaser. The phrase 'first taxable sale, barter, exchange or similar transaction' means the transfer of indigenous
petroleum in its original state to a first taxable transferee. The fair international market price shall be determined in consultation
with an appropriate government agency.

"For the purpose of this subsection, `indigenous petroleum' shall include locally extracted mineral oil, hydrocarbon gas, bitumen,
crude asphalt, mineral gas and all other similar or naturally associated substance with the exception of coal, peat, bituminous
shale and/or stratified mineral deposits.

"(b) For purposes of this section, the term

"(1) 'Gross output' shall be interpreted as the actual market value of minerals or products, or of bullion from each mine or mineral
lands operated as a separate entity without any deduction from mining, milling, refining, (including all expenses incurred to
prepare the said minerals or mineral products in the marketable state) as well as transporting, handling, marketing, or any other
expenses: Provided, That if the minerals or mineral products are sold or consigned abroad by the lessee or owner of the mine
under C.I.F. terms, the actual cost of ocean freight and insurance shall be deducted; Provided, however, That in the case of
mineral concentrate not traded in commodity exchanges in the Philippines or abroad such as copper concentrate, the actual
market value shall be the world price quotations of the refined mineral products content thereof prevailing in the said commodity
exchanges, after deducting the smelting, refining and other charges incurred in the process of converting the mineral concentrates
into refined metal traded in those commodity exchanges.

"(2) 'Minerals' shall mean all naturally occurring inorganic substances (found in nature) whether in solid, liquid or gaseous, or any
intermediate state.

"(3) 'Mineral products' shall mean things produced and prepared in a marketable state by simple treatment processes such as
washing or drying, but without undergoing any chemical change or process or manufacturing by the lessee, concessionaire or
owner of mineral lands.

"(4) 'Quarry resources' shall mean any common stone or other common mineral substances as the Director of Bureau of Mines
and Geo-Sciences may declare to be quarry resources such as but not restricted to marl, marble, granite, volcanic cinders, basalt,
tuff and rock phosphate: Provided, That they contain no metal or metals or other valuable minerals in economically workable
quantities.

"(c) Time, manner and place of payment of excise tax on mineral and mineral products. Unless otherwise provided, the excise tax
on minerals and mineral products shall be due and payable upon removal of the minerals or mineral products or quarry resources
from the locality where mined or upon removal from customs custody in the case of importations.

"Any person liable to pay the excise tax on locally produced or extracted mineral, mineral products or quarry resources shall,
before removal of such products file, in duplicate, a return setting forth the quantity and the actual market value of the mineral or
mineral products to be removed and pay the excise taxes due thereon to the Collection Agent, or the Treasurer of the city or
municipality of the place where the mine is located except as herein below provided.

"However, the output of the mine may be removed from such locality without the prepayment of such excise taxes if the lessee,
owner, or operator of the mining claim shall file a bond in the form and amount and with such sureties as the Commissioner may
require, conditioned upon the payment of such excise taxes. It shall be the duty of every lessee, owner or operator to make a true
and complete return in duplicate setting forth the quantity and the actual market value of the minerals or mineral products or
quarry resources removed during such calendar quarter, of the balance, if any, in cases where payments are made upon removal,
and pay the excise taxes due thereon within 20 days after the end of such quarter to the Collection Agent, or the Treasurer of the
city or municipality of the place where the mine is located.

"In the case of indigenous petroleum, the tax due thereon shall be paid by the buyer or purchaser within 15 days from the date of
actual or constructive delivery to the said buyer or purchaser."

"Sec. 18. Section 141 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 157. Removal of articles after payment of tax. When the tax has been paid on articles or products subject to excise tax the
same shall not thereafter be stored or permitted to remain in the distillery, distillery warehouse, bonded warehouse, or other
factory or place where produced. However, upon prior permit from the Commissioner, oil refineries and/or companies may store
or deposit tax-paid petroleum products and commingle the same with its own bonded products. Imported petroleum products
may be allowed to be withdrawn from the customs custody without any repayment of excise tax which products have been
commingled with the tax-paid bonded products of the importer himself after securing a prior permit from the Commissioner of
Internal Revenue: Provided, That withdrawals shall be taxed and accounted for on a `first-in, first-out basis.'"

Sec 19. Section 180 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:
"Sec. 237. Registration of name or style with the revenue district officer or collection agent. Every person, other than persons
required to be registered under the provisions of Section 107, engaged in any business shall, or on before the commencement of
his business, or whenever he transfers to another revenue district, register with the revenue district officer concerned within 10
days from commencement of business or transfer. In cities or municipalities where no revenue district officer is stationed, such
person shall register with the collection agent. The registration shall contain his name or style, place of residence, business, the
place where such business is carried on, and such other information as may be required by the Commissioner in the form
prescribed therefor. In case of a firm, the names and residences of the various persons constituting the same shall also be
registered. The Commissioner, after taking into consideration the volume of sales, financial condition and other relevant factors,
may require the registrant to guarantee the payment of his taxes by way of advance payment, or the posting or filing of a security,
guarantee or collateral acceptable to the Commissioner."

Sec. 20. Section 181 of the National Internal Revenue Code is hereby renumbered and amended to read as follows:

"Sec. 238. Issuance of receipts or sales or commercial invoices. All persons subject to an internal revenue tax shall for each sale or
transfer or merchandise or for services rendered valued at P25 or more, issue receipts, or sales or commercial invoices, prepared
at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service:
Provided, That, in the case of sales, receipts or transfers in the amount of P100 or more, or, regardless of amount, where the sale
or transfer is made by persons subject to value-added tax to other persons also subject to value-added tax; or, where the receipt
is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall
show the name, business style, if any, and address of the purchaser, customer, or client. The original of each receipt or invoice
shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the
exercise of profession, shall keep and preserve the same in his place of business for a period of 3 years from the close of the
taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his
place of business, for a like period.

"The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the
provisions of this section."

Sec. 21. Sections 122, 130, 134; Sections 157 to 161, inclusive, paragraphs (1) (c) to (f), inclusive, and (h) to (q); and paragraphs (2)
to (4) of Section 163; Sections 164 to 170, inclusive; Sections 174, 176, 179; Sections 215; paragraph (a) of Section 216; Sections
222, 224 and 225, Section 230 to 238, inclusive, Sections 241, 279, 280, 297, 323 and 234 all of the National Internal Revenue
Code are hereby repealed.

Sec. 22. The imposition of occupation fee and rentals provided in Sections 215 and 216(a) respectively, of the National Internal
Revenue Code shall henceforth be collected by the municipality or city where the mining claim is situated. The disposition of the
collection shall continue to be in accordance with the provision of said Sections 215 and 216(a).

The entire provisions of Chapter V, Title VIII of the National Internal Revenue Code governing the charges of forest products,
including Section 297 of the same Code are hereby transferred to and shall form part of Presidential Decree No. 705, as amended,
otherwise known as the Revised Forestry Code of the Philippines. All references to the Bureau of Internal Revenue, Commissioner
of Internal Revenue and Ministry of Finance in the said Chapter V shall henceforth refer to the Forest Management Bureau,
Director of Forest Management Bureau and Secretary of Environment and Natural Resources, respectively.

Sec. 23. The following sections of the National Internal Revenue Code and all references thereto are renumbered as follows:

Title XII Repealing Provisions

Chapter 1 Section 287

Sec. 25. Transitory provisions. (a) All VAT-registered persons shall be allowed transitional input taxes which can be credited
against output tax in the same manner as provided in Sections 104 of the National Internal Revenue Code as follows:

1) The balance of the deferred sales tax credit account as of December 31, 1987 which are accounted for in accordance with
regulations prescribed therefor;

2) A presumptive input tax equivalent to 8% of the value of the inventory as of December 31, 1987 of materials and supplies which
are not for sale, the tax on which was not taken up or claimed as deferred sales tax credit; and

3) A presumptive input tax equivalent to 8% of the value of the inventory as of December 31, 1987 as goods for sale, the tax on
which was not taken up or claimed as deferred sales tax credit.

Tax credit prescribed in paragraphs (2) and (3) above shall be allowed only to a VAT-registered person who files an inventory of
the goods referred to in said paragraphs as provided in regulations.

(b) Any unused tax credit certificate issued prior to January 1, 1988 for excess tax credits which are applicable against advance
sales tax shall be surrendered to, and replaced by the Commissioner with new tax credit certificates which can be used in payment
for value-added tax liabilities.

(c) Any person already engaged in business whose gross sales or receipts for a 12-month period from September 1, 1986 to
August 1, 1987, exceed the amount of P200,000, or any person who has been in business for less than 12 months as of August 1,
1987 but expects his gross sales or receipts to exceed P200,000 on or before December 31, 1987, shall apply for registration on or
before October 29, 1987.

Sec. 26. The funds needed to carry out the provisions of this Executive Order shall be drawn from the appropriations authorized
for the Bureau of Internal Revenue for CY 1987. Any deficiency shall be covered by the contingency fund provided by the current
General Appropriations Act. For CY 1988 and thereafter, such sums shall be included in the annual General Appropriations Act.

Sec. 27. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate the rules and
regulations to effectively implement this Executive Order.

Sec. 28. The Commissioner of Internal Revenue shall codify and consolidate all internal revenue laws embodied in the present
National Internal Revenue Code, as amended by various Executive Orders, and other issuances, and cause the publication thereof.

Sec. 29. The provisions of any law, whether general or special, rules and regulations and other issuances or parts thereof which
are inconsistent with this Order are hereby repealed, amended or modified accordingly.

Sec. 30. This Order shall take effect on January 1, 1988: Provided, That the provisions of Section 25 (c) hereof shall take effect
immediately upon approval of this Order.

DONE in the City of Manila, this 25th day of July, in the year of Our Lord, nineteen hundred and eighty-seven.
 2. TOLENTINO VS. SECRETARY OF FINANCE
G.R. No. 115455 | October 30, 1995

DOCTRINE: Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid
them by imposing such taxes according to the taxpayers' ability to pay.

FACTS: Congress enacted RA No. 7716, which sought to widen the tax base of the existing Value Added Tax (VAT) system and
enhance its administration by amending the NIRC.

VAT is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of service. It is equivalent
to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross
receipts from the sale or exchange of services.

The petitioners alleged, among others, that RA. No. 7716 violates the rule that taxes should be uniform and equitable and that
Congress shall "evolve a progressive system of taxation.” They claim that VAT is regressive, because the law imposes a flat rate of
10% and thus places the tax burden on all taxpayers without regard to their ability to pay.

ISSUE: Whether R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law, is unconstitutional for being regressive.
NO.

RULING: The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it
simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision has been interpreted
to mean simply that "direct taxes are to be preferred, and as much as possible, indirect taxes should be minimized."

Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which
perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, §17(1) of the 1973
Constitution from which the present Art. VI, §28(1) was taken. Sales taxes are also regressive.

In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain
transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716,
§4, amending §103 of the NIRC).

Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:
a. Goods for consumption or use which are in their original state (agricultural, marine and forest products, cotton seeds in
their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services
to enhance agriculture (milling of palay, corn sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients
used for the manufacture of feeds).
b. Goods used for personal consumption or use (household and personal effects of citizens returning to the Philippines) and
or professional use, like professional instruments and implements, by persons coming to the Philippines to settle here.
c. Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum products subject to
 excise tax and services subject to percentage tax.
d. Educational services, medical, dental, hospital and veterinary services, and services rendered under employer-employee
relationship.
e. Works of art and similar creations sold by the artist himself.
f. Transactions exempted under special laws, or international agreements.
g. Export-sales by persons not VAT-registered.
h. Goods or services with gross annual sale or receipt not exceeding P500,000.00.

3. CIR VS. AMEXPRESS INTERNATIONAL INC.

G.R. No. 152609 | June 29,2005

DOCTRINE: As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of the tax. Goods
and services are taxed only in the country where they are consumed. Thus, exports are zero-rated, while imports are taxed. The
law, however, clearly provides for an exception to the destination principle; that is, for a zero percent VAT rate for services that are
performed in the Philippines, “paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the [BSP].”

FACTS: American Express International (respondent) is a corporation duly organized and existing under and by virtue of the laws
of the State of Delaware, USA., with office in the Philippines at Makati. It is a servicing unit of American Express, Inc.- Hongkong
Branch and is engaged primarily to facilitate the collections of Amex-HK receivables from card members situated in the Philippines
and payment to service establishments in the Philippines.

Amex Philippines registered itself with the BIR Makati as a value-added tax taxpayer effective March 1988 and was issued a VAT
registration certificate.
For the period of 1 Jan. 1997 to 31 Dec. 1997, Amex filed with the BIR its quarterly VAT returns.

However, on 23 March 1999, Amex amended the said returns, showing an excess in the input taxes.

A month later, Amex filed with the BIR a letter-request for the refund of its 1997 excess input taxes in the amount of around 3.7M
PHP (this was arrived at by deducting the output VAT liabilities to the input VAT paid).

Amex cites as basis therefore, Sec. 110 (B) of the 1997 Tax Code, which states that “any input tax attributable to the purchase of
capital goods or to zero-rated sales by a VAT registered person may at his option be refunded or credited against other internal
revenue taxes, subject to the provisions of Sec. 112.”

There being no immediate action on the part of the CIR (petitioner), Amex filed a petition.

CTA: ruled in favor of Amex. It held that Amex’s services are subject to zero-rate.

CA: affirmed the CTA decision. It held that Amex’s services fell under the first type enumerated in Sec. 4.102-2(b)(2) of RR 7-95, as
amended by RR 5-96, that they were services other than, “ processing, manufacturing or repacking of good for persons doing
business outside the Philippines” and “paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the BSP.”

ISSUE: Whether or not Amex is entitled to the refund allegedly representing excess input VAT for the year1997. YES

RULING: Last paragraph of Sec. 102 of the Tax Code provides:

 “(b) Transactions subject to zero percent (0%) rate.—

The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate:

1. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

2. Services other than those mentioned in the preceding subparagraph, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the [BSP];”

Zero rating of “other” services.

Under the above quoted paragraph, services performed by VAT-registered persons in the Philippines (other than the processing,
manufacturing or repacking of goods for persons doing business outside the Philippines), when paid in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP, are zero-rated.

Respondent is a VAT-registered person that facilitates the collection and payment of receivables belonging to its nonresident
foreign client, for which it gets paid in acceptable foreign currency inwardly remitted and accounted for in conformity with BSP
rules and regulations. Certainly, the service it renders in the Philippines is not in the same category as “processing, manufacturing
or repacking of goods” and should, therefore, be zero-rated. In reply to a query of respondent, the BIR opined in VAT Ruling No.
080- 89 that the income respondent earned from its parent company’s regional operating centers (ROCs) was automatically zero-
rated effective January 1, 1988.

VAT requirements for the supply of service.

The VAT is a tax on consumption “expressed as a percentage of the value added to goods or services” purchased by the producer
or taxpayer. As an indirect tax on services, its main object is the transaction itself or, more concretely, the performance of all kinds
of services conducted in the course of trade or business in the Philippines. These services must be regularly conducted in this
country; undertaken in “pursuit of a commercial or an economic activity;” for a valuable consideration; and not exempt under the
Tax Code, other special laws, or any international agreement.

As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of the tax. Goods and
services are taxed only in the country where they are consumed. Thus, exports are zero-rated, while imports are taxed.

The respondent’s services are exempt from the destination principle.

The law clearly provides for an exception to the destination principle; that is, for a 0% VAT rate for services that are performed in
the Philippines, “paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the
[BSP].” Thus, for the supply of service to be zero-rated as an exception, the law merely requires that:

(1) The service be performed in the Philippines;

(2) The service fall under any of the categories in Section 102(b) of the Tax Code; and,

(3) It be paid in acceptable foreign currency accounted for in accordance with BSP rules and regulations.

These three requirements for exemption from the destination principle are met by Amex.

(a) Its facilitation service is performed in the Philippines.

(b) It falls under the second category found in Section 102(b) of the Tax Code, because it is a service other than “processing,
manufacturing or repacking of goods” as mentioned in the provision.

(c) Undisputed is the fact that such service meets the statutory condition that it be paid in acceptable foreign currency duly
accounted for in accordance with BSP rules.

Confusion in zero rating arises because petitioner equates the performance of a particular type of service with the consumption of
its output abroad. In the present case, the facilitation of the collection of receivables is different from the utilization or
consumption of the outcome of such service. While the facilitation is done in the Philippines, the consumption is not. Respondent
renders assistance to its foreign clients —the ROCs outside the country— by receiving the bills of service establishments located
here in the country and forwarding them to the ROCs abroad. The consumption contemplated by law, contrary to petitioner’s
administrative interpretation, does not imply that the service be done abroad in order to be zero-rated.

Tax situs of a zero-rated service.

The law neither makes a qualification nor adds a condition in determining the tax situs of a zero-rated service. Under this
criterion, the place where the service is rendered determines the jurisdiction to impose the VAT. Performed in the Philippines,
such service is necessarily subject to its jurisdiction, for the State necessarily has to have “a substantial connection” to it, in order
to enforce a zero rate. The place of payment is immaterial; much less is the place where the output of the service will be further
or ultimately used.

In sum, having resolved that transactions of respondent are zero-rated, the SC upholds the former’s entitlement to the refund as
determined by the appellate court. Moreover, there is no conflict between the decisions of the CTA and CA. Furthermore, under a
zero-rating scheme, the sale or exchange of a particular service is completely freed from the VAT, because the seller is entitled to
recover, by way of a refund or as an input tax credit, the tax that is included in the cost of purchases attributable to the sale or
exchange. from the tax base.”, “[T]he tax paid or withheld is not deducted from the tax base.” Having been applied for within the
reglementary period , respondent’s refund is in order

4.COMMISSIONER OF INTERNAL REVENUE VS. PLACER DOME TECHNICAL SERVICES PHIL

G.R. No.00000 | Date

DOCTRINE: The law neither makes a qualification nor adds a condition in determining the tax situs of a zero-rated service. Under
this criterion, the place where the service is rendered determines the jurisdiction to impose the VAT.

FACTS: Sometime in 1996, at the San Antonio Mines in Marinduque owned by Marcopper Mining Corporation (Marcopper), mine
tailings from the Taipan Pit started to escape through the Makulapnit Tunnel and Boac Rivers, causing the cessation of mining and
milling operations, and causing potential environmental damage to the rivers and the immediate area. To contain the damage and
prevent the further spread of the tailing leak, Placer Dome, Inc. (PDI), the owner of 39.9% of Marcopper, undertook to perform
the clean-up and rehabilitation of the Makalupnit and Boac Rivers, through a subsidiary. To accomplish this, PDI engaged Placer
Dome Technical Services Limited (PDTSL), a non-resident foreign corporation with office in Canada, to carry out the project. In
turn, PDTSL engaged the services of Placer Dome Technical Services (Philippines), Inc. (respondent), a domestic corporation and
registered Value-Added Tax (VAT) entity, to implement the project in the Philippines.

PDTSL and respondent entered into an Implementation Agreement. The Agreement further stipulated that PDTSL was to pay
respondent an amount of money, in U.S. funds, equal to all Costs incurred for Implementation Services performed under the
Agreement,[5] as well as a fee agreed to one percent (1%) of such Costs.
Later, respondent amended its quarterly VAT returns. In the amended returns, respondent declared a total input VAT payment of
P43,015,461.98 for the said quarters, and P42,837,933.60 as its total excess input VAT for the same period. Then respondent filed
an administrative claim for the refund of its reported total input VAT payments in relation to the project it had contracted from
PDTSL, amounting to P43,015,461.98. In support of this claim for refund, respondent argued that the revenues it derived from
services rendered to PDTSL, pursuant to the Agreement, qualified as zero-rated sales under Section 102(b)(2) of the then Tax
Code, since it was paid in foreign currency inwardly remitted to the Philippines.

CIR did not act on this claim. Thus, respondent filed a Petition for Review with the Court of Tax Appeals (CTA), praying for the
refund of its total reported excess input VAT totaling P42,837,933.60.

ISSUE: Whether respondent Placer is entitled to the refund as the revenues qualified as zero rated sales. YES.

RULING: Section 102(b) Transactions Subject to Zero Percent (0%) Rate- The following services performed in the Philippines by
VAT-registered persons shall be subject to zero percent (0%) rate: (1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP);(2) Services other than those mentioned in the preceding subparagraph, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the [BSP].

It is Section 102(b)(2) which finds special relevance to this case. The VAT is a TAX on consumption “expressed as a percentage of
the value added to goods or services” purchased by the producer or taxpayer. As an indirect tax on services, its main object is the
transaction itself or, more concretely, the performance of all kinds of services conducted in the course of trade or business in the
Philippines. These services must be regularly conducted in this country; undertaken in “pursuit of a commercial or an economic
activity;” for a valuable consideration; and not exempt under the Tax Code, other special laws, or any international agreement. Yet
even as services may be subject to VAT, our tax laws extend the benefit of zero-rating the VAT due on certain services. Under the
last paragraph of Scetion 102 (b), services performed by VAT-registered persons in the Philippines, when paid in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the BSP, are ZERO-RATED.
Petitioner invokes the “destination principle,” citing that respondent’s while rendered to a non-resident foreign corporation, are
not destined to be consumed abroad. Hence, the onus of taxation of the revenue arising therefrom, for VAT purposes, is also
within the Philippines. The Court in American Express debunked this argument. As a general rule, the VAT system uses the
destination principle as a basis for the jurisdictional reach of the tax. Goods and services are taxed only in the country where they
are consumed. Thus, exports are zero-rated, while imports are taxed. Thus, exports are zero-rated while imports are taxed.

Confusion in zero rating arises because petitioner equates the performance of a particular type of service with the consumption of
its output abroad. In the present case, the facilitation of the collection of receivables is different from the utilization or
consumption of the outcome of such service. While the facilitation is done in the Philippines, the consumption is not. Respondent
renders assistance to its foreign clients the ROCs outside the country by receiving the bills of service establishments located here
in the country and forwarding them to the ROCs abroad. The consumption contemplated by law, contrary to petitioner's
administrative interpretation, does not imply that the service be done abroad in order to be zero-rated.

Consumption is "the use of a thing in a way that thereby exhausts it." Applied to services, the term means the performance or
"successful completion of a contractual duty, usually resulting in the performer's release from any past or future liability x x x" The
services rendered by respondent are performed or successfully completed upon its sending to its foreign client the drafts and bills
it has gathered from service establishments here. Its services, having been performed in the Philippines, are therefore also
consumed in the Philippines.

Unlike goods, services cannot be physically used in or bound for a specific place when their destination is determined. Instead,
there can only be a "predetermined end of a course" when determining the service "location or position x x x for legal purposes."
Respondent's facilitation service has no physical existence, yet takes place upon rendition, and therefore upon consumption, in
the Philippines. Under the destination principle, as petitioner asserts, such service is subject to VAT at the rate of 10 percent.
However, the law clearly provides for an exception to the destination principle; that is, for a zero percent VAT rate for services
that are performed in the Philippines, "paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the [BSP]." Thus, for the supply of service to be zero-rated as an exception, the law merely requires that first, the
service be performed in the Philippines; second, the service fall under any of the categories in Section 102(b) of the Tax Code; and,
third, it be paid in acceptable foreign currency accounted for in accordance with BSP rules and regulations.

The law neither makes a qualification nor adds a condition in determining the tax situs of a zero-rated service. Under this
criterion, the place where the service is rendered determines the jurisdiction to impose the VAT. Performed in the Philippines,
such service is necessarily subject to its jurisdiction, for the State necessarily has to have "a substantial connection" to it, in order
to enforce a zero rate. The place of payment is immaterial; much less is the place where the output of the service will be further
or ultimately used.

5. TOSHIBA VS. CIR

G.R. No.157594 | March 9, 2010

DOCTRINE: This case discusses the Cross Border Doctrine which emphasizes the distinction between VAT-exempt entities and VAT-
exempt transactions for PEZA-registered enterprises engaged in export sales. The mere VAT exemption of the entity does not
necessarily mean that all its transactions are VAT-exempt.

FACTS: Toshiba is a domestic corporation engaged in the manufacturing and exporting of electric machinery, equipment systems,
accessories, parts, components, materials, and goods, including those related to office automation and information technology.

Toshiba is registered with the Philippine Economic Zone Authority (PEZA) as an Economic Zone (ECOZONE) export enterprise. It is
also registered with the Bureau of Internal Revenue (BIR) as a value-added tax (VAT) taxpayer.

Toshiba filed VAT returns for the first and second quarters of 1997, initially declaring input VAT payments on domestic purchases
of taxable goods and services with no zero-rated sales. Later, amended VAT returns were submitted, now including zero-rated
sales amounting to ₱7,494,677,000.00.

On March 30, 1999, Toshiba filed applications for tax credit/refund of its unutilized input VAT payments for the first half of 1997
with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (DOF One-Stop Shop).

The Commissioner of Internal Revenue (CIR) opposed Toshiba's claim, raising several defenses, including the need for
administrative investigation, lack of evidence of erroneous or illegal collection, and the presumption that taxes paid are made in
accordance with the law.

ISSUE: Whether or not Toshiba is eligible for a credit/refund of its unutilized VAT inputs considering its tax-exempt status. YES

RULING: The Court emphasized that Toshiba, being a PEZA-registered enterprise, is a VAT-exempt entity under the Cross Border
Doctrine.

It is now a settled rule that based on the Cross Border Doctrine, PEZA-registered enterprises, such as Toshiba, are VAT-exempt and
no VAT can be passed on to them. The Court explained in the Toshiba case that – PEZA-registered enterprise, which would
necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended,
which imposes the five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes; but,
rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory.

Toshiba claimed a refund of unutilized input VAT payments on its local purchases of goods and services attributable to its export
sales for the first and second quarters of 1997. The court upheld Toshiba's claim, stating that the BIR acknowledged, even after
RMC No. 74-99, that PEZA-registered enterprises availing themselves of the income tax holiday could claim VAT credit under
certain conditions.

Ultimately, Toshiba was entitled to the credit/refund of unutilized input VAT payments attributable to its zero-rated sales in the
amounts of ₱1,158,016.82 and ₱227,265.26, for the first and second quarters of 1997, respectively, or in the total amount of
₱1,385,282.08.

6. CIR VS. PLDT

G.R. No. 140230 | December 15, 2005

DOCTRINE:
An exemption from “all taxes” excludes indirect taxes, unless the exempting statute is so couched as to include indirect tax from
the exemption.

It is basic that in construing a statute, it is the duty of courts to seek the real intent of the legislature, even if, by so doing, they
may limit the literal meaning of the broad language. Tax exemption represents a loss of revenue to the government and must,
therefore, not rest on vague inference. When claimed, it must be strictly construed against the taxpayer who must prove that he
falls under the exception.

If an exemption is found to exist, it must not be enlarged by construction, since the reasonable presumption is that the state has
granted in express terms all it intended to grant at all, and that, unless the privilege is limited to the very terms of the statute the
favor would be extended beyond dispute in ordinary cases.

FACTS:
The Philippine Long Distance Telephone Company (PLDT) is a grantee of a franchise under R.A. 7082 to install, operate and
maintain a telecommunications system throughout the Philippines.

For equipment, machineries, and spare parts it imported for its business on different dates from October 1, 1992 to May 31, 1994,
PLDT paid the BIR the amount of P164,510,953.00, broken down as follows:

(a) compensating tax of P126,713,037.00;

(b) advance sales tax of P12,460,219.00; and
(c) other internal revenue taxes of P25,337,697.00.

For similar importations made between March 1994 to May 31, 1994, PLDT paid P116,041,333.00 value-added tax (VAT).

On March 15, 1994, PLDT addressed a letter to the BIR seeking a confirmatory ruling on its tax exemption privilege under Section
12 of R.A. 7082, which reads:

Section 12. The grantee... shall be liable to pay the same taxes on their real estate, buildings, and personal property,
exclusive of this franchise, as other persons or corporations are now or hereafter may be required by law to pay. In
addition thereto, the grantee, ... shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the
telephone or other telecommunications businesses transacted under this franchise by the grantee, its successors or
assigns, and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof: provided, that the
 grantee... shall continue to be liable for income taxes payable under Title II of the National Internal Revenue Code
pursuant to Section 2 of Executive Order No. 72 unless the latter enactment is amended or repealed, in which case the
amendment or repeal shall be applicable thereto.

The BIR issued a ruling, reading as follows:

PLDT shall be subject only to the following taxes, to wit: x x x

7. The 3% franchise tax on gross receipts which shall be in lieu of all taxes on its franchise or earnings thereof. x
xx

The “in lieu of all taxes” provision under Section 12 of R.A. 7082 clearly exempts PLDT from all taxes including the 10%
value-added tax (VAT) prescribed by Section 101 (a) of the same Code on its importations of equipment, machineries
and spare parts necessary in the conduct of its business covered by the franchise, except the aforementioned
enumerated taxes for which PLDT is expressly made liable. x x x

In view thereof, this Office... hereby holds that PLDT, is exempt from VAT on its importation of equipment, machineries,
and spare parts... needed in its franchise operations.

Armed with the foregoing BIR ruling, PLDT filed on December 2, 1994 a claim for tax credit/refund of the VAT, compensating
taxes, advance sales taxes and other taxes it had been paying “in connection with its importation of various equipment,
machineries and spare parts needed for its operations”.

With its claim not having been acted upon by the BIR, PLDT filed with the CTA a petition for review, seeking a refund of, or the
issuance of a tax credit certificate in, the amount of P280,552,286.00, representing compensating taxes, advance sales taxes, VAT
and other internal revenue taxes alleged to have been erroneously paid on its importations from October 1992 to May 1994.

CTA: It granted PLDT’s petition.

The CTA decision is punctuated by a dissenting opinion of Associate Judge Amancio Q. Saga who maintained that the phrase ”in
lieu of all taxes” found in Section 12 of R.A. 7082, refers to exemption from ”direct taxes only” and does not cover “indirect
taxes”, such as VAT, compensating tax and advance sales tax.

CA: It dismissed the BIR’s petition for review. According to it, the “in lieu of all taxes” clause found in Section 12 of PLDT’s
franchise (R.A. 7082) covers all taxes, whether direct or indirect; and that said section states, in no uncertain terms, that PLDT’s
payment of the 3% franchise tax on all its gross receipts from businesses transacted by it under its franchise is in lieu of all taxes
on the franchise or earnings thereof.

Petitioner’s contention: The BIR Commissioner submits that the exempting “in lieu of all taxes” clause covers direct taxes only,
adding that for indirect taxes to be included in the exemption, the intention to include must be specific and unmistakable. He thus
faults the CA for erroneously declaring PLDT exempt from payment of VAT and other indirect taxes on its importations. To the
Commissioner, PLDT’s claimed entitlement to tax refund/credit is without basis inasmuch as the 3% franchise tax being imposed
on PLDT is not a substitute for or in lieu of indirect taxes.

ISSUES:
1. Whether or not PLDT, given the tax component of its franchise, is exempt from paying VAT, compensating taxes, advance
sales taxes and internal revenue taxes on its importations. – NO.

2. Whether or not the phrase “in lieu of other taxes” includes indirect taxes. – NO.
RULING:
Discussion on burden and incidence of taxation

Based on the possibility of shifting the incidence of taxation, or as to who shall bear the burden of taxation, taxes may be classified
into either direct tax or indirect tax.

Direct taxes
They are those that are exacted from the very person who, it is intended or desired, should pay them; they are impositions for
which a taxpayer is directly liable on the transaction or business he is engaged in.

Indirect taxes
They are those that are demanded, in the first instance, from, or are paid by, one person in the expectation and intention that he
can shift the burden to someone else.

Stated elsewise, indirect taxes are taxes wherein the liability for the payment of the tax falls on one person but the burden thereof
can be shifted or passed on to another person, such as when the tax is imposed upon goods before reaching the consumer who
ultimately pays for it. When the seller passes on the tax to his buyer, he, in effect, shifts the tax burden, not the liability to pay it,
to the purchaser as part of the price of goods sold or services rendered.

To put the situation in graphic terms, by tacking the VAT due to the selling price, the seller remains the person primarily and
legally liable for the payment of the tax. What is shifted only to the intermediate buyer and ultimately to the final purchaser is the
burden of the tax.

Stated differently, a seller who is directly and legally liable for payment of an indirect tax, such as the VAT on goods or services, is
not necessarily the person who ultimately bears the burden of the same tax. It is the final purchaser or end-user of such goods or
services who, although not directly and legally liable for the payment thereof, ultimately bears the burden of the tax.

In this case: PLDT, vis-à-vis its payment of internal revenue taxes on its importations in question, is effectively claiming exemption
from taxes not falling under the category of direct taxes. The claim covers VAT, advance sales tax and compensating tax.

Value-Added Tax (VAT)

The NIRC classifies VAT as “an indirect tax... the amount of [which] may be shifted or passed on to the buyer, transferee or lessee
of the goods”.

As aptly pointed out by Judge Amancio Q. Saga in his dissent, the 10% VAT on importation of goods partakes of an excise tax
levied on the privilege of importing articles.

It is not a tax on the franchise of a business enterprise or on its earnings. It is imposed on all taxpayers who import goods (unless
such importation falls under the category of an exempt transaction under Section 109 of the Revenue Code) whether or not the
goods will eventually be sold, bartered, exchanged or utilized for personal consumption. The VAT on importation replaces the
advance sales tax payable by regular importers who import articles for sale or as raw materials in the manufacture of finished
articles for sale.

Rule: The liability for the payment of the indirect taxes lies only with the seller of the goods or services, not in the buyer thereof.
Thus, one cannot invoke one’s exemption privilege to avoid the passing on or the shifting of the VAT to him by the
manufacturers/suppliers of the goods he purchased.

Hence, it is important to determine if the tax exemption granted to a taxpayer specifically includes the indirect tax which is shifted
to him as part of the purchase price, otherwise it is presumed that the tax exemption embraces only those taxes for which the
buyer is directly liable.
 Interpretation of “in lieu of all taxes”

“Taxation is the rule, exemption is the exception.” Accordingly, statutes granting tax exemptions must be construed in strictissimi
juris against the taxpayer and liberally in favor of the taxing authority.

To him, therefore, who claims a refund or exemption from tax payments rests the burden of justifying the exemption by words
too plain to be mistaken and too categorical to be misinterpreted.

In this case: As may be noted, the clause “in lieu of all taxes” in Section 12 of R.A. 7082 is immediately followed by the limiting or
qualifying clause “on this franchise or earnings thereof”, suggesting that the exemption is limited to taxes imposed directly on
PLDT since taxes pertaining to PLDT’s franchise or earnings are its direct liability. Accordingly, indirect taxes, not being taxes on
PLDT’s franchise or earnings, are outside the purview of the “in lieu” provision.

If we were to adhere to the appellate court’s interpretation of the law that the “in lieu of all taxes” clause encompasses the
totality of all taxes collectible under the Revenue Code, then, the immediately following limiting clause “on this franchise and its
earnings” would be nothing more than a pure jargon bereft of effect and meaning whatsoever.

Needless to stress, this kind of interpretation cannot be accorded a governing sway following the familiar legal maxim redendo
singula singulis, meaning, take the words distributively and apply the reference. Under this principle, each word or phrase must be
given its proper connection in order to give it proper force and effect, rendering none of them useless or superfluous.

Rule: In Maceda v. Macaraig, Jr., the Court said that the lesson in the case was that an exemption from “all taxes” excludes
indirect taxes, unless the exempting statute is so couched as to include indirect tax from the exemption.

Jurisprudence teaches that imparting the “in lieu of all taxes” clause a literal meaning, as did the CA and the CTA before it, is
fallacious.

Rule: It is basic that in construing a statute, it is the duty of courts to seek the real intent of the legislature, even if, by so doing,
they may limit the literal meaning of the broad language.

Tax exemption represents a loss of revenue to the government and must, therefore, not rest on vague inference. When claimed, it
must be strictly construed against the taxpayer who must prove that he falls under the exception.

And, if an exemption is found to exist, it must not be enlarged by construction, since the reasonable presumption is that the state
has granted in express terms all it intended to grant at all, and that, unless the privilege is limited to the very terms of the statute
the favor would be extended beyond dispute in ordinary cases.

In this case: The Court fails to see how Section 12 of R.A. 7082 operates as granting PLDT blanket exemption from payment of
indirect taxes, which, in the ultimate analysis, are not taxes on its franchise or earnings. PLDT has not shown its eligibility for the
desired exemption. None should be granted.

~
Additional reading only
(Just in case)

Advance sales tax

It has the attributes of an indirect tax because the tax-paying importer of goods for sale or of raw materials to be processed into
merchandise can shift the tax or lay the “economic burden of the tax”, on the purchaser, by subsequently adding the tax to the
selling price of the imported article or finished product.

Compensating tax
It also partakes of the nature of an excise tax payable by all persons who import articles, whether in the course of business or not.
The rationale for compensating tax is to place, for tax purposes, persons purchasing from merchants in the Philippines on a more
or less equal basis with those who buy directly from foreign countries.

Contention: PLDT alleges that the Bureau of Customs assessed the company for advance sales tax and compensating tax for
importations entered between October 1, 1992 and May 31, 1994 when the value-added tax system already replaced, if not
totally eliminated, advance sales and compensating taxes.

Held: Pursuant to E.O. 273 which took effect on January 1, 1988, a multi-stage value-added tax was put into place to replace the
tax on original and subsequent sales tax. Thus, compensating tax and advance sales tax were no longer collectible internal
revenue taxes under the NIRC when the Bureau of Customs made the assessments in question and collected the corresponding
tax. Thus, PLDT was no longer under legal obligation to pay compensating tax and advance sales tax on its importation from 1992
to 1994.

Given the above perspective, the amount PLDT paid in the concept of advance sales tax and compensating tax on the 1992 to
1994 importations were, in context, erroneous tax payments and would theoretically be refundable. It should be emphasized,
however, that, such importations were, when made, already subject to VAT.

Factoring in the fact that a portion of the claim was barred by prescription, the CTA had determined that PLDT is entitled to a total
refundable amount of P94,673,422.00 (P87,257,031.00 of compensating tax + P7,416,391.00 = P94,673,422.00). Accordingly, it
behooves the BIR to grant a refund of the advance sales tax and compensating tax in the total amount of P94,673,422.00, subject
to the condition that PLDT present proof of payment of the corresponding VAT on said transactions.

7. MALAYAN INSURANCE COMPANY, INC., VS. ST. FRANCIS SQUARE REALTY CORPORATION
G.R. Nos. 198916-17, JULY 23, 2018, Peralta, J.

DOCTRINE: Malayan can no longer claim that input VAT is an additional cost built into the cost of goods and services it purchased
and procured from its contractors and suppliers because it is a VAT-registered purchaser that has sold condominium units and
parking lots in the course of its business and admitted to having offset input tax from the project against its output tax liabilities.

Additionally, Malayan has stated that it has offset the input tax from the project against its output tax liabilities. It would be an
unjust enrichment at the expense of St. Francis to permit Malayan to pass the burden of such indirect tax on to buyers of the said
units and slots, and to further claim that input VAT must still form part of the ARCC. St. Francis' proportionate share in the
remaining units would be unduly reduced, while Malayan's share would be increased.

FACTS: Both Malayan Insurance Company, Inc. and St. Francis Square Realty Corporation have submitted a motion asking the
court to reconsider its decision from January 11, 2016. The sole aspect of the court's decision that St. Francis challenges in its
application for partial reconsideration is its determination that the input value-added tax (VAT) in the amount of P45,419,770
should be recognized as part of the actual remaining construction cost (ARCC).

St. Francis asserts that the question of input VAT is not restricted to or solely about the technical classifications of taxes or
accounting rules, and that input VAT cannot be considered an expense in accordance with tax laws nor be deemed a component
of the ARCC in accordance with the plain and ordinary meaning of the word "cost".

St. Francis, citing VAT Ruling No. 053-94, argues that the VAT paid by a VAT-registered person on his purchases is an asset account
in the Balance Sheet and cannot be considered as an expenditure unless the person is exempt from VAT. This is because an asset
account cannot have a negative balance. According to St. Francis, this is the reason why under Malayan's own documentary
evidence consisting of cash vouchers, input VAT was treated separately from the actual construction cost, and was treated in
Malayan's audited financial statements under the heading "Other Assets" as opposed to the expense category. The cash vouchers
were Malayan's own documentary evidence.
St. Francis further contends that because Malayan admitted that the input VAT was used to offset its output VAT and thus reduce
its tax liability, the input VAT can no longer be charged because St. Francis factored in such tax when computing its investment in
the project, it cannot now claim that input VAT should not be included in Malayan is adamant that input VAT should be included
as a cost according to the legislation as well as the laws of accounting, and that it should be included in the ARCC as envisioned in
the MOA.

ISSUE: Should the input VAT in the amount of P45,419,770, which is based on the official receipts, check vouchers, and other
supporting documents, be prohibited in the calculation of the ARCC?

RULING: It is not incorrect to claim that the issue of whether or not input VAT counts as a direct construction cost and ought to be
included as a component of the ARCC is a legal one, not a factual one. This is because the law determines what counts as a direct
construction cost.

However, the Court went on to state that such VAT should be included in the ARCC because the cash vouchers and receipts
showed that Malayan's payment to the contractors and suppliers included the same tax. Although the Court had previously ruled
that input VAT is a financial cost and not a direct construction cost, the Court went on to state that such VAT should be included in
the ARCC.

However, when deciding such a question of law, the Court failed to take into account the nature of VAT as an indirect and
consumption tax that is ultimately borne by the final consumers of consumer goods, properties, or services. This is because the
liability for paying VAT is passed on to the final consumers by the providers of goods and services, who, in turn, may credit their
own VAT liability from the VAT payments they receive from the final consumer. Only in the case of a buyer who is not registered
for VAT does the tax burden that is passed on count as cost; rather, it is an input tax that can be credited against the purchaser's
output tax liabilities. On the other hand, only in the case of a buyer who is not registered for VAT does VAT count as part of the
cost of the purchase price.

Therefore, the input tax that is passed on to the end consumers, such as the purchasers of condominium units and parking spots
offered by Malayan, becomes a component of the ultimate consumers' costs associated with the acquisition or operation of the
asset than the "investment" sense, as the actual expenditures that are necessary to finish the project. This is because of the fact
that the ARCC specifically excludes input VAT from its definition of "investment." Given that Malayan admitted that it had offset
its input VAT against its output VAT, Malayan is presumed to have decided to pass the burden of the tax on to the buyers of the
condominium units and parking lots, and it practically incurred no actual expenditure that could be included in the computation of
the ARCC.

Given that Malayan had already benefited from the crediting of the input VAT against its output VAT liabilities, the Court rules
that allowing Malayan to claim input VAT as part of the ARCC would result in unjust enrichment of Malayan.

In the meantime, Malayan cannot successfully rely on BIR Ruling No. 229-15 dated 30 June 2015 to support their argument that
input VAT should be allowed to remain as a component of the ARCC. This ruling states that once a tax is shifted to the buyer or
customer as an addition to the costs of goods or services sold, it is no longer considered a tax but rather an additional cost that
the buyer or customer is required to pay in order to obtain the goods or services.

Malayan's argument that It is sufficient to state that Malayan is not the final buyer or customer envisioned in the BIR ruling. This is
due to the fact that Malayan is a VAT registered purchaser which, in the normal course of its business, has shifted the burden of
such indirect tax to the buyers of its condominium units and parking lots, and has also used input VAT to offset its out-put VAT
liabilities.

In conclusion, the Court overturned its previous judgement and determined that the input VAT in the amount of P45,419,770,
which is based on the official receipts, check vouchers, and other supporting documents, shall not be excluded in the
calculation of the ARCC.
Input VAT is an indirect consumption tax that is ultimately shouldered by end consumers, and the Court finds that its prior
statement regarding Input VAT is contradictory to the nature of the tax as an indirect consumption tax. The Court also finds
that it would be an unfair enrichment if the same were recognized as part of the ARCC, despite the fact that Malayan had
utilized its input VAT from the project to balance its output VAT responsibilities.

8. PANASONIC COMMUNICATION IMAGING CORP. VS. CIR

G.R. No. 178090 | February 8, 2010

DOCTRINE: Zero-rated transactions generally refer to the export sale of goods and services. The tax rate in this case is set at zero.
When applied to the tax base or the selling price of the goods or services sold, such zero rate results in no tax chargeable against
the foreign buyer or customer. But, although the seller in such transactions charges no output tax, he can claim a refund of the
VAT that his suppliers charged him. The seller thus enjoys automatic zero rating, which allows him to recover the input taxes he
paid relating to the export sales, making him internationally competitive. For the effective zero rating of such transactions,
however, the taxpayer has to be VAT-registered and must comply with invoicing requirements.

FACTS: Petitioner Panasonic Communications Imaging Corporation of the Philippines (Panasonic) produces and exports plain
paper copiers and their sub-assemblies, parts, and components. It is also a registered value-added tax (VAT) enterprise.
From April 1 to September 30, 1998 and from October 1, 1998 to March 31, 1999, petitioner Panasonic generated export sales.
Believing that these export sales were zero-rated for VAT under Section 106(A)(2)(a)(1) of the 1997 National Internal Revenue
Code as amended by Republic Act (R.A.) 8424 (1997 NIRC), Panasonic paid input VAT for the two periods attributable to its zero-
rated sales.
Claiming that the input VAT it paid remained unutilized or unapplied, petitioner Panasonic filed with the BIR two separate
applications for refund or tax credit of what it paid. When the BIR did not act on the same, Panasonic filed a petition for review
with the CTA, averring the inaction of the respondent CIR on its applications.

The CTA’s First Division rendered judgment denying the petition for lack of merit. The First Division said that, while petitioner
Panasonic’s export sales were subject to 0% VAT under Sec. 106(A)(2)(a)(1) of the 1997 NIRC, the same did not qualify for zero-
rating because the word "zero-rated" was not printed on Panasonic’s export invoices. This omission, said the First Division,
violates the invoicing requirements of Sec. 4.108-1 of Revenue Regulations (RR) 7-95.

Its motion for reconsideration having been denied, on January 5, 2007 petitioner Panasonic appealed the First Division’s decision
to the CTA en banc. On May 23, 2007 the CTA en banc upheld the First Division’s decision and resolution and dismissed the
petition.

ISSUE: Whether the CTA en banc correctly denied petitioner Panasonic’s claim for refund of the VAT it paid as a zero-rated
taxpayer on the ground that its sales invoices did not state on their faces that its sales were "zero-rated."

RULING: YES. The VAT is a tax on consumption, an indirect tax that the provider of goods or services may pass on to his
customers. Under the VAT method of taxation, which is invoice-based, an entity can subtract from the VAT charged on its sales or
outputs the VAT it paid on its purchases, inputs and imports.

Zero-rated transactions generally refer to the export sale of goods and services. The tax rate in this case is set at zero. When
applied to the tax base or the selling price of the goods or services sold, such zero rate results in no tax chargeable against the
foreign buyer or customer. But, although the seller in such transactions charges no output tax, he can claim a refund of the VAT
that his suppliers charged him. The seller thus enjoys automatic zero rating, which allows him to recover the input taxes he paid
relating to the export sales, making him internationally competitive.

For the effective zero rating of such transactions, however, the taxpayer has to be VAT-registered and must comply with invoicing
requirements. Interpreting these requirements, respondent CIR ruled that under Revenue Memorandum Circular (RMC) 42-2003,
the taxpayer’s failure to comply with invoicing requirements will result in the disallowance of his claim for refund. RMC 42-2003
provides:
A-13. Failure by the supplier to comply with the invoicing requirements on the documents supporting the sale of goods
and services will result in the disallowance of the claim for input tax by the purchaser-claimant.

Petitioner Panasonic points out, however, that in requiring the printing on its sales invoices of the word "zero-rated," the
Secretary of Finance unduly expanded, amended, and modified by a mere regulation (Section 4.108-1 of RR 7-95) the letter and
spirit of Secs. 113 and 237 of the 1997 NIRC, prior to their amendment by R.A. 9337.
Petitioner Panasonic points out that Secs. 113 and 237 did not require the inclusion of the word "zero-rated" for zero-rated sales
covered by its receipts or invoices. The BIR incorporated this requirement only after the enactment of R.A. 9337 on November 1,
2005, a law that did not yet exist at the time it issued its invoices.
But when petitioner Panasonic made the export sales subject of this case, i.e., from April 1998 to March 1999, the rule that
applied was Section 4.108-1 of RR 7-95, otherwise known as the Consolidated Value-Added Tax Regulations, which the Secretary
of Finance issued on December 9, 1995 and took effect on January 1, 1996. It already required the printing of the word "zero-
rated" on the invoices covering zero-rated sales. When R.A. 9337 amended the 1997 NIRC on November 1, 2005, it made this
particular revenue regulation a part of the tax code. This conversion from regulation to law did not diminish the binding force of
such regulation with respect to acts committed prior to the enactment of that law.
This Court held that, since the "BIR authority to print" is not one of the items required to be indicated on the invoices or receipts,
the BIR erred in denying the claim for refund. Here, however, the ground for denial of petitioner Panasonic’s claim for tax refund
—the absence of the word "zero-rated" on its invoices—is one which is specifically and precisely included in the above
enumeration. Consequently, the BIR correctly denied Panasonic’s claim for tax refund.

9. CIR VS. MAGSAYSAY LINES

G.R. No.146984 | July 28, 2006

DOCTRINE: : Any sale, barter or exchange of goods or services not in the course of trade or business is not subject to VAT. It is
clear that "course of business" or "doing business" connotes regularity of activity.

FACTS: The National Development Corporation (NDC) decided to sell to private enterprises all of its shares in the National Marine
Corporation (NMC) and five (5) of vessels. These were sold through public biddings by which Magsaysay Lines was the highest
bidder. Among the stipulated terms and conditions for the public auction was that the winning bidder was to pay "a value added
tax of 10% on the value of the vessels."

The implementing Contract of Sale was executed between NDC and Magsaysay. Paragraph 11.02 of the contract stipulated that
"value-added tax, if any, shall be for the account of the PURCHASER." Further, in a VAT Ruling from the BIR, it was held that the
sale of the vessels was subject to the 10% VAT. The ruling cited that NDC was a VAT-registered enterprise, and thus its
"transactions incident to its normal VAT registered activity of leasing out personal property including sale of its own assets that
are movable, tangible objects which are appropriable or transferable are subject to the 10% [VAT].”

ISSUE: WON the sale of vessels by the NDC is subject to VAT ? [NO]
RULING: The sale of the vessels was not in the ordinary course of trade or business of NDC which was appreciated by both the
CTA and the Court of Appeals.
In Imperial v. Collector of Internal Revenue, the term "carrying on business" does not mean the performance of a single
disconnected act, but means conducting, prosecuting and continuing business by performing progressively all the acts normally
incident thereof; while "doing business" conveys the idea of business being done, not from time to time, but all the time.

What is clear therefore is that "course of business" or "doing business" connotes regularity of activity. In the instant case, the sale
was an isolated transaction. The sale which was involuntary and made pursuant to the declared policy of Government for
privatization could no longer be repeated or carried on with regularity. It should be emphasized that the normal VAT-registered
activity of NDC is leasing personal property.

Section 100 of the Tax Code, which is relied upon by the CIR, is captioned "Value-added tax on sale of goods," and it expressly
states that "there shall be levied, assessed and collected on every sale, barter or exchange of goods, a value added tax." Section
100 should be read in light of Section 99, which lays down the general rule on which persons are liable for VAT in the first place
and on what transaction if at all. It may even be noted that Section 99 is the very first provision in Title IV of the Tax Code, the Title
that covers VAT in the law. Before any portion of Section 100, or the rest of the law may be applied, in order to subject a
transaction to VAT, it must first be satisfied that the taxpayer and transaction involved is liable for VAT under Section 99.

10. MINDANAO II GEOTHERMAL PARTNERSHIP VS. CIR

G.R. No. 193301 | March 11, 2013

DOCTRINE: Summary Of Rules On Prescriptive Periods Involving VAT:

(1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the zero-rated
or effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the administrative claim within which
to decide whether to grant a refund or issue a tax credit certificate. The 120-day period may extend beyond the two-year period
from the filing of the administrative claim if the claim is filed in the later part of the two-year period. If the 120-day period expires
without any decision from the CIR, then the administrative claim may be considered denied by inaction
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s decision denying the administrative
claim, or from the expiration of the 120-day period without any action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its
reversal by this Court in Aichi on 6 October 2010, as an exception to the mandatory and jurisdictional 120+30 day periods.

FACTS: Pursuant to EPIRA, Mindanao I and II filed with the CIR claims for refund or tax credit of accumulated and unutilized and/or
excess input taxes due to VAT zero-rated sales in 2003. Mindanao I and II filed their claims in 2005.

Mindanao I and II entered into a contract of Build-Operate-Transfer (BOT) with the Philippine National Oil Corporation – Energy
Development Corporation (PNOC-EDC) where Mindanao will convert the steam into electric capacity and energy for PNOC-EDC
and shall subsequently supply and deliver the same to the National Power Corporation (NPC), for and in behalf of PNOC-EDC.

The amendment of the NIRC of 1997 modified the VAT rate applicable to sales of generated power by generation companies from
ten (10%) percent to zero percent (0%). Thus, Mindanao adopted the VAT zero-rating of the EPIRA in computing for its VAT
payable when it filed its VAT Returns, on the belief that its sales qualify for VAT zero-rating.

Mindanao reported its unutilized or excess creditable input taxes in its Quarterly VAT Returns for the taxable year 2003, which
were subsequently amended and filed with the BIR.
Since the application for refund by Mindanao remains unacted upon by the CIR, they filed administrative and judicial claims in
2005.

The CTA En Banc denied Mindanao II’s claims for refund tax credit for the first and second quarters of 2003, and Mindanao I’s
claims for refund/tax credit for the first, second, third, and fourth quarters of 2003, for being filed out of time.

CTA En Banc Ruling:

Mindanao II’s judicial claims were filed beyond the period allowed in Sec. 112(A), by which the reckoning of the two-year
prescriptive period for filing the application for refund or credit of input VAT attributable to zero-rated sales or effectively zero-
rated sales shall be counted from the close of the taxable quarter when the sales were made (regardless of whether the tax was
actually paid), according to CIR v. Mirant Pagbilao Corporation (Mirant). Also, the sale of the fully-depreciated Nissan Patrol is
incidental to Mindanao II’s VAT zero-rated transactions and is VATable pursuant to Sec. 105.

Mindanao I’s claims for the first, second, third and fourth quarters of 2003 were filed out of time. Section 229 is inapplicable in
light of Mirant. Moreover, the procedure prescribed under Section 112(C) should be followed first before the CTA En Banc can act
on Mindanao I’s claim.

ISSUE #1: Whether the reckoning date for counting the two-year prescriptive period in Section 112 should be counted from the
end of the taxable quarter when the sales were made (Mirant) or the date of filing the return (Atlas)? Neither.

RULING: Neither Atlas nor Mirant applies, because when Mindanao II and Mindanao I filed their respective administrative and
judicial claims in 2005, neither case had been promulgated. Atlas was promulgated on 8 June 2007, Mirant on 12 September 2008.
Besides, Atlas merely stated that the two-year prescriptive period should be counted from the date of payment of the output VAT,
not from the close of the taxable quarter when the sales involving the input VAT were made. The Atlas doctrine did not interpret,
expressly or impliedly, the 120+30 day periods.

Prescriptive Period for the Filing of Administrative Claims

Section 112(A) of the 1997 Tax Code was the applicable law at the time of filing of the claims in issue, therefore the claims needed
to have been filed within two (2) years after the close of the taxable quarter when the sales were made. Mindanao I and II’s
administrative claims for the first quarter of 2003 had prescribed, but their claims for the second, third and fourth quarters of
2003 were filed on time.

Prescriptive Period for the Filing of Judicial Claims

In determining whether the claims for the second, third and fourth quarters of 2003 had been properly appealed, there is still see
no need to refer to either Atlas or Mirant, or even to Sec. 229. The second paragraph of Sect. 112(C) is clear that the taxpayer can
appeal to the CTA “within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one
hundred twenty day-period.”

The 120+30 day periods are mandatory and jurisdictional. The taxpayer cannot simply file a petition with the CTA without waiting
for the Commissioner’s decision within the 120-day period, because otherwise there would be no “decision” or “deemed a denial”
decision for the CTA to review. Moreover, Sec. 112(C) expressly grants a 30-day period to appeal to the CTA, and this period need
not necessarily fall within the two-year prescriptive period, as long as the administrative claim is filed within such time. The said
prescriptive period does not refer to the filing of the judicial claim with the CTA, but to the administrative claim with the
Commissioner.

San Roque: Recognition of BIR Ruling No. DA-489-03

BIR Ruling No. DA-489-03 provided that the “taxpayer-claimant need not wait for the lapse of the 120-day period before it could
seek judicial relief with the CTA.” In the consolidated cases of CIR v. San Roque, however, the Supreme Court En Banc held that
the taxpayer cannot simply file a petition with the CTA without waiting for the Commissioner’s decision within the 120-day
jurisdictional period. Notwithstanding, the Court also held in San Roque that BIR Ruling No. DA-489-03 constitutes equitable
estoppel in favor of taxpayers. Being a general interpretative rule, it can be relied on by all taxpayers from the time of its issuance
on 10 December 2003 up to its reversal by the Court in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.
(Aichi) on 6 October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional.”

Mindanao II filed its administrative claims for the second, third, and fourth quarters of 2003 on 13 April 2005. Counting 120 days
after filing of the administrative claim (11 August 2005) and 30 days after the CIR’s denial by inaction, the last day for filing a
judicial claim with the CTA for the second, third, and fourth quarters of 2003 was on 12 September 2005. However, the judicial
claim could not be filed earlier than 11 August 2005, which was the expiration of the 120-day period for the Commissioner to act.

Mindanao II filed its judicial claim for the second quarter before the expiration of the 120-day period; it was thus prematurely
filed. However, pursuant to San Roque, the claim qualifies under the exception to the strict application of the 120+30 day periods.
Its judicial claims for the third quarter and fourth quarter of 2003 were filed on time.

Mindanao I filed its administrative claims for the second, third, and fourth quarters of 2003 on 4 April 2005. Counting 120 days
after filing of the administrative claim with the CIR (2 August 2005) and 30 days after the CIR’s denial by inaction, the last day for
filing a judicial claim was on 1 September 2005. However, the judicial claim cannot be filed earlier than 2 August 2005, which is
the expiration of the 120-day period for the Commissioner to act on the claim. Mindanao I prematurely filed its judicial claim for
the second quarter of 2003 but claim qualifies under the exception in San Roque. Its judicial claims for the third and fourth
quarters of 2003, however, were filed after the prescriptive period.

ISSUE #2: Whether the sale of the fully-depreciated Nissan Patrol is a one-time transaction not incidental to the VAT zero-rated
operation of Mindanao II, thus not VATable? NO.

RULING: Mindanao II asserts that the sale of a fully depreciated Nissan Patrol is not an incidental transaction in the course of its
business but an isolated transaction that should not have been subject to 10% VAT. It does not follow that an isolated transaction
cannot be an incidental transaction for purposes of VAT liability. Indeed, a reading of Section 105 would show that a transaction
“in the course of trade or business” includes “transactions incidental thereto.” In the course of its business, Mindanao II bought
and eventually sold a Nissan Patrol. Prior to the sale, the Nissan Patrol was part of Mindanao II’s property, plant, and equipment.
Therefore, the sale of the Nissan Patrol is an incidental transaction made in the course of Mindanao II’s business which should be
liable for VAT.

11. PSALM CORP VS. CIR

G.R. No. 198146 | August 8, 2017

DOCTRINE: The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a
nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to
members or their guests), or government entity.

FACTS: Power Sector Assets and Liabilities Management Corporation (PSALM) is a government-owned and controlled corporation
created under Republic Act No. 9136 (RA 9136), also known as the Electric Power Industry Reform Act of 2001 (EPIRA).

Section 50 of RA 9136 states that the principal purpose of PSALM is to manage the orderly sale, disposition, and privatization of
the National Power Corporation (NPC) generation assets, real estate and other disposable assets, and Independent Power
Producer (IPP) contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal
manner.

Two power plants were sold by PSALM. The NPC received a letter from the Bureau of Internal Revenue (BIR) demanding
immediate payment of P3,813,080,472 deficiency value-added tax (VAT) for the sale of the Pantabangan-Masiway Plant and
Magat Plant.

ISSUE 1: Whether the sale of the power plants is subject to VAT. NO.

RULING: To resolve the issue of whether the sale of the Pantabangan-Masiway and Magat Power Plants by PSALM to private
entities is subject to VAT, the Court must determine whether the sale is "in the course of trade or business" as contemplated
under Section 105 of the NIRC, which reads:

SEC 105. Persons Liable. - Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or
properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in
Sections 106 to 108 of this Code. xxx

The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or an economic activity,
including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock,
nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members
or their guests), or government entity.

PSALM is limited to selling only NPC assets and IPP contracts of NPC. The sale of NPC assets by PSALM is not “in the course of
trade or business” but purely for the specific purpose of privatizing NPC assets in order to liquidate all NPC financial obligations.
PSALM is tasked to sell and privatize the NPC assets within the term of its existence. Privatization of assets by PSALM is not subject
to VAT:

The sale of the power plants is not in pursuit of a commercial or economic activity but a governmental function mandated by law
to privatize NPC generation assets. The sale of the power plants is not “in the course of trade or business” as contemplated under
Section 105 of the NIRC, and thus, not subject to VAT.

Hence, the P3,813,080,472 deficiency VAT remitted by PSALM under protest should therefore be
refunded to PSALM.

ISSUE 2: Whether the privatization of assets by PSALM is subject to VAT. NO.

RULING: Pursuant to Section 105 in relation to Section 106, both of the Tax Code of 1997, a value-added tax equivalent to ten
percent (10%) of the gross selling price or gross value in money of the goods, is collected from any person, who, in the course of
trade or business, sells, barters, exchanges, leases goods or properties, which tax shall be paid by the seller or transferor. The
phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial activity, including transactions
incidental thereto. Since the disposition or sale of the assets is a consequence of PSALM's mandate to ensure the orderly sale or
disposition of the property and thereafter to liquidate the outstanding loans and obligations of NPC, utilizing the proceeds from
sales and other property contributed to it, including the proceeds from the Universal Charge, and not conducted in pursuit of any
commercial or profitable activity, including transactions incidental thereto, the same will be considered an isolated transaction,
which will therefore not be subject to VAT.

12. RR NO. 16-2005, SEC 4.106-7 ( DEEMED SALE)

SEC. 4.106-7. Transactions Deemed Sale. -

(a) The following transactions shall be "deemed sale" pursuant to Sec. 106 (B) of the Tax Code:

(1) Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use in
 the course of business. Transfer of goods or properties not in the course of business can take place when VAT-registered
person withdraws goods from his business for his personal use;

(2) Distribution or transfer to:

i. Shareholders or investors share in the profits of VAT-registered person;

Property dividends which constitute stocks in trade or properties primarily held for sale or lease declared out of retained
earnings on or after January 1, 1996 and distributed by the company to its shareholders shall be subject to VAT based on the zonal
value or fair market value at the time of distribution, whichever is applicable.

ii. Creditors in payment of debt or obligation.

(3) Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. Consigned
goods returned by the consignee within the 60-day period are not deemed sold;

(4) Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock-in-trade,
supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new
owner or successor. The following circumstances shall, among others, give rise to transactions "deemed sale" for
purposes of this Section;

i. Change of ownership of the business. There is a change in the ownership of the business when a single
proprietorship incorporates; or the proprietor of a single proprietorship sells his entire business

ii. Dissolution of a partnership and creation of a new partnership which takes over the business.

(b) The Commissioner of Internal Revenue shall determine the appropriate tax base in cases where a transaction is deemed a sale,
barter or exchange of goods or properties under Sec. 4.106-7 paragraph (a) hereof, or where the gross selling price is
unreasonably lower than the actual market value. The gross selling price is unreasonably lower than the actual market value if it is
lower by more than 30% of the actual market value of the same goods of the same quantity and quality sold in the immediate
locality on or nearest the date of sale.

For transactions deemed sale, the output tax shall be based on the market value of the goods deemed sold as of the time
of the occurrence of the transactions enumerated in Sec. 4.106-7(a)(1),(2), and (3) of these Regulations. However, in the case of
retirement or cessation of business, the tax base shall be the acquisition cost or the current market price of the goods or
properties, whichever is lower.

In the case of a sale where the gross selling price is unreasonably lower than the fair market value, the actual market
value shall be the tax base.

13. RR NO. 16-2005, SEC 4.106-2

Sec 4.106-2. Meaning of the Term “Goods or Properties”. - The term “goods or properties” refers to all tangible and intangible
objects which are capable of pecuniary estimation and shall include, among others:

1. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
2. The right or the privilege to use patent, copyright, design or model, plan, secret formula, goodwill, trademark, trade
 brand, or other like property or right;
3. The right or the privilege to use any industrial commercial, or scientific equipment;
4. The right or the privilege to use motion picture films, films, tapes and discs; and
5. Radio, television, satellite transmission, and cable television time.

14. FORT BONIFACIO VS. CIR

GR. No. 158885 & 170680 | October 2, 2009

DOCTRINE: A law must not be read in truncated parts; its provisions must be read in relation to the whole law. It is the cardinal
rule in statutory construction that a statute’s clauses and phrases must not be taken as detached and isolated expressions, but the
whole and every part thereof must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole.

To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the enabling law. An implementing
rule or regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule that is not consistent with
the statute itself is null and void.

FACTS: Respondents filed a Motion for Reconsideration of the Decision dated April 2, 2009 which granted the consolidated
petitions of petitioner Fort Bonifacio Development Corporation. In the said decision, the Court restrained respondents from
collecting from petitioner the amount representing the transitional input tax credit due it for the fourth quarter of 1996 and
likewise directed respondents to refund the amount paid as output VAT for the third quarter of 1997 in light of the persisting
transitional input tax credit available to petitioner for the said quarter or to issue a tax credit corresponding to such amount.
The respondents raised the following arguments in their MR:

 The distinction between the treatment of real properties/real estate dealers and transactions involving other commercial
goods is supplied under Section 105 and is further defined by Revenue Regulations No. 7-95;
 Section 4.105.1 and Par. (A)(III) of the transitory provisions of RR No. 7-95 validly limited the 8% transitional input tax to
improvements on real properties; and
 RR No. 6-97 did not repeal RR No. 7-95.

ISSUE: Whether or not the limitation on the application of transitional input tax under RR No. 7-95 is valid. NO.

RULING: CIR disallowed FBDC’s presumptive input tax credit arising from the land inventory on the basis of Revenue Regulation 7-
95 (RR 7-95) and Revenue Memorandum Circular 3-96 (RMC 3-96). Specifically, Section 4.105-1 of RR 7-95 provides:
Sec. 4.105-1. Transitional input tax on beginning inventories. – Taxpayers who became VAT-registered persons upon effectivity of
RA No. 7716 who have exceeded the minimum turnover of ₱500,000.00 or who voluntarily register even if their turnover does not
exceed ₱500,000.00 shall be entitled to a presumptive input tax on the inventory on hand as of December 31, 1995 on the
following:
(a) goods purchased for resale in their present condition;
(b) materials purchased for further processing, but which have not yet undergone processing;
(c) goods which have been manufactured by the taxpayer;
(d) goods in process and supplies, all of which are for sale or for use in the course of the taxpayer’s trade or business as a VAT-
registered person.
However, in the case of real estate dealers, the basis of the presumptive input tax shall be the improvements, such as buildings,
roads, drainage systems, and other similar structures, constructed on or after the effectivity of EO 273 (January 1, 1988).
The transitional input tax shall be 8% of the value of the inventory or actual VAT paid, whichever is higher, which amount may be
allowed as tax credit against the output tax of the VAT-registered person.
In the April 2, 2009 Decision sought to be reconsidered, the Court struck down Section 4.105-1 of RR 7-95 for being in conflict with
the law. It held that the CIR had no power to limit the meaning and coverage of the term "goods" in Section 105 of the Old NIRC
sans statutory authority or basis and justification to make such limitation. This it did when it restricted the application of Section
105 in the case of real estate dealers only to improvements on the real property belonging to their beginning inventory.
A law must not be read in truncated parts; its provisions must be read in relation to the whole law. It is the cardinal rule in
statutory construction that a statute’s clauses and phrases must not be taken as detached and isolated expressions, but the whole
and every part thereof must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole. Every
part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered
together with other parts of the statute and kept subservient to the general intent of the whole enactment.
In construing a statute, courts have to take the thought conveyed by the statute as a whole; construe the constituent parts
together; ascertain the legislative intent from the whole act; consider each and every provision thereof in the light of the general
purpose of the statute; and endeavor to make every part effective, harmonious and sensible.
The statutory definition of the term "goods or properties" leaves no room for doubt. It states:
Sec. 100. Value-added-tax on sale of goods or properties. — (a) Rate and base of tax. — There shall be levied, assessed and
collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to 10% of the gross selling price
or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.
(1) The term 'goods or properties' shall mean all tangible and intangible objects which are capable of pecuniary estimation and
shall include:
(A) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; xxx
The amendatory provision of Section 105 of the NIRC, as introduced by RA 7716(this has already been amended by the New NIRC,
specifically Section 111. Note, however, that the contents of both provisions are more or less similar), states:
Sec. 105. Transitional Input tax Credits. – A person who becomes liable to value-added tax or any person who elects to be a VAT-
registered person shall, subject to the filing of an inventory as prescribed by regulations, be allowed input tax on his beginning
inventory of goods, materials and supplies equivalent to 8% of the value of such inventory or the actual value-added tax paid on
such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax.
The term "goods or properties" by the unambiguous terms of Section 100 includes "real properties held primarily for sale to
costumers or held for lease in the ordinary course of business." Having been defined in Section 100 of the NIRC, the term "goods"
as used in Section 105 of the same code could not have a different meaning. This has been explained in the Decision dated April 2,
2009, thus:
Under Section 105, the beginning inventory of "goods" forms part of the valuation of the transitional input tax credit. Goods, as
commonly understood in the business sense, refers to the product which the VAT-registered person offers for sale to the public.
With respect to real estate dealers, it is the real properties themselves which constitute their "goods." Such real properties are
the operating assets of the real estate dealer.
Section 4.100-1 of RR No. 7-95 itself includes in its enumeration of "goods or properties" such "real properties held primarily for
sale to customers or held for lease in the ordinary course of trade or business." Said definition was taken from the very statutory
language of Section 100 of the Old NIRC. By limiting the definition of goods to "improvements" in Section 4.105-1, the BIR not only
contravened the definition of "goods" as provided in the Old NIRC, but also the definition which the same revenue regulation itself
has provided.
Section 4.105-1 of RR 7-95 restricted the definition of "goods", viz:
However, in the case of real estate dealers, the basis of the presumptive input tax shall be the improvements, such as buildings,
roads, drainage systems, and other similar structures, constructed on or after the effectivity of EO 273 (January 1, 1988).
As mandated by Article 7 of the Civil Code, an administrative rule or regulation cannot contravene the law on which it is based. RR
7-95 is inconsistent with Section 105 insofar as the definition of the term "goods" is concerned. This is a legislative act beyond the
authority of the CIR and the Secretary of Finance. The rules and regulations that administrative agencies promulgate, which are
the product of a delegated legislative power to create new and additional legal provisions that have the effect of law, should be
within the scope of the statutory authority granted by the legislature to the objects and purposes of the law, and should not be in
contradiction to, but in conformity with, the standards prescribed by law.
To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the enabling law. An
implementing rule or regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule that is not
consistent with the statute itself is null and void.
While administrative agencies, such as the Bureau of Internal Revenue, may issue regulations to implement statutes, they are
without authority to limit the scope of the statute to less than what it provides, or extend or expand the statute beyond its terms,
or in any way modify explicit provisions of the law. Indeed, a quasi-judicial body or an administrative agency for that matter
cannot amend an act of Congress. Hence, in case of a discrepancy between the basic law and an interpretative or administrative
ruling, the basic law prevails.
To recapitulate, RR 7-95, insofar as it restricts the definition of "goods" as basis of transitional input tax credit under Section
105 is a nullity.
On January 1, 1997, RR 6-97 was issued by the Commissioner of Internal Revenue. RR 6-97 was basically a reiteration of the same
Section 4.105-1 of RR 7-95, except that the RR 6-97 deleted the following paragraph:
However, in the case of real estate dealers, the basis of the presumptive input tax shall be the improvements, such as buildings,
roads, drainage systems, and other similar structures, constructed on or after the effectivity of E.O. 273 (January 1, 1988).
It is clear, therefore, that under RR 6-97, the allowable transitional input tax credit is not limited to improvements on real
properties. The particular provision of RR 7-95 has effectively been repealed by RR 6-97 which is now in consonance with Section
100 of the NIRC, insofar as the definition of real properties as goods is concerned. The failure to add a specific repealing clause
would not necessarily indicate that there was no intent to repeal RR 7-95. The fact that the aforequoted paragraph was deleted
created an irreconcilable inconsistency and repugnancy between the provisions of RR 6-97 and RR 7-95.

15. CIR VS. PAGBILAO CORP

G.R. No.00000 | Date

DOCTRINE:A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital
goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The
application may be made only within two (2) years, after the close of the taxable quarter when the importation or purchase was
made.

FACTS: Mirant Pagbilao Corporation (MPC), formerly Southern Energy Quezon, Inc., and also formerly known as Hopewell (Phil.)
Corporation, is a domestic firm engaged in the generation of power which it sells to the National Power Corporation (NPC). For the
construction of the electrical and mechanical equipment portion of its Pagbilao, Quezon plant.

It filed an application for the refund of input VAT on its purchase of capital goods and services for the period 1 April 1996 to 31
December 1996 (amounting to P39,330,500.85) pursuant to the procedures prescribed under Revenue Regulations No. 7-95.
Respondent previously secured the services of Mitsubishi Corporation of Japan but opted not to immediately pay the VAT
component of the progress billings from Mitsubishi for the period covering 07 April 1993 to 06 September 1996.

It must be noted at this juncture that consistent with its belief to be zero-rated, MPC opted not to pay the VAT component of the
progress billings from Mitsubishi for the period covering April 1993 to September 1996—for the E & M Equipment Erection
Portion of MPC’s contract with Mitsubishi. This prompted Mitsubishi to advance the VAT component as this serves as its output
VAT which is essential for the determination of its VAT payment. Apparently, it was only on April 14, 1998 that MPC paid
Mitsubishi the VAT component for the progress billings from April 1993 to September 1996, and for which Mitsubishi issued
Official Receipt (OR) No. 0189 in the aggregate amount of PhP 135,993,570.

Under Section 13 of Republic Act No. (RA) 6395, the NPCs revised charter, NPC is exempt from all taxes. In the light of the NPCs
tax exempt status, MPC, on the belief that its sale of power generation services to NPC is, pursuant to Sec. 108(B)(3) of the Tax
Code, zero-rated for VAT purposes MPC filed on December 1, 1997 with Revenue District Office (RDO) No. 60 in Lucena City an
Application for Effective Zero Rating. The application covered the construction and operation of its Pagbilao power station under a
Build, Operate, and Transfer scheme.

Not getting any response from the BIR district office, MPC refiled its application in the form of a "request for ruling" with the VAT
Review Committee at the BIR national office on January 28, 1999. On May 13, 1999, the Commissioner of Internal Revenue issued
VAT Ruling No. 052-99, stating that "the supply of electricity by Hopewell Phil. to the NPC, shall be subject to the zero percent
(0%) VAT, pursuant to Section 108 (B) (3) of the National Internal Revenue Code of 1997."

While waiting for an answer from the BIR commissioner pertaining to its application, MPC filed petition for review to CTA in order
to toll the running of the two-year prescriptive period for claiming a refund under the law.

In his Answer, the BIR Commissioner raised the following special and affirmative defenses:

· [MPC]s claim for refund is still pending investigation and consideration before the office of [the BIR Commissioner].
Accordingly, the present petition is premature;

· In an action for refund or tax credit, the taxpayer has the burden to show that the taxes paid were erroneously or illegally
paid and failure to sustain the said burden is fatal to the action for refund;

· It is incumbent upon [MPC] to show that the claim for tax credit has been filed within the prescriptive period under the tax
code;

The CTA ruled in favor of MPC, and declared that MPC had overwhelmingly proved, through the VAT invoices and official receipts
it had presented, that its purchases of goods and services were necessary in the construction of power plant facilities which it
used in its business of power generation and sale. However, the amount granted was reduced to P28,744,626.95.

The Commissioner appealed to CA raising a new argument that MPC being a public utility is subject to franchise tax instead of
VAT, therefore, MPC cannot claim input VAT. The CA dismissed the appeal by ruling that the (1) Commissioner cannot validly
change his theory of the case on appeal; (2) The MPC is not a public utility within the contemplation of law; (3) The sale by MPC of
its generated power to the National Power Corporation (NAPOCOR) is subject to VAT at zero percent rate; and (4) The MPC, as a
VAT-registered taxpayer, may apply for tax credit.

ISSUE:
1. Whether or not respondent’s claim for refund or tax credit for creditable input VAT payment has prescribed.

RULING:

1. YES. Unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within
two years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT
regardless of whether said tax was paid or not. When a zero-rated VAT taxpayer pays its input VAT a year after the pertinent
transaction, said taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT.

The claim for refund or tax credit for the creditable input VAT payment made by MPC embodied in OR No. 0189 was filed beyond
the period provided by law for such claim. Sec. 112(A) of the NIRC pertinently reads:

(A) Zero-rated or Effectively Zero-rated Sales. – Any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax: x x x. (Emphasis ours.)

The above proviso clearly provides in no uncertain terms that unutilized input VAT payments not otherwise used for any internal
revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter when the
relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not.
As the CA aptly puts it, albeit it erroneously applied the aforequoted Sec. 112(A), "Prescriptive period commences from the close
of the taxable quarter when the sales were made and not from the time the input VAT was paid nor from the time the official
receipt was issued." Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer
only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always be
the end of the quarter when the pertinent sales or transaction was made, regardless when the input VAT was paid . Be that as it
may, and given that the last creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third
quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax credit for said quarter
prescribed two years after September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC’s claim for refund or
tax credit filed on December 10, 1999 had already prescribed.

16. CIR VS. TEAM SUAL CORP

GR No: 201225-26 | April 18, 2018

DOCTRINE: In order for the CTA to acquire jurisdiction over a judicial claim for refund or tax credit arising from unutilized input
VAT, the said claim must first comply with the mandatory 120+30-day waiting period. Any judicial claim for refund or tax credit
filed in contravention of said period is rendered premature, depriving the CTA of jurisdiction to act on it.

FACTS: Team Sual Corp (TSC) is principally engaged in the business of power generation and subsequent sale thereof to the
National Power Corporation (NPC) under a Build, Operate, and Transfer scheme. As a seller of services, TSC is registered with the
Bureau of Internal Revenue (BIR) as a VAT taxpayer.

On December 6, 2000, TSC filed with the BIR Revenue District Office No. 5-Alaminos, Pangasinan an application for zero-rating
arising from its sale of power generation services to NPC for the taxable year 2001. The same was subsequently approved. As a
result, TSC filed its VAT returns covering the four quarters of taxable year 2001.

For the first, second, third, and fourth quarters of 2001, TSC reported excess input VAT amounting to P37,985,009.25,
P29,298,556.12, P32,869,835.40, and P66,566,967.02, respectively. The total excess input VAT claimed by TSC for the taxable year
amounted to P166,720,367.79.8

On March 20, 2003, TSC filed with the BIR an administrative claim for refund in the aggregate amount of P166,720,367.79 for its
unutilized input VAT for taxable year 2001.

On March 31, 2003, without waiting for the resolution of its administrative claim for refund or tax credit, TSC filed with the CTA
Division a petition for review docketed as CTA Case No. 6630. It prayed for the refund or issuance of a tax credit certificate for its
alleged unutilized input VAT for the first quarter of taxable year 2001 in the amount of P37,985,009.25.

On July 23, 2003, TSC filed another petition for review docketed as CTA Case No. 6733, seeking the refund or issuance of a tax
credit certificate for its alleged unutilized input VAT for the second, third, and fourth quarters of taxable year 2001 in the
amount of P128,735,358.54. Both cases were consolidated on August 7, 2003.
On September 15, 2011, the CTA En Banc rendered a Consolidated Decision granting TSC's claim for refund of input VAT for the
second, third, and fourth quarters of taxable year 2001 amounting to P123,110,001.68. Insofar as the refund of the input VAT for
the first quarter of taxable year 2001 is concerned, the CTA En Banc ruled that the CTA did not acquire jurisdiction over it as it had
been filed prematurely.

ISSUE: Whether or not CTA has jurisdictio to act on TSC’s two judicial claims for refund.

RULING: NO for claims pertaining to first quarter but YES for the remaining claims for second, third and fourth quarters.

In order for the CTA to acquire jurisdiction over a judicial claim for refund or tax credit arising from unutilized input VAT, the said
claim must first comply with the mandatory 120+30-day waiting period. Any judicial claim for refund or tax credit filed in
contravention of said period is rendered premature, depriving the CTA of jurisdiction to act on it.

Pursuant to Section 112, Subsections (A) and (C) of the National Internal Revenue Code (NIRC) of 1997, the procedure to be
followed in claiming a refund or tax credit of unutilized input VAT are as follows:

Sec. 112. Refunds or Tax Credits of Input Tax.

(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales.

xxxx

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund
or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of
complete documents in support of the application filed in accordance with Subsections (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the
Court of Tax Appeals.

It is clear from the above-quoted provisions that any taxpayer seeking a refund or tax credit arising from unutilized input VAT from
zero-rated or effectively zero-rated sales should first file an initial administrative claim with the BIR. This claim for refund or tax
credit must be filed within two years after the close of the taxable quarter when the sales were made.

The CIR is then given a period of 120-days from the submission of complete documents in support of the application to either
grant or deny the claim. If the claim is denied by the CIR or the latter has not acted on it within the 120-day period, the taxpayer-
claimant is then given a period of 30 days to file a judicial claim via petition for review with the CTA.

The mandatory and jurisdictional nature of the 120-day waiting period has been reiterated time and again by the Court.

In the instant case, TSC filed its administrative claim for refund for taxable year 2001 on March 20, 2003, well within the two-year
period provided for by law. TSC then filed two separate judicial claims for refund: one on March 31, 2003 for the first quarter of
2001, and the other on July 23, 2003 for the second, third, and fourth quarters of the same year.

Given the fact that TSC's administrative claim was filed on March 20, 2003, the CIR had 120 days or until July 18, 2003 to act on it.
Thus, the first judicial claim was premature because TSC filed it a mere 11 days after filing its administrative claim.
On the other hand, the second judicial claim filed by TSC was filed on time because it was filed on July 23, 2003 or five days after
the lapse of the 120-day period. Accordingly, it is clear that the second judicial claim complied with the mandatory waiting period
of 120 days and was filed within the prescriptive period of 30 days from the CIR's action or inaction. Therefore, the CTA division
only acquired jurisdiction over TSC's second judicial claim for refund covering its second, third, and fourth quarters of taxable
year 2001.

It is apparent from the records that the issue of TSC's non-compliance with the 120-day waiting period has been raised by the CIR
throughout the pendency of the entire case.

Being a mere scrap of paper, TSC's judicial claim for refund filed on March 31, 2003 covering the first quarter of taxable year 2001
cannot be the source of any rights.

Thus, considering the foregoing, the Court agrees with the ruling of the CTA En Banc which held that between the March 31 and
the July 23 petitions for review filed by TSC, the CTA Division only acquired jurisdiction over the latter.

17. CIR VS. SILICON PHIL

G.R No. 169778 | March 12, 2014

DOCTRINE: The mandatory rule is that a judicial claim must be filed with the CTA within thirty (30) days from the receipt of the
Commissioner’s decision denying the administrative claim or from the expiration of the 120-day period without any action from
the Commissioner. Otherwise, said judicial claim shall be considered as filed out of time - Section 112 of the NIRC 1997

FACTS: Petitioner is a commissioner of Internal Revenue. While Respondent, Silicon Philippines, Inc. is a corporation organized and
existing under Philippine laws, engaged in the business of designing, developing, manufacturing and exporting advanced large-
scale integrated circuit components.

On 6 May 1999 respondent filed with One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of
Finance (DOF) an application for Tax Credit/Refund of VAT for the second quarter of 1998, in the sum of P21,338,910.44.

No action was taken by the petitioner on the claim for refund. Thus, respondent filed a Petition for Review with the Court of Tax
Appeals (CTA).

The CTA partially granted the petition of respondent and ordered to issue a tax credit certificate, reduced the amount to
P8,179,049 (instead of the P21M) representing VAT on importation of capital goods. On the other, CTA denied the claim for
refund of input VAT on domestic purchases of goods and services attributable to zero-rated sales on the ground that export sale
invoices presented in support thereto do not have BIR permit to print, the sale invoice do not that the sale was zero-rated, all in
violation of Sections 113 and 239 of NIRC of 1997.

Aggrieved and unsatisfied, the respondent filed Petition for Review with the Court of Appeals. The CA reversed and set aside the
decision of the CTA and granted full tax refund – P21,338,910.04.

The CA found that respondent’s failure to secure a BIR authority or permit to print invoices or receipts does not completely
destroy the integrity of its export sales invoices in support of its claim for refund, since the BIR permit to print is not among those
required to be stated in the sales invoices or receipts to be issued by a taxpayer pursuant to Sections 113 and 237 of the NIRC of
1997, as amended.

ISSUE: W/N the grant of tax refund or issuance of tax credit in favor Silicon Philippines proper. – NO.
RULING:

JURISDICTION OF CTA

First, the Court may Moto Propio determine whether or not the CTA has jurisdiction over the respondent's claim.
Section 112 of the NIRC of 1997, prior to seeking judicial recourse before the CTA, a VAT-registered person may apply for the
issuance of a tax credit certificate or refund of creditable input tax attributable to zero- rated or effectively zero-rated sales within
two (2) years after the close of taxable quarter when the sales or purchases were made.
The provisions of Section 112 shows that under paragraph (D) thereof, the Commissioner of Internal Revenue is given a 120-day
period, from submission of complete documents in support of the administrative claim within which to act on claims for
refund/applications for issuance of the tax credit certificate. Upon denial of the claim or application, or upon expiration of the
120-day period, the taxpayer only has 30 days within which to appeal said adverse decision or unacted claim before the CTA.
Applying the foregoing discussion in the case at bench, although respondent has indeed complied with the required two-year
period within which to file a refund/tax credit claim with the BIR by filing its administrative claim on 6 May 1999 (within the period
from the close of the subject second quarter of taxable year 1998 when the relevant sales or purchases were made), it appears
however, that respondent’s corresponding judicial claim filed with the CTA on 30 June 2000 was filed beyond the 30- day period.
To recapitulate, the mandatory rule is that a judicial claim must be filed with the CTA within thirty (30) days from the receipt of
the Commissioner’s decision denying the administrative claim or from the expiration of the 120-day period without any action
from the Commissioner. Otherwise, said judicial claim shall be considered as filed out of time.
Hence, failure of respondent to observe the 30-day period under said Section through its belated filing of the Petition for Review
before the CTA warrants a dismissal with prejudice for lack of jurisdiction.
IMPRINTING OF THE WORD “ZERO-RATED”

As regards the prints on the supporting receipts or invoices, it is worth mentioning that the High Court already ruled on the
significance of imprinting the word "zero-rated" for zero-rated sales covered by its receipts or invoices, pursuant to Section 4.108-
1 of Revenue Regulations No. 7-95.

In Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal Revenue, the Second Division of
this Court enunciated:

“The requirement is reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and
services. As aptly explained by the CTA’s First Division, the appearance of the word "zero-rated" on the face of invoices
covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually
paid. If, absent such word, a successful claim for input VAT is made, the government would be refunding money it did not
collect.”
“Further, the printing of the word "zero-rated" on the invoice helps segregate sales that are subject to 10% (now 12%)
VAT from those sales that are zero-rated. Unable to submit the proper invoices, petitioner Panasonic has been unable to
substantiate its claim for refund. The absence of the word "zero-rated" on its invoices—is one which is specifically and
precisely included in the above enumeration. Consequently, the BIR correctly denied Panasonic’s claim for tax refund.”

In this case, Clearly, the foregoing pronouncement affirms that absence or non- printing of the word "zero-rated" in respondent’s
invoices is fatal to its claim for the refund and/or tax credit representing its unutilized input VAT attributable to its zero-rated
sales.

On the other hand, while this Court considers the importance of imprinting the word "zero-rated" in said invoices, the same does
not apply to the phrase "BIR authority to print." In Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue, the
Court ruled that there is no law or BIR rule or regulation requiring the taxpayer-claimant's authority from the BIR to print its sales
invoices (BIR authority to print) to be reflected or indicated therein. It stressed "that while entities engaged in business are
required to secure from the BIR an authority to print receipts or invoices and to issue duly registered receipts or invoices, it is not
required that the BIR authority to print be reflected or indicated therein
All told, the CTA has no jurisdiction over respondent's judicial appeal considering that its Petition for Review was filed beyond the
mandatory 30-day period pursuant to Section 112(D) of the NIRC of 1997, as amended. Consequently, respondent's instant claim
for refund must be denied.
WHEREFORE, the petition is GRANTED. Accordingly, the 16 September 2005 Decision of the Court of Appeals in CA-G.R. SP No.
80886 is hereby REVERSED and SET ASIDE. The Petition for Review filed.

18. PADLAN VS. DINGLASAN

G.R. No. 180321 | March 20, 2013

Note: This case did not discuss VAT or any type of tax.

DOCTRINE: Tax declaration may be presented to show the assessed value of the real property as basis to determine which court
has jurisdiction.

FACTS: Spouses Dinglasan are the duly registered owners of Lot No. 625. Without their knowledge and consent, the land was
divided into several lots under their names through the fraudulent manipulations of Maura. On April 26, 1990, Maura sold the
subject lot to Lorna. By virtue of the fictitious sale, new titles were issued. Sometime in August 1990, Lorna sold the lot to Padlan
for ₱4,000.00. A new title was issued in Padlan’s name.

Dinglasan filed a complaint against Padlan in the RTC Bataan to obtain title to the property. The amount alleged in the Complaint
by Dinglasan for the disputed lot is only ₱4,000.00.

ISSUE: Whether RTC has jurisdiction over the action. NO.

RULING: Where the ultimate objective of the plaintiffs is to obtain title to real property, it should be filed in the proper court
having jurisdiction over the assessed value of the property subject thereof.

Based on Section 33 of the same law BP Blg. 129, the MTC has exclusive original jurisdiction in all civil actions which involve title
to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not
exceed ₱20,000.00.

In the case at bar, the only basis of valuation of the subject property is the value alleged in the complaint that the lot was sold by
Lorna to Padlan in the amount of ₱4,000.00. No tax declaration was even presented that would show the valuation of the
subject property. In one of the hearings, Dinglasan’s counsel informed the court that they will present the tax declaration of the
property in the next hearing since they have not yet obtained a copy from the Provincial Assessor’s Office. However, they did not
present such a copy.

Since the amount alleged in the Complaint by respondents for the disputed lot is only ₱4,000.00, the MTC and not the RTC has
jurisdiction over the action. Therefore, all proceedings in the RTC are null and void.
 19. AICHI FORGING CO. V. CTA & CIR
G.R. No.00000 | Date

DOCTRINE: Except only to the extent allowed by the window period, there is no legal basis for the insistence that the simultaneous
filing of both administrative and judicial claims (pursuant to Section 112 of the Tax Code) is pennissible for as long as both fall
within the 2-year prescriptive period.

FACTS: AICHI is a domestic corporation duly organized and existing under the laws of the Philippines, and is principally engaged in
the manufacture, production, and processing of all kinds of steel and steel byproducts, such as closed impression die steel forgings
and all automotive steel parts. It is duly registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer and with the Board
of Investments (BOI) as an expanding producer of closed impression die steel forgings.

On 26 September 2002, AICHI filed with the BIR District Office in San Pedro, Laguna, a written claim for refund and/or tax credit of
its unutilized input VAT credits for the third and fourth quarters of 2000 and the four taxable quarters of 2001. AICHI sought the
tax refund/credit of input VAT for the said taxable quarters in the total sum of P18,030,547.776 representing VAT payments on
importation of capital goods and domestic purchases of goods and services.

As respondent CIR failed to act on the refund claim, and in order to toll the running of the prescriptive period provided under
Sections 229 and 112 (D) of the National Internal Revenue Code (Tax Code), AICHI filed, on 30 September 2002, a Petition for
Review before the CTA Division.

CTA Division partially granted the refund claim of AICHI, because it was filed within the prescriptive period.

ISSUE:

1. whether AICHI was entitled to a refund or issuance of a tax credit certificate of unutilized input VAT attributable to zero-
rated sales and unutilized input tax on importation of capital goods for the period 1 July 2000 to 31 December 2001 (or
six consecutive taxable quarters)
2. whether the administrative claim (refund claim with the BIR) and judicial claim (Petition for Review with the CTA) were
filed within the statutory periods for filing the claims

RULING:

1. there may be two possible scenarios when an appeal to the CTA is considered fatally defective even when initiated within the
two-year prescriptive period: first, when there is no decision and the appeal is taken prior to the lapse of the 120-day
mandatory period,45except only the appeal within the window period from 10 December 2003 to 6 October 2010;46 second,
the appeal is taken beyond 30 days from either decision or inaction "deemed a denial."47 In contrast, an appeal outside the
2-year period is not legally infirm for as long as it is taken within 30 days from the decision or inaction on the administrative
claim that must have been initiated within the 2-year prescriptive period. In other words, the appeal to the CTA is always
initiated within 30 days from decision or inaction regardless whether the date of its filing is within or outside the 2-year
period of limitation.

To repeat, except only to the extent allowed by the window period, there is no legal basis for the insistence that the
simultaneous filing of both administrative and judicial claims (pursuant to Section 112 of the Tax Code) is pennissible for
as long as both fall within the 2-year prescriptive period.

CTA has no jurisdiction over AICHI's judicial claim considering that its Petition for Review was filed prematurely, or
without cause of action for failure to exhaust the administrative remedies provided under Section 112 (D) of the Tax
Code, as amended. In addition, AICHI availed of the wrong remedy. Likewise, we find no need to pass upon the issue on
whether petitioner AICHI had substantiated its claim for refund or tax credit. Indisputably, we must deny AICHI's claim for
refund.
 20. SAN ROQUE VS. CIR
GR No. 203249 | July 23, 2018

DOCTRINE: Under the principle of equitable estoppel enshrined in Section 246 of the NIRC which decrees that a BIR regulation or
ruling cannot adversely prejudice a taxpayer who in good faith relied on the BIR regulation or ruling prior to its reversal.

FACTS: San Roque Power Corporation is a VAT-registered taxpayer which was granted by the BIR a zero-rating on its sales of
electricity to National Power Corporation (NPC) effective 14 January 2004, up to 31 December 2004

On 22 December 2005 and 27 February 2006, the petitioner filed two separate administrative claims for refund of its alleged
unutilized input tax for the period 1 January 2004 up to 31 March 2004, and 1 April 2004 up to 31 December 2004, respectively.
Due to the inaction of respondent CIR, the petitioner filed petitions for review before the CTA: (1) on 30 March 2006, for its
unutilized input VAT for the period 1 January 2004 to 31 March 2004, and (2) on 20 June 2006, for the
unutilized input VAT for the period 1 April 2004 to 31 December 2004.

The CTA Division partially granted the refund claim. The CIR moved for reconsideration but to no avail.

The CIR filed a petition for review with the CTA En Banc. The CIR questioned the claimant's judicial recourse to the CTA as
inconsistent with the procedure prescribed in Section 112 (D) of the NIRC. The CIR asserted that the petitions for review filed with
the CTA were premature, and thus, should be dismissed.

The CTA En Banc sided with the CIR in ruling that the judicial claims of the petitioner were prematurely filed in violation of the
120-day and 30-day periods prescribed in Section 112 (D) of the NIRC. The court held that by reason of prematurity of its petitions
for review, San Roque Power Corporation failed to exhaust administrative remedies which is fatal to its invocation of the court's
power of review.

ISSUE: Whether or not the judicial claims of the petitioner were prematurely filed in violation of the 120-day and 30-day periods
prescribed in Section 112 (D) of the NIRC. YES

Whether or not the CTA Division erred in partially granting the claim for refund/credit in favor of the petitioner by reason of
prematurity. No.
RULING: From the effectivity of the 1997 NIRC on 1 January 1998, the procedure has always been definite: the 120-day period is
mandatory and jurisdictional. Accordingly, a taxpayer can file a judicial claim (1) only within thirty days after the Commissioner
partially or fully denies the claim within the 120-day period, or (2) only within thirty days from the expiration of the 120- day
period if the Commissioner does not act within such period.

Thus, noncompliance with the mandatory 120+30-day period renders the petition before the CTA void.

Significantly, a taxpayer can file a judicial claim only within thirty (30) days from the expiration of the 120-day period if the
Commissioner does not act within the 120-day period. The taxpayer cannot file such judicial claim prior to the lapse of the 120-
day period, unless the CIR partially or wholly denies the claim within such period. The taxpayer-claimant must strictly comply with
the mandatory period by filing an appeal to the CTA within thirty days from such inaction; otherwise, the court cannot validly
acquire jurisdiction over it.

In this case, San Roque Power Corporation timely filed its administrative claims for refund/credit of its unutilized input VAT for the
first quarter of 2004, and for the second to fourth quarters of the same year, on December 22, 2005 and February 27, 2006,
respectively, or within the two-year prescriptive period. Counted from such dates of submission of the claims (with supporting
documents), the CIR had 120 days, or until April 13, 2006, with respect to the first administrative claim, and until June27, 2006, on
the second administrative claim to decide.

However, San Roque, without waiting for the full expiration of the 120-day periods and without any decision by the CIR,
immediately filed its petitions for review with the CTA on 30 March 2006, or a mere ninety-eight (98) days for the first
administrative claim; and on 20 June 2006, or only one hundred thirteen (113) days for the second administrative claim, from the
submission of the said claims. In other words, the judicial claims of San Roque were prematurely filed as correctly found by the
CTA En Banc.

Ordinarily, a prematurely filed appeal is to be dismissed for lack of jurisdiction in line with the Court’s ruling in Aichi. But, as stated
in the premises, the Court accorded to the CTA jurisdiction over the claims in this case due to the ruling in San Roque. In the
consolidated cases of San Roque, the Court en banc recognized an exception to the mandatory and jurisdictional nature of the
120+30-day period.

It was noted that BIR Ruling No. DA-489-03, which expressly stated - [A] taxpayer- claimant need not wait for the lapse of the 120-
day period before it could seek judicial relief with the CTA by way of Petition for Review – is a general interpretative rule issued by
the CIR pursuant to its power under Section 4 of the NIRC, hence, applicable to all taxpayers.

Thus, taxpayers can rely on this ruling from the time of its issuance on December 10, 2003. The conclusion is impelled by the
principle of equitable estoppel enshrined in Section 246 of the NIRC which decrees that a BIR regulation or ruling cannot adversely
prejudice a taxpayer who in good faith relied on the BIR regulation or ruling prior to its reversal.

Then, in Taganito Mining Corporation v. CIR, the Court further clarified the doctrines in Aichi and San Roque explaining that during
the window period from December 10, 2003, upon the issuance of BIR Ruling No. DA-489-03 up to October 6, 2010, or date of
promulgation of Aichi, taxpayers need not observe the stringent 120-day period.

In other words, the 120+30-day period is generally mandatory and jurisdictional from the effectivity of the 1997 NIRC on January
1, 1998, up to the present. By way of an exception, judicial claims filed during the window period from December 10, 2003 to
October 6, 2010, need not wait for the exhaustion of the 120-day period. The exception in San Roque has been applied
consistently in numerous decisions of this Court.

In this case, the two judicial claims filed by San Roque fell within the window period, thus, the CTA can take cognizance over them.
It is similarly situated as Taganito Mining Corporation (Taganito) in the consolidated cases of San Roque. In that case, Taganito
prematurely filed on February 14, 2007 its petition for review with the CTA, or within the window period from December 10,
2003, with the issuance of BIR Ruling DA-489-03 and October 6, 2010, when Aichi was promulgated. The Court considered
Taganito to have filed its administrative claim on time. Similarly, the judicial claims in this case were filed on March 30, 2006 and
June 20, 2006, or within the said window period. Consequently, the exception to the mandatory and jurisdictional character of the
120-day and 30-day periods is applicable.

21. TAGANITO MINING VS. CIR

G.R. No.00000 | Date

DOCTRINE: under Section 112(A), the taxpayer may, within 2 years after the close of the taxable quarter when the sales were
made, via an administrative claim with the CIR, apply for the issuance of a tax credit certificate or refund of creditable input tax
due or paid attributable to such sales. Under Section 112(D), the CIR must then act on the claim within 120 days from the
submission of the taxpayer’s complete documents.

FACTS: Taganito Mining Corporation (TMC) is a domestic corporation expressly granted a permit by the government via an
operating contract to explore, develop and utilize mineral deposits found in a specified portion of a mineral reservation area
located in Surigao del Norte and owned by the government. In exchange, TMC is obliged to pay royalty to the government over
and above other taxes. During July to December 1989, TMC removed, shipped and sold substantial quantities of Beneficiated
Nickel Silicate ore and chromite ore and paid excise taxes in the amount of Php6,277,993.65 in compliance with Sec. 151(3) of the
Tax Code. The 5% excise tax was based on the amount and weight shown in the provisional invoice issued by TMC. The metallic
minerals are then shipped abroad to Japanese buyers where the minerals were analyzed allegedly by independent surveyors upon
unloading at its port of destination.

Analysis abroad would oftentimes reveal a different value for the metallic minerals from that indicated in the
temporary/provisional invoice submitted by TC. Variance is in the "market values" in the provisional invoice and that indicated in
the final calculation sheet presented by the buyers. Variances occur in the weight of the shipment or the price of the metallic
minerals per kilogram and sometimes in their metallic content resulting in discrepancies in the total selling price. It is always the
price indicated in the final invoice that is determinative of the amount that the buyers will eventually pay TMC. TMC had no
quarrel with the price they would receive from the clients for the metallic minerals sold, but claims that there has been
overpayment of excise taxes already paid to the government declaring that the 5% excise tax were based on the amount indicated
in the provisional invoice, and if the excise tax would be based on the final invoice, they would be paying less.

TMC's contention: it is entitled to a refund because the actual market value that should be made the basis of the taxes is the
amount specified in the independent surveyor abroad.

Commissioner defense: (1) claim for refund is subject pending administrative investigation; (2) tax was collected in accordance
with law; (3) burden of proof is upon the taxpayer to establish the right to refund;(4) mere allegations of refundability do not ipso
facto merit refund claimed; (5) claims for refund of taxes are construed strictly against claimant, it being in the nature of an
exemption; (6) TMC's right to claim for refund is already barred after failing to file it within the 2 year prescriptive period, which
should be counted from the time specified by law for payment and not on the date of
actual payment.

ISSUE: Whether or not it is valid. YES/NO.

RULING: It is Section 112 of the NIRC which applies to claims for tax credit certificates and tax refunds arising from sales of VAT-
registered persons that are zero-rated or effectively zero-rated, which are, simply put, claims for unutilized creditable input VAT.
Thus, under Section 112(A), the taxpayer may, within 2 years after the close of the taxable quarter when the sales were made, via
an administrative claim with the CIR, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales. Under Section 112(D), the CIR must then act on the claim within 120 days from the submission of the
taxpayer’s complete documents.

The 2-year period under Section 229 does not apply to appeals before the CTA in relation to claims for a refund or tax credit for
unutilized creditable input VAT. Section 229 pertains to the recovery of taxes erroneously, illegally, or excessively collected. San
Roque stressed that "input VAT is not ‘excessively’ collected as understood under Section 229 because, at the time the input VAT
is collected, the amount paid is correct and proper." It is, therefore, Section 112 which applies specifically with regard to claiming
a refund or tax credit for unutilized creditable input VAT.

The 120+30 day period prescribed under Section 112(D) mandatory and jurisdictional from the effectivity of the 1997 NIRC on
January 1, 1998, up to the present. As an exception, judicial claims filed from December 10, 2003 to October 6, 2010 need not
wait for the exhaustion of the 120-day period.

In the present case, Taganito filed its judicial claim with the CTA on April 17, 2008, clearly within the period of exception of
December 10, 2003 to October 6, 2010. Its judicial claim was, therefore, not prematurely filed.

Further, Taganito failed to properly substantiate its claim for refund of the input VAT on its importations.

Under Sections 110(A) and 113(A) of the NIRC, any input tax that is subject of a claim for refund must be evidenced by a VAT
invoice or official receipt. With regard to the importation of goods or properties, however, Section 4.110-8 of R.R. No. 16-05, as
amended, further requires that an import entry or other equivalent document showing actual payment of VAT on the imported
goods must also be submitted. Here, Taganito failed to submit the import entries relevant to its claim.

Also, its claim of refund of input VAT relates to its importation of dump trucks, allegedly a purchase of capital goods. Capital goods
or properties refers to goods or properties with estimated useful life greater than 1 year and which are treated as depreciable
assets. A subsidiary record in ledger form shall be maintained for the acquisition, purchase or importation of depreciable assets or
capital goods. But here, it failed to present the actual subsidiary ledger.

Thus, Taganito is not entitled to a refund.

22. BIR RULING NO: DA 489-03

Issued December 10 ,20023

BIR Ruling DA-489-03 stated that: taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial
relief with the CTA by way of Petition for Review.

General Rule: Mandatory 90+30 Day Period

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the [90 days], the taxpayer affected may, within 30 days from: 1. the receipt of the decision denying the claim
or 2. after the expiration of 90-day period To appeal the decision or the unacted claim with the Court of Tax Appeals (CTA).

Exception: [CIR vs. Aichi, October 6, 2010] There are two recognized exceptions to the mandatory and jurisdictional nature of the
period.
1. if the CIR, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA.

Such specific ruling is applicable only to the particular taxpayer.

2. if the CIR issued a general interpretative rule in accordance with Section 4 of the Tax Code which misleads all the
taxpayers into prematurely filing judicial claims with the CTA.

The CIR, in such case, is not allowed to later on question the CTA's assumption of jurisdiction over such claim since
equitable estoppel has set in as expressly authorized under Section 246 of the Tax Code.

BIR Ruling No. DA 489-03 falls under the 2nd exception.

From the time the issuance of BIR ruling No. DA 489-03 on December 10, 2003 up to its reversal by the Supreme Court in CIR v.
Aichi (October 6, 2010) (or a period of almost 7 years), taxpayers need not wait for the lapse of the [120]-day period before it
could seek judicial relief with the CTA by way of Petition for Review. This exception, however, is limited to cases of premature
filing and late filing is absolutely prohibited.

23. CIR VS. MANILA LODGE

No. L-11176 | June 29, 1959

Doctrine: The term 'business' as used in law imposing a license tax on business, trades, etc. ordinarily means business in the
trade or commercial sense only, carried on with a view to profit or livelihood.

Thus, where the corporation handled no money except such as was necessary to cover operational expenses, conducted no
business for itself, and engaged in no transactions that contemplated a profit for itself—such a corporation is considered not
organized for profit and therefore cannot be said to be engaged in business as contemplated in law.

FACTS: The Manila Lodge No. 761 is a fraternal, civic, non-stock, non-profit organization which operates Manila Elks Club. The
organization sells at retail, liquor, fermented liquor, tobaccos and cigarettes exclusively to its members and their guests.

The CIR discovered that the Manila Elks Club had not paid for their privilege taxes as required by Section 193 of the Tax Code. The
CIR demanded payment of fixed taxes together with a penalty. Manila Lodge claimed exemption and requested for re-
assessment.

Manila Lodge claimed that its exemption is based on the fact that it is not engaged in the business of selling at retail liquor,
fermented liquor and tobacco because their sale is exclusive to the members and their guests and only for the purpose of
providing comfort, recreation and convenience to the members and providing enough margin to cover operational expenses.

On the other hand, CIR contends that Section 193 of the Tax Code provides that persons selling articles such as cigars, tobacco,
liquor are subject to privilege taxes irrespective of whether or not they made profit and whether or not they are civic or fraternal
clubs selling only to their members and guests.

ISSUE: WoN Manila Lodge can be considered a “business” as defined by the Tax Code and therefore subject to privilege taxes? –
NO
RULING: The provisions of Sec. 193 in relation to Sec. 178 of the Tax Code are clear and precise – that privilege taxes are only to
be imposed on persons or entities who engage in retail of liquor, fermented liquors and tobacco for BUSINESS PURPOSES. In
order that these persons should be subjected to the privilege taxes imposed by Sec. 193 and 178 of the Tax Code, it is necessary
that they be engaged in the 'business' of selling liquor and tobacco, otherwise the privilege taxes as a dealer of liquor and tobacco
cannot attach.

'The term 'business' as used in law imposing a license tax on business, trades, etc. ordinarily means business in the trade or
commercial sense only, carried on with a view to profit or livelihood. Thus, it is evident that the plain, ordinary meaning of
'business' is restricted to activities or affairs where profit is the purpose, or livelihood is the motive.

The term 'business' being used without any qualification in Sec 193 and Sec. 178 of the Tax Code, should therefore be construed in
its plain and ordinary meaning, restricted to activities for profit or livelihood.

Manila Elks Club cannot be considered as engaged in the business of selling liquor and tobacco as the only money handled by
them is merely to cover operational expenses. Where the corporation handled no money except as was necessary to cover
operational expenses, conducted no business for itself, and engaged in no transactions that contemplated a profit for itself—such
a corporation is considered not organized for profit under the General Corporation Law.

Manila Elks Club, not being engaged in the business of selling at retail liquor and tobacco, cannot therefore be held liable for
privilege taxes.

Relevant provisions:
Section 178 of Tax Code. Payment of privilege taxes – A privilege tax must be paid before any business or occupation
hereinafter specified can be lawfully begun or pursued. The tax on business is payable for every separate or distinct
establishment or place where the business subject to the tax is conducted; and one occupation or line of business does not
become exempt by being conducted with some other occupation or business for which such tax has been paid.

SEC. 193. Amount of tax on business. —Fixed taxes on business shall be collected as follows, the amount stated being for
the whole year when not otherwise specified:
(i) Retail liquor dealers, one hundred pesos. xx
(k) Retail dealers in fermented liquors, fifty pesos. xx
(n) Wholesale tobacco dealers, sixty pesos; retail tobacco dealers, sixteen pesos.'
 ADDED CASES ON VAT TAX

1. SITEL PHILS. CORP. VS. CIR

G.R. No.00000 | Date

DOCTRINE: Insert here

FACTS: Sitel, a domestic corporation, is engaged in the business of providing call center services from the Philippines to domestic
and offshore businesses. It is registered with the BIR as a VAT taxpayer.

On March 28, 2006, Sitel filed separate formal claims for refund or issuance of tax credit for its unutilized input VAT totaling
₱23M+, for the taxable year 2004, arising from:
1. domestic purchases of goods and services attributed to zero-rated transactions and
2. purchases/importations of capital goods.

CTA - partially granted the claim, but denied the following:

 ₱7M+ claim for unutilized input VAT attributable to its zero-rated sales. Relying upon the rulings of this Court in CIR v.
Burmeister, Sitel failed to prove that the recipients of its services are doing business outside the Philippines, as required
in Section 108(B)(2) of the 1997 NIRC.
 ₱2M+ claim representing input VAT paid on capital goods purchased for 2004 for failure to comply with the invoicing
requirements under Sections 113, 237, and 238 of the NIRC of 1997, as amended.

ISSUE: Whether Sitel is entitled to claim the refund for unutilized input VAT paid for the first to fourth quarters of the taxable year
2004. NO.

RULING: Sitel cannot claim the refund for input VAT paid for the taxable year 2004 for the following reasons:
1. SItel failed to prove that its recipients are foreign corporations doing business outside the Philippines, and
2. Sitel failed to strictly comply with invoicing requirements for VAT refund.

SITEL FAILED TO PROVE THAT THE RECIPIENTS ARE FOREIGN CORPORATIONS DOING BUSINESS OUTSIDE PH
Section 108(B)(2) speaks of Transactions Subject to Zero Percent (0%) Rate, particularly, services rendered to a person engaged in
business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines
when the services are performed.
In Burmeister v. CIR, the Court clarified that an essential condition to qualify for zero-rating is that the service-recipient must be
doing business outside the Philippines.

Also, the Court, in Accenture, Inc. v. CIR, emphasized that a taxpayer claiming for a VAT refund or credit under Section 108(B) has
the burden to prove not only that the recipient of the service is a foreign corporation, but also that said corporation is doing
business outside the Philippines. Consequently, it is not enough that the recipient of the service be proven to be a foreign
corporation; rather, it must be specifically proven to be a nonresident foreign corporation.

Here, while Sitel' s documentary evidence, which includes Certifications issued by the SEC and Agreements between Sitel and its
foreign clients, may have established that Sitel rendered services to foreign corporations in 2004 and received payments therefor
through inward remittances, said documents failed to specifically prove that such foreign clients were doing business outside the
Philippines or have a continuity of commercial dealings outside the Philippines.

Thus, the Court finds no reason to reverse the ruling of the CTA Division denying the refund of ₱7M+ allegedly representing Sitel's
input VAT attributable to zero-rated sales.

SITEL FAILED TO STRICTLY COMPLY WITH INVOICING REQUIREMENTS FOR VAT REFUND
In Western Mindanao Power Corp. v. CIR, the Court ruled that in a claim for tax refund or tax credit, the applicant must prove not
only entitlement to the grant of the claim under substantive law, he must also show satisfaction of all the documentary and
evidentiary requirements for an administrative claim for a refund or tax credit and compliance with the invoicing and accounting
requirements mandated.

The NIRC requires that the creditable input VAT should be evidenced by a VAT invoice or official receipt, which may only be
considered as such when the TIN-VAT is printed thereon, as required by Section 4.108-1 of RR 7-95.

Here, the subject invoice/official receipts are not imprinted with the taxpayer's TIN followed by the word VAT, these would not be
considered as VAT invoices/official receipts and would not give rise to any creditable input VAT in favor of Sitel.

2. VISAYAS GEOTHERMAL POWER CO. VS. CIR

G.R. No. 205279 | April 26, 2017

DOCTRINE: “[f]ailure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the doctrine of
exhaustion of administrative remedies and renders the petition premature and thus without a cause of action, with the effect that
the CTA does not acquire jurisdiction over the taxpayer’s petition.”

Petitioner: Visayas Geothermal Power Company

Respondent: Commissioner of Internal Revenue

FACTS: Petitioner Visayas Geothermal is a special purpose limited partnership established primarily to “invest in, acquire, finance,
complete, construct, develop, improve, operate, maintain and hold that certain partially constructed power production
geothermal electrical generating facility in Malitbog, Leyte, for the production and sale of electricity from geothermal resources,
to sell or otherwise dispose of the Project and such other property.” It is registered with the BIR as a Value-Added Tax (VAT)
taxpayer.

On February 13, 2009, Visayas Geothermal filed with the BIR an administrative claim for refund of unutilized input VAT covering
the taxable year 2007 in the amount of P11,902,576.07. On March 30, 2009, it proceeded to immediately file a petition for review
with the CTA, as it claimed that the BIR failed to act upon the claim for refund.
To substantiate its claim for refund, Visayas Geothermal cited, Section 6 of R.A. No. 9136, otherwise known as the “Electric Power
Industry Reform Act of 2001,” which provides in part that “[p]ursuant to the objective of lowering electricity rates to end-users,
sales of generated power by generation companies shall be [VAT] zero-rated.”

It also referred to the 1997 National Internal Revenue Code (NIRC), as amended by R.A. No. 9337, which imposes a zero percent
VAT rate on sale of power generated through renewable sources of energy.

The CTA First Division denied the petition for being prematurely filed. Visayas Geothermal moved to reconsider however the CTA
En Banc affirmed in toto the rulings of the CTA First Division.

ISSUE: Whether or not Visayas Geothermal’s claim for refund was prematurely filed. NO.

RULING: The CTA erred in ruling that the petitioner’s judicial claim was prematurely filed.

In a line of cases, the Court has underscored the need to strictly comply with the 120+30-day periods provided in Section 112 of
the 1997 NIRC, which reads:

Sec. 112. Refunds or Tax Credits of Input Tax.—

(A) Zero-Rated or Effectively Zero-Rated Sales.— Any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales x x x.

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made.— In proper cases, the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted
claim with the Court of Tax Appeals.

The Court ruled in San Roque that “[f]ailure to comply with the 120-day waiting period violates a mandatory provision of law. It
violates the doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a cause of
action, with the effect that the CTA does not acquire jurisdiction over the taxpayer’s petition.” With the current rule that gives
a taxpayer 30 days to file the judicial claim even if the CIR fails to act within the 120-day period, the remedy of a judicial claim
for refund or credit is always available to a taxpayer.

As the petitioner correctly pointed out, this general rule that calls for a strict compliance with the 120+30-day mandatory periods
admits of an exception.

The Court has declared, also in San Roque:

“except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi
doctrine was adopted, which again reinstated the 120+30[-]day periods as mandatory and jurisdictional.”

The BIR Ruling No. DA-489-03 referred to in the exception was recognized by the Court to be a general interpretative rule
applicable to all taxpayers, as it was a response to a query made, not by a particular taxpayer but by a government agency tasked
with processing tax refunds and credits.
BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under Section 246 of the Tax Code. BIR Ruling No. DA-
489-03 expressly states that the “taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial
relief with the CTA by way of Petition for Review.”

It is material that both administrative and judicial claims in the present case were filed by the petitioner in 2009. The CTA En
Banc’s reliance on the general rule enunciated by the Court in San Roque is misplaced. Notwithstanding the fact that the
petitioner failed to wait for the expiration of the 120-day mandatory period, the CTA could still take cognizance of the petition
for review.

Entitlement to Tax Refund

In its Decision, the CTA First Division recognized that the petitioner’s entitlement to tax refund required proof of satisfaction of
the following requisites:

1. that there must be zero-rated or effectively zero-rated sales;

2. that input taxes were incurred or paid;
3. that such input taxes are attributable to zero-rated or effectively zero-rated sales;
4. that the input taxes were not applied against any output VAT liability; and
5. that the claim for refund was filed within the two-year prescriptive period.

The foregoing matters call for factual findings, which are not for the Court to now determine. The Court finds it necessary to
remand the case to the CTA, which shall determine and rule on the entitlement of the petitioner to the claimed tax refund.

The Supreme Court held that the Decision and Resolution of the Court of Tax Appeals En Banc are REVERSED and SET ASIDE. The
case is REMANDED to the Court of Tax Appeals, which is DIRECTED to determine petitioner Visayas Geothermal Power
Company’s entitlement to a tax refund.

3. MARUBENI VS. CIR

G.R. No. 198485 | June 5, 2017

DOCTRINE: Section 112 (C) of the Tax Code (NIRC) that applies to the judicial claim for refund and compliance with the 120+30 day
periods is mandatory and jurisdictional. The failure to observe the 120 days prior to filing of a judicial claim for refund is not a
mere non-exhaustion of administrative remedies but is jurisdictional in nature.

FACTS: Marubeni is a domestic corporation duly registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT)
taxpayer. On April 25, 2000, Marubeni filed its Quarterly VAT Return for the 1st quarter of Calendar Year (CY) 2000 with the BIR.
On March 27, 2002, Marubeni filed with the BIR a written claim for a refund and/or the issuance of a Tax Credit Certificate (TCC),
which it later amended on April 25, 2002, reducing its claim to ₱3,887,419.31.

On the same date, Marubeni filed a petition for review before the CTA claiming a refund and/or issuance of a TCC in the amount
of ₱3,887,419.31. On June 2, 2009, the CTA Second Division dismissed Marubeni's judicial claim and ruled that while Marubeni
timely filed its administrative claim for refund and/or the issuance of a TCC on March 27, 2002, which was within the two-year
period from the close of the 1st quarter of CY 2000, Marubeni's judicial claim for refund and/or issuance of TCC that was filed on
April 25, 2002 (or the same day Marubeni amended its administrative claim for a refund and/or the issuance of a TCC) was late
because this should have been filed also within the two-year period from the close of the 1st quarter of CY 2000.

The CTA En Banc agreed with the CTA Second Division that Marubeni timely filed its administrative claim for refund. But as to
Marubeni's judicial claim for refund, the CTA En Banc ruled that following Section 112 (D) of the 1997 National Internal Revenue
Code and the Court's ruling that the filing of the petition for review with the CTA was premature. Accordingly, Marubeni should
have filed its petition for review with the CTA 30 days from receipt of the decision of the CIR denying the claim or after the
expiration of the 120-day period from the filing of the administrative claim with the CIR. Marubeni’s motion for reconsideration
was denied. Hence, this petition.

ISSUE: Whether or not Marubeni timely filed its claim. NO.

RULING: Section 112 (C) of the 1997 Tax Code that applies to the judicial claim for refund, and, citing San Roque, compliance with
the 120+30 day periods is mandatory and jurisdictional. As this law states, the taxpayer may, if he wishes, appeal the decision of
the Commissioner to the CTA within 30 days from receipt of the Commissioner's decision, or if the Commissioner does not act on
the taxpayer's claim within the 120-day period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-
day period.

Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The taxpayer can file his
administrative claim for refund or credit at anytime within the two-year prescriptive period. If he files his claim on the last day of
the two-year prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing to decide the
claim. If the Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to
file his judicial claim with the CTA. This is not only the plain meaning but also the only logical interpretation of Section l 12(A) and
(C).

Marubeni therefore failed to comply with the mandatory and jurisdictional requirement of Section 112 (C) when it filed its petition
for review with the CTA on April 25, 2002, or just 29 days after filing its administrative claim before the BIR on March 27, 2002. In
fine, Marubeni's judicial claim for refund was, as correctly found by the CTA En Banc, premature and the CTA was devoid of any
jurisdiction over the petition for review because of Marubeni's failure to strictly comply with the 120+30 day periods required by
Section 112 (C) of the 1997 Tax Code. The CIR's failure to raise the issue of compliance with the 120+30 day periods in its Answer
to Marubeni's petition for review cannot be deemed a waiver of such objection. Marubeni’s failure to observe the periods is fatal
to its judicial claim for refund.

4. LUZON GEOTHERMAL POWER CO. VS. CIR

G.R. No.00000 | Date

4. LUZON GEOTHERMAL POWER CO. VS. CIR

832 SCRA 589 (2017)

DOCTRINE: The 120-day and 30-day reglementary periods under Section 112(C) of the National Internal Revenue Code are both
mandatory and jurisdictional. Non-compliance with these periods renders a judicial claim for refund of creditable input tax
premature.

FACTS: CE Luzon is a domestic corporation engaged in the energy industry. It owns and operates the CE Luzon Geothermal Power
Plant, which generates power for sale to the Philippine National Oil Company-Energy Development Corporation by virtue of an
energy conversion agreement. CE Luzon is a VAT-registered taxpayer with Tax Identification Number 003- 924-356-000.

The sale of generated power by generation companies is a zero-rated transaction under Section 6 of Republic Act No. 9136.

In the course of its operations, CE Luzon incurred unutilized creditable input tax amounting to ₱26,574,388.99 for taxable year
2003.7 This amount was duly reflected in its amended quarterly VAT returns. CE Luzon then filed before the Bureau of Internal
Revenue an administrative claim for refund of its unutilized creditable Without waiting for the Commissioner of Internal Revenue
to act on its claim, or for the expiration of 120 days, CE Luzon instituted before the Court of Tax Appeals a judicial claim for
refund of its first quarter unutilized creditable input tax on March 30, 2005.
The material dates are summarized below:

CIR denied its claim for refund for non-observance of the 120-day period.

Respondent asserts that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the
administrative and the judicial claims are filed within the two-year prescriptive period has no legal basis. Hence, this petition
before the Supreme Court.

ISSUE: Whether the prescriptive period to file judicial claims for refund of input Value Added Tax is 2 years and not 120 days. 120
days as provided under Section 112(A) and (C) of the National Internal Revenue Code.

RULING: Excess input tax or creditable input tax is not an erroneously, excessively, or illegally collected tax. Hence, it is Section
112(C) and not Section 229 of the National Internal Revenue Code that governs claims for refund of creditable input tax.

The tax credit system allows a VAT-registered entity to "credit against or subtract from the VAT charged on its sales or outputs the
VAT paid on its purchases, inputs and imports."

The VAT paid by a VAT-registered entity on its imports and purchases of goods and services from another VAT-registered entity
refers to input tax. On the other hand, output tax refers to the VAT due on the sale of goods, properties, or services of a VAT-
registered person.

Ordinarily, VAT-registered entities are liable to pay excess output tax if their input tax is less than their output tax at any given
taxable quarter. However, if the input tax is greater than the output tax, VAT-registered persons can carry over the excess input
tax to the succeeding taxable quarter or quarters.

Nevertheless, if the excess input tax is attributable to zero-rated or effectively zero-rated transactions, the excess input tax can
only be refunded to the taxpayer or credited against the taxpayer's other national internal revenue tax. Availing any of the two (2)
options entail compliance with the procedure outlined in Section 112, not under Section 229, of the National Internal Revenue
Code.

Section 229 of the National Internal Revenue Code, in relation to Section 204(C), pertains to the recovery of excessively,
erroneously, or illegally collected national internal revenue tax.

The procedure outlined under Sections 204(C) and 229, that a claim for refund of excessively or erroneously collected taxes
should be made within two (2) years from the date the taxes are paid. Both the administrative and judicial claims should be
brought within the two (2)-year prescriptive period. Otherwise, they shall forever be barred. However, Section 229 presupposes
that the taxes sought to be refunded were wrongfully paid.

It is unnecessary to construe and harmonize Sections 112(C) and 229 of the National Internal Revenue Code. Excess input tax or
creditable input tax is not an excessively, erroneously, or illegally collected tax because the taxpayer pays the proper amount of
input tax at the time it is collected. That a VAT-registered taxpayer incurs excess input tax does not mean that it was wrongfully
or erroneously paid. It simply means that the input tax is greater than the output tax, entitling the taxpayer to carry over the
excess input tax to the succeeding taxable quarters. If the excess input tax is derived from zero-rated or effectively zero-rated
transactions, the taxpayer may either seek a refund of the excess or apply the excess against its other internal revenue tax.

The term "excess" input VAT simply means that the input VAT available as credit exceeds the output VAT, not that the input
VAT is excessively collected because it is more than what is legally due. Thus, the taxpayer who legally paid the input VAT
cannot claim for refund or credit of the input VAT as "excessively" collected under Section 229.

Considering that creditable input tax is not an excessively, erroneously, or illegally collected tax, Section 112(A) and (C) of the
National Internal Revenue Code govern:
Section 112. Refunds or Tax Credits of Input Tax. -
(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales xxx
....
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted
claim with the Court of Tax Appeals.

Taxpayers must await either for the decision of the Commissioner of Internal Revenue or for the lapse of 120 days before filing
their judicial claims with the Court of Tax Appeals. Failure to observe the 120-day period renders the judicial claim premature.

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 taxpayer's 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.

Subsection (A) of the said provision states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two years after the close of the taxable quarter xxx The phrase "within two (2) years ... apply for the issuance of a tax
credit certificate or refund" refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA. This is
apparent in the first paragraph of subsection (D) of the same provision, which states that the CIR has "120 days from the
submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)" within which to
decide on the claim.

The Aichi doctrine was reiterated by this Court in San Roque, which held that the 120-day and 30-day periods in Section 112(C)
of the National Internal Revenue Code are both mandatory and jurisdictional.

In the present case, only CE Luzon's second quarter claim was filed on time. Its claims for refund of creditable input tax for the
first, third, and fourth quarters of taxable year 2003 were filed prematurely. It did not wait for the Commissioner of Internal
Revenue to render a decision or for the 120-day period to lapse before elevating its judicial claim with the Court of Tax Appeals.

However, despite its non-compliance with Section 112(C) of the National Internal Revenue Code, CE Luzon's judicial claims are
shielded from the vice of prematurity. It relied on the Bureau of Internal Revenue Ruling DA-489-03, which expressly states that "a
taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the [Court of Tax
Appeals] by way of a Petition for Review."

Although the Bureau of Internal Revenue Ruling DA-489-03 is an "erroneous interpretation of the law," this Court made an
exception explaining that "[t]axpayers should not be prejudiced by an erroneous interpretation by the Commissioner, particularly
on a difficult question of law."

However, the case should be remanded to the Court of Tax Appeals for the proper computation of creditable input tax to which
CE Luzon is entitled.

5. PROCTER & GAMBLE ASIA VS. CIR

G.R. No.205652 | Date September 06, 2017

DOCTRINE: As ruled by the Supreme Court in the case of San Roque, while the Court reiterated the mandatory and jurisdictional
nature of the 120+30-day periods, it recognized as an exception BIR Ruling No. DA-489-03, issued prior to the promulgation of
Aichi, where the BIR expressly allowed the filing of judicial claims with the CTA even before the lapse of the 120-day period.

The Court held that BIR Ruling No. DA-489-03 furnishes a valid basis to hold the CIR in estoppel because the CIR had misled
taxpayers into filing judicial claims with the CTA even before the lapse of the 120-day period.

FACTS: On March 22, 2007 and May 2, 2007, P&G filed applications and letters addressed to the BIR Revenue District Office (RDO)
No. 49, requesting the refund or issuance of tax credit certificates (TCCs) of its input VAT attributable to its zero-rated sales
covering the taxable periods of January 2005 to March 2005, and April 2005 to June 2005.

On March 28, 2007, P&G filed a petition for review with the CTA seeking the refund or issuance of TCC in the amount of
P23,090,729.17 representing input VAT paid on goods or services attributable to its zero-rated sales for the first quarter of taxable
year 2005.

On October 6, 2010, while P&G's claim for refund or tax credit was pending before the CTA Division, the case of Commissioner of
Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi) ruled that the compliance with the 120-day period granted to the
CIR, within which to act on an administrative claim for refund or credit of unutilized input VAT, as provided under Section 112(C)
of the NIRC as amended, is mandatory and jurisdictional in filing an appeal with the CTA.

On November 17, 2010, the CTA Division dismissed P&G's judicial claim, for having been prematurely filed.

Aggrieved, P&G elevated the matter to the CTA En Banc insisting, among others, that the Court's ruling in Aichi should not be
given a retroactive effect.

In the meantime, on February 12, 2013, this Court decided the consolidated cases of Commissioner of Internal Revenue v. San
Roque Power Corporation, Taganito Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v.
Commissioner of Internal Revenue (San Roque), where the Court recognized BIR Ruling No. DA-489-03 as an exception to the
mandatory and jurisdictional nature of the 120-day waiting period.
ISSUE: Did the CTA En Banc erred in dismissing P&G's judicial claims for refund on the ground of prematurity. YES

RULING: Section 112 of the NIRC, as amended, provides for the rules on claiming refunds or tax credits of unutilized input VAT.

SEC. 112. Refunds or Tax Credits of Input Tax.

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made . In proper cases, the Commissioner
shall grant a refund or issue the tax credit certificate for creditable input taxes within 120 days from the date of
submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within
thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred
twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals.

In short, the CIR is given 120 days within which to grant or deny a claim for refund. Upon receipt of CIR's decision or ruling
denying the said claim, or upon the expiration of the 120-day period without action from the CIR, the taxpayer has 30 days
within which to file a petition for review with the CTA.

In the case of San Roque, while the Court reiterated the mandatory and jurisdictional nature of the 120+30-day periods as
provided in the case of Aichi, an exception is BIR Ruling No. DA-489-03, issued prior to the promulgation of Aichi, where
the BIR expressly allowed the filing of judicial claims with the CTA even before the lapse of the 120-day period.

The Court held that BIR Ruling No. DA-489-03 furnishes a valid basis to hold the CIR in estoppel because the CIR had misled
taxpayers into filing judicial claims with the CTA even before the lapse of the 120-day period:

There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not acquire jurisdiction
over a judicial claim that is filed before the expiration of the 120-day period.

However, the exceptions are:

FIRST: When the Commissioner, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim
with the CTA. Such specific ruling is applicable only to such particular taxpayer.

SECOND: Where the Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads
all taxpayers into filing prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be allowed to
later on question the CTA's assumption of jurisdiction over such claim since equitable estoppel has set in as expressly
authorized under Section 246 of the Tax Code.

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not by a
particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that is, the One
Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. This government agency
is also the addressee, or the entity responded to, in BIR Ruling No. DA-489-03. Thus, while this government agency
mentions in its query to the Commissioner the administrative claim of Lazi Bay Resources Development, Inc., the
agency was in fact asking the Commissioner what to do in cases like the tax claim of Lazi Bay Resources
Development, Inc., where the taxpayer did not wait for the lapse of the 120-day period.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling No.
DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6
October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional.
In this case, records show that P&G filed its judicial claims for refund on March 28, 2007 and June 8, 2007, respectively, or after
the issuance of BIR Ruling No. DA-489-03, but before the date when Aichi was promulgated. Thus, even though P&G filed its
judicial claim without waiting for the expiration of the 120-day mandatory period, the CTA may still take cognizance of the case
because the claim was filed within the excepted period stated in San Roque. In other words, P&G's judicial claims were deemed
timely filed and should not have been dismissed by the CTA. Court reiterated that all taxpayers may rely upon BIR Ruling No. DA-
489-03, as a general interpretative rule, from the time of its issuance on December 10, 2003 until its effective reversal by the
Court in Aichi.

The Court further held that while RR 16-2005 may have re-established the necessity of the 120-day period, taxpayers cannot be
faulted for still relying on BIR Ruling No. DA-489-03 even after the issuance of RR 16-2005 because the issue on the mandatory
compliance of the 120-day period was only brought before the Court and resolved with finality in Aichi.

6. NIPPON EXPRESS VS. CIR

G.R. No.00000 | Date

DOCTRINE: . We then declared for the first time that a VAT invoice is necessary for every sale, barter or exchange of goods or
properties while a VAT official receipt properly pertains to every lease of goods or properties, and for every sale, barter or
exchange of services. Thus, we held that a VAT invoice and a VAT receipt should not be confused as referring to one and the same
thing; the law did not intend the two to be used alternatively.

FACTS:
1. Nippon Express is a domestic corp registered with the Large Taxpayer District of BIR as a Value Added Tax taxpayer.
2. MARCH 30, 2005: It filed with the LTDO and application for tax credit of its excess/unsused input taxes attributable to
zero-related sales for the taxable year 2004 in the total amount of Php 27, 828, 748. 95
3. Nippon filed a Petition for Review before the CTA on 31 March 2006.

ANSWER OF COMMISSIONER OF INTERNAL REVENUE:

In its Answer, respondent Commissioner of Internal Revenue (CIR) interposed the defense, among others, that Nippon
Express' excess input VAT paid for its domestic purchases of goods and services attributable to zero-rated sales for the
four quarters of taxable year 2004 was not fully substantiated by proper documents.

RULING OF THE CTA DIVISION

After trial, the CTA Division (the court) found that Nippon Express' evidentiary proof of its zero-rated sale of services to
PEZA-registered entities consisted of documents other than official receipts.

Invoking Section 113 of the NIRC, as amended by Section 11 of Republic Act (R.A.) No. 9337, the court held the view that
the law provided for invoicing requirements of VAT-registered persons to issue a VAT invoice for every sale, barter or
exchange of goods or properties, and a VAT official receipt for every lease of goods or properties, and for every sale,
barter or exchange of services. Noting that Nippon Express is engaged in the business of providing services, the court
denied the latter's claim for failure to submit the required VAT official receipts as proof of zero-rated sales.

PETITION FOR REVIEW BEFORE THE CTA EN BANC AND RULING OF THE CTA EN BANC
Nippon Express alleged
1. that it had fully complied with the invoicing requirements when it submitted sales invoices to support its claim
of zero-rated sales.
2. Nippon argued that there is nothing in the tax laws and regulations that requires the sale of goods or properties
to be supported only by sales invoices, or the sale of services by official receipts only.
 CTA ENBANC RULING: PETITION DISMISSED

ISSUE:

1. Did the CTA acquire jurisdiction over Nippon Express’ judicial claim? NO
2. Are the sales invoices and documents other than official receipts proper in substantiating zero rated sales of services in
connection with a claim for refund under Section 112 of the NIRC?
HELD:
1. THE CTA DID NOT ACQUIRE JURISDICTION OVER NIPPON EXPRESS JUDICIAL CLAIM.

Concerning the claim for refund of excess or unutilized creditable input VAT attributable to zero-rated sales, the
pertinent law is Section 112 of the NIRC12 which reads:

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within
thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred
twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals.

In this case, Nippon Express timely filed its administrative claim on 30 March 2005, or within the two-year
prescriptive period. Counted from such date of submission of the claim with supporting documents, the CIR had 120
days, or until 28 July 2005, the last day of the 120-day period, to decide the claim.

As the records reveal, the CIR did not act on the application of Nippon Express. Thus, in accordance with law and
the cited jurisprudence, the claimant, Nippon Express, had thirty days from such inaction "deemed a denial," or until 27
August 2005, the last day of the 30-day period, within which to appeal to the CTA.

However, Nippon Express filed its petition for review with the CTA only on 31 March 2006, or two hundred forty-six
(246) days from the inaction by the CIR. In other words, the petition of Nippon Express was belatedly filed with the CTA
and, following the doctrine above, the court ought to have dismissed it for lack of jurisdiction.

2. Be it noted that under the law on VAT, as contained in Title IV of the NIRC, there are three known taxable transactions,
namely:
(i) sale of goods or properties (Section 106);
(ii) importation (Section 107); and
(iii) sale of services and lease of properties (Section 108).

Both sale transactions in Section 106 and 108 are qualified by the phrase 'in the course of trade or business,' whereas
importation in Section 107 is not.

At this juncture, it is imperative to point out that the law had set apart the sale of goods or properties, as contained in
Section 106, from the sale of services in Section 108.

INVOICING AND ACCOUNTING REQUIREMENTS FOR TAXABLE TRANSACTIONS

In establishing the fact that taxable transactions like sale of goods or properties or sale of services were made, the law
provided for invoicing and accounting requirements, to wit:
Section 113. Invoicing and Accounting Requirement for VAT-Registered Persons.

(A) Invoicing Requirements. A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition
to the information required under Section 237, the following information shall be indicated in the invoice or
receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's
identification number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the value-added tax.

Section 237. Issuance of Receipts or Sale or Commercial Invoices.

All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at
Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate,
showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That
in the case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of the amount,
where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where
the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued
which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where
the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show
the Taxpayer Identification Number (TIN) of the purchaser.

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the
transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the
same in his place of business for a period of three (3) years from the close of the taxable year in which such
invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of
business, for a like period. (emphases supplied)

SALES OF GOODS OR PROPERTIES→ SALES INVOICES

SALES OF SERVICES→ OFFICIAL RECEIPTS

While Sections 113 and 237 used the disjunctive term "or," it must not be interpreted as giving a taxpayer an unconfined choice
to select between issuing an invoice or an official receipt.

To the court a quo, sales invoices must support sales of goods or properties while official receipts must support sales of services.

The court quoted from AT&T Communications Services Philippines, Inc. v. Commissioner:

Although it appears under [Section 113] that there is no clear distinction on the evidentiary value of an invoice or official
receipt, it is worthy to note that the said provision is a general provision which covers all sales of a VAT registered person,
whether sale of goods or services. It does not necessarily follow that the legislature intended to use the same
interchangeably. The Court therefore cannot conclude that the general provision of Section 113 of the NIRC of 1997, as
amended, intended that the invoice and official receipt can be used for either sale of goods or services, because there are
specific provisions of the Tax Code which clearly delineates the difference between the two transactions.

In this instance, Section 108 of the NIRC of 1997, as amended, provides:

 SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties.-

xxxx

(C) Determination of the Tax -The tax shall be computed by multiplying the total amount indicated in the official
receipt by one-eleventh (1/11)(emphases supplied)

Comparatively, Section 106 of the same Code covers sale of goods, thus:

SEC. 106. Value-added Tax on Sale of Goods or Properties,-

xxxx

(D) Determination of the Tax. The tax shall be computed by multiplying the total amount indicated in the invoice by
one-eleventh (1/11). (emphases supplied)

Apparently, the construction of the statute shows that the legislature intended to distinguish the use of an invoice from an official
receipt. It is more logical therefore to conclude that subsections of a statute under the same heading should be construed as
having relevance to its beading. The legislature separately categorized VAT on sale of goods from VAT on sale of services, not only
by its treatment with regard to tax but also with respect to substantiation requirements. Having been grouped under Section 108,
its subparagraphs, (A) to (C), and Section 106, its subparagraphs (A) to (D), have significant relations with each other.

Settled is the rule that every part of the statute must be considered with the other parts. Accordingly, the whole of Section 108
should be read in conjunction with Sections 113 and 237 so as to give life to all the provisions intended for the sale of services.
There is no contlict between the provisions of the law that cover sale of services that are subject to zero rated sales; thus, it should
be read altogether to reveal the true legislative intent.

SALES OR COMMERCIAL INVOICES VS. RECEIPT

The SC also cited Commissioner v. Manila Mining Corporation (Manila Mining):

A "sales or commercial invoice" is a written account of goods sold or services rendered indicating the prices charged therefor or a
list by whatever name it is known which is used in the ordinary course of business evidencing sale and transfer or agreement to sell
or transfer goods and services.

A "receipt" on the other hand is a written acknowledgment of the fact of payment in money or other settlement between seller
and buyer of goods, debtor or creditor, or person rendering services and client or customer.

It was in Kepco Philippines Corporation v. Commissioner (Kepco) that the Court was directly confronted with the adequacy of a
28

sales invoice as proof of the purchase of services and official receipt as evidence of the purchase of goods. The Court initially cited
the distinction between an invoice and an official receipt as expressed in the Manila Mining case. We then declared for the first
time that a VAT invoice is necessary for every sale, barter or exchange of goods or properties while a VAT official receipt properly
pertains to every lease of goods or properties, and for every sale, barter or exchange of services. Thus, we held that a VAT invoice
and a VAT receipt should not be confused as referring to one and the same thing; the law did not intend the two to be used
alternatively.

In this case, the documentary proofs presented by Nippon Express to substantiate its zero-rated sales of services consisted of
sales invoices and other secondary evidence like transfer slips, credit memos, cargo manifests, and credit notes. It is very clear
that these are inadequate to support the petitioner's sales of services.

7. TEAM SUAL VS. CIR

G.R. No.00000 | Date

DOCTRINE: In order for the CTA to acquire jurisdiction over a judicial claim for refund or tax credit arising from unutilized input
VAT, the said claim must first comply with the mandatory 120+30-day waiting period. Any judicial claim for refund or tax credit
filed in contravention of said period is rendered premature, depriving the CTA of jurisdiction to act on it.

Pursuant to Section 112, Subsections (A) and (C) of the National Internal Revenue Code (NIRC) of 1997, any taxpayer seeking a
refund or tax credit arising from unutilized input VAT from zero-rated or effectively zero-rated sales should first file an initial
administrative claim with the BIR. This claim for refund or tax credit must be filed within two years after the close of the taxable
quarter when the sales were made.

The CIR is then given a period of 120-days from the submission of complete documents in support of the application to either
grant or deny the claim. If the claim is denied by the CIR or the latter has not acted on it within the 120-day period, the taxpayer-
claimant is then given a period of 30 days to file a judicial claim via petition for review with the CTA.

As such, the law provides for two scenarios before a judicial claim for refund may be filed with the CTA:
1. the full or partial denial of the claim within the 120-day period, or
2. the lapse of the 120-day period without the CIR having acted on the claim. It is only from the happening of either one
may a taxpayer-claimant file its judicial claim for refund or tax credit for unutilized input VAT.
Consequently, failure to observe the said period renders the judicial claim premature, divesting the CTA of jurisdiction to act on it.

This mandatory and jurisdictional nature of the 120-day waiting period has been reiterated time and again by the Court.

FACTS: Team Sual Corporation is a domestic corporation principally engaged in the business of power generation and subsequent
sale thereof. In 2000, TSC filed an application for zero-rating arising from its sale of power generation services to NPC for the
taxable year 2001. The same was subsequently approved. As a result, TSC filed its VAT returns covering the four quarters of
taxable year 2001. TSC reported excess input VAT amounting to P166,720,367.79.

On March 20, 2003, TSC filed with the BIR an administrative claim for refund for its unutilized input VAT for taxable year 2001. On
March 31, 2003, without waiting for the resolution of its administrative claim for refund or tax credit, TSC filed a petition for
review with the CTA praying for the refund or issuance of a tax credit certificate for its alleged unutilized input VAT for the first
quarter of taxable year 2001. On July 23, 2003, TSC filed another petition for review with the CTA for the refund or issuance of a
tax credit certificate for its alleged unutilized input VAT for the second, third, and fourth quarters of taxable year 2001 . Both cases
were consolidated.

ISSUE: WoN CTA has jurisdiction to act on TSC's two judicial claims for refund.

RULING: Only over the second claim.

In the instant case, TSC filed its administrative claim for refund for taxable year 2001 on March 20, 2003, well within the two-year
period provided for by law. TSC then filed two separate judicial claims for refund: one on March 31, 2003 for the first quarter of
2001, and the other on July 23, 2003 for the second, third, and fourth quarters of the same year.

The FIRST judicial claim: Given the fact that TSC's administrative claim was filed on March 20, 2003, the CIR had 120 days or until
July 18, 2003 to act on it. Thus, the first judicial claim was premature because TSC filed it a mere 11 days after filing its
administrative claim.

The SECOND judicial claim: This was filed by TSC was filed on time because it was filed on July 23, 2003 or five days after the lapse
of the 120-day period. Accordingly, it is clear that the second judicial claim complied with the mandatory waiting period of 120
days and was filed within the prescriptive period of 30 days from the CIR's action or inaction. Therefore, the CTA division only
acquired jurisdiction over TSC's second judicial claim for refund covering its second, third, and fourth quarters of taxable year
2001.

8. KEPCO ILIJAN VS. CIR

G.R. No. 205185 | September 26, 2018

DOCTRINE: There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not acquire
jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There are, however, two exceptions to this
rule. The first exception is if the Commissioner, through a specific ruling, misleads a particular taxpayer to prematurely file a
judicial claim with the CTA. Such specific ruling is applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads all taxpayers into filing
prematurely judicial claims with the CTA. In these cases, the Commissioner cannot be allowed to later on question the CTA's
assumption of jurisdiction over such claim since equitable estoppel has set in as expressly authorized under Section 246 of the Tax
Code.

FACTS: KEPCO, a duly registered domestic corporation engaged in the production of electricity as an independent power producer
(IPP) and in the sale of electricity solely to the National Power Corporation (NPC), claimed the refund or issuance of the tax credit
certificate for approximately P75M for the VAT incurred in taxable year 2002.

It appears that KEPCO filed its quarterly VAT returns for the four quarters of taxable year 2002, thereby showing the incurred
expenses representing teh importation and domestic purchases of goods and services, including the input VAT thereon. In April
2004, it brought its administrative claim for refund with the BIR, claiming excess input VAT amount to P74, 658, 481.68 for taxable
year 2002.

Nine days after filing the administrative claim, KEPCO filed its petition for review with the CTA.

ISSUE: Whether or not the CTA acquired jurisdiction over the case and whether the claim for the refund of P72,618,752.22 should
be granted.

RULING: The court partly grants the petition.

Sec. 112 of the NIRC provides:

(a) Zero-rated or effectively zero-rated sales. - any VAT registered person, whose sales are zero-rated or effectively zero-rated
may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax.
(c) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund
or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of
complete documents in support of the application filed in accordance with Subsection (A) hereof.

Under the foregoing, a VAT-registered taxpayer claiming a refund or tax credit of excess and unutilized input VAT must file the
administrative claim within two years from the close of the taxable quarter when the sales were made.

The CTA En Banc ruled that the statutory period for claiming the refund or tax credit was clearly provided under Section 112 of the
NIRC; that the ruling in Mirant - which did not create a new doctrine but only pronounced the correct application of Section 112
(A) of the NIRC - was the applicable jurisprudence; and that, therefore, no. new doctrine had been retroactively applied to the
petitioner.

The resolution of when to reckon the two-year prescriptive period for the filing an administrative claim for refund or credit of
unutilized input VAT in light of the pronouncements in Atlas and Mirant was extensively addressed and dealt with in
Commissioner of Internal Revenue v. San Roque Corporation (San Roque).

The records show that the petitioner herein filed its administrative claims for refund for the first, second, third, and fourth
quarters of taxable year 2002 on April 13, 2004. Such claims were covered by Section 112(A) of the N1RC that was the rule
applicable prior to Atlas and Mirant. As such, the proper reckoning date in this case, pursuant to Section 112(A) of the NIRC, was
the close of the taxable quarter when the relevant sales were made.

The petitioner filed its administrative and judicial claims for refund on April 13, 2004 and April 22, 2004, respectively. Both claims
were filed after BIR Ruling No. DA-589-03 was issued on December 10, 2003, but before the promulgation of the Aichi
pronouncement on October 06, 2010. Thus, notwithstanding the petitioner's having filed its judicial claim without waiting for the
decision of the respondent or for the expiration of the 120-day mandatory period, the C TA could still take cognizance of the
claims because they were filed within the period exempted from the mandatory and jurisdictional 120-30 period rule.

9. STEAG STATE POWER, INC. VS. CIR

G.R. No.00000 | Date

DOCTRINES:

 A plain reading of Section 112 (D) of the Tax Code reveals that a taxpayer may appeal the Commissioner’s denial or inaction
only within 30 days when the decision that denies the claim is received, or when the 120-day period (NOTE: now 90 days)
given to the Commissioner to decide on the claim expires.

 Under Section 112 of the Tax Code, only the administrative claim for refund of input value-added tax must be filed within
the two (2)-year prescriptive period, the judicial claim need not be.

 The phrase “within two (2) years … apply for the issuance of a tax credit certificate or refund” refers to administrative claims
for refund or credit filed with the Commissioner of Internal Revenue, not to appeals made before the Court of Tax Appeals.

 A claim for unutilized input value-added tax is in the nature of a tax exemption. Thus, strict adherence to the conditions
prescribed by the law is required of the taxpayer.

FACTS: Steag State Power is a domestic corporation primarily engaged in power generation and sale of electricity. It is registered
with the Bureau of Internal Revenue (BIR) as a value-added tax taxpayer.

Steag State Power filed before the BIR District Office administrative claims for refund of its allegedly unutilized input VAT.
However, due to the Commissioner of Internal Revenue’s inaction on its administrative claims, Steag State Power filed a Petition
for Review on Certiorari before the Court of Tax Appeals (CTA) on April 20, 2006 (first judicial claim), elevating its claim for refund
for the taxable year 2004. Through another Petition, filed on December 27, 2006 (second judicial claim), it sought judicial
recourse involving its claim for refund for the taxable year 2005. Eventually, the Petitions were consolidated.

CTA denied the Petitions. It held that its first judicial claim, were filed late, while the second judicial claim was prematurely filed.
Steag State Power filed its Motion for Reconsideration which was partially granted.

After a hearing was conducted where Steag State Power filed its supplemental formal offer of evidence, the CTA First Division
dismissed the consolidated cases for lack of jurisdiction. On appeal, the CTA En Banc affirmed the dismissal of the cases. It denied
the appeal for having been filed late. Motion for Reconsideration was likewise denied.

Thus, Steag State Power filed before the Supreme Court (SC) a Petition for Review on Certiorari, assailing the CTA En Banc Decision
which was denied. Hence, Steag State Power filed a Motion for Reconsideration.

It insists that its claims are timely. It argues that, although the claims were filed beyond the 120+30-day periods under Section 112
of the National Internal Revenue Code, as amended (Tax Code), they were nonetheless filed within the two (2)-year period under
Section 229 of the same law. It contends that the timing was in accordance with Revenue Regulation No. 7-95, which establishes
that appeals before the Court of Tax Appeals may be made after the 120-day period and before the lapse of the two (2)-year
period.

Steag State Power further asserts that the window created in San Roque Power Corporation by BIR Ruling No. DA-489-03, which
excludes from the 120+30-day periods prematurely filed judicial claims from December 10, 2003 to October 6, 2010-when Aichi
Forging Company of Asia, Inc. was promulgated-should also extend to claims belatedly filed. It reasons that taxpayers were misled
by CIR’s pronouncement in the BIR Ruling that they had the full two (2)-year period to file their Petitions before the Court of Tax
Appeals. Even so, it contends that Aichi Forging Company of Asia, Inc. and San Roque Power Corporation cannot be applied
retroactively, as doing so will impair Steag State Power’s substantive rights and deprive it of its right to a refund.

ISSUES:

1. What is the prescriptive periods for filing refunds of Input Tax?

2. Whether Steag State Power’s claim that it filed its judicial claims under Revenue Regulation No. 7-95, which supposedly
allowed claims for refund filed after the 120-day period but before the lapse of the two (2)-year period, tenable.
3. Whether the 2-year prescriptive period in Section 112 applies to judicial claim.
4. Whether the appeal of Steag State Power was filed within the prescriptive period.
5. Whether Steag State Power is correct in claiming that BIR Ruling No. DA-489-03 should cover both prematurely and
belatedly filed claims for tax refund.

RULING:

1. Section 112 of the NIRC provides:

SECTION 112. Refunds or Tax Credits of Input Tax. – xxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the Commissioner shall
grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days (now 90
days; please note for all succeeding mentions of the 120-day period) from the date of submission of complete documents
in support of the application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to
act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the
receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the
 decision or the unacted claim with the Court of Tax Appeals.

A plain reading of the above provision reveals that a taxpayer may appeal the Commissioner’s denial or inaction only within 30
days when the decision that denies the claim is received, or when the 120-day period given to the Commissioner to decide on
the claim expires.

In the case of Aichi Forging Company of Asia, Inc., this Court applied the plain text of the law and declared that the observance of
the 120+30-day periods is crucial in filing an appeal before the CTA. This Court also declared that, following CIR v. Mirant Pagbilao
Corporation, claims for refund or tax credit of excess input tax are governed not by Section 229, but by Section 112 of the Tax
Code.

These doctrines were reiterated in the case of San Roque Power Corporation, where the SC stressed that Section 112, in providing
the 120+30 day periods to appeal before the CTA, “must be applied exactly as worded since it is clear, plain, and unequivocal.”

—--------------

2. Steag State Power’s claim that it filed its judicial claims under Revenue Regulation No. 7-95, which supposedly allowed claims
for refund filed after the 120-day period but before the lapse of the two (2)-year period, is untenable.

First, Steag State Power’s judicial claims were filed on April 20, 2006 and December 27, 2006; hence, they were governed by the
Tax Code, which clearly provided: (1) 120 days for the Commissioner to act on a taxpayer’s claim; and (2) 30 days for the taxpayer
to appeal either from the Commissioner’s decision or from the expiration of the 120-day period in case of the Commissioner’s
inaction.

Moreover, Revenue Regulation No. 16-2005, not Revenue Regulation No. 7-95, was the prevailing rule when Steag State Power
filed its judicial claims. Its Section 4.112-1 faithfully reflected Section 112 of the Tax Code, as amended by Republic Act No. 9337:

SEC. 4.112-1. Claims for Refund/Tax Credit Certificate of Input Tax. – xxx

(d) Period within which refund or tax credit certificate/refund of input taxes shall be made

In proper cases, the Commissioner of Internal Revenue shall grant a tax credit certificate/refund for creditable input taxes
within one hundred twenty (120) days from the date of submission of complete documents in support of the application
filed in accordance with subparagraph (a) above.

In case of full or partial denial of the claim for tax credit certificate/refund as decided by the Commissioner of Internal
Revenue, the taxpayer may appeal to the Court of Tax Appeals (CTA) within thirty (30) days from the receipt of said
denial, otherwise the decision shall become final. However, if no action on the claim for tax credit certificate/refund has
been taken by the Commissioner of Internal Revenue after the one hundred twenty (120) day period from the date of
submission of the application with complete documents, the taxpayer may appeal to the CTA within 30 days from the
lapse of the 120-day period.

It is misleading for Steag State Power to raise its supposed reliance in good faith on Revenue Regulation No. 7-95, when the rule
had already been superseded and revoked by the time it filed its judicial claims.

—--------------

3. Under Section 112 of the Tax Code, only the administrative claim for refund of input value-added tax must be filed within the
two (2)-year prescriptive period, the judicial claim need not be.
Section 112(A) states that:

(A) Zero-rated or Effectively Zero-rated Sales. – Any VAT registered person, whose sales are zero-rated or effectively zero-
rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance
of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.

In Aichi Forging Company of Asia, Inc. and San Roque Power Corporation, the phrase “within two (2) years … apply for the
issuance of a tax credit certificate or refund” refers to administrative claims for refund or credit filed with the Commissioner of
Internal Revenue, not to appeals made before the Court of Tax Appeals.

This is apparent in Section 112(D), Paragraph 1 of the Tax Code, which gives the Commissioner [120] days from the date of
submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) within which he
or she can decide on the claim. On the other hand, Section 112(D), Paragraph 2 provides a 30-day period within which one may
appeal a judicial claim before the Court of Tax Appeals.

Reading together Subsections (A) and (D), San Roque Power Corporation declared that the 30-day period does not have to fall
within the two (2)-year prescriptive period, as long as the administrative claim is filed within the two (2)-year prescriptive period.

—--------------

4. The right to appeal before the CTA, being a statutory right, can be invoked only under the requisites provided by law. Section 11
of Republic Act No. 1125, or the Court of Tax Appeals Charter, provides a 30-day period of appeal either from receipt of the
Commissioner’s adverse decision or from the lapse of the period fixed by law for action. Thus:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. – Any party adversely affected by a decision, ruling or
inaction of the Commissioner of Internal Revenue … may file an appeal with the CTA within thirty (30) days after the
receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section
7(a)(2) herein.

(B) Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of
the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the
case of inaction as herein provided, from the expiration of the period fixed by law to act thereon.

In turn, Section 7(a)(2) of the CTA Charter, as amended, reads:

Sec. 7. Jurisdiction. – The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

xxx

(A) (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the inaction shall be deemed a denial.

Under the CTA Charter, the Commissioner’s inaction on a claim for refund is considered a “denial” of the claim, which may be
appealed before the CTA within 30 days from the expiration of the period fixed by law for action.

Here, since Steag State Power filed its judicial claims way beyond the 30-day period to appeal, the Court of Tax Appeals lost its
jurisdiction over the Petitions. Jurisdiction over the subject matter is fundamental for a court to act on a given controversy.
Moreover, it “cannot be waived … and is not dependent on the consent or objection or the acts or omissions” [Nippon Express
(Philippine) Corporation v. CIR] of any or both parties.

Contrary to Steag State Power’s stance, the CTA is not precluded to pass on this issue motu proprio, regardless of any purported
stipulation made by the parties.

—--------------

5. Steag State Power is wrong in claiming that BIR Ruling No. DA-489-03 should cover both prematurely and belatedly filed claims
for tax refund. BIR Ruling No. DA-489-03 expressly states that the “taxpayer-claimant need not wait for the lapse of the 120-day
period before it could seek judicial relief with the Court of Tax Appeals by way of Petition for Review.”

There is nothing in the same BIR Ruling that states, expressly or impliedly, that late filings of judicial claims are acceptable.

Similarly, in CIR v. Mindanao II Geothermal Partnership, it was held that the rule cannot be properly invoked because it
contemplates premature filing, not late filing. This Court further emphasized that late filing, or beyond the 30-day period, is
absolutely prohibited, even when BIR Ruling No. DA-489-03 was in force.

VAT REFUND IN TRAIN

10. STEAG STATE POWER, INC. VS. CIR

GR No. 205282 | Jan. 14, 2019

DOCTRINE: A taxpayer may appeal the Commissioner's denial or inaction only within 30 days when the decision that denies the
claim is received, or when the 120-day period given to the Commissioner to decide on the claim expires.

FACTS: Steag State Power is a domestic corporation engaged in power generation and sale of electricity to the National Power
Corporation. It is registered with the Bureau of Internal Revenue as a value-added taxpayer. Steag State Power built its power
plant from 2003 to November 15, 2006.

During the construction period, Steag State Power filed its quarterly value-added tax returns from the first to fourth quarters of
2004 on April 26, 2004, July 26, 2004, October 25, 2004, and January 25, 2005. It later filed amended value-added tax returns for
the taxable quarters on December 16, 2004 and April 22, 2005. Likewise, for the taxable quarters of 2005, Steag State Power filed
its quarterly value-added tax returns on April 22,2005, July 26, 2005, October 25, 2005, and January 25, 2006.

Steag State Power filed before the BIR in South Makati administrative claims for refund of its allegedly unutilized input value-
added tax payments on capital goods worth P650M. Due to the alleged inaction on their administrative claims, Steag State Power
then elevated this through different petitions. The appeal for claim for refund for taxable year 2004 was filed on April 20, 2006.
The appeal for taxable year 2005 was filed on December 27, 2006.

The Court of Tax Appeals First Division denied the petitions due to insufficiency of evidence. It held that the appeals for
administrative claims for refund of input taxes for January 2004 to May 2005 were filed late. The appeal of refund claim of input
taxes for June 2005 to October 2005 were prematurely filed.

Steag State Power insists that its claims are timely. It argues that, although the claims were filed beyond the 120+30-dayperiods
under Section 112 of the National Internal Revenue Code, as amended (Tax Code), they were nonetheless filed within the two (2)-
year period under Section 229 of the same law. It contends that the timing was in accordance with Revenue Regulation No. 7-95,
which establishes that appeals before the Court of Tax Appeals maybe made after the 120-day period and before the lapse of the
two (2)-year period.

Steag State Power further asserts that the window created in San Roque Power Corporation by BIR Ruling No. DA-489-03,which
excludes from the 120+30-day periods prematurely filed judicial claims from December 10, 2003 to October 6,2010-when Aichi
Forging Company of Asia, Inc. was promulgated-should also extend to claims belatedly filed. It reasons that taxpayers were misled
by respondent's pronouncement in the BIR Ruling that they had the full two (2)-year period to file their Petitions before the Court
of Tax Appeals.

ISSUE: Whether Steag State Power’s claims were belatedly filed. YES.

RULING:
The issue on the timeliness of respondent's filing of judicial claim is anchored on the nature of the prescriptive periods under
Section 112 of the Tax Code.

SECTION 112. Refunds or Tax Credits of Input Tax. -

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall
grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the
date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)
hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to
act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days. From the
receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals.

A taxpayer may appeal the Commissioner's denial or inaction only within 30 days when the decision that denies the claim is
received, or when the 120-day period given to the Commissioner to decide on the claim expires.

In Aichi Forging Company of Asia, Inc., this Court applied the plain text of the law and declared that the observance of the
120+30-day periods is crucial in filing an appeal before the Court of Tax Appeals. This Court also declared that, following
Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, claims for refund or tax credit of excess input tax are
governed not by Section 229, but by Section 112 of the Tax Code.

Steag State Power’s judicial claims were filed on April 20, 2006 and December 27, 2006; hence, they were governed by the Tax
Code, which clearly provided: (1) 120 days for the Commissioner to act on a taxpayer's claim; and (2) 30days for the taxpayer to
appeal either from the Commissioner's decision or from the expiration of the 120-day period in case of the Commissioner's
inaction.

Moreover, Revenue Regulation No. 16-2005, not Revenue Regulation No. 7-95, was the prevailing rule when Steag State Power
filed its judicial claims. Its Section 4.112-1 faithfully reflected Section 112 of the Tax Code, as amended by Republic Act No. 9337.

As to the two-year period, only the administrative claim for refund of input value-added tax must be filed within the two-year
prescriptive period, the judicial claim need not be. In the Achi Forging Company of Asia, Inc. case, it was established that the
phrase "within two (2) years ... apply for the issuance of a tax credit certificate or refund" refers to administrative claims for
refund or credit filed with the Commissioner of Internal Revenue, not to appeals made before the Court of Tax Appeals.

Finally, since Steag State Power filed its judicial claims way beyond the 30-day period to appeal, the Court of Tax Appeals lost its
jurisdiction over the Petitions.
As to the argument that BIR Ruling No. DA-489-03 should cover prematurely and belatedly filed claims for tax refund, the Court
clarified that it specifically pertained to cases where a taxpayer did not wait for the lapse of the 120-day period. Nowhere did it
state that late filings of judicial claims are acceptable.

11. CIR VS. TEAM ENERGY CORP. (MIRANT PAGBILAO CORP.)

G.R. No.230412 | March 27, 2019

DOCTRINE: In claiming a tax refund or tax credit for unutilized input Value-Added Tax (VAT) attributable to effectively zero-rated
sales, a taxpayer need not secure a Certificate of Compliance (COC) from the Energy Regulatory Commission (ERC) under the
Electric Power Industry Reform Act (EPIRA). The taxpayer's entitlement to the refund or credit is anchored on Section 108(B)(3) of
the 1997 National Internal Revenue Code (NIRC), in relation to the special law granting tax exemption to the purchaser of services
(in this case, the National Power Corporation, NPC), and not on compliance with EPIRA requirements. Additionally, the failure to
submit a COC from the ERC does not disqualify the taxpayer from claiming the tax refund or tax credit. Furthermore, if the Bureau
of Internal Revenue (BIR) fails to inform the taxpayer of the need to submit additional documents during the administrative
process, it cannot later argue that the judicial claim was premature due to alleged non-submission of complete documents.

FACTS: Team Energy Corporation, formerly Mirant Pagbilao Corporation, is engaged in power generation and sales to the National
Power Corporation (NPC) under a Build, Operate, Transfer Scheme. Team Energy is registered with the Bureau of Internal Revenue
(BIR) as a VAT taxpayer. In 2004, Team Energy applied for effective zero-rating for the supply of electricity to NPC for 2005, which
was approved. It filed Quarterly VAT Returns and a Monthly VAT Declaration, claiming a refund of input VAT totaling
P79,185,617.33 for the first three quarters of 2005 and October 2005.

Petitioner Commissioner of Internal Revenue (CIR) filed an administrative claim for cash refund, but due to inaction, Team Energy
filed a Petition for Review. During trial, Team Energy presented evidence, while the CIR waived the right to present evidence. The
Court in Division partially granted Team Energy's petition, ordering the CIR to refund or issue a tax credit certificate. The CIR filed a
Motion for Reconsideration, leading to an Amended Decision dismissing the petition. Team Energy appealed to the CTA En Banc.

ISSUE: Whether or not Team Energy's is entitled to a refund or tax credit of its unutilized input VAT attributable to its zero-rated
sales of electricity to NPC. YES

RULING: The Court held in favor of Team Energy. It rejected the CIR's argument that Team Energy must comply with EPIRA
requirements, stating that the claim is based on Section 108(B)(3) of the Tax Code, not the EPIRA. The Court emphasized that to
qualify for VAT zero-rating, Team Energy needed only to show its VAT registration and compliance with invoicing requirements.
The Court ruled that Team Energy is entitled to a refund or credit of unutilized input VAT, as its sale of electricity to NPC qualifies
for effective zero-rating under Section 108(B)(3) of the Tax Code, in relation to Section 13 of the NPC Charter. The Court also
dismissed the CIR's claim that the judicial claim was prematurely filed, as the CIR failed to send a written notice requiring
additional documents during the administrative process.

Team Energy is entitled to a refund or credit of its unutilized input VAT attributable to zero-rated sales of electricity to NPC, and
the Court affirmed the decisions of the Court of Tax Appeals En Banc. The ruling clarified that compliance with EPIRA requirements
was not necessary for VAT zero-rating, and the CIR's failure to request additional documents during the administrative process did
not render Team Energy's judicial claim premature.

12. MEDICARD PHILS. VS. CIR

G.R. No.00000 | Date

DOCTRINE: The amounts earmarked and eventually paid by MEDICARD to the medical service providers do not form part of gross
receipts for VAT purposes; thus, exempt from tax.

A tax cannot be imposed without clear and express words for that purpose. Accordingly, the general rule of requiring adherence to
the letter in construing statutes and applies with peculiar strictness to tax laws and the provisions of a taxing act are not to be
extended by implication.

MEDICARD primarily acts as an intermediary between the purchaser of healthcare services for a fee. MEDICARD members can
either avail of medical services from MEDICARD’s accredited healthcare providers or directly from MEDICARD. MEDICARD informs
its would-be members beforehand that 80% of the amount would be earmarked for medical utilization and only the remaining
20% comprises its service fee (MEDICARD’s sale of its services is exempt from VAT under Section 109(G).

FACTS: MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and medical insurance coverage to
its clients. It filed its First, Second, Third, and Fourth Quarterly VAT Returns for the year 2006.

Upon finding some discrepancies between MEDICARD’s ITRs and VAT Returns, the CIR informed MEDICARD and issued a Letter
Notice. Subsequently, the CIR issued a Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT. On January 4,
2008, MEDICARD received CIR’s Formal Assessment Notice (FAN) for alleged deficiency VAT for taxable year 2006 in the total
amount of P196,614,476.69 inclusive of penalties.

Citing CIR v. Philippine Health Care providers, since MEDICARD does not actually provide medical and/or hospital services, but
merely arranges for the same, its services are not VAT exempt. MEDICARD contended that an HMO involves two different but
interrelated contracts:

1. Contract with health care institutions/professionals - MEDICARD undertakes to make arrangements with
healthcare institutions or professionals under specific health related services for a specific period of time in exchange for
payment of a more or less fixed membership fee.
2. A corporate client and MEDICARD - MEDICARD expressly provides that 20% of the membership fee for
individual, regardless of the amount involved already includes the VAT of 10%/20% excluding the remaining 80% because
MEDICARD would earmark this latter portion for medical utilization of its members.

Hence, it argued that the amounts paid to doctors, hospitals and clinics should be excluded from the computation of its gross
receipts.

ISSUE: Whether the amounts that MEDICARD earmarked and eventually paid to the medical services providers should still form
part of its gross receipts for VAT purposes. NO.

RULING: Amounts earmarked and eventually paid by MEDICARD to the medical service providers do not form part of gross
receipts for VAT purposes.

Since an HMO like MEDICARD is primarily engaged in arranging for coverage or designated managed care services that are needed
by plan holders/members for fixed prepaid membership fees and for a specified period of time, MEDICARD is principally engaged
in the sale of services. Its VAT base and corresponding liability is, thus, determined under Section 108(A)32 of the Tax Code.

RR No. 16-2005 defined gross receipts in general, thus:

HMO's gross receipts shall be the total amount of money or its equivalent representing the service fee actually or
constructively received during the taxable period for the services performed or to be performed for another person,
excluding the value-added tax. The compensation for their services, representing their service fee, is presumed to be the
total amount received as enrollment fee from their members plus other charges received.

Section 4.108-4. x x x. "Gross receipts" refers to the total amount of money or its equivalent representing the contract price,
compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and
 deposits applied as payments for services rendered, and advance payments actually or constructively received during the
taxable period for the services performed or to be performed for another person, excluding the VAT.

The definition of gross receipts under. RR No. 16-2005 merely presumed that the amount received by an HMO as membership fee
is the HMO's compensation for their services. As a mere presumption, an HMO is, thus, allowed to establish that a portion of the
amount it received as membership fee does NOT actually compensate it but some other person, which in this case are the medical
service providers themselves.

In the proceedings ·below, the nature of MEDICARD's business and the extent of the services it rendered are not seriously
disputed. As an HMO, MEDICARD primarily acts as an intermediary between the purchaser of healthcare services (its members)
and the healthcare providers (the doctors, hospitals and clinics) for a fee. By enrolling membership with MEDICARD, its members
will be able to avail of the pre-arranged medical services from its accredited healthcare providers without the necessary protocol
of posting cash bonds or deposits prior to being attended to or admitted to hospitals or clinics, especially during emergencies, at
any given time. Apart from this, MEDICARD may also directly provide medical, hospital and laboratory services, which depends
upon its member's choice.

Thus, in the course of its business as such, MEDICARD members can either avail of medical services from MEDICARD's accredited
healthcare providers or directly from MEDICARD. In the former, MEDICARD members obviously knew that beyond the agreement
to pre-arrange the healthcare needs of its ·members, MEDICARD would not actually be providing the actual healthcare service.
Thus, based on industry practice, MEDICARD informs its would-be member beforehand that 80% of the amount would be
earmarked for medical utilization and only the remaining 20% comprises its service fee. In the latter case, MEDICARD's sale of its
services is exempt from VAT under Section 109(G).

As to the CIR's argument that the act of earmarking or allocation is by itself an act of ownership and management over the funds,
the Court does not agree. On the contrary, it is MEDICARD's act of earmarking or allocating 80% of the amount it received as
membership fee at the time of payment that weakens the ownership imputed to it. By earmarking or allocating 80% of the
amount, MEDICARD unequivocally recognizes that its possession of the funds is not in the concept of owner but as a mere
administrator of the same. For this reason, at most, MEDICARD's right in relation to these amounts is a mere inchoate owner
which would ripen into actual ownership if, and only if, there is underutilization of the membership fees at the end of the fiscal
year. Prior to that, MEDICARD is bound to pay from the amounts it had allocated as an administrator once its members avail of
the medical services of MEDICARD's healthcare providers.

13. POWER SECTOR ASSETS & LIABILITIES MANAGEMENT CORP. (PSALM) VS. CIR
G.R. No. 198146 | August 8, 2017

DOCTRINE: The phrase ‘in the course of trade or business’ means the regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto , by any person regardless of whether or not the person engaged therein is a
nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to
members or their guests), or government entity.

FACTS: Petitioner PSALM is a GOCC created under RA 9136, also known as the Electric Power Industry Reform Act of 2001
(EPIRA). The principal purpose of PSALM is to manage the orderly sale, disposition, and privatization of the National Power
Corporation (NPC) generation assets, real estate and other disposable assets, and Independent Power Producer (IPP) contracts
with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.

In 2006, PSALM conducted public biddings for the privatization of the Pantabangan-Masiway Hydroelectric Power Plant
(Pantabangan-Masiway Plant) and Magat Hydroelectric Power Plant (Magat Plant).
In 2007, the NPC received a letter from the BIR demanding immediate payment of P3,813,080,472 deficiency VAT for the sale of
the Pantabangan-Masiway Plant and Magat Plant, which it endorsed to PSALM.

On 30 August 2007, the BIR, NPC, and PSALM executed a MOA wherein they agreed among others that NPC/PSALM shall remit
under protest to the BIR the amount of Php 3,813,080,472.00, representing basic VAT.

On 21 September 2007, PSALM filed with the DOJ a petition for the adjudication of the dispute with the BIR to resolve the issue of
whether the sale of the power plants should be subject to VAT.

PSALM’s Contentions: The privatization of NPC assets, such as the sale of the Pantabangan-Masiway and Magat Power Plants, is
pursuant to PSALM's mandate under the EPIRA law and is not conducted in the course of trade or business. PSALM cited BIR
Ruling No. 020-02, which provides that PSALM's sale of assets is not conducted in pursuit of any commercial or profitable activity
as to fall within the ambit of a VAT-able transaction under Sections 105 and 106 of the NIRC.

DOJ’s Ruling: It ruled in favor of PSALM. The disposition of Pantabangan-Masiway and Magat Power Plants was not in the regular
conduct or pursuit of a commercial or an economic activity but was effected by the mandate of the EPIRA upon petitioner to
direct the orderly sale, disposition, and privatization of NPC generation assets, real estate and other disposable assets, and IPP
contracts, and afterward, to liquidate the outstanding obligations of the NPC.

The BIR moved for reconsideration, alleging that the DOJ had no jurisdiction since the dispute involved tax laws administered by
the BIR and therefore within the jurisdiction of the CTA. Furthermore, the BIR stated that the sale of the subject power plants by
PSALM to private entities is in the course of trade or business, as contemplated under Section 105 of the NIRC of 1997, which
covers incidental transactions. Thus, the sale is subject to VAT. However, the DOJ denied BIR's Motion for Reconsideration.

On 7 April 2009, the BIR filed with the CA a petition for certiorari, seeking to set aside the DOJ's decision for lack of jurisdiction.
But the CA dismissed the petition.

CA’s Ruling: In conclusion, it found that the DOJ Secretary gravely abused his discretion amounting to lack of jurisdiction when he
assumed jurisdiction over the case.

CIR’s Contentions: It argued that:

1. The previous exemption of NPC from VAT under Section 13 of RA 6395 was expressly repealed by Section 24 of Republic
Act No. 9337. It posits that the VAT exemption accorded to PSALM under BIR Ruling No. 020-02 is also deemed revoked
since PSALM is a successor-in-interest of NPC; and

2. The sale made by NPC and/or its successors-in interest of the power plants is an incidental transaction which should be
subject to VAT.

ISSUE: Whether the sale of the power plants is subject to VAT. NO.

RULING: To resolve the issue of whether the sale of the Pantabangan-Masiway and Magat Power Plants by petitioner PSALM to
private entities is subject to VAT, the Court must determine whether the sale is "in the course of trade or business" as
contemplated under Section 105 of the NIRC, which reads:

SEC 105. Persons Liable. - Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or
properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in
Sections 106 to 108 of this Code.

The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or
 lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods,
properties or services at the time of the effectivity of Republic Act 7716.

The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein
is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells
exclusively to members or their guests), or government entity.

The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by
nonresident foreign persons shall be considered as being rendered in the course of trade or business. (Emphasis supplied)

Under Section 50 of the EPIRA law, PSALM's principal purpose is to manage the orderly sale, disposition, and privatization of the
NPC generation assets, real estate and other disposable assets, and IPP contracts with the objective of liquidating all NPC financial
obligations and stranded contract costs in an optimal manner.

Privatization of assets by PSALM is NOT subject to VAT

Pursuant to Section 105 in relation to Section 106, both of the Tax Code of 1997, a value-added tax equivalent to ten percent
(10%) of the gross selling price or gross value in money of the goods, is collected from any person, who, in the course of trade or
business, sells, barters, exchanges, leases goods or properties, which tax shall be paid by the seller or transferor.

The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial activity, including
transactions incidental thereto.

Since the disposition or sale of the assets is a consequence of PSALM's mandate to ensure the orderly sale or disposition of the
property and thereafter to liquidate the outstanding loans and obligations of NPC, utilizing the proceeds from sales and other
property contributed to it, including the proceeds from the Universal Charge, and not conducted in pursuit of any commercial
or profitable activity, including transactions incidental thereto, the same will be considered an isolated transaction, which will
therefore not be subject to VAT. (BIR Ruling No. 113-98 dated July 23, 1998

Furthermore, the Supreme Court does not agree with the CIR's position, which is anchored on the wrong premise that PSALM is a
successor-in-interest of NPC. PSALM is not a successor-in-interest of NPC.

Under its charter, NPC is mandated to "undertake the development of hydroelectric generation of power and the production of
electricity from nuclear, geothermal and other sources, as well as the transmission of electric power on a nationwide basis."

With the passage of the EPIRA law which restructured the electric power industry into generation, transmission, distribution, and
supply sectors, the NPC is now primarily mandated to perform missionary electrification function through the Small Power Utilities
Group (SPUG) and is responsible for providing power generation and associated power delivery systems in areas that are not
connected to the transmission system.

On the other hand, PSALM, a government-owned and controlled corporation, was created under the EPIRA law to manage the
orderly sale and privatization of NPC assets with the objective of liquidating all of NPC's financial obligations in an optimal
manner.

Clearly, NPC and PSALM have different functions. Since PSALM is not a successor-in-interest of NPC, the repeal by RA 9337 of
NPC's VAT exemption does not affect PSALM.

In any event, even if PSALM is deemed a successor-in-interest of NPC, still the sale of the power plants is not "in the course of
trade or business" as contemplated under Section 105 of the NIRC, and thus, not subject to VAT. The sale of the power plants is
not in pursuit of a commercial or economic activity, but a governmental function mandated by law to privatize NPC generation
assets. PSALM was created primarily to liquidate all NPC financial obligations and stranded contract costs in an optimal manner.

PSALM is limited to selling only NPC assets and IPP contracts of NPC. The sale of NPC assets by PSALM is not "in the course of
trade or business" but purely for the specific purpose of privatizing NPC assets in order to liquidate all NPC financial obligations.
PSALM is tasked to sell and privatize the NPC assets within the term of its existence. The EPIRA law even requires PSALM to submit
a plan for the endorsement by the Joint Congressional Power Commission and the approval of the President of the total
privatization of the NPC assets and IPP contracts.

Thus, it is very clear that the sale of the power plants was an exercise of a governmental function mandated by law for the
primary purpose of privatizing NPC assets in accordance with the guidelines imposed by the EPIRA law.

Similarly, the sale of the power plants in this case is not subject to VAT since the sale was made pursuant to PSALM's mandate
to privatize NPC assets, and was not undertaken in the course of trade or business. In selling the power plants, PSALM was
merely exercising a governmental function for which it was created under the EPIRA law.

The CIR argues that the Magsaysay case, which involved the sale in 1988 of NDC vessels, is not applicable in this case since it was
decided under the 1986 NIRC. The CIR maintains that under Section 105 of the 1997 NIRC, which amended Section 99[62] of the
1986 NIRC, the phrase "in the course of trade or business" was expanded, and now covers incidental transactions. Since NPC still
owns the power plants and PSALM may only be considered as trustee of the NPC assets, the sale of the power plants is considered
an incidental transaction which is subject to VAT.

We disagree with the CIR's position. PSALM owned the power plants which were sold. PSALM's ownership of the NPC assets is
clearly stated under Sections 49, 51, and 55 of the EPIRA law.

Under the EPIRA law, the ownership of the generation assets, real estate, IPP contracts, and other disposable assets of the NPC
was transferred to PSALM. Clearly, PSALM is not a mere trustee of the NPC assets but is the owner thereof. Precisely, PSALM,
as the owner of the NPC assets, is the government entity tasked under the EPIRA law to privatize such NPC assets.

The sale of the power plants cannot be considered as an incidental transaction made in the course of NPC's or PSALM's business.
Therefore, the sale of the power plants should not be subject to VAT.

14. CIR VS. EURO-PHIL AIRLINE SERVICES

G.R. No. 222436 | July 23, 2018

DOCTRINE: Instances when it is not subject to 12% VAT

1.if there is non-imprintment of the word zero-rated in the invoice of VAT official receipt it does not mean
that the transaction is is subject to 12% VAT. Section 113 of the NIRC of 1997, “Consequences of Issuing Erroneous VAT
Invoice of VAT Official Receipt,”

2.Failure to comply with the invoicing requirements required by law does not make the transaction subject to
a 12% VAT. , Section 4. 113-4 of Revenue Regulations 16-2005, Consolidated Value-Added Tax Regulations of 2005

FACTS: Respondent Euro-Philippines Airline Services, Inc. (Euro-Phil) is an exclusive passenger sales agent of British Airways,
PLC, an off-line international airline in the Philippines to service British Airways passengers in the Philippines.

Euro-Phil received a Formal Assessment Notice (FAN) dated September 13, 2010 from the CIR on 14 September 2010 in the
aggregate amount of ₱4,271,228,20.00 consisting of assessment of Value Added Tax (VAT), among others, for the taxable year
ending March 31, 2007 with Details of Discrepancies.

On 29 September 2010, Euro-Phil filed a final protest on CIR.

Following the lapse of the 180-day period within which to resolve the protest, Euro-Phil filed a petition for review before the CTA-
for the cancellation of the FAN issued by CIR for deficiency VAT.

Euro-Phil argued therein that the receipts that are supposedly subject to 12% VAT actually pertained to “services rendered to
persons engaged exclusively in international air transport” hence, zero-rated.

CTA rendered a decision that Euro-Phil is rendering services to persons engaged in international air transport operations and, is
zero-rated under Section 108 of the NIRC of 1997.

CIR filed a Motion for Partial Reconsideration but was denied.

CIR then appealed before the CTA En Banc alleging Euro-Phil’s services is subject to 12% VAT.

CIR moved for reconsideration of the said decision insisting that the presentation of VAT official receipts with the words “zero-
rated” imprinted thereon is indispensable to cancel the value-added tax (VAT) assessment against Euro-Phil.

CTA (En Banc) denied the motion for reconsideration of the CIR. In the dissenting opinion given by Justice Del Rosario

In the case at bar, Europhil is assessed for deficiency VAT for services it rendered as passenger sales agent of British
Airways PLC. It invoked that the services rendered by VAT-registered persons to persons engaged in international air
transport operations is subject to zero percent (0%) rate, under Section 108 of the NIRC,however it is not enough for
respondent to invoke Section 108 of the NIRC of 1997, as amended.

Europhil has likewise the burden to show compliance with the invoicing requirements laid down in Section 113 of the
NIRC of 1997, as amended, to be entitled to zero rating. Needless to say, unless appropriately refuted, tax assessments
by tax examiners are presumed correct and made in good faith.

In fine, the issue of compliance with Section 113 of the NIRC of 1997, as amended, is vital in the disposition of the present
controversy which the Court should consider, lest an indispensable requirement for the availment of VAT zero-rating is
blatantly ignored.

Hence, this petition with CIR adopting Justice Del Rosario’s dissent and that Euro-Phil had to comply with the invoicing
requirements to be entitled to zero rating of VAT.

ISSUE:
Is the transaction sale made by Euro-Phil makes them entitled to the benefit of zero-rated VAT despite its failure to comply with
invoicing requirements as mandated by law. – YES.

RULING:
The petition is denied.

Section 108 of the NIRC of 1997 imposes zero percent (0%) VAT on services performed in the Philippines by VAT-registered
persons to persons engaged in international air transport operations, as it thus provides:

Section 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –

(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-
 registered persons shall be subject to zero percent (0%) rate.

(4) Services rendered to persons engaged in international shipping or international air-transport operations,
including leases of property for use thereof; x x x

In this case: There is no dispute that Euro-Phil is VAT registered.

Next, it is also not disputed that the services rendered by Euro-Phil was to a person engaged in international air-transport
operations.asdfghj

Thus, by application, Section 108 of the NIRC of 1997 subjects the services of Euro-Phil to British Airways PLC, to the rate of zero
percent VAT.

Contention: the CIR argues that (based on Justice Del Rosarios’s opinion) Euro-Phil’s failure to present and offer any proof to show
that it has complied with the invoicing requirements, deems its sale of services to British Airways PLC subject to 12% VAT.

Held: It does not negate the established fact that British Airways PLC is engaged in international air-transport operations.

Rule: As dictated by Section 113 of the NIRC of 1997 nowhere therein is a presumption created by law that the non-imprintment
of the word “zero rated” deems the transaction subject to 12% VAT.

In addition, Section 4. 113-4 of Revenue Regulations 16-2005, Consolidated Value-Added Tax Regulations of 2005, also does
notstate that the non-imprintment of the word “zero rated” deems the transaction subject to 12% VAT.

In this case: Thus, failure to comply with invoicing requirements as mandated by law does not deem the transaction subject to
12% VAT.

ANCILLARY ISSUE:
Whether or not the issue of non-compliance of the invoicing requirements by Euro-Phil must be recognized despite being raised
only on appeal. – NO.

Held: Here, it is not disputed that CIR raised the issue that the alleged failure to present VAT official receipts with the imprinted
words “zero rated” adopting the dissent of Justice Del Rosario, only at the latter stage of the appeal on Motion for
Reconsideration of the CTA En Banc’s decision. Accordingly, with the doctrine that issues may not be raised for the first time on
appeal, CIR should not be allowed by this Court to raise this matter.

15. CIR VS. NEGROS CONSOLIDATED FARMERS MULTI-PURPOSE COOPERATIVE

G.R. No. 212735 |December 05, 2018

DOCTRINE: Transactions such as sales by agricultural cooperatives duly registered with the Cooperative Development Authority
(CDA) to their members, as well as sales of their produce, whether in its original state or processed form, to non-members, are
exempt from VAT.

FACTS: Respondent Negros Consolidated Farmers COFA is a multi-purpose agricultural cooperative organized under Republic Act
(RA) No. 6938. COFA's farmer-members deliver the sugarcane produce to be milled and processed in COFA's name with the sugar
mill/refinery. Before the refined sugar is released by the sugar mill, however, an Authorization Allowing the Release of Refined
Sugar (AARRS) from the Bureau of Internal Revenue (BIR) is required from COFA.

For several instances, upon COFA's application, the BIR issued the AARRS without requiring COFA to pay advance VAT pursuant to
COFA's tax exemption under Section 61 of RA 6938 and Section 109(r) (now under Section 109[L]) of RA No.8424, as amended by
RA No. 9337.

As such, COFA was issued Certificates of Tax Exemption dated May 24, 1999 and April 23, 2003 by the BIR. However, beginning
February 3, 2009, the BIR, through the Regional Director required as a condition for the issuance of the AARRS the payment of
“advance VAT” the BIR issued RR No. 13-2008 consolidating the regulations on the advance payment of VAT or" advance VAT" on
the sale of refined sugar on the premise that COFA, as an agricultural cooperative, does not fall under the term "producer."

According to the BIR, a "producer" is one who tills the land it owns or leases, or who incurs cost for agricultural production of the
sugarcane to be refined by the sugar refinery. As bases for the required payment of advance VAT, the Regional Director pointed to
Sections 3 and 4 of Revenue Regulations (RR) No. 13-2008, 12 which, in part, respectively provide: Sec. 3. Requirement to pay in
Advance VAT Sale of Refined Sugar. - In general, the advance VAT on the sale of refined sugar provided for under Sec. 8 hereof,
shall be paid in advance by the owner/seller before the refined sugar is withdrawn from any sugar refinery/mill. xxx
xx xx
Sec. 4. Exemption from the Payment of the Advance VAT. -

xxx
xxxx

A cooperative is said to be the producer of the sugar if it is the tiller of the land it owns, or leases, incurs cost of agricultural
production of the sugar and produces the sugar cane to be refined.

xxx

COFA paid the advance VAT under protest and sought the legal opinion of the BIR, as to whether COFA is considered the producer
of the sugar product of its members.

The BIR ruled that the sales of sugar produced by COFA to its members and non-members are exempt from VAT pursuant to
Section 109(L)of RA 9337. COFA then filed with petitioner Commissioner of Internal Revenue (CIR) an administrative claim for
refund pursuant to Section 229 of RA 8424. Due to CIR's inaction, COFA filed a petition for review before the CTA seeking the
refund of the amount of P7,290,960.00 representing 71,480 LKG bags of refined sugar at Pl02.00 VAT per bag for the period
covering May 12, 2009 to July 22, 2009.

CIR filed an answer and raised that respondents alleged failure to comply with the requisites for recovery of tax erroneously or
illegally collected as spelled under Section 229 of RA 8424, specifically, the lack of a prior claim for refund or credit with the CIR.
Petitioner additionally argued that COF A is not entitled to refund as it failed to present certain documents required under
Sections 3 and 4 of RR No. 13-2008.

CTA Division rendered its decision finding COFA to be exempt from VAT and thus, ordered the refund of the advance VAT it
erroneously paid. A petition for review before the CTA En Banc was filed by petitioner maintaining the same arguments. Wherein
CTA En Banc affirmed COFA's status as an agricultural cooperative entitled to VAT exemption. CIR pointed to COFA's failure to
present documentary evidence to prove that it is indeed the principal provider of the various production inputs(fertilizers), capital,
technology transfers and farm management, as well as documentary evidence to show that COF A has sales transactions with its
members and non-members.

ISSUE: WON COFA, at the time of the subject transactions, i.e., from May 12, 2009 to July 22, 2009, is VAT exempt and
therefore entitled to a tax refund for the advance VAT it paid.

RULING: COFA is a VAT-exempt agricultural cooperative.

Exemption from the payment of VAT on sales made by the agricultural cooperatives to members or to non-members necessarily
includes exemption from the payment of "advance VAT" upon the withdrawal of the refined sugar from the sugar mill. Section 7
of RA 9337 amending Section 109 of RA 8424 provides that sale or importation of agricultural and marine food products in their
original state are exempt from VAT. However refined sugar is considered to be included in VAT as refined sugar already
underwent several refining processes and as such, is no longer considered to be in its original state. However, if the sale of the
sugar, whether raw or refined, was made by an agricultural cooperative to its members or non-members, such transaction is still
VAT-exempt by virtue of Section 109 (L) of RA 8424. By way of exception, withdrawal of refined sugar is exempted from advance
VAT upon the concurrence of certain conditions which ultimately relate to a two-pronged criteria: first, the character of the
cooperative seeking the exemption; and second, the kind of customers to whom the sale is made.

As for its character, for an agricultural cooperative to be exempted from the payment of advance VAT on refined sugar, it must be
(a) a cooperative in good standing duly accredited and registered with the CDA; and (b) the producer of the sugar. [ Section 4 of
RR No. 13-2008]

(A cooperative shall be considered in good standing if it is a holder of a "Certificate of Good Standing" issued by the CDA. A
cooperative is said to be the producer of the sugar if it is the tiller of the land it owns, or leases, incurs cost of agricultural
production of the sugar and produces the sugar cane to be refined.)

As for the second criteria, the sale of sugar in its original form is always exempt from VAT regardless of who the seller is, On the
other hand, sale of sugar, in its processed form, by a cooperative is exempt from VAT if the sale is made to members of the
cooperative. Whereas, if the sale of sugar in its processed form is made by the cooperative to non-members, said sale is exempt
from VAT only if the cooperative is an agricultural producer of the sugar cane that has been converted into refined sugar.

In this case respondent met the two-pronged criteria for it was a cooperative in good standing as indicated in the Certification of
Good Standing previously issued and subsequently renewed by the CDA. It was likewise established that COFA was duly accredited
and registered with the CDA as evidenced by the issuance of the CDA Certificate of Registration; Also it was also proven by the BIR
that respondent is a “producer” for COFA has direct participation in the sugarcane production of its farmers-member. Having
established that COFA is an agricultural cooperative in good standing and duly registered with the CDA and is the producer of the
sugar, its sale then of refined sugar whether sold to members or non-members, following the express provisions of Section 109(L)
of RA 8424, as amended, is exempt from VAT. As a logical and necessary consequence of its established VAT exemption, COFA is
likewise exempted from the payment of advance VAT required under RR No. 13-2008.

16. COCA COLA BOTTLERS PHILS., INC. VS. CIR

G.R. No. 222428 | February 18, 2019

DOCTRINE: 12% VAT taxpayers are not entitled to claim refund of excess input VAT but carry-over to the subsequent taxable
quarters; VAT refund claim under Sec. 229 is not proper.

FACTS: Petitioner Coca-Cola filed with the BIR an administrative claim for refund or tax credit of its alleged over/erroneous
payment of VAT for March 31, 2008. Three days thereafter, Coca-Cola filed with the CTA a judicial claim for refund or issuance of
tax credit certificate presenting its financial employees as witness in support of its case. The CTA Division as well as the CTA En
Banc denied the petitioner's claim.

Sec. 112 of the NIRC, according to the CTA, provides only two instances when excess input taxes may be claimed for refund and/or
issuance of tax credit certificate:
1. When the claimant is a VAT-registered person, whose sales are zero-rated or effectively zero-rated under Sec.
112(A);
2. When the VAT registration of the claimant has been cancelled due to cessation of business, or due to changes in
or cessation of status under Sec. 112(B).
But since the amount sought to be credited or refunded represents undeclared input taxes and not erroneously paid VAT or
understatement of VAT overpayment, it does not fall under the instances enumerated.

In addition, Secs. 204(C) and 229 of the NIRC similarly apply only to instances of erroneous payment or illegal collection of internal
revenue taxes. The term "excess" input VAT simply means that the input VAT available as credit exceeds the output VAT, not that
the input VAT is excessively collected because it is more than what is legally due.

ISSUES:
1. Whether the excess input tax can be claimed as a refund or tax credit.
2. Whether recovery under Sec. 229 may be had.

RULING:
1. NO. Petitioner’s claim does not fall under the instance enumerated in Sec. 112. Even assuming that it falls under the said
Sec. 112, the excess shall be carried over to the succeeding quarters. It means that no refund or tax credit is allowed.
2. NO. There was no erroneous or excessive payment made. Even assuming that input VAT is in fact "excessively" collected
as understood under Sec. 229, since only the person legally liable to pay the tax can file the judicial claim for refund.

A non zero-rated VAT-registered taxpayer who has no output VAT because he has no sales cannot claim a tax refund or
credit of his unused input VAT under the VAT System. Even if the taxpayer has sales but his input VAT exceeds his output
VAT, he cannot seek a tax refund or credit for his "excess" input VAT under the VAT System. He can only carry-over and
apply his "excess" input VAT against his future output VAT.

If such "excess" input VAT is an "excessively" collected tax, the taxpayer should be able to seek a refund or credit for such
"excess" input VAT whether or not he has output VAT.

The VAT System does not allow such refund or credit. Such "excess" input VAT is not an "excessively" collected tax under
Sec. 229. The "excess" input VAT is a correctly and properly collected tax. However, such "excess" input VAT can be
applied against the output VAT because the VAT is a tax imposed only on the value added by the taxpayer. If the input
VAT is in fact "excessively" collected under Sec. 229, then it is the person legally liable to pay the input VAT, not the
person to whom the tax was passed on as part of the purchase price and claiming credit for the input VAT under the VAT
System, who can file the judicial claim under Sec. 229.