April 2011 Philippine Supreme Court Decisions on Tax Law

Here are selected April 2011 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; irrevocability of option to carry-over excess income tax payments. When the taxpayer opted to carry over its unutilized creditable withholding tax from 1997 to taxable year 1998, the carry-over could no longer be converted into a claim for tax refund because of the irrevocability rule provided in Section 76 of the National Internal Revenue Code of 1997. Thereby, the taxpayer became barred from claiming the refund. Commissioner of Internal Revenue vs. PL Management International Philippines, Inc., G.R. No. 160949, April 4, 2011.

National Internal Revenue Code; carrying-over excess income tax payments; prescription.  In view of its irrevocable choice, taxpayer remained entitled to utilize that amount of excess creditable withholding tax as tax credit in succeeding taxable years until fully exhausted. In this regard, prescription did not bar it from applying the amount as tax credit considering that there was no prescriptive period for the carrying over of the amount as tax credit in subsequent taxable years. Commissioner of Internal Revenue vs. PL Management International Philippines, Inc., G.R. No. 160949, April 4, 2011.

National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added tax; printing of “zero-rated.” Taxpayer insists that Sections 113 and 237 of the National Internal Revenue Code (NIRC) and Section 4.108-1 of Revenue Regulations (RR) No. 7-95 do not provide that failure to indicate the word “zero-rated” in the invoices or receipts would result in the outright invalidation of these invoices or receipts and the disallowance of a claim for tax credit or refund. Sections 113 (A) and 237 of the NIRC provide for the invoicing requirements for value-added tax (VAT) registered persons. Related to these provisions, Section 4.108-1 of RR No. 7-95 enumerates the information which must appear on the face of the official receipts or invoices for every sale of goods by VAT-registered persons. At the time taxpayer filed its claim for credit of VAT input tax, RR No. 7-95 was already in effect and it required, among others, that the word “zero-rated” be imprinted on the invoice covering zero-rated sales. It also provided that only VAT-registered persons are required to print their tax identification number followed by the word “VAT” in their invoices or receipts and this shall be considered as a “VAT invoice.” All purchases covered by invoices other than a “VAT invoice” shall not give rise to any input tax. The invoicing requirements for VAT-registered taxpayer as provided in the NIRC and revenue regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributed to zero-rated sales. A “VAT invoice” is an invoice that meets the requirements of Section 4.108-1 of RR No. 7-95. Contrary to taxpayer’s claim, RR No. 7-95 expressly states that “purchases covered by invoices other than a VAT invoice shall not give rise to any input tax.” Taxpayer’s invoice, lacking the word “zero-rated,” is not a “VAT invoice,” and this cannot give rise to any input tax. The subsequent enactment of Republic Act No. 9337 [amending the NIRC] on 1 November 2005 elevating provisions of RR No. 7-95 into law merely codified into law administrative regulations that already had the force and effect of law. Such codification does not mean that prior to the codification the administrative regulations were not enforceable.  Microsoft Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 180173, April 6, 2011.

National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added tax; rationale for printing of “zero-rated.” As the Court has ruled in several cases, the printing of the word “zero-rated” is required to be placed on VAT invoices or receipts covering zero-rated sales in order to be entitled to claim for tax credit or refund. In Panasonic vs. Commissioner of Internal Revenue, the Court held that the appearance of the word “zero-rated” on face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid. Absent such word, the government may be refunding taxes it did not collect.  Microsoft Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 180173, April 6, 2011.

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