June 2012 Philippine Supreme Court Decisions on Tax Law

Here are select June 2012 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code; Revenue Regulations No. 7-95; refund of input VAT; printing of “zero-rated” on official receipt. Revenue Regulations No. 7-95, which took effect on 1 January 1996, proceeds from the rule-making authority granted to the Secretary of Finance by the National Internal Revenue Code for the efficient enforcement of the same Tax Code and its amendments. In Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal Revenue, the Court had ruled that this provision is “reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services.” Moreover, the Court held in Kepco Philippines Corporation v. Commissioner of Internal Revenue that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section 113 (B) (2) (c) of Republic Act No. 9337 actually confirmed the validity of the imprinting requirement on VAT invoices or official receipts – a case falling under the principle of legislative approval of administrative interpretation by reenactment. The Court has consistently held as fatal the failure to print the word “zero-rated” on the VAT invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A. 9337. Western Mindanao Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 181136, June 13, 2012.

Republic Act No. 6055; Presidential Decree No. 1096 (National Building Code of the Philippines); Republic Act No. 7160 (Local Government Code of 1991); exemption of non-stock non-profit foundations; building permit fee. Republic Act (R.A.) No. 6055 granted the following tax exemptions to educational institutions like petitioner which converted to non-stock, non-profit educational foundations: exemption from the payment of all taxes, import duties, assessments, and other charges imposed by the Government on all income derived from or property, real or personal, used exclusively for the educational activities of the Foundation. On the other hand, under the National Building Code, only public buildings and traditional indigenous family dwellings are exempted from the payment of building permit fees. Hence, not being expressly included in the enumeration of structures to which the building permit fees does not apply, petitioner’s claim for exemption rests solely on its interpretation of the term “other charges imposed by the National Government” in the tax exemption clause of R.A. No. 6055. A “charge” is broadly defined as the “price of, or rate for, something,” while the word “fee” pertains to a “charge fixed by law for services of public officers or for use of a privilege under control of government.” As used in the Local Government Code of 1991 (R.A. No. 7160), “charges” refers to pecuniary liability, as rents or fees against persons or property, while “fee” means a charge fixed by law or ordinance for the regulation or inspection of a business or activity. That “charges” in its ordinary meaning appears to be a general term which could cover a specific “fee” does not support petitioner’s position that building permit fees are among those “other charges” from which it was expressly exempted. Note that the “other charges” mentioned in R.A. No. 6055 is qualified by the words “imposed by the Government on all property used exclusively for the educational activities of the foundation.” Building permit fees are not impositions on property but on the activity subject of government regulation. While it may be argued that the fees relate to particular properties, i.e., buildings and structures, they are actually imposed on certain activities the owner may conduct either to build such structures or to repair, alter, renovate or demolish the same. Since building permit fees are regulatory impositions and not charges on property, they are not impositions from which the petitioner is exempt. Angeles University Foundation vs. City of Angeles, et al., G.R. No. 189999, June 27, 2012.

(Caren thanks Ma. Luisa D. Manalaysay for assisting in the preparation of this post.)