August 2012 Philippine Supreme Court Decision on Tax Law

National Internal Revenue Code; Value Added Tax; claim for credit or refund of input value-added tax; printing of “zero-rated.”. Section 244 of the National Internal Revenue Code (NIRC) explicitly grants the Secretary of Finance the authority to promulgate the necessary rules and regulations for the effective enforcement of the provisions of the tax code. Consequently, the following invoicing requirements enumerated in Section 4.108-1 of the Revenue Regulations (RR) 7-95 must be observed by all VAT-registered taxpayers: (1) the name, TIN and address of seller; (2) date of transaction; (3) quantity, unit cost and description of merchandise or nature of service; (4) the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client; (5) the word “zero-rated imprinted on the invoice covering zero-rated sales; and the invoice value or consideration. The need for taxpayers to indicate in their invoices and receipts the fact that they are zero-rated or that its transactions are zero-rated became more apparent upon the integration of the abovementioned provisions of RR No. 7-95 in Section 113 of the NIRC enumerating the invoicing requirements of VAT-registered persons when the NIRC was amended by Republic Act No. 9337. The Court has consistently ruled that the absence of the word “zero-rated” on the invoices and receipts of a taxpayer will result in the denial of the claim for tax refund. Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 168856, August 29, 2012.

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