March 2013 Philippine Supreme Court Decisions on Tax Law

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

National Internal Revenue Code; value added tax; prescriptive period for filing a tax refund or credit of input value-added tax. The rules on the determination of the prescriptive period for filing a tax refund or credit of unutilized input value-added tax (VAT), as provided in Section 112 of the 1997 Tax Code, are as follows:

(1) An administrative claim must be filed with the Commissioner of Internal Revenue (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 to be denied by inaction.

(3) A judicial claim must be filed with the Court of Tax Appeals (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 Bureau of Internal Revenue Ruling No. DA-489-03, which 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,” from the time of its issuance on 10 December 2003 up to its reversal by the Court in CIR vs. Aichi Forging Company of Asia on 6 October 2010, as an exception to the mandatory and jurisdictional 120+30 day periods. Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue/Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue. G.R. No. 193301 & G.R. No. 194637. March 11, 2013.

National Internal Revenue Code; value-added tax; isolated transactions. Taxpayer’s sale of the Nissan Patrol is said to be an isolated transaction. However, it does not follow that an isolated transaction cannot be an incidental transaction for purposes of value-added tax (VAT) liability. Section 105 of the National Internal Revenue Code of 1997 would show that a transaction “in the course of trade or business” includes “transactions incidental thereto.” Taxpayer’s business is to convert the steam supplied to it by PNOC-EDC into electricity and to deliver the electricity to National Power Corporation. In the course of its business, taxpayer bought and eventually sold a Nissan Patrol. Prior to the sale, the Nissan Patrol was part of taxpayer’s property, plant, and equipment. Therefore, the sale of the Nissan Patrol is an incidental transaction made in the course of taxpayer’s business which should be liable for VAT. Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue/Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue. G.R. No. 193301 & G.R. No. 194637. March 11, 2013.

National Internal Revenue Code; value-added tax; period to appeal decision or inaction of the Commissioner of Internal Revenue in claims for tax refund or credit of input value-added tax. The taxpayer may appeal the denial or the inaction of the Commissioner of Internal Revenue (CIR) only within thirty (30) days from receipt of the decision denying the claim or the expiration of the 120-day period given to the CIR to decide the claim. Because the law is categorical in its language, there is no need for further interpretation by the courts and non-compliance with the provision cannot be justified. Nippon Express (Philippines) Corporation vs. Commissioner of Internal Revenue. G.R. No. 196907. March 13, 2013

National Internal Revenue Code; value-added tax; period to appeal decision or inaction of the Commissioner of Internal Revenue in claims for tax refund or credit of input value-added tax; exception. Judicial claims for tax refund or credit filed from January 1, 1998 until the present should strictly adhere to the 120+ 30-day period referred to in Section 112 of the National Internal Revenue Code of 1997 (NIRC). The 120-day period is given by law to the Commissioner of Internal Revenue (CIR) to grant or deny application for tax refund or credit. The 30-day period refers to the period within which the taxpayer may appeal the denial or the inaction of the CIR. The only exception to the 120+ 30-day period is the period from December 10, 2003 — when Bureau of Internal Revenue Ruling No. DA-489-03, which expressly stated that the taxpayer need not wait for the lapse of the 120-day period before seeking judicial relief, was issued — until its reversal on October 6, 2010. Nippon Express (Philippines) Corporation vs.Commissioner of Internal Revenue. G.R. No. 196907. March 13, 2013.

(Caren thanks Grace Ann C. Lazaro for assisting in the preparation of this post.)

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