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Claims for taxes, whether assessed before or after On the contrary, under Section 87 of the NIRC, it is the
the death of the deceased, can be collected from the probate or settlement court which is bidden not to
heirs even after the distribution of the properties of
the decedent. They are exempted from the authorize the executor or judicial administrator of the
application of the statute of non-claims. The heirs decedent's estate to deliver any distributive share to any
shall be liable therefor, in proportion to their share in party interested in the estate, unless it is shown a
the inheritance. 13 Certification by the Commissioner of Internal Revenue
that the estate taxes have been paid. This provision
Thus, the Government has two ways of collecting disproves the petitioner's contention that it is the probate
the taxes in question. One, by going after all the
heirs and collecting from each one of them the
court which approves the assessment and collection of
amount of the tax proportionate to the inheritance the estate tax.
received. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code upon all If there is any issue as to the validity of the BIR's decision
property and rights to property belong to the to assess the estate taxes, this should have been
taxpayer for unpaid income tax, is by subjecting said
property of the estate which is in the hands of an pursued through the proper administrative and judicial
heir or transferee to the payment of the tax due the avenues provided for by law.
estate. (Commissioner of Internal Revenue vs.
Pineda, 21 SCRA 105, September 15, 1967.) Section 229 of the NIRC tells us how:
From the foregoing, it is discernible that the approval of Sec. 229. Protesting of assessment. � When the
the court, sitting in probate, or as a settlement tribunal Commissioner of Internal Revenue or his duly
over the deceased is not a mandatory requirement in the authorized representative finds that proper taxes
should be assessed, he shall first notify the taxpayer
collection of estate taxes. It cannot therefore be argued of his findings. Within a period to be prescribed by
that the Tax Bureau erred in proceeding with the levying implementing regulations, the taxpayer shall be
and sale of the properties allegedly owned by the late required to respond to said notice. If the taxpayer
President, on the ground that it was required to seek first fails to respond, the Commissioner shall issue an
the probate court's sanction. There is nothing in the Tax assessment based on his findings.
Code, and in the pertinent remedial laws that implies the
Such assessment may be protested administratively
necessity of the probate or estate settlement court's by filing a request for reconsideration or
reinvestigation in such form and manner as may be 318 and 324 of the old tax code (Republic Act 5203), the
prescribed by implementing regulations within (30) BIR's Notices of Levy on the Marcos properties, were
days from receipt of the assessment; otherwise, the
assessment shall become final and unappealable. issued beyond the allowed period, and are therefore null
and void:
If the protest is denied in whole or in part, the
individual, association or corporation adversely . . . the Notices of Levy on Real Property (Annexes
affected by the decision on the protest may appeal O to NN of Annex C of this Petition) in satisfaction of
to the Court of Tax Appeals within thirty (30) days said assessments were still issued by respondents
from receipt of said decision; otherwise, the decision well beyond the period mandated in Revenue
shall become final, executory and demandable. (As Memorandum Circular No. 38-68. These Notices of
inserted by P.D. 1773) Levy were issued only on 22 February 1993 and 20
May 1993 when at least seventeen (17) months had
already lapsed from the last service of tax
Apart from failing to file the required estate tax return assessment on 12 September 1991. As no notices of
within the time required for the filing of the same, distraint of personal property were first issued by
petitioner, and the other heirs never questioned the respondents, the latter should have complied with
assessments served upon them, allowing the same to Revenue Memorandum Circular No. 38-68 and
lapse into finality, and prompting the BIR to collect the issued these Notices of Levy not earlier than three
(3) months nor later than six (6) months from 12
said taxes by levying upon the properties left by September 1991. In accordance with the Circular,
President Marcos. respondents only had until 12 March 1992 (the last
day of the sixth month) within which to issue these
Petitioner submits, however, that "while the assessment Notices of Levy. The Notices of Levy, having been
of taxes may have been validly undertaken by the issued beyond the period allowed by law, are thus
void and of no effect. 15
Government, collection thereof may have been done in
violation of the law. Thus, the manner and method in
We hold otherwise. The Notices of Levy upon real
which the latter is enforced may be questioned
property were issued within the prescriptive period and in
separately, and irrespective of the finality of the former,
accordance with the provisions of the present Tax Code.
because the Government does not have the unbridled
The deficiency tax assessment, having already become
discretion to enforce collection without regard to the clear
final, executory, and demandable, the same can now be
provision of law." 14
collected through the summary remedy of distraint or levy
pursuant to Section 205 of the NIRC.
Petitioner specifically points out that applying
Memorandum Circular No. 38-68, implementing Sections
The applicable provision in regard to the prescriptive be collected by levy upon real property within three years
period for the assessment and collection of tax deficiency following the assessment of the tax. Since the estate tax
in this instance is Article 223 of the NIRC, which assessment had become final and unappealable by the
pertinently provides: petitioner's default as regards protesting the validity of
the said assessment, there is now no reason why the BIR
Sec. 223. Exceptions as to a period of limitation of cannot continue with the collection of the said tax. Any
assessment and collection of taxes. � (a) In the case objection against the assessment should have been
of a false or fraudulent return with intent to evade tax
or of a failure to file a return, the tax may be
pursued following the avenue paved in Section 229 of the
assessed, or a proceeding in court for the collection NIRC on protests on assessments of internal revenue
of such tax may be begun without assessment, at taxes.
any time within ten (10) years after the discovery of
the falsity, fraud, or omission: Provided, That, in a Petitioner further argues that "the numerous pending
fraud assessment which has become final and
executory, the fact of fraud shall be judicially taken
court cases questioning the late president's ownership or
cognizance of in the civil or criminal action for the interests in several properties (both real and personal)
collection thereof. make the total value of his estate, and the consequent
estate tax due, incapable of exact pecuniary
xxx xxx xxx determination at this time. Thus, respondents'
assessment of the estate tax and their issuance of the
(c) Any internal revenue tax which has been Notices of Levy and sale are premature and oppressive."
assessed within the period of limitation above
prescribed, may be collected by distraint or levy or
He points out the pendency of Sandiganbayan Civil Case
by a proceeding in court within three years following Nos. 0001-0034 and 0141, which were filed by the
the assessment of the tax. government to question the ownership and interests of
the late President in real and personal properties located
xxx xxx xxx within and outside the Philippines. Petitioner, however,
omits to allege whether the properties levied upon by the
The omission to file an estate tax return, and the BIR in the collection of estate taxes upon the decedent's
subsequent failure to contest or appeal the assessment estate were among those involved in the said cases
made by the BIR is fatal to the petitioner's cause, as pending in the Sandiganbayan. Indeed, the court is at a
under the above-cited provision, in case of failure to file a loss as to how these cases are relevant to the matter at
return, the tax may be assessed at any time within ten issue. The mere fact that the decedent has pending
years after the omission, and any tax so assessed may cases involving ill-gotten wealth does not affect the
enforcement of tax assessments over the properties petitioner has not pointed out one single provision in the
indubitably included in his estate. Memorandum of the Special Audit Team which gave rise
to the questioned assessment, which bears a trace of
Petitioner also expresses his reservation as to the falsity. Indeed, the petitioner's attack on the assessment
propriety of the BIR's total assessment of bears mainly on the alleged improbable and
P23,292,607,638.00, stating that this amount deviates unconscionable amount of the taxes charged. But mere
from the findings of the Department of Justice's Panel of rhetoric cannot supply the basis for the charge of
Prosecutors as per its resolution of 20 September 1991. impropriety of the assessments made.
Allegedly, this is clear evidence of the uncertainty on the
part of the Government as to the total value of the estate Moreover, these objections to the assessments should
of the late President. have been raised, considering the ample remedies
afforded the taxpayer by the Tax Code, with the Bureau
This is, to our mind, the petitioner's last ditch effort to of Internal Revenue and the Court of Tax Appeals, as
assail the assessment of estate tax which had already described earlier, and cannot be raised now via Petition
become final and unappealable. for Certiorari, under the pretext of grave abuse of
discretion. The course of action taken by the petitioner
It is not the Department of Justice which is the reflects his disregard or even repugnance of the
government agency tasked to determine the amount of established institutions for governance in the scheme of a
taxes due upon the subject estate, but the Bureau of well-ordered society. The subject tax assessments having
Internal Revenue, 16 whose determinations and become final, executory and enforceable, the same can
assessments are presumed correct and made in good no longer be contested by means of a disguised protest.
faith. 17 The taxpayer has the duty of proving otherwise. In In the main, Certiorari may not be used as a substitute for
the absence of proof of any irregularities in the a lost appeal or remedy. 19 This judicial policy becomes
performance of official duties, an assessment will not be more pronounced in view of the absence of sufficient
disturbed. Even an assessment based on estimates is attack against the actuations of government.
prima facie valid and lawful where it does not appear to
have been arrived at arbitrarily or capriciously. The On the matter of sufficiency of service of Notices of
burden of proof is upon the complaining party to show Assessment to the petitioner, we find the respondent
clearly that the assessment is erroneous. Failure to appellate court's pronouncements sound and resilient to
present proof of error in the assessment will justify the petitioner's attacks.
judicial affirmance of said assessment. 18 In this instance,
Anent grounds 3(b) and (B) � both alleging/claiming assessments, (upon which the Levy and sale of
lack of notice � We find, after considering the facts properties were based), nor appealed the same to
and circumstances, as well as evidences, that there the Court of Tax Appeals.
was sufficient, constructive and/or actual notice of
assessments, levy and sale, sent to herein petitioner There being sufficient service of Notices to herein
Ferdinand "Bongbong" Marcos as well as to his petitioner (and his mother) and it appearing that
mother Mrs. Imelda Marcos. petitioner continuously ignored said Notices despite
several opportunities given him to file a protest and
Even if we are to rule out the notices of assessments to thereafter appeal to the Court of Tax Appeals, �
personally given to the caretaker of Mrs. Marcos at the tax assessments subject of this case, upon
the latter's last known address, on August 26, 1991 which the levy and sale of properties were based,
and September 12, 1991, as well as the notices of could no longer be contested (directly or indirectly)
assessment personally given to the caretaker of via this instant petition for certiorari. 20
petitioner also at his last known address on
September 12, 1991 � the subsequent notices given Petitioner argues that all the questioned Notices of Levy,
thereafter could no longer be ignored as they were
sent at a time when petitioner was already here in
however, must be nullified for having been issued without
the Philippines, and at a place where said notices validly serving copies thereof to the petitioner. As a
would surely be called to petitioner's attention, and mandatory heir of the decedent, petitioner avers that he
received by responsible persons of sufficient age has an interest in the subject estate, and notices of levy
and discretion. upon its properties should have been served upon him.
Thus, on October 20, 1992, formal assessment
notices were served upon Mrs. Marcos c/o the
We do not agree. In the case of notices of levy issued to
petitioner, at his office, House of Representatives, satisfy the delinquent estate tax, the delinquent taxpayer
Batasan Pambansa, Q.C. (Annexes "A", "A-1", "A- is the Estate of the decedent, and not necessarily, and
2", "A-3"; pp. 207-210, Comment/Memorandum of exclusively, the petitioner as heir of the deceased. In the
OSG). Moreover, a notice to taxpayer dated October same vein, in the matter of income tax delinquency of the
8, 1992 inviting Mrs. Marcos to a conference relative
to her tax liabilities, was furnished the counsel of
late president and his spouse, petitioner is not the
Mrs. Marcos � Dean Antonio Coronel (Annex "B", p. taxpayer liable. Thus, it follows that service of notices of
211, ibid). Thereafter, copies of Notices were also levy in satisfaction of these tax delinquencies upon the
served upon Mrs. Imelda Marcos, the petitioner and petitioner is not required by law, as under Section 213 of
their counsel "De Borja, Medialdea, Ata, Bello, the NIRC, which pertinently states:
Guevarra and Serapio Law Office", on April 7, 1993
and June 10, 1993. Despite all of these Notices,
petitioner never lifted a finger to protest the xxx xxx xxx
. . . Levy shall be effected by writing upon said SO ORDERED.
certificate a description of the property upon which
levy is made. At the same time, written notice of the
levy shall be mailed to or served upon the Register
of Deeds of the province or city where the property is
located and upon the delinquent taxpayer, or if he be
absent from the Philippines, to his agent or the
manager of the business in respect to which the
liability arose, or if there be none, to the occupant of
the property in question.
3 [3]
CA Resolution; Rollo, pp. 21-24.
4 [4]
Rollo, pp. 51-64.
CA whereat its recourse was docketed as CA-G.R. SP GRANTED. The Decision of this Court, dated
May 30, 1996, affirming the Decision of the
No. 38413. Court of Tax Appeals x x x is SET ASIDE. The
[petitioner Commissioner of Internal Revenue]
is hereby ordered to issue [respondent] a TAX
At first, the CA, in a decision dated May 30, CREDIT in the amount of P131,741,034.22.
However, upon respondent’s motion for In its reversal action, the CA ruled that the tax
reconsideration, the CA, in the herein assailed basic credit in the total amount of P131,741,034.22 consists
Resolution dated May 10, 2000, reversed itself by of (1) P81,991,810.91, representing input VAT credits
setting aside its earlier decision of May 30, 1996 and attributable to direct export sales subject to 0% VAT,
ordering herein petitioner to issue in respondent’s and (2) P49,749,223.31, representing input VAT
favor a tax credit in the amount of P131,741,034.22, attributable to sales of gold to the CB which were
IN THE LIGHT OF ALL THE application of VAT Ruling No. 008-92 to the subject
FOREGOING, [respondent’s] Motion for gold sales of respondent because of the resulting
Reconsideration, x x x as supplemented, is
5 [5]
Penned by Associate Justice Pacita Canizares-Nye (ret.), prejudice to the latter despite the existence of
with former Associate Justice Pedro Ramirez (ret.) and former CA
Associate Justice Romeo J. Callejo, Jr., concurring; Rollo, pp. 86- alternative modes for the recovery of the input VAT.
94.
VAT Ruling No. 008-92 to respondent would not
This time, it was petitioner who moved for a prejudice the latter.
reconsideration but his motion was denied by the CA
in its subsequent Resolution of October 16, 2000. Initially, the Court, in its Resolution of January
6[6]
24, 2001, denied the Petition for lack of
Hence, petitioner’s present recourse assailing verification and certification against forum shopping.
only that portion of the CA Resolution of May 10, However, upon petitioner’s manifestation and motion
2000 allowing respondent the amount of for reconsideration, the Court reinstated the Petition in
P49,749,223.31 as tax credit corresponding to the its subsequent Resolution of March 5, 2001.7[7]
input VAT attributable to its sales of gold to the CB
The petition must have to fall.
for the period January 1, 1988 to July 31, 1989. It is
petitioner’s sole contention that the CA erred in
We start with the well-entrenched rule that
rejecting the retroactive application of VAT Ruling
rulings and circulars, rules and regulations,
No. 008-92, dated January 23, 1992, subjecting sales
promulgated by the Commissioner of Internal
of gold to the CB to 10% VAT to respondent’s sales of
Revenue, would have no retroactive application if to
gold during the period from January 1, 1988 to July
31, 1989. Petitioner posits that, contrary to the ruling
6 [6]
Rollo, pp. 95-96.
of the appellate court, the retroactive application of 7 [7]
Rollo, p. 173.
so apply them would be prejudicial to the taxpayers.8 gathered by the Bureau of Internal Revenue are
materially different from the facts on which the
[8]
ruling is based; or c) where the taxpayer acted in
bad faith.
14 [14]
CA Resolution, May 10, 2000; Rollo, p. 30.
(pursuant to the 1988 to 1990 BIR issuances), excise taxes, documentary stamp taxes, and
[respondent] could have claimed a cash refund output VAT.
or tax credit of the input VAT in the amount of
P49,749,223.31. If it had been allowed a cash 2.42.2 In terms of income tax, a tax
refund or tax credit, it could have used the full deduction is only an expense item in computing
amount thereof to pay its other tax obligations income tax liabilities (Sections 27 to 29, Tax
(or, in the case of a cash refund, to fund its Code) while a tax credit is a direct credit against
operations). With VAT Ruling No. 059-92, final income tax due (Section 106[b], Tax
[respondent] is precluded from claiming the Code). This is illustrated in the example below:
cash refund or tax credit and is limited to the so-
called remedy of deducting the input VAT from Assume that in 1988, respondent had a
gross income. But a cash refund or tax credit is gross income of P1,000,000,000 and deductible
not the same as a tax deduction. A tax expenses in general (such as salaries, utilities,
deduction has less benefits than a tax credit. transportation, fuel and costs of sale) of
Consider the following differences; P500,000,000. Assume also that [respondent]
had input VAT of P131,741,034.22, the amount
2.42.1 A tax credit may be used to pay being claimed in the instant case.
any national internal revenue tax liability. [Respondent’s] income tax liability, depending
Section 104(b) of the Tax Code states; on whether it utilized the input tax as tax credit
or tax deduction, would be as follows:
“(b) Excess output or input tax. – xxx
Any input tax attributable to xxx zero-rated a. Tax credit
sales by a VAT-registered person may at his
option be refunded or credited against other Gross Income (Section 28, Tax Code)
internal revenue taxes, subject to the
provisions of Section 106.” P1,000,000,000.00
Deductions (Section 29, Tax Code)
On the other hand, a tax deduction may (
be used only against gross income for purposes 500,000,000.00)
of income tax. A tax deduction is not allowed Taxable Income (Section 27, Tax Code)
against other internal revenue taxes such as
Tax rate (Section 24[a], Tax Code)
P 500,000.000.00 x 35%
Tax payable
Tax rate (Section 24[a], Tax Code) P 128,890,638.02
Here, when respondent sold gold to the CB, it attributable to such sales.
Ruling RMC No. 59-88 dated December 14, 1988, DENIED and the assailed CA Resolutions are
24 [6]
the determination of its VAT payment. Apparently, it
Transactions Subject to Zero Percent (%) Rate. – The following
services performed in the Philippines by VAT-registered persons shall be was only on April 14, 1998 that MPC paid Mitsubishi
subject to zero-percent rate: x x x (3) Services rendered to persons whose
exemption under special laws x x x effectively subjects the supply of such
services to zero percent (0%) rate.
the VAT component for the progress billings from
April 1993 to September 1996, and for which the National Internal Revenue Code (NIRC), MPC
Mitsubishi issued Official Receipt (OR) No. 0189 in went to the CTA via a petition for review, docketed as
the aggregate amount of PhP 135,993,570. CTA Case No. 6133.
On August 25, 1998, MPC, while awaiting Answering the petition, the BIR Commissioner,
approval of its application aforestated, filed its citing Kumagai-Gumi Co. Ltd. v. CIR,25[7] asserted
quarterly VAT return for the second quarter of 1998 that MPC’s claim for refund cannot be granted for this
where it reflected an input VAT of PhP main reason: MPC’s sale of electricity to NPC is not
148,003,047.62, which included PhP 135,993,570 zero-rated for its failure to secure an approved
supported by OR No. 0189. Pursuant to the procedure application for zero-rating.
prescribed in Revenue Regulations No. 7-95, MPC
filed on December 20, 1999 an administrative claim Before the CTA, among the issues stipulated by
for refund of unutilized input VAT in the amount of the parties for resolution were, in gist, the following:
PhP 148,003,047.62.
1. Whether or not [MPC] has unapplied
or unutilized creditable input VAT for the 2nd
quarter of 1998 attributable to zero-rated sales
Since the BIR Commissioner failed to act on its to NPC which are proper subject for refund
pursuant to relevant provisions of the NIRC;
claim for refund and obviously to forestall the running
of the two-year prescriptive period under Sec. 229 of 25[7]
CTA Case No. 4670, July 29, 1997.
2. Whether the creditable input VAT of
MPC for said period, if any, is substantiated by In view of all the foregoing, the instant
documents; and petition is PARTIALLY GRANTED.
Accordingly, respondent is hereby ORDERED
3. Whether the unutilized creditable to REFUND or in the alternative, ISSUE A TAX
input VAT for said quarter, if any, was applied CREDIT CERTIFICATE in favor of the
against any of the VAT output tax of MPC in the petitioner its unutilized input VAT payments
subsequent quarter. directly attributable to its effectively zero-rated
sales for the second quarter of 1998 in the
reduced amount of P10,766,939.48, computed
To provide support to the CTA in verifying and as follows:
analyzing documents and figures and entries Claimed Input VAT
P148,003,047.62
contained therein, the Sycip Gorres & Velayo (SGV),
Less: Disallowances
an independent auditing firm, was commissioned.
a.) As summarized by SGV & Co. in its initial
report (Exh. P)
The Ruling of the CTA I. Input Taxes on Purchases of Services:
1. Supported by documents
other than VAT Ors P
10,629.46
On the basis of its affirmative resolution of the 2. Supported by photocopied VAT OR
879.09
first issue, the CTA, by its Decision dated March 18, II. Input Taxes on Purchases of Goods:
1. Supported by documents other than
2003, granted MPC’s claim for input VAT refund or VAT invoices
165,795.70
credit, but only for the amount of PhP 10,766,939.48. 2. Supported by Invoices with TIN only
1,781.82
The fallo of the CTA’s decision reads: 3. Supported by photocopied VAT
invoices for refund or tax credit have not been amply
3,153.62
III. Input Taxes on Importation of Goods: substantiated by pertinent documents, such as but not
1. Supported by photocopied documents
[IEDs and/or Bureau of Customs limited to VAT ORs, invoices, and other supporting
(BOC) Ors]
716,250.00 documents. Wrote the CTA:
2. Supported by broker’s computations
91,601.00 990,090.69
We agree with the above SGV findings
b.) Input taxes without supporting documents as that out of the remaining taxes of
summarized in Annex A of SGV & Co.’s P136,246,017.45, the amount of P252,477.45
supplementary report (CTA records, page was not supported by any document and should
134) 252,447.45 therefore be outrightly disallowed.
c.) Claimed input taxes on purchases of services As to the claimed input tax of
from P135,993,570.00 (P136,246,017.45 less
Mitsubishi Corp. for being substantiated by P252,477.45 ) on purchases of services from
dubious OR 135,996,570.0026[8]
Mitsubishi Corporation, Japan, the same is
Refundable Input
found to be of doubtful veracity. While it is true
P10,766,939.48 that said amount is substantiated by a VAT
official receipt with Serial No. 0189 dated April
SO ORDERED.27[9] 14, 1998 x x x, it must be observed, however,
that said VAT allegedly paid pertains to the
services which were rendered for the period
Explaining the disallowance of over PhP 137 1993 to 1996. x x x
million claimed input VAT, the CTA stated that most The Ruling of the CA
of MPC’s purchases upon which it anchored its claims
26 [8]
Should be 135,993,570.00 as per this petition and CA decision.
27[9]
Supra note 2, at 62.
Aggrieved, MPC appealed the CTA’s Decision SO ORDERED.28[10]
In net effect, MPC did not, for the VATable The CA, citing Sec. 110(A)(1)(B) of the NIRC,
MPC-Mitsubishi 1993 to 1996 transactions adverted held that OR No. 0189 constituted sufficient proof of
to, immediately pay the corresponding input VAT. OR payment of creditable input VAT for the progress
No. 0189 issued on April 14, 1998 clearly reflects the billings from Mitsubishi for the period covering April
36 [18]
Rollo, p. 57.
37 [19] 38 [20]
Id. at 60. Id. at 57.
7, 1993 to September 6, 1996. Sec. 110(A)(1)(B) of input VAT, we agree with the CA’s above disposition.
the NIRC pertinently provides: As the Court distinctly notes, the law considers a
duly-executed VAT invoice or OR referred to in the
Section 110. Tax Credits. –
above provision as sufficient evidence to support a
A. Creditable Input Tax. –
claim for input tax credit. And any doubt as to what
(1) Any input tax evidenced by a VAT invoice OR No. 0189 was for or tended to prove should
or official receipt issued in accordance with
Section 113 hereof on the following transactions reasonably be put to rest by the SGV report on which
shall be creditable against the output tax:
the CTA notably placed much reliance. The SGV
(a) Purchase or importation of goods:
report stated that “[OR] No. 0189 dated April 14,
xxxx 1998 is for the payment of the VAT on the progress
(b) Purchase of services on which a value- billings” from Mitsubishi Japan “for the period April
added tax has been actually paid.
(Emphasis ours.) 7, 1993 to September 6, 1996 for the E & M
Equipment Erection Portion of the Company’s
Without necessarily saying that the BIR is contract with Mitsubishi Corporation (Japan).”39[21]
xxxx
Notably, the above provisions also set a two-
Sec. 229. Recovery of Tax Erroneously
or Illegally Collected.— No suit or proceeding year prescriptive period, reckoned from date of
shall be maintained in any court for the recovery payment of the tax or penalty, for the filing of a claim
of any national internal revenue tax hereafter
alleged to have been erroneously or illegally of refund or tax credit. Notably too, both provisions
assessed or collected, or of any penalty claimed
to have been collected without authority, of any apply only to instances of erroneous payment or
sum alleged to have been excessively or in any
manner wrongfully collected without authority, illegal collection of internal revenue taxes.
or of any sum alleged to have been excessively
or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed MPC’s creditable input VAT not erroneously paid
with the Commissioner; but such suit or
proceeding may be maintained, whether or not
such tax, penalty, or sum has been paid under
protest or duress.
For perspective, under Sec. 105 of the NIRC, or imposed on each sale, barter, exchange or
lease of goods or properties or on each rendition
creditable input VAT is an indirect tax which can be of services in the course of trade or business as
they pass along the production and distribution
shifted or passed on to the buyer, transferee, or lessee chain, the tax being limited only to the value
of the goods, properties, or services of the taxpayer. added to such goods, properties or services by
the seller, transferor or lessor. It is an indirect
The fact that the subsequent sale or transaction tax that may be shifted or passed on to the
buyer, transferee or lessee of the goods,
involves a wholly-tax exempt client, resulting in a properties or services. As such, it should be
understood not in the context of the person or
zero-rated or effectively zero-rated transaction, does entity that is primarily, directly and legally
not, standing alone, deprive the taxpayer of its right to liable for its payment, but in terms of its nature
as a tax on consumption. In either case, though,
a refund for any unutilized creditable input VAT, albeit the same conclusion is arrived at.
the erroneous, illegal, or wrongful payment angle does The law that originally imposed the VAT
in the country, as well as the subsequent
not enter the equation. amendments of that law, has been drawn from
In Commissioner of Internal Revenue v. the tax credit method. Such method adopted the
mechanics and self-enforcement features of the
Seagate Technology (Philippines), the Court explained VAT as first implemented and practiced in
Europe x x x. Under the present method that
the nature of the VAT and the entitlement to tax refund relies on invoices, an entity can credit against or
subtract from the VAT charged on its sales or
or credit of a zero-rated taxpayer: outputs the VAT paid on its purchases, inputs
and imports.
Viewed broadly, the VAT is a uniform
tax x x x levied on every importation of goods, If at the end of a taxable quarter the
whether or not in the course of trade or business, output taxes charged by a seller are equal to the
input taxes passed on by the suppliers, no
payment is required. It is when the output taxes prescriptive period reckoned from the close of the
exceed the input taxes that the excess has to be
paid. If, however, the input taxes exceed the taxable quarter when the relevant sales or transactions
output taxes, the excess shall be carried over to
the succeeding quarter or quarters. Should the were made pertaining to the creditable input VAT,
input taxes result from zero-rated or effectively applies to the instant case, and not to the other actions
zero-rated transactions or from the acquisition
of capital goods, any excess over the output which refer to erroneous payment of taxes.
taxes shall instead be refunded to the taxpayer
or credited against other internal revenue taxes. As a final consideration, the Court wishes to
xxxx remind the BIR and other tax agencies of their duty to
treat claims for refunds and tax credits with proper
Zero-rated transactions generally refer
to the export sale of goods and supply of attention and urgency. Had RDO No. 60 and, later, the
services. The tax rate is set at zero. When
applied to the tax base, such rate obviously BIR proper acted, instead of sitting, on MPC’s
results in no tax chargeable against the
purchaser. The seller of such transactions underlying application for effective zero rating, the
charges no output tax, but can claim a refund matter of addressing MPC’s right, or lack of it, to tax
of or a tax credit certificate for the VAT
previously charged by suppliers.41[23] credit or refund could have plausibly been addressed
(Emphasis added.)
at their level and perchance freed the taxpayer and the
Considering the foregoing discussion, it is clear government from the rigors of a tedious litigation.
that Sec. 112(A) of the NIRC, providing a two-year
The all too familiar complaint is that the
41[23]
G.R. No. 153866, February 11, 2005, 451 SCRA 132, 141-
143.
government acts with dispatch when it comes to tax
collection, but pays little, if any, attention to tax payments directly attributable to its effectively zero-
claims for refund or exemption. It is high time our tax rated sales for the second quarter in the total amount
collectors prove the cynics wrong. of PhP 10,766,939.48.
Carpio Morales,
COMMISSIONER OF
and
G.R. No. 152609
INTERNAL REVENUE,
Garcia, JJ
Petitioner,
Present:
AMERICAN EXPRESS
INTERNATIONAL, INC.
Pang
Promulgated:
aniba
(PHILIPPINE
n, J.,
BRANCH),
Respondent.
Chairman,
June 29, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Sandoval-
-- -- -- -- -- -- -- -- -- -- -- -- -- x
Gutierrez,
is performed in the Philippines; (2)
DECISION
the service falls under any of the
A
s a general rule, the value-
paid for in acceptable foreign
added tax (VAT) system uses
currency that is accounted for in
the destination principle.
accordance with the regulations of
However, our VAT law itself provides
the Bangko Sentral ng Pilipinas.
for a clear exception, under which
Since respondent’s services meet
the supply of service shall be zero-
these requirements, they are zero-
rated when the following
rated. Petitioner’s Revenue
requirements are met: (1) the service
Regulations that alter or revoke the
above requirements are ultra vires
“WHEREFORE, premises
considered, the petition is hereby
and invalid. DISMISSED for lack of merit. The
assailed decision of the Court of Tax
Appeals (CTA) is AFFIRMED in toto.”[3]
The Case
disposed as follows:
The Facts service establishments in the
Philippines.
Pilipinas.
granting that it is valid, the ruling Petitioner raises this sole issue
foreign currency and accounted for conformity with BSP rules and
Ruling No. 080-89 that the income another.”[14] For facilitating in the
rating. Pursuant to the Tax Code, a credit card company extends credit
therefore, be levied upon the supply for the purchase of goods and
establishments, to be reimbursed by
or other credit device existing for the is, therefore, given “the power to
exists between the issuer and the extend credit sales through the use
holder of the credit card enables the of the credit card facilities of a non-
bank credit card company to avoid
not deposit in their bank accounts does not redeem the drafts at full
the credit card drafts[23] that arise price. The agreement between them
from the credit sales. Instead, they usually provides for discounts to be
merely record their receivables from taken by the company upon its
periodically send the drafts end of each month, it then bills its
The credit card company, in fail to pay the amounts owed, the
credit[26]
process described above primarily The parent company -- to
consists of gathering the bills and which the ROCs and respondent
credit card drafts of different service belong -- takes charge not only of
Servicing the bill is not the same as billing the credit card holders for
billing. For the former type of their respective drafts that it has
when the branches and home office allows goods and services to be sold
may choose not to make any sale abroad, and that the parent
control center, where most or all of these drafts and billings of credit
registered person[40] that gets paid in indirect tax[44] on services,[45] its main
the Tax Code, other special laws, or a foreign company that is a clearly
with its Hong Kong-based client meet over a sustained period of time; on a
that is accounted for in conformity of the tax.[51] Goods and services are
outcome of such service. While the not imply that the service be done
clients -- the ROCs outside the thing in a way that thereby exhausts
past or future liability x x x.” [54] The specific place when their destination
upon its sending to its foreign client course”[55] when determining the
the drafts and bills it has gathered service “location or position x x x for
in the Philippines, are therefore also existence, yet takes place upon
provides for an exception to the the service fall under any of the
zero percent VAT rate for services Tax Code; and, third, it be paid in
“processing, manufacturing or
Again, contrary to petitioner’s for persons doing business outside
goods exported.[58] The law neither regulations of the BSP, are zero-
goods. It simply states that the the product that arises from the
persons in the Philippines -- services that creates the income must not be
determining the tax situs of a zero- much less is the place where the
rated service. Under this criterion, output of the service will be further
limits the services that may be sold specie” does not apply to Section
service that fall under the term “sale provision contains an enumeration of
and are patently not of the same Nothing sets them apart from other
kind.[72] Project studies involve and similar general services that may
application if the revocation x x x will Section 246[87] of the Tax Code apply.
BIR commissioner may render a in the halls of the Senate also reveal
102(b) of the Tax Code, the principle have reenacted the law with full
upon it by a ruling of the government rated, the Court upholds the former’s
some extent confirmatory that the and CA. This Court respects the
cases and has necessarily developed withheld is not deducted from the tax
freed from the VAT, because the hereby DENIED, and the assailed
ARTEMIO V. ATTESTATION
PANGANIBA
N
Associate I attest that the conclusions in
Justice
Chairman, the above Decision had been reached
Third Division
in consultation before the case was