Beruflich Dokumente
Kultur Dokumente
SEAGATE TECHNOLOGY
Facts:
ISSUE: W/N Segeate is entitled to the refund or issuance of Tax Credit Certificate
YES
RATIO:
Seagate is a PEZA registered enterprise
If at the end of a taxable quarter the 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 exceed the input taxes tha the excess has to be
paid. If, however, the input taxes exceed the output taxes, the excess shall
be carried over to the succeeding quarter or quarters. Should the input taxes
result from zero rated or effectively zero rated transactions or from the
acquisition of capital goods, any excess over the output taxes shall instead
be refunded to the taxpayer or credited against other internal revenue taxes
Although both are taxable and similar in effect, zero rated transactions
differ from effectively zero rated transactions as to their source
Zero rated transactions generally refer to the export sale of goods and
supply of services. The tax rate is set at zero. When applied to the tax base,
such rate obviously results in no tax chargeable against the purchaser. The
seller of such transactions charges no output tax, but can claim a refund of
or a tax credit certificate for the VAT previously charged by suppliers.
Effectively zero rated transactions, however, refer to the sale of goods or
supply of services to persons or entities whose exemption under special
laws or international agreements to which the Philippines is a signatory
effectively subjects such transaction to a zero rate. Again, as applied to the
tax base, such rate does not yield any tax chargeable against the purchaser.
The seller who chares zero output tax on such transactions can also claim a
refund of or a tax credit certificate fir the VAT previously charged by
suppliers.
In terms of the VAT computation, zer rating and exemption are the same,
but the extend of relief that results from either one of them is not
Applying the destination principle to the exportation of goods, automatic
zero rating is primarily intended to be enjoys by the seller who is directly
and legally liable for the VAT, making such seller internationally
competitive by allowing the refund or credit of input taxes that are
attributable to export sales. Effective zero rating on the contrary is intended
to benefit the purchaser who not being directly and legally liable for the
payment of the VAT, will ultimately bear the burden of the tax shifted by the
suppliers.
In both instances of zero rating, there is a TOTAL relief for the purchaser
from the burden of the tax. But in an exemption there is only partial relief
because the purchaser is not allowed any tax refund of or credit for input
taxes paid.
the object of exemption from the VAT may either be the transaction itself or
any of the parties to the transaction
An exempt transaction on the one hand., involved goods or services which,
by their nature are specifically listed in and expressly exempted from the
VAT under the Tax Code, without regard to the tax status VAT exempt or
not of the party to the transaction. Such transaction is not subject to the
VAT, but the seller is not allowed any tax refund of or credit for any input
taxes paid.
An exempt party, on the other hand is a person or entity granted VAT
exemption under the TAX Code, a special law or an international agreement
to which the Philippines is a signatory, and by virtue of which, its taxable
transactions become exempt from the VAT. Such party is also not subject to
the VAT but may be allowed a tax refund of or credit for input taxes paid,
depending on its registration as a VAT r non-VAT taxpayer.
Special laws may certainly exempt transactions from the VAT. However, the
Tax Code provides that those falling under PD 66 are not. PD 66 is the
precursor of RA 7916 the special law under which Seagate was registered.
The purchase transactions it entered into are therefore not VAT exempt.
These are subject to the Vat. Seagate is required to register.
Its sales transactions however will either be zero rated or taxed at the
standard rate of 10 percent. Depending again on the application of the
destination principle
If Seagate enters into such sales transactions with a purchaser --- usually in
a foreign country for use or consumption outside the Philippines, these
shall be subject to a 0 percent. If entered into which a purchase for use or
consumption in the Philippine, then these shall be subject to 10 percent,
unless the purchaser is exempt from the indirect burden of the VAT, in
which case it shall also be zero rated.
Since the purchases of Seagate are not exempt from the VAT, the rate to be
applied is zero. Its exemption under both PD 66 and RA 7916 effectively
subjects such transactions to a zero rate because the ecozone within which it
is registered is managed and operated by the PEZA as a separate customs
territory. This means that such zone has created the legal fiction of a foreign
territory. Under the cross border principle of the VAT system being enforced
by the BIR, no VAT shall be imposed to form part of the cost of goods
destined for consumption outside of the territorial border of the taxing
authority. If exports of goods and services from the Philippines to a foreign
country are free of the VAT, then the same rule holds for such exports from
the national territory except specifically declared areas --- to an ecozone.
Sales made by a VAT registered person in the customs territory to a PEZA
registered entity are considered exports to a foreign country, conversely,
sales by a PEZA registered entity to a VAT registered person in the customs
territory are deemed imports from a foreign country. This legal fiction is
necessary to give meaningful effect to the policies of the special law
creating the zone. If Seagate is located in an export processing zone within
that ecozone, sales to the export processing zone , even without being
actually exported, shall in fact be viewed as constructively exported under
EO 226. Considered as export sales, such purchase transactions by Seagate
would indeed be subject to a zero rate
The Exemptions Broad and Express
Applying the special laws we have earlier discussed, Seagate as an entity is
exempt from internal revenue laws and regulations.
This exemption covers both direct and indirect taxes, stemming from the
very nature of the VAT as a tax on consumption, for which the direct
liability is imposed on one person but the indirectly made to bear, as added
cost to such sales, the equivalent VAT n its purchases.
First, RA 7916 states that no taxes, local, and national, shall be imposed on
the business establishments operating within the ecozone Since this law
does not exclude the VAT from the prohibition, it is deemed included
Second, when RA 8748 was enacted to amend RA 7916, the same
prohibition applied, except for real property taxes that presently are
imposed on land owned by developers
Third, foreign and domestic merchandise, raw materials, equipment and the
like shall not be subject to internal revenue laws and regulations under
PD 66 the original charter provisions on the latter law modify such
exemption
Fourth, even the rules implementing the PEZA law clearly reiterate that
merchandise except those prohibited by law shall not be subject to
internal revenue laws and regulations if brought to the ecozones restricted
area for manufacturing by registered export enterprises of which Seagate is
one. These rules also apply to all enterprises registered with the PEZA prior
to the effectivity of such ruled
Tax Refund as Tax Exemption
To be sure, statutes that grant tax exemptions are construed strictissimi juris
against the taxpayer and liberally in favor of the taxing authority
Tax refunds are in the nature of such exemptions. Accordingly, the
claimants of those refunds bear the burden of proving the factual basis of
them claims and of showing by words to plain to be mistaken, that the
legislature intended to exempt them. In the present case, all the cited legal
provisions with respect to the grant of the tax exemptions are too vivid to
pass unnoticed.
Seagate which as an entity is exempt, is different from its transactions
which are not exempt. The end result, however, is that it is not subject to the
VAT. The non taxability of transactions that are otherwise taxable is merely
a necessary incident to the tax exemption conferred by law upon it as an
entity, not upon the transactions themselves. Nonetheless, its exemption as
an entity and the non exemption of its transactions lead to the same result.
VAT registration, not application for effective zone rating indispensable to Vat refund
It filed with BIR a letter-request for the refund of its 1997 excess input taxes,
citing as basis Section 110B of the 1997 Tax Code, which held that xxx Any
input tax attributable to the purchase of capital goods or to zero-rated sales
by a VAT-registered person may at his option be refunded or credited against
other internal revenue taxes, subject to the provisions of Section 112.
In addition, respondent relied on VAT Ruling No. 080-89, which read, In
Reply, please be informed that, as a VAT registered entity whose service is
paid for in acceptable foreign currency which is remitted inwardly to the
Philippine and accounted for in accordance with the rules and regulations of
the Central Bank of the Philippines, your service income is automatically zero
rated xxx
Petitioner claimed, among others, that the claim for refund should be
construed strictly against the claimant as they partake of the nature of tax
exemption.
CTA rendered a decision in favor of respondent, holding that its services are
subject to zero-rate. CA affirmed this decision and further held that
respondents services were services other than the processing,
manufacturing or repackaging of goods for persons doing business outside
the Philippines and paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of BSP.
Issue:
W/N AMEX Phils is entitled to refund
Held:
Yes. Section 102 of the Tax Code provides for the VAT on sale of services and
use or lease of properties. Section 102B particularly provides for the services
or transactions subject to 0% rate:
(1) Processing, manufacturing or repacking goods for other persons doing
business outside the Philippines which goods are subsequently exported,
where the services are paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the BSP;
(2) Services other than those mentioned in the preceding subparagraph, e.g.
for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP
Facts:
Mirant Pagbilao Corporation ( hereinafter MPC ) is a domestic firm
engaged in the generation of power which it sells to the National Power
Corporation ( hereinafter NPC ). For the construction of the electrical and
mechanical equipment portion of its Pagbilao, Quezon Plant, which appears
to have been undertaken from 1993 to 1996, MPC secured the services of
Mitsubishi Corporation ( hereinafter Mitsubishi ) of Japan. It was only on
April 14, 1998 that MPC paid Mitsubishi the VAT component for the progress
billings from April 1993 to September 1996, and for which Mitsubishi issued
Official Receipt No. 0189 ( hereinafter Official Receipt ). In accordance with
a VAT Ruling No. 052-99 issued on May 13, 1999, the supply of electricity by
MPC to the NPC, shall be subject to zero percent VAT.
MPC filed on December 20, 1999 an administrative claim for refund of
unutilized input VAT. It is the allegation of MPC that since its sales to NPC is
subject to zero percent VAT, then the input VAT must be refunded.
principle; that is 0% VAT rate for services that are performed in the
Philippines, paid for in acceptable foreign currency and accounted for in
accordance with the R&R of BSP. The respondent meets the following
requirements for exemption, and thus should be zero-rated:
Issues:
1. Whether or not the 1998 Official Receipt can evidence payment of input
VAT corresponding to a 1993 to 1996 transaction?
2. Whether or not the claim for VAT refund of MPC was filed within the
reglementary period?
Ruling:
1. The Supreme Court ruled that the Official Receipt constituted sufficient
proof of payment of creditable input VAT for the progress billings from
Mitsubishi for the period covering April 7, 1993 to September 6, 1996. As the
Court distinctly notes, the law considers a duly- vexecuted VAT invoice or
Official Receipt as sufficient evidence to support a claim for input tax credit.
2. The claim for refund or tax credit for the creditable input VAT payment
made by MPC embodied in the Official Receipt was filed beyond the period
provided by law for such claim.
The unutilized input VAT payments not otherwise used for any internal
revenue tax due the taxpayer must be claimed within two years reckoned
from the close of the taxable quarter when the relevant sales were made
pertaining to the input VAT regardless of whether said tax was paid or not.
Given that the last creditable input VAT due for the period covering the
progress billing of September 6, 1996 is the third quarter of 1996 ending on
September 30, 1996, any claim for unutilized creditable input VAT refund or
tax credit for said quarter prescribed two years after September 30, 1996 or,
to be precise, on September 30, 1998. Consequently, MPCs claim for refund
or tax credit filed on December 10, 1999 had already prescribed.
Atlas Consolidated vs. CIR
ATLAS
CONSOLIDATED
MINING
DEVT
524
SCRA
73,
GR Nos. 141104 & 148763, June 8, 2007
CORP
vs.
CIR
103
"The taxpayer must justify his claim for tax exemption or refund by
the clearest grant of organic or statute law and should not be
permitted to stand on vague implications."
"Export processing zones (EPZA) are effectively considered as
foreign territory for tax purposes."
FACTS:
CTA set aside petitioners revenue commissioners assessment of 1.1 M as
the 25% surtax on private respondents unreasonable accumulation of
ISSUES:
1. Whether or not private respondent is a holding company and/or investment
company?
2. Whether or not Antonio accumulated surplus for years 75-78
3. Whether or not Tuason Inc. is liable for the 25% surtax on undue
accumulation of surplus for 75-78
surplus profits. Antonio claims that he spent the money to build an apartment
in urdaneta but theres a large discrepancy bet. The market value and the
surplus.
(a) Imposition of tax. If any corporation, except banks, insurance
income and not the consequences of the accumulation. Thus, if the failure to
formed or availed of for the purpose of preventing the imposition of the tax
pay dividends were for the purpose of using the undistributed earnings &
profits for the reasonable needs of the business, that purpose would not fall
another corporation, through the medium of permitting its gains and profits to
Cynamid vs CA
I n order to determine whether profits are accumulated for the reasonable
needs of the business to avoid the surtax upon the shareholders, it must be
(b) Prima facie evidence. The fact that any corporation is a mere holding
company shall be prima facie evidence of a purpose to avoid the tax upon its
shareholders or members. Similar presumption will lie in the case of an
shown that the controlling intention of the taxpayer is manifested at the time
of the accumulation, not intentions subsequently, which are mere
afterthoughts.
investment company where at any time during the taxable year more than
fifty per centum in value of its outstanding stock is owned, directly or
indirectly, by one person.
Facts:
Petitioner is a corporation organized under Philippine laws and is a wholly
owned subsidiary of American Cyanamid Co. based in Maine, USA. It is
In this case, Tuason Inc, a mere holding company for the corporation did
not involve itself in the development of subdivisions but merely subdivided its
own lots and sold them for bigger profits. It derived its income mostly from
CIR assessed on petitioner a deficiency income tax of P119,817) for the year
1981. Cyanamid protested the assessments particularly the 25% surtax for
undue accumulation of earnings. It claimed that said profits were retained to
Tuason Inc is also owned by Antonio himself. While these profits were
actually made, the commissioner points out that the corp. did not use up its
business needs of the company. The CIR refused to allow the cancellation of
the assessments, petitioner appealed to the CTA. It claimed that there was
needs of the business to mean the immediate needs of the business, and it
not legal basis for the assessment because 1) it accumulated its earnings
is held that if the corporation did not prove an immediate need for the
accumulation of earnings and profits such was not for reasonable needs of
the business and the penalty tax would apply. (Law of Federal Income
listed and traded in the NY Stock Exchange. The CTA denied the petition
nature of the business, its credit policies, the amount of inventories, the rate
stating that the law permits corporations to set aside a portion of its retained
earnings for specified purposes under Sec. 43 of the Corporation Code but
availability of credit and other similar factors. The Tax Court opted to
that petitioners purpose did not fall within such purposes. It found that there
determine the working capital sufficiency by using the ration between the
was no need to set aside such retained earnings as working capital as it had
the assessment is correct. With the petitioners failure to prove the CIR
accumulated earnings tax are found under Sec. 25 of the NIRC, and that the
petitioner is not among those exempted. The CA affirmed the CTAs decision.
Held:
In order to determine whether profits are accumulated for the reasonable
needs of the business to avoid the surtax upon the shareholders, it must be
shown that the controlling intention of the taxpayer is manifested at the time
of the accumulation, not intentions subsequently, which are mere
afterthoughts. The accumulated profits must be used within reasonable time
after the close of the taxable year. In the instant case, petitioner did not
establish by clear and convincing evidence that such accumulated was for
The pool then submitted an income tax return. BIR then assessed
(assessment was made beyond the allowable period of assessment) a
deficiency corporate income tax. This assessment was protested by
petitioners through SGV contending that they are not an unregistered
partnership, that they have tax exemption and that there is double
taxation, and that the assessment made was beyond the period allowed
by law. BIR denied the protest. The case was then elevated to the CA
which ruled that the pool was a partnership taxable as a corporation
and that the collection of the premiums from Munich form part of their
income and thus considered as taxable income.
To determine the reasonable needs of the business, the United States Courts
have invented the Immediacy Test which construed the words reasonable
revenue commissioner assessed the pool for corporate taxes on the basis
of the information return it had submitted for the year ending 1975, a
taxable year when said treaty was not yet in effect. 54 Although petitioners
omitted in their pleadings the date of effectivity of the treaty, the Court
takes judicial notice that it took effect only later, on December 14, 1984.
SEE RULES ON EVIDENCE.
Held:
1.
2.
Finally, the petitioners' claim that Munich is tax-exempt based on the RPWest German Tax Treaty is likewise unpersuasive, because the internal
NO. The CA and the CTA categorically found that the prescriptive period
was tolled under then Section 333 of the NIRC, because "the taxpayer
cannot be located at the address given in the information return filed and
for which reason there was delay in sending the assessment. Indeed,
whether the government's right to collect and assess the tax has
prescribed involves facts which have been ruled upon by the lower courts.
It is axiomatic that in the absence of a clear showing of palpable error or
grave abuse of discretion, as in this case, this Court must not overturn the
factual findings of the CA and the CTA.
FACTS:
The Company, a domestic corporation engaged in mining, had filed its income tax
returns for 1951, 1952, 1953 and 1956. In 1957 BIR investigated the income tax
returns filed by the Company because on August 10, 1954, its auditor, Felipe Ollada
claimed the refund of the sum of P107,472.00 representing alleged overpayments of
income taxes for the year 1951. After the investigation the examiners reported that:
1.
2.
In view of said reports the CIR sent the Company a letter of demand requiring it to
pay certain deficiency income taxes for the years 1951 to 1954, inclusive, and for the
year 1956. Deficiency income tax assessment notices for said years were also sent to
the Company. The Company requested a reconsideration of the assessment, but the
Commissioner refused to reconsider, hence the Company appealed to the Court of
Tax Appeals. The assessments for 1951 to 1954 were contested in CTA Case No.
565, while that for 1956 was contested in CTA Case No. 578. Upon agreement of the
parties the two cases were heard and decided jointly.On May 6, 1961 the Tax Court
rendered judgment ordering the Company to pay the amounts of P107,846.56,
P134,033.01 and P71,392.82 as deficiency income taxes for the years 1953, 1954
and 1956, respectively. The Tax Court nullified the assessments for the years 1951
and 1952 on the ground that they were issued beyond the five-year period prescribed
by Section 331 of the National Internal Revenue Code.
However, on August 7, 1961, upon motion of the Company, the Tax Court
reconsidered its decision and further reduced the deficiency income tax liabilities of
the Company to P79,812.93, P51,528.24 and P71,382.82 for the years 1953, 1954
and 1956, respectively. In this amended decision the Tax Court subscribed to the
theory of the Company that Benguet Consolidated Mining Company, hereafter
referred to as Benguet, had no right to share in "Accounts Receivable," hence onehalf thereof may not be accrued as an expense of the Company for a given year.
Both the Company and the Commissioner appealed to this Court.
ISSUE:
1. WON not the accounting system used by the Company
justifies such a treatment of this item; and if not, whether
said method used by the Company, and characterized by
the Commissioner as a "hybrid method," may be allowed
under the aforequoted provisions of our tax code? NO.
Company uses an accrual method not hybrid method.
product thereof which has been mined and sold during the year for which
the return is made [Sec. 30(g) (1) (B)].
While taxable income is based on the method of accounting used by the
taxpayer, it will almost always differ from accounting income. This is so
because of a fundamental difference in the ends the two concepts serve.
Accounting attempts to match cost against revenue. Tax law is aimed at
collecting revenue. It is quick to treat an item as income, slow to recognize
deductions or losses. Thus, the tax law will not recognize deductions for
contingent future losses except in very limited situations. Good accounting,
on the other hand, requires their recognition. Once this fundamental
difference in approach is accepted, income tax accounting methods can be
understood more easily.
15% profit remittance tax imposed by Section 24 (b) (2) of the Tax
Code.
Petitioner claimed for the refund or issuance of a tax credit of
P229,424.40 "representing profit tax remittance erroneously paid on
the dividends remitted by AG&P. This was however denied stating that
while it is true that said dividends remitted were not subject to the 15%
profit remittance tax and neither is it subject to the 10% intercorporate
dividend tax, the recipient of the dividends, being a non-resident
stockholder, nevertheless, said dividend income is subject to the 25 %
tax pursuant to Article 10 (2) (b) of the Tax Treaty dated February 13,
1980 between the Philippines and Japan.
Held:
1.
2.
YES. Under the Tax Code, a resident foreign corporation is one that
is "engaged in trade or business" within the Philippines. Petitioner
contends that precisely because it is engaged in business in the
Philippines through its Philippine branch that it must be considered
as a resident foreign corporation. Petitioner reasons that since the
Philippine branch and the Tokyo head office are one and the same
entity, whoever made the investment in AG&P, Manila does not
matter at all. A single corporate entity cannot be both a resident
and a non-resident corporation depending on the nature of the
particular transaction involved. Accordingly, whether the dividends
are paid directly to the head office or coursed through its local
branch is of no moment for after all, the head office and the office
branch constitute but one corporate entity, the Marubeni
Corporation, which, under both Philippine tax and corporate laws,
is a resident foreign corporation because it is transacting business
in the Philippines.
NO. The alleged overpaid taxes were incurred for the remittance of
dividend income to the head office in Japan which is a separate and
distinct income taxpayer from the branch in the Philippines. There
can be no other logical conclusion considering the undisputed fact
that the investment (totalling 283.260 shares including that of
3.
4.
2.
Cases are not tried jointly in the CTA. CTA reversed the decision of
CIR and held that the proceeds of BOAC passage ticket in the
Philippines do not constitute income from Philippine sources since no
service of air carriage of passengers or goods was performed within
the Philippines.
Hence this petition.
NOTE: At the time the assessments were made, BOAC had
no landing rights and not CPC except party in the years 1961 and
1962.
Issue: 1. WON revenue of BOAC from sales of ticket in the
Philippines is taxable? 2. WON BOAC is a resident foreign
corporation? 3. WON BOAC is a non-resident foreign corporation and
is subject only to 35% gross income tax?
Held:
1.
2.
CIR assessed BOAC with deficiency income taxes from 1959 to 1963. BOAC
protested said assessment. CIR released new assessment which claims for
taxes until 1967. The second assessment was also protested, but the claim
for refund was denied. Hence review with CTA.
CIR assessed BOAC with deficiency income tax, interest and penalty for
the years 1968-1969 and 1970-1971 with penalties for violation of Sec. 46
filing of return. Filed for request to set aside payment but was denied.
Jul
Facts:
stock of the Atok-Big Wedge Mining Co., Inc., received from the
income but formed part of the capital and therefore belonged not
As advising bank, Bank of America is bound only to check the apparent authenticity
of the letter of credit, which it did. Websters explains that the word apparent
suggests appearance to unaided senses that is not or may not be borne out by more
rigorous examination or greater knowledge.
May Bank of America then recover what it has paid under the letter of credit when the
corresponding draft for partial availment thereunder and the required documents
therefore were later negotiated with it by Inter-Resin? The answer is yes.
This kind of transaction is what is commonly referred to as a discounting
arrangement. This time, Bank of America, has acted independently as a negotiating
bank, thus saving Inter-Resin from the hardship of presenting the documents directly
to Bank of Ayudhya to recover payment. As a negotiating bank, Bank of America has
a right of recourse against the issuer bank and until reimbursement is obtained, InterResin, as the drawer of the draft, continues to assume a contingent liability thereon.
SC noted that the additional ground raised by Bank of America, i.e. that Inter-Resin
sent waste instead of its products, is really of no consequence. In the operation of a
letter of credit, the involved banks deal only with documents and not on goods
described in those documents.
for the purpose ofraising revenues. Ordinance 3358 prescribes municipal license fees
for the privilege to engage in the businessof selling liquor or alcohol beverages;
considering that the sale of intoxicating liquor is (potentially) harmfulto public health
and morals, and must be subject to supervision or regulation by the State and by
cities andmunicipalities authorized to act in the premises. On the other
hand, Ordinances 3634 , 3301 and 3816 imposed taxes on the sales of general
merchandise, wholesale or retail, and are revenue measures enacted bythe Municipal
Board of Manila.Both a license fee and a tax may be imposed on the same
business or occupation, or for selling the same article, without it being in
violation of the rule against double taxation. The contrary view of the Treasurer inits
letter is of no consequence as the government is not bound by the errors
or mistakes committed by its officers, specially on matters of law.The company, thus, is
not entitled to refund.
5 SCRA 102
G.R. No. L-16021 August 31, 1962
Regala, J.
Doctrine:
In order to ascertain the capital and/or ordinary gains taxes
properly payable on the sale of a business, including its tangible assets, it
is incumbent upon the taxpayer to show not only the cost basis of each
asset, but also what portion of the selling price is fairly attributable to
each asset.
Facts:
After deducting the total book value of the assets and the
incidental expenses from the gross selling price, petitioner filed his
income tax return, showing a net profit of P19,678.09 as having been
realized from the sale of the bakery. On the basis of this amount, he paid
P2,439.00 as income tax.
Issues:
1.
Whether the Tax Court had jurisdiction over this case; and
2.
Held:
and RULINGS:
1.