Transfer Tax and VAT

Dizon vs CTA

Facts:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will was
filed with Branch 51 of the Regional Trial Court (RTC) of Manila (probate court).

Issue: At what point in time should the estate be valued for purposes of estate tax?

Held:

The estate tax should be measured based on the value of the estate as it stood at the time of
the decedent‟s death, regardless of any subsequent contingency affecting value or any subsequent
increase or decrease in value (date-of-death valuation rule; NIRC, Section 85). Thus, where the claims
are reduced or condoned through compromise agreements entered into by the estate with its creditors
resulting in the reduction of the amount actually paid post-death, the deductible claim would still be
valued as of the date of death

Atlas Consolidated vs. CIR

Facts:

Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of

various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases of
capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992. It is
operating within export processing zones and registered with the EPZA. BIR did not immediately act on
the matter prompting the petitioner to file a petition for review before the CTA.

Issue: Explain the destination principle and cross border doctrine in relation to VAT.

Held:

Under the destination principle, goods and services are taxed only in the country where these
are consumed. In connection with the said principle, the cross border doctrine mandates that no VAT
shall be imposed to form part of the cost of the goods destined for consumption outside the territorial
border of the taxing authority. Hence, actual export of goods and services from the Philippines to a
foreign country must be free of VAT, while those destined for use or consumption within the Philippines
shall be imposed with VAT

taxpayer whose claim for the refund or credit pertaining to its alleged unutilized input tax for the third
and fourth quarters of the year 2002 amounting to P50,124,086.75 had been denied by the
Commissioner of Internal Revenue. The Court of Tax Appeals (CTA) En Banc and in Division denied its
appeal.
 Coral Bay Nickel vs. CIR

Facts:

Taxpayer whose claim for the refund or credit pertaining to its alleged unutilized input tax for
the third and fourth quarters of the year 2002 amounting to P50,124,086.75 had been denied by the
Commissioner of Internal Revenue. The Court of Tax Appeals (CTA) En Banc and in Division denied its
appeal.

Issue: Is an ecozone considered a foreign territory?

Held:

Yes. An ecozone, by fiction of law, is a foreign territory separate and distinct from the customs
territory. Accordingly, the sales made by suppliers from a customs territory to a purchaser located
within an ecozone will be considered as exportations. Following the Philippine VAT system's adherence
to the Cross Border Doctrine and Destination Principle, the VAT implications are that "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".

Issue: Since goods purchased that were destined for consumption within an ecozone is free of VAT,
what is the remedy of a buyer who has paid VAT on such purchase?

Held:

The buyer has recourse for claim of reimbursement, not against the government, but against the
seller who had shifted to it the output VAT.

CIR vs. SM Prime

Facts:

CIR issued deficiency assessment notice against SM Prime, operator of cinema and theater
houses, for the unpaid VAT from gross receipts arising from admission of tickets. CIR maintained that
enumeration of services subject to VAT in the Tax Code is not exclusive; SM Prime, on the other hand,
insisted that the absence of gross receipts from cinema/theater admission tickets from the list of
services reinforces this legislative intent.

Issue: Won SM Prime is liable?

Held:

SM Prime is not liable. Since the imposition of a tax is a burden on the taxpayer, it cannot be
presumed nor can it be extended by implication. A law will not be considered as imposing a tax unless it
does so clearly, expressly, and unambiguously. Coupled with this principle is the legislative intent that
exempts gross receipts arising from admission of tickets from VAT.

Issue: Who can therefore tax SM Prime for gross receipts arising from admission of tickets?

Held:

The local government, particularly the province can tax SM Prime. The province may levy an
amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert
halls, circuses, boxing stadia, and other places of amusement at a rate of not more than 30% of gross
receipts from admission fee

BIR vs. CA and COMASERCO

Facts:

Condominium corporations collect association dues and memberships fees from its member
condominium-unit owners. Such dues and fees are used solely for administrative expenses in
implementing the condominium corporations’ purposes.

Issue: Are these collections subject to VAT?

Held:

Yes. VAT is a tax on transactions, imposed at every stage of the distribution process on the sale,
barter, exchange of goods or property, and on the performance of services, even in the absence of profit
attributable thereto. Hence, it is immaterial whether the primary purpose of a corporation indicates that
it receives payments for services rendered to its affiliates on a reimbursement-on-cost basis only,
without realizing profit, for purposes of determining liability for VAT on services rendered; as long as the
entity provides service for a fee, remuneration or consideration, then the service rendered is subject to
VAT

Mindanao II Geothermal vs. CIR

Facts:

Mindanao II Geothermal sold the depreciated Nissan Patrol previously used by its manager.

Issue: Is the sale subject to VAT?

Held:

Yes. VATable transactions include those entered in the course of trade or business including
transactions incidental thereto. Prior to the sale, the depreciated Nissan Patrol was part of the
company‟s equipment. Its sale is therefore incidental transaction made in the course of its business.

Fort Bonifacio Development vs. CIR

Facts:

Petitioner claimed transitional input VAT corresponding to its inventory of land. The BIR
disallowed the claim of presumptive input VAT and thereby assessed petitioner for deficiency VAT

Issue: Is prior payment of tax a prerequisite before a taxpayer could avail of transitional input tax credit?

Held:

No. All that is required from the taxpayer is to file a beginning inventory with the Bureau of
Internal Revenue. It was never mentioned in Section 105 that prior payment of taxes is a requirement

CIR vs. Aichi Forging, October 6, 2010; CIR vs. San Roque Power, February 12, 2013; CIR vs. Mindanao
II Geothermal, January 15, 2014

Issue: Is refund or credit of “excess” input VAT the same as refund or credit of a tax excessively or
wrongfully collected under Section 229, NIRC?

Held:

No. The input VAT is not “excessively” collected as understood under Section 220 because at the
time the input VAT is collected, the amount paid is correct and proper. The term “excess” input VAT
simply means the input VAT available as credit exceeds the output VAT, not that the input VAT is
excessively collected because it is more than what is legally due. Thus, the taxpayer who legally paid the
input VAT cannot claim for refund or credit of the input VAT as “excessively” collected under Section
229, NIRC; rather, it is Section 112, NIRC which applies.

Issue: Pursuant to NIRC, how are output and input taxes dealt with?

Held:

The following are the guidelines:

(a) If at the end of taxable quarter, the output tax exceeds the input tax, the excess shall be paid by the
VAT-registered person.
(b) If at the end of taxable quarter, the input tax exceeds the output tax, the excess shall be carried over
to the succeeding quarter or quarters.

(c) In case of a person whose VAT registration has been cancelled due to retirement from or cessation
from business, or due to changes in or cessation of status, he may, within two (2) years from date of
cancellation, apply for the issuance of a tax credit certificate for unused input tax which may be used to
pay his other internal revenue taxes.

(d) In case of excess input tax is attributable to zero-rated sales by a VAT-registered person, he has the
option of refund or credit against other internal revenue taxes, subject to Section 112.

(e) Payment of VAT is monthly, not later than the 20th day following the end of each month. Filing of
return is quarterly, not later than the 25th day following the close of each taxable quarter.

Issue: What are the rules on prescriptive periods for claiming refund or credit of input VAT?

Held:

A. Two-Year Prescriptive Period (1) It is only the administrative claim that must be filed within the two-
year prescriptive period. (Aichi) (2) The proper reckoning date for the two-year prescriptive period is
the close of the taxable quarter when the relevant sales were made. (San Roque) (3) The only other rule
is the Atlas ruling, which applied only from 8 June 2007 to 12 September 2008. Atlas states that the two-
year prescriptive period for filing a claim for tax refund or credit of unutilized input VAT payments
should be counted from the date of filing of the VAT return and payment of the tax. (San Roque)

B. 120+30 Day Period (1) The taxpayer can file an appeal in one of two ways:

(1) file the judicial claim within thirty days after the Commissioner denies the claim within the 120-day
period, or (2) file the judicial claim within thirty days from the expiration of the 120-day period if the
Commissioner does not act within the 120-day period.

(2) The 30-day period always applies, whether there is a denial or inaction on the part of the CIR.

(3) As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. (Aichi and San
Roque) (4) As an exception to the general rule, premature filing is allowed only if filed between 10
December 2003 and 5 October 2010, when BIR Ruling No. DA-489-03 was still in force. (San Roque) (5)
Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force.

Northern Mindanao Power vs. CIR

Facts:

Petitioner filed an administrative claim for a refund on 20 June 2000 for the 3rd and the
4th quarters of taxable year 1999, and on 25 July 2001 for taxable year 2000
Issue: Explain the difference between VAT invoice and VAT receipt.

Held:

A "sales or commercial invoice" is a written account of goods sold or services rendered

indicating the prices charged therefor or a list by whatever name it is known which is used in the
ordinary course of business evidencing sale and transfer or agreement to sell or transfer goods and
services. A "receipt" on the other hand is a written acknowledgment of the fact of payment in money or
other settlement between seller and buyer of goods, debtor or creditor, or person rendering services
and client or customer. A VAT invoice is the seller's best proof of the sale of goods or services to the
buyer, while a VAT receipt is the buyer's best evidence of the payment of goods or services received
from the seller. A VAT invoice and a VAT receipt should not be confused and made to refer to one and
the same thing. Certainly, neither does the law intend the two to be used alternatively

Bonifacio Water Corporation vs. CIR

Facts:

Applying for administrative claim for refund, official receipts under the name of Bonifacio GDE
Water Corporation were disallowed on the ground that the use of the said business name was never
approved by SEC.

Issue: Can the official receipts issued under a new name of a corporation, which name is without
approval of the Securities and Exchange Commission (SEC), be allowed as evidence for said corporation’s
claim of VAT refund?

Held:

No. The change of corporation‟s name, being unauthorized and without approval of the SEC,
and the issuance of official receipts under that name which were presented to support the claim for tax
refund, cannot be used to allow the grant of tax refund or issuance of a tax credit certificate. The
absence of official receipts issued in its name is tantamount to noncompliance with the substantiation
requirements provided by law.