Ruling/Case No.

Date Overview

RMC 57-2013 August 29, 2013 The Tax Code does not provide for other
modes of recovering input VAT from zero-
rated transactions except through refund
for cash or tax credit. In the ruling, the BIR
declared as having no legal basis and denied
the request to expense input VAT upon
expiration of the two-year period to refund.

Under the RMC, the BIR also enjoined BIR

officers engaged in the audit and review of
audit cases to disallow unutilized
creditable input VAT attributable to zero-
rated sales that is claimed as deduction
for income tax purposes.

Therefore, this RMC prohibits the outright

expensing of input VAT upon expiration
of the two-year period to refund and not
the expensing of input VAT when claim for
refund is denied.

BIR Ruling No. DA 591-2004
November 24, 2004 A taxpayer-claimant of a denied claim for
refund/tax credit of unutilized input taxes
relating to VAT zero-rated sales may claim
the same as deduction for income tax
purposes if the denial was due to:

(a) failure to comply with certain sales

invoicing requirements, such as failure to
issue VAT invoice/receipt with the word
“zero-rated” printed thereon, or issuance of
invoices/receipts that had not been
registered with the BIR; or (b) failure to
show evidence that the input taxes
sought to be refunded were not carried
over and applied against any output VAT in
the succeeding periods.

In the said ruling, the BIR held that input

taxes are assets which are expected to
benefit the taxpayer. Denial by the BIR or
the Court of the refund application means
that the asset has lost its useful value. Thus,
the denied claim should be treated as a
deductible loss of property sustained during
the taxable year.

On the other hand, if the denial is due to

the failure of the taxpayer to submit
supporting VAT invoices/receipts for the
purchases giving rise to the input taxes
being refunded, the denied claim cannot
qualify as a loss deduction in the year
denied. In this ruling, the BIR held that
purchases not covered by proper VAT
invoices/receipts shall not give rise to any
input tax as the VAT passed on by the
supplier should have formed part of the
expense or cost of the items purchased.
Accordingly, the BIR held that the remedy
available to the taxpayer is to amend its
income tax return if the three-year period
for such relief has not yet prescribed and no
letter of investigation covering its income
 tax liabilities has been issued to the
company.

RMC 42-2003 In case the zero-rated sales fail to comply

with the invoicing requirements, input VAT
claimed for refund or tax credit may be
charged to the appropriate expense account
or asset account subject to depreciation,
whichever is applicable. In other words, the
denied claim for refund/tax credit of input
VAT attributable to zero-rated sales may
be charged to expense or cost of goods or
services for purposes of computing taxable
income subject to income tax.