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Refund or Tax Credit of Excess Input Tax

 Value Added Tax is a tax on consumption levied on


the sale, barter, exchange or lease of goods or
properties and services in the Philippines and on
importation of goods into the Philippines. (Sec. 4.105-
2, RR 16-2005)

 To simplify, it means that a certain tax rate ( 0% to


12% ) is added up to the selling price of a goods or
services sold. It is also imposed on imported goods
from abroad.
 The term input tax means the value added tax
due from or paid by a VAT-registered person in
the course of his trade or business on
importation of goods or local purchase of
goods, properties or services including lease or
use of property from a VAT-registered person
(Sec. 110 [A], NIRC).

 Output tax – the value added tax due on the


sale or lease of taxable goods or properties or
services by any person required to register
under Sec. 236 of NIRC. (Sec. 110[B] NIRC)
Types of VAT and Tax Rate
1. VATable- 12%
 On sale of goods and properties- twelve percent (12%)
of the gross selling price or gross value in money of the goods or
properties sold, bartered or exchanged.

 On sale of the services and use or lease of properties- twelve (12%)


of gross receipts derived from the sale or exchange of services,
including the use or lease of properties.

 On importation of goods- twelve percent (12%) based on the total


value used by the Bureau of Customs in determining tariff and
customs duties, plus customs’ duties, excise taxes, if any, and other
charges, such as tax to be paid by the importer prior to the release of
such goods from customs custody; provided, that where the customs
duties determines on the basis of quantity or volume of the goods,
the VAT shall be based on the landed cost pus excise taxes, if any.
2. VAT Zero- Rated- 0%

 Zero- rated is a sale, barter or exchange of goods,


properties and/or services subject to 0% VAT
pursuant to Sections 106 (A) (2) and 108 (B) of the
Tax Code.

 Zero-rated is usually pertaining to export sale of


service or those zero-rated as approved by the
special laws such as PEZA or Economic Zone
registered companies.
3. VAT Exempt- 0%

 A sale of goods or transactions is considered VAT


Exempt if it falls under Sec 109- Exempt Transactions.

 Normally VAT Exempt transactions are basic


necessities such as agricultural products, tuition fees,
lending activities, real properties, books, and
transportations.
There are 5 Categories of input taxes that may be
credited against output tax namely:

1. Input tax credit on importation of goods and current


local purchases of goods, properties and services
2. Transitional input tax credit
3. Presumptive input tax credit
4. Final Withholding tax credit
5. Excess input tax credit

(page 479 Reviewer on Taxation Mamalateo 2014)


We must remember that credits of input taxes must
be supported by VAT invoices or receipts which must
be issued in the name of the buyer of goods,
properties or services. (Sec. 113[A] in relation to Sec.
237, NIRC)

Input tax on purchase of goods or properties is


creditable upon consummation of sale and on
importation of goods or properties, upon payment of
the value added tax prior to the release of the goods
from customs custody.

Input tax on purchase of services is creditable only


when paid by the buyer to the seller thereof and
evidenced by the seller’s official receipt. (Sec. 110[2],
NIRC)
Categories of Refunds or Tax Credits

 Zero-rated or effectively zero-rated sales of goods


 Local purchase or importation of capital goods;
 Cessation of business or dissolution of the Corporation

However, the regulation also allows the refund or tax


credit on unused input tax on purchase of real property.
Under RA 9337 (2005), item 2 above was removed.
Who may claim for refund/apply for tax credit
certificate:

 - Zero- rated or effectively zero-rated sales

 - Cancellation of VAT Registration


Zero-rated or effectively zero-rated sales

- Seller of the goods is the one entitled to the refund or


credit
- In the purchase of capital goods, it is the purchaser
that is entitled.

However, in order to be entitled to refund or tax credit


of unutilized input tax payments, petitioner must
proved that:
a. The claimant must be a VAT-registered person

b. The application for the issuance of a tax credit


certificate or refund is filed with the BIR or the DOF
within 2 years after the close of the taxable quarter
when the sales were made, and with the CTA w/in 30
days from the date of receipt of denial from the CIR
or in case of inaction by the CIR from the lapse of the
120 days from date of filing of the complete
documents in support of the administrative claim
c. The claimed input tax payments were not applied
against any output tax during the period covered by
the claim
d. Claimant must deduct from its VAT quarterly return the
input tax being claimed as refund or tax credit
e. VAT payments are directly attributable to zero-rated or
effectively zero-rated sales
f. For aero-rated sales under Sec. 106 (A)(2)(a)(1), (2) and
(b) and Sec. 108(B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly
accounted for in accordance with rules and regulations of
BSP.
g. Duly supported by VAT invoices or official receipts
h. VAT return for the succeeding quarters must be
submitted with the CTA. (page 483 Reviewer on Taxation
Mamalateo 2014)
Cancellation of VAT Registration (Sec. 112[c]
NIRC)
a. A person whose registration has been cancelled due to
retirement from or cessation of business, or due to
changes in or cessation of status under Section 106(C) of
the Code may, within two (2) years from the date of
cancellation, apply for the issuance of a tax credit
certificate for any unused input tax which may be used in
payment of his other internal revenue taxes.

b. He shall be entitled to a refund if he has no internal


revenue tax liabilities against which the tax credit
certificate may be utilized.
Excess Input Tax on Purchase of Real
Property
 Requisites:

1. The applicant must be a VAT-registered person;


2. There be a purchase of land;
3. The purchase of land is substantiated by sufficient evidence
4. The input taxes have not been applied against the output
taxes
5. The application for refund has been made within 2 yrs after
the close of the taxable quarter when was made
6. The land subject of the purchase was used by the applicant
in his VAT taxable business. (CTA case No. 6137)
A person is entitled to VAT refund or tax credit
when:
a. The claimed input tax payments are duly supported
by VAT invoices or receipts in accordance with Sec.
4.104-5 RR No. 7-95
a. The claimed input tax payments are directly
attributable to zero-rated sales
a. It was not applied against any output tax nor carried
over to succeeding months/quarters
a. Both the administrative and judicial claims for
refund or tax credit were filed within 2 yr
prescriptive period.
Refund or Tax Credit of Excess Input Tax
 In proper cases, the Commissioner of Internal Revenue shall grant a tax
credit certificate/refund for creditable input taxes within one hundred
twenty (120) days from the date of submission of complete documents
in support of the application.

 In case of full or partial denial of the claim for tax credit certificate/refund
as decided by the Commissioner of Internal Revenue:

 (a) The taxpayer may appeal to the Court of Tax Appeals (CTA) within
thirty (30) days from the receipt of said denial, otherwise the decision
shall become final.

 (b) If no action on the claim for tax credit certificate/refund has been
taken by the Commissioner of Internal Revenue after the one hundred
twenty (120) day period from the date of submission of the application
with complete documents, the taxpayer may appeal to the CTA within 30
days from the lapse of the 120-day period. [RR 16-2005]
BIR FORM for VAT
 There are two types of VAT Return

 1. Monthly – BIR FORM 2550M


- Monthly Value-Added Tax Declaration
Tax Form: BIR Form 2550M
Documentary Requirements
- Procedures

2. Quarterly - BIR Form 2550Q


 - Quarterly Value-Added Tax Return
Tax Form: BIR Form 2550Q
Attachments to the Return
- Procedures
DEADLINE FOR FILING AND PAYMENT OF VAT

 For the Monthly VAT return, deadline is every 20th of


the following month of the applicable month

 Example: For July VAT return, the Deadline is August


20.

 For the Quarterly VAT return, deadline is every 25th of


the following month of the applicable quarter.

 Example: For the second quarter ending June 30, the


filing is July 25.
Claim for Refund or Tax Credit
 The filing for tax credit or refund is within the 2yr period
reckoned on the administrative claim for refund,

 In case of input tax attributable to export sales, after the


close of the taxable quarter when such sales were made

 In case of capital goods, within 2 years after the close of


the taxable quarter when the importation or purchase
was made.

 The prescriptive period in claiming for the refund of input


tax in the judicial level is reckoned from the date of filing
of the quarterly VAT return. (page 491 Reviewer on Taxation
Mamalateo 2014)
Compliance Requirements
 A person who’s subject to pay internal revenue tax must
comply with the administrative requirements prescribed
by the Tax Code

1. Registration as a VAT taxpayer;


2. Keeping and stamping of books of accounts, sales
invoices and official receipts and other accounting
records;
3. Issuances of invoices and receipts;
4. Filing of tax return and payment of taxes
5. Withholding of tax on certain payments made to other
persons. (page 504 Reviewer on Taxation Mamalateo 2014)
Cargill Phils. vs CIR
G.R. No. 203774, March 11, 2015
 Cargill is a domestic, VAT registered corporation.
 Filed VAT returns from 2nd quarter, CY 2001 up to 3rd quarter, FY
2003, covering the period from April 1, 2001 to Feb. 28, 2003.
 The returns showed overpayment 44.9M.
 Filed Vat returns covering the period from Mar. 1, 2003 up to
Aug. 31, 2004. These returns showed another overpayment of
31.9M.
 Cargill maintained that the overpayments were due to its export
sales of coconut oil and other oil products.
 On June 27, 2003, it filed an administrative claim with the BIR
for refund in the amt. of 26.1M covering the period Apr 1, 2001 to
Feb. 28, 2003.
 Subsequently, it filed a judicial claim for refund on June 30, 2003
before the CTA via pet. for review.
FACTS:

 On May 31, 2005, Cargill filed a second admin claim for refund
for the period Mar 1, 2003 to Aug. 31, 2004. On the same day,
it filed a judicial claim for refund before the CTA via pet. for
review.
 The CTA consolidated the 2 cases filed by Cargill because it
involved same questions of fact and law.
 CTA in division partially granted the claim for refund of Cargill,
maintaining that it failed to substantiate the remainder of its
claims so that it was not entitled for the whole amount claimed.
 In an amended decision by the CTA division, it dismissed the
case, without ruling on the merits, for being prematurely filed.
 CTA en banc affirmed the above ruling.
Issue:
Whether the outright dismissal by the CTA en banc of the
petition is correct on the ground of prematurity.
Ruling:
 Section 112. Refunds or Tax Credits of Input Tax. –
(A) Zero-rated or Effectively Zero-rated Sales. – any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may, within two (2) years
after the close of the taxable quarter when the sales were made, apply for
the issuance of a tax credit certificate or refund of creditable input tax due or
paid attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax: x x x.chanrobleslaw
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In
proper cases, the Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred twenty (120) days
from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the
failure on the part of the Commissioner to act on the application within the
period prescribed above, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration
of the one hundred twenty day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals.
 In the landmark case of Aichi, it was held that the
observance of the 120-day period is a mandatory and
jurisdictional requisite to the filing of a judicial claim for
refund before the CTA. As such, its non-observance would
warrant the dismissal of the judicial claim for lack of
jurisdiction. It was, withal, delineated in Aichi that the two
(2)-year prescriptive period would only apply to
administrative claims, and not to judicial
claims.36 Accordingly, once the administrative claim is filed
within the two (2)-year prescriptive period, the taxpayer-
claimant must wait for the lapse of the 120-day period and,
thereafter, he has a 30-day period within which to file his
judicial claim before the CTA, even if said 120-day and 30-
day periods would exceed the aforementioned two (2)-year
prescriptive period.
 The 120-day + 30-day requirements provided under the law
is a mandatory and jurisdictional requisite in filing a judicial
claim for refund before the CTA. Its non-observance would
warrant the dismissal of the judicial claim for lack of
jurisdiction.
 But the 2 year prescriptive period would only apply to
administrative cases and not to judicial cases.
 Accordingly, once the administrative claim is filed within the
two (2)-year prescriptive period, the taxpayer-claimant must
wait for the lapse of the 120-day period and, thereafter, he
has a 30-day period within which to file his judicial claim
before the CTA, even if said 120-day and 30-day periods
would exceed the aforementioned two (2)-year prescriptive
period.
Is the rule absolute?
Exception:
Taxpayers claiming during the period Dec. 10, 2003
up to October 6, 2010 need not observe the 120-day
requirement before they may claim for refund for excess
VAT payments.

Before and after the aforementioned period, the general


rule applies.
 For Cargill, its first refund claim was filed before the
excepted period. Therefore, the dismissal was proper.
 However, in its second refund claim, it well within the
excepted period (need not wait for the expiry of the 120
day period before petition with the CTA may be filed).
Therefore, the CTA erred in dismissing the complaint.
 But because the determination of Cargill’s claim for
refund involves factual issues, evidentiary in nature which
are beyond the pale of judicial review under R-45, the
case is remanded to the CTA for resolution on the merits.
Silicon Phils. vs CIR
G.R. No. 182737, March 02, 2016

FACTS:
Petitioner is a corporation engaged in the business of
designing, developing, manufacturing and exporting
integrated circuit components. It is a preferred pioneer
enterprise registered with the Board of Investments. It is
likewise registered with the Bureau of Internal Revenue
(BIR) as a VAT taxpayer by virtue of its sale of goods and
services with a permit to print accounting documents like
sales invoices and official receipts.
Petitioner sought to recover the VAT it paid on imported
capital goods for the 2nd quarter of 2001. On Oct. 16,
2001, it filed with the DoF application for refund of 9M.
On Sept. 4, 2002, filed another claim for refund on VAT
paid on imported capital goods for the 3rd and 4th quarters
of 2001, 1.4M and 14.5M respectively.
DoF slept on the claim for refund by petitioner.
Subsequently, petitioner filed separate petitions for review
before the CTA;
1st case: recovery of 9M filed on July 30, 2003
2nd case: recovery of 1.4M filed on Oct. 20, 2003
3rd case: recovery of 14.5M filed on Dec. 30, 2003
 These petitions before the CTA were consolidated and the
CTA in division ruled:
 a taxpayer claiming a refund/tax credit of input VAT paid on
purchased capital goods must prove all of the following:
 (1) that it is a VAT-registered entity;
 (2) that it paid input VAT on capital goods purchased; (3) that its
input VAT payments on capital goods were duly supported by VAT
invoices or official receipts;
 (4) that it did not offset or apply the claimed input VAT payments on
capital goods against any output VAT liability; and
 (5) that the administrative and judicial claims for a refund were filed
within the two-year prescriptive period.
 Petitioner failed to prove that its purchases were capital
goods; to be treated as such, the following must concur:
 (1) the goods or properties have an estimated useful life of
more than one year;
 (2) they are treated as depreciable assets under Section 29(f)
of Revenue Regulations No. 7-95; and
 (3) they are used directly or indirectly in the production or
sale of taxable goods or services.

On appeal to CTA en banc, it affirmed the decision of its


division. It is necessary to ascertain the treatment of the
purported capital goods as depreciable assets, which can only
be determined through the examination of the detailed general
ledgers and audited financial statements, including the
person's income tax return.
 Issue:

Whether or not the CTA correctly appreciated the case


in coming up with its decision.
 No. The decision of CTA is void for having been rendered
without jurisdiction. It creates no rights and produces no
effect.

Taxable
Administrative End of the 120- End of the 30- Judicial Claim Number of
Quarter of
Claim Filed day Period day Period Filed Days Late
2001

16 October 13 February
2nd 15 March 2002 30 July 2003 502 days
2001 2002

4 September 20 October
3rd 2 January 2003 1 February 2003 261 days
2002 2003

4 September 30 December
4th 2 January 2003 1 February 2003 332 days
2002 2003
 To repeat, a claim for tax refund or credit, like a claim for
tax exemption, is construed strictly against the taxpayer.
One of the conditions for a judicial claim of refund or
credit under the VAT System is compliance with the
120+30 day mandatory and jurisdictional periods. Thus,
strict compliance with the 120+30 day periods is
necessary for such a claim to prosper, except for the
period from the issuance of BIR Ruling No. DA-489-03 on
10 December 2003 to 6 October 2010 when
the Aichi doctrine was adopted, which again reinstated
the 120+30 day periods as mandatory and jurisdictional.
VAT Refund Comparison: NIRC vs. TRAIN LAW
Tax Particulars NIRC TRAIN LAW
Period within which Sec. 112 (C) The Commissioner shall C. The Commissioner shall grant
grant a refund or issue the tax credit a refund for creditable input
VAT refund of input certificate for creditable input taxes taxes within 90 days from the
taxes shall be made within 120 days from the date of date of submission of the official
submission of complete documents. receipts or invoices and other
In case of full or partial denial of the documents in support of the
claim for tax refund or tax credit, or application filed.
the failure on the part of the Should the Commissioner find
Commissioner to act on the that the grant of refund is not
application within the period proper, the Commissioner must
prescribed above, the taxpayer state in writing the legal and
affected may, within 30 days from the factual basis for the denial.
receipt of the decision denying claim In case of full or partial denial of
or after the expiration of the 120 day claim for tax refund, the taxpayer
period, appeal the decision or the may within 30 days from receipt
unacted claim with the Court of Tax of the decision denying the claim
Appeals (CTA). appeal the decision with the
CTA.
Penalty for failure on the part of
any official, agent, or employee
of the BIR to act on the
application within the 90-day
period shall be imposed.
CHANGES

1. 120 DAYS REDUCED TO 90 DAYS


- Comparing the old provisions of the Tax Code and the
TRAIN law, the period within which the BIR should decide on
a VAT refund application was reduced from 120 days to 90
days. This is a welcome development, as VAT refund
applications will now be processed at a faster pace.

- This action of reducing requirements will definitely make


the VAT refund evaluation faster for the BIR.
 2. NO MORE ‘DEEMED DENIAL’ RULE

- The old rule (NIRC) included a “deemed denial”


provision. This means that when no decision is issued by the
BIR within 120 days, the application is deemed denied, and
the taxpayer may seek relief with CTA within 30 days after the
BIR’s 120-day period to review the application. In other words,
there is no more need to wait for the BIR’s decision if the 120-
day has lapsed, in order for the taxpayer to go to court.

- This is not the case under the TRAIN law. An appeal to


the CTA may only ripen after the taxpayer’s receipt of the
BIR’s decision denying the claim for VAT refund. Should the
BIR find that granting a refund is not proper, the BIR
Commissioner must state in writing the legal and factual basis
for such denial. The receipt of the decision has become a
necessary requirement before judicial relief may be availed.
 3. PERSONAL ACCOUNTABILITY OF BIR OFFICERS

- An interesting provision in the TRAIN law empowers the


taxpayer to file a criminal complaint against a BIR officer who
deliberately fails to act on the application for refund within the
prescribed period. The imposition of criminal liability is a heavy
sanction for an erring BIR officer, in addition to the penalties of
perpetual disqualification to hold public office, to vote, and to
participate in any public election.
(http://bworldonline.com/hoping-best-vat-refunds-train/)
4. Products, service, or groups that will continue to be
VAT-exempt

 Food and agricultural products


 Senior citizens
 Persons with Disability (PWD)
 Cooperatives
 Tourism
 Education
 Renewable energy
 Health
 Enterprises and BPOs located in Special Economic Zones
 Condominium association dues
 Rentals and leases below P15,000 per month
Groups, products, or transactions that will be VAT-
exempt

 Businesses with annual gross sales of P3 million and below

 Government owned and controlled corporations (GOCCs),


state universities and colleges (SUC), and government
agencies
 Medicines for diabetes, cholesterol, and hypertension (VAT
exemption beginning 2019)
 Socialized housing, or houses priced at P450,000 and below,
and low-cost housing, or those priced at P3 million and below
(VAT exemption retained from 2018 to 2020 only)
(https://www.pinoymoneytalk.com/products-exempted-from-vat-tax-
reform/)
5. VAT Threshold Increase

- The VAT threshold is increased from P1.9 million to P3


million to protect the poor and low-income Filipinos and
small and micro businesses and for manageable
administration. This effectively exempts the sale of goods
and services .of marginal establishments from VAT.
(http://www.dof.gov.ph/taxreform/index.php/e-vat/)
ERGO
“ If the State expects its taxpayers to observe
fairness and honesty in paying their taxes, so
must it apply the same standard against itself in
refunding excess payments. When it is
undisputed that a taxpayer is entitled to a refund,
the State should not invoke technicalities to keep
money not belonging to it. No one, not even the
State, should enrich oneself at the expense of
another”. (G.R. No. 122480, April 12, 2000)
Group B
 Camacho, Karen - Researcher
 Dulnuan, Natalie - Researcher
 Moreno, Rhea - Researcher
 Sanchez, Grece – Researcher/Reporter
 Abaten, - Researcher/Reporter
 Kingad, - Researcher
 Tan, Patrick – Researcher/Powerpoint