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• VAT 53Value Added Tax46-registered entit( as e&idened$( VAT egistration Certifiation #o' 78-9-999778• VAT returns for the period > April >77 to 9 ?une >777

ha&e $een filed

• An administrati&e laim for refund of VAT input taxes inthe amount of 0=,777 +ith e&enue istrit 2ffie #o', Talisa( Ce$u'

• #o final ation has $een reei&ed $( 5respondent6 from5petitioner6 on 5respondents6 laim for VAT refund'

• C. is sued in his offiial apait(, ha&ing $een dul(appointed and empo+ered to perform the duties of his offie,inluding, among others, the dut( to at and appro&e laims for refund

or tax redit'• CTA: granted the laim for refund'• CA: affirmed in the redued amount of0>=,>==,7=='97 of the Tax Code nor !etions@'>9 and @'>9-> of 8-7/ +ere applia$le' a&ing paid the inputVAT on the apital goods it purhased, respondent orretl( filed theadministrati&e and udiial laims for its refund +ithin the t+o-(ear presripti&e period'

• !uh pa(ments +ere -- to the extent of the refunda$le &alue --dul( supported $( VAT in&oies or offiial reeipts, and +ere not (et offsetagainst an( output VAT lia$ilit('

ISSUE: 12# !eagate is entitled to the refund'

HELD: es'Zero-rate !a"e! o# goo

• Although $oth are taxa$le and similar in effet, )ero-ratedtransations differ from effeti&el( )ero-rated transations as to their 

soure'• Zero-rated transations generall( refer to the export sale of goods and suppl( of ser&ies' The tax rate is set at )ero'

• 1hen applied to the tax $ase, suh rate o$&iousl( results in notax hargea$le against the purhaser'

• The seller of suh transations harges no output tax, $ut anlaim a refund of or a tax redit ertifiate for the VAT pre&iousl( harged$( suppliers'

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• "ffeti&el( )ero-rated transations, ho+e&er, refer to the saleof goods or suppl( of ser&ies to persons or entities +hose exemptionunder speial la+s or international agreements to +hih the 0hilippines isa signator( effeti&el( su$ets suh transations to a )ero rate' Again, asapplied to the tax $ase, suh rate does not (ield an( tax hargea$le

against the purhaser'• The seller +ho harges )ero output tax on suh transations

an also laim a refund of or a tax redit ertifiate for the VAT pre&iousl(harged $( suppliers'

Ta$ Cre%t Met&o a' Vat o' %m(ortat%o' o# goo!

• Vie+ed $roadl(, the VAT is a uniform tax ranging, at present,from 9 perent to >9 perent le&ied on e&er( importation of goods, +hether or not in the ourse of trade or $usiness, or imposed on eah sale, $arter,exhange or lease of goods or properties or on eah rendition of ser&ies

in the ourse of trade or $usiness as the( pass along the prodution anddistri$ution hain, the tax $eing limited onl( to the &alue added to suhgoods, properties or ser&ies $( the seller, transferor or lessor'

• .t is an indiret tax that ma( $e shifted or passed on to the$u(er, transferee or lessee of the goods, properties or ser&ies'

• As suh, it should $e understood not in the ontext of theperson or entit( that is primaril(, diretl( and legall( lia$le for its pa(ment,$ut in terms of its nature as a tax on onsumption'

• The la+ that originall( imposed the VAT in the ountr(, as +ellas the su$seuent amendments of that la+, has $een dra+n from the tax 

credit method '• Dnder the present method that relies on in&oies, an entit( an

redit against or su$trat from the VAT harged on its sales or outputs theVAT paid on its purhases, inputs and imports'

• .f at the end of a taxa$le uarter the output taxes harged $( aseller are eual to the input taxes passed on $( the suppliers, no pa(mentis reuired' .t is +hen the output taxes exeed the input taxes that theexess has to $e paid'

• .f, ho+e&er, the input taxes exeed the output taxes, theexess shall $e arried o&er to the sueeding uarter or uarters'

• !hould the input taxes result from )ero-rated or effeti&el()ero-rated transations or from the auisition of apital goods, an( exesso&er the output taxes shall instead $e refunded to the taxpa(er or reditedagainst other internal re&enue taxes'

• !eagate as an entit( is exempt from internal re&enue la+s andregulations'

• This exemption o&ers both  diret and indiret taxes,stemming from the &er( nature of the VAT as a tax on onsumption, for 

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+hih the diret liability  is imposed on one person $ut the indiret burden ispassed on to another'

• !eagate, as an exempt entit(, an neither $e diretl( hargedfor the VAT on its sales nor indiretl( made to $ear, as added ost to suhsales, the eui&alent VAT on its purhases'

Vat-E$em(t

• !eagate as an entit( is exempt from internal re&enue la+s andregulations'

• This exemption o&ers both  diret and indiret taxes,stemming from the &er( nature of the VAT as a tax on onsumption, for +hih the diret liability  is imposed on one person $ut the indiret burden ispassed on to another'

• !eagate, as an exempt entit(, an neither $e diretl( hargedfor the VAT on its sales nor indiretl( made to $ear, as added ost to suh

sales, the eui&alent VAT on its purhases'• Moreo&er, the exemption is $oth express and per&asi&e for the

follo+ing reasons:

1. A 87>< states that no taxes, loal and national, shall $e imposed on$usiness esta$lishments operating +ithin the eo)one' !ine this la+does not exlude the VAT from the prohi$ition, it is deemed inluded

Moreo&er, e&en though the VAT is not imposed on the entit( $ut on thetransation, it ma( still $e passed on and, therefore, indiretl( imposedon the same entit( -- a patent irum&ention of the la+'

That no VAT shall $e imposed diretl( upon $usiness esta$lishmentsoperating +ithin the eo)one under A 87>< also means that no VATma( $e passed on and imposed indiretl(' Quando aliquid prohibetur ex directo prohibetur et per obliquum' 1hen an(thing is prohi$ited diretl(, itis also prohi$ited indiretl('

2. 1hen A 8@ +as enated to amend A 87>

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x x internal re&enue la+s and regulations x x x if $rought to the eo)onesrestrited area for manufaturing $( registered export enterprises,&of +hih respondent is one' These rules also appl( to all enterprisesregistered +ith the "0ZA prior to the effeti&it( of suh rules'

5. "xport proessing )one enterprises registered +ith the Board of .n&estments 3B2.4 under "2 ==< patentl( eno( exemption from nationalinternal re&enue taxes on imported apital euipment reasona$l(needed and exlusi&el( used for the manufature of their produts'

6. The exemption from loal and national taxes granted under A 8==8are ipso fato aorded to eo)ones' .n ase of dou$t, onflits +ithrespet to suh tax exemption pri&ilege shall $e resol&ed in fa&or of theeo)one'

8' The tax redits under A 8@@ -- gi&en for imported ra+ materials

primaril( used in the prodution of export goods, and for loall( produedra+ materials, apital euipment and spare parts used $( exporters of non-traditional produts -- shall also $e ontinuousl( eno(ed $( similar exporters +ithin the eo)one' .ndeed, the latter exporters are li%e+iseentitled to suh tax exemptions and redits'

D)CTRI*E:+ U'er t&e VAT met&o o# ta$at%o', &%& %! %'vo%e /a!e,

a' e't%ty a' !u/trat #rom t&e VAT &arge o' %t! !a"e! or out(ut!t&e VAT %t (a% o' %t! (ur&a!e!, %'(ut! a' %m(ort!.

+ Zero-rate tra'!at%o'! ge'era""y re#er to t&e e$(ort !a"e

o# goo! a' !u(("y o# !erv%e!. T&e ta$ rate %! !et at 0ero.1&e'a(("%e to t&e ta$ /a!e, !u& rate o/v%ou!"y re!u"t! %' 'o ta$&argea/"e aga%'!t t&e (ur&a!er. T&e !e""er o# !u& tra'!at%o'!&arge! 'o out(ut ta$, /ut a' "a%m a re#u' o# or a ta$ re%tert%#%ate #or t&e VAT (rev%ou!"y &arge /y !u(("%er!.

E##et%ve"y 0ero-rate tra'!at%o'!, &oever, re#er to t&e !a"e o# goo! or !u(("y o# !erv%e! to (er!o'! or e't%t%e! &o!ee$em(t%o' u'er !(e%a" "a! or %'ter'at%o'a" agreeme't! to &%&t&e P&%"%((%'e! %! a !%g'atory e##et%ve"y !u/2et! !u& tra'!at%o'!to a 0ero rate. Aga%', a! a(("%e to t&e ta$ /a!e, !u& rate oe! 'oty%e" a'y ta$ &argea/"e aga%'!t t&e (ur&a!er.T&e !e""er &o&arge! 0ero out(ut ta$ o' !u& tra'!at%o'! a' a"!o "a%m are#u' o# or a ta$ re%t ert%#%ate #or t&e VAT (rev%ou!"y &arge/y !u(("%er!.

+ T&e VAT !&a"" /e %m(o!e o' every %m(ortat%o' o# goo!,&et&er or 'ot %' t&e our!e o# trae or /u!%'e!!. T&%! %! u'"%3e VAT

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o' !a"e o# goo! or (ro(ert%e! &%& mu!t /e %' t&e our!e o# traeor /u!%'e!!. )t&er%!e, t&e (er!o'4tra'!at%o' !&a"" 'ot /e "%a/"e to(ay VAT.

+ PEZA-reg%!tere e'ter(r%!e!, &%& ou" 'ee!!ar%"y /e"oate %t&%' eo0o'e!, are VAT-e$em(t e't%t%e! 'ot /eau!e o# 

Set%o' 56 o# RA 7859 &%& %m(o!e! t&e ;< (re#ere't%a" ta$ rate o'gro!! %'ome o# PEZA-reg%!tere e'ter(r%!e! %' "%eu o# a"" ta$e!= /utrat&er /eau!e o# Set%o' > o# t&e !ame &%& e!ta/"%!&e! t&e #%t%o't&at eo0o'e! are #ore%g' terr%tory. T&e P&%"%((%'e VAT !y!tema&ere! to t&e ro!!-/orer otr%'e &%& mea'! t&at 'o VAT !&a""/e %m(o!e to #orm (art o# t&e o!t o# goo! e!t%'e #or o'!um(t%o' out!%e o# t&e terr%tor%a" /orer o# t&e ta$%'g aut&or%ty.He'e, atua" e$(ort o# goo! a' !erv%e! #rom t&e P&%"%((%'e! to a#ore%g' ou'try mu!t /e #ree o# VAT? &%"e t&o!e e!t%'e #or u!e or o'!um(t%o' %t&%' t&e P&%"%((%'e! !&a"" /e %m(o!e %t& VAT.

**.nput tax and output tax; Zero-rated sales of goods or properties: CIR v.@e'guetFACTS2n August =, >7, eput( Commissioner of .nternal e&enue, "ufraio !antosissued VAT uling #o 8- +hih delared Fthe sale of gold to Central an! is considered as export sale sub"ect to #ero$rate pursuant to %ection 1&& '()C of the *ax Code+ as amended by ,- 'o. 23/ ' B. ame out +ith at least <other issuanes reiterating the )ero-rating sale of gold to entral Ban%'espondent then sold to Central Ban% gold during August >77 to ?ul( >77> and

entered into transations that resulted in input VAT inurred in relation to thesu$et sales of gold' Beause of this, it filed appliations for tax refundsGreditsorresponding to the input VAT for the amounts of 0@7M and 0@M' .t+ere expressl( disallo+ed sine on ?anuar( >77=, VAT uling #o 99-7= +asissued stating that sales of gold to the Central Ban% shall not $e onsideredexport sales and thus su$et to >9H VAT, +hih +ithdre+, modified andsuperseded all inonsistent B. issuanes' Iater on, B. issued a defiien(assessment against respondent Benguet orp sine there +as a $alane of exess output VAT'

espondent filed three separate petitions for re&ie+ +ith CTA +herein it arguedthe retroati&e appliation of the B. ruling' CTA dismissed suh petitions sine itlaimed there +as no preudie on the part of respondent and there +as no&iolation on !e =@< #.C 3non-retroati&it( of rulings that +ould preudietaxpa(er4' CA re&ersed the deision stating that there +as finanial damage' .f respondent had %no+n suh sale +ould $e su$et to >9H VAT during the time of transations, respondent +ould ha&e passed on the ost of the input taxes to theCentral Ban%'

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ISSUE 12# respondent orporation +as preudied due to the retroati&e effetof the B. issuaneJ ESB

HELD

VAT is a perentage tax imposed at e&er( stage of the distri$ution proess on thesale, $arter, exhange or lease of goods or properties and rendition of ser&ies inthe ourse of trade or $usiness, or importation of goods--%t %! a' %'%ret ta$&%& may /e !&%#te to t&e /uyer, tra'!#eree, or "e!!ee o# t&e goo!,(ro(ert%e!, or !erv%e! 21"V", the part( diretl( lia$le for the pa(ment of the tax is the !"II"'

.n transations taxed at a >9H rate:a4 +hen at the end of an( gi&en taxa$le uarter, +hen the output VAT e$ee!the input VAT, the exess shall $e paid to the go&ernment 3!eller Iia$le to pa(

exess4$4 1hen the input VAT e$ee!  the output VAT, the exess +ould $e arriedo&er to VAT lia$ilities for sueeding uarterGs 3!eller pa(s in the next uarter44 BDT +hen transations +hih are taxed at 0ero-rate, the( 2 #2T "!DIT.# 2DT0DT TAK' .nput tax attri$uta$le to )ero-rated should $e r e#u'e or re%te against other internal re&enue taxes at o(t%o' of taxpa(er'

I' t&%! a!e, uling #o' 99-7= 3issued in >77= after the transations +ithCentral Ban%4 unilaterall( forfeited or +ithdre+ this option of respondent +hihga&e the ad&erse effet that respondent $eame the unexpeted and un+illingde$tor to the B. of the amount eui&alent to the total VAT ost of its produt3lia$ilit( it ould ha&e reo&ered from B. under )ero-rated senario or ouldha&e passed to the Central $an% if it %ne+ it +ould $e taxed at >9H during the(ears >77 to >77>4' T&u!, %t %! "ear t&at re!(o'e't !u##ere eo'om%(re2u%e &e' %t o'!ummate !a"e! o# go" to e'tra" /a'3 ere ta3e'out o# t&e 0ero-rate ategory' The hange in the &at ratings resulted in thet+in loss of its exemption from pa(ment of output VAT and opportunit( to reo&er .nput VAT and su$et it to >9H VAT +ith option to pass to Central Ban%'

D)CTRI*ES

>' .nput tax and output tax 3!ee illustration $elo+ to understandonept4

.n transations taxed at a >9H rate, +hen at the end of an( gi&en taxa$le uarter the output VAT exeeds the input VAT, the exess shall $e paid to thego&ernment; 1hen the input VAT exeeds the output VAT, the exess +ould $earried o&er to VAT lia$ilities for sueeding uarterGs' BDT +hen transations+hih are taxed at )ero-rate, the( 2 #2T "!DIT .# 2DT0DT TAK'

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• #2T": VAT is the end user of onsumer goodsGser&ies +hihultimatel( shoulders the tax as a lia$ilit( that is passed on to the end users$( the pro&iders of these goods +ho, in turn, ma( redit their o+n VATlia$ilit( 3input tax4 from the VAT pa(ments the( reei&e from final onsumer 

3output tax4 -- from ase C. &' Magsa(sa( Iines

=' Zero-related sales of goods or propertiesTransations +hih are taxed at Zero-rate o 'ot re!u"t %' a'y out(ut ta$? .nputVAT attri$uta$le to )ero-related sales ould $e  re#u'e or re%te aga%'!tot&er %'ter'a" reve'ue ta$e! at the option of the taxpa(er 

ILLUSTRATI)* )* ZER)-RATED TRA*SACTI)*S a' < VATTRA*SACTI)*S:!enario:

VAT egistered person 3taxpa(er4 purhased materials from supplier at 09'99'.nluded in this 09'99 is the 08'9 VAT passed on to him $( his supplier at the>9H output VAT 3of the supplierL so that means the $u(er pa(s the supplier the>9H suh supplier is reuired to pa(4.n this ase, The taxpa(er is allo+ed to reover t&e P7. #rom t&e @IR  inaddition to other input VAT he had inurred in relation to the )ero-ratedtransations through TAK "ED#GC".T'

L 1hen suh taxpa(er sells his E.#.!" produt in a 0ero-rate tra'!at%o'at 0>>9'99, for example, he is 'ot  reuired to pa( an( 2DT0DT &at' !o he getsthe full 0>>9'99

L 1hen suh taxpa(er sells his E.#.!" produt !u/2et to < VAT  at0>>9'99, the taxpa(er is allo+ed to reo&er @)TH %'(ut VAT o# P7. 3+hih hepaid to supplier earlier4 a' &%! out(ut VAT o# P5.7 3>9H of the 09'99 &aluehe added in addition to the 09'99 material4 $( passing /ot&  osts to the $u(er'Thus, the $u(er of the finish produt pa(s $oth input and output VAT, +hih iseui&alent of P. 308'9 0='894 o' t&e #%'%!&e (rout'

#2T": .n B2T ases, ta$(ayer &a! o(t%o' 'ot to arry a'y VAT o!t$eause in )ero-related transation, the taxpa(er is allo+ed to reo&er input tax

from B. +ithout need to pa( output tax' A# in >9H rated VAT, the taxpa(er isallo+ed to pass on $oth input and output VAT to the $u(er'

TERMS T) *)1 u'er ISSUA*CES %' t&%! a!e:. E$(ort !a"e!  - onl( diret export sales and foreign urren(

denominated sales, shall be qualified for #ero$rating 

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5. Loa" Sa"e! o# Goo!- +hih by fiction of la0  are onsideredexport sales 3ex' "xport ut( Ia+ onsidered sales of gold to Central Ban%of phil as export sale4' This is 'ot onsidered as export sale for VATpurposes

. E) *o 57: an( person +ho, in the ourse of trade or

$usiness, sells, $arters, or exhanged goods, renders ser&ies, orengages in similar transations and an( person +ho imports goods is lia$lefor out(ut VAT at rates either >9H or 9H 3)ero-rated4 depending on thelassifiation of the transation under !e >99 #.C' 0ersons registeredunder the VAT s(stem are allo+ed to reogni)e input VAT or the VAT duefrom or paid $( it in the ourse of its trade of $usiness on importation ofgoods or loal purhases of goods or ser&ie, inluding lease or use ofproperties, from a VAT-registered person'

Meaning of Nin the ourse of tradeN: La(a'ay Foo! v. CIRFACTS

!ummar(:• Iapanda( Eoods +as inorporated primaril( to engage in the

managing, promoting, administering, or assisting in an( $usiness or ati&it(of orporations, partnerships, assoiations, indi&iduals or firms'

• Thus, in extending loans to its affiliates, Iapanda( is engagedin transations inidental to its $usiness of pro&iding assistane to itsaffiliates'

• Iapanda( is sa(ing VAT anOt $e imposed on the extension of loans to its affiliates $eause itOs not done in the ourse of their $usiness'

• !C said itOs +rong and that VAT +as orretl( imposed sine

said ati&it( is in the ourse of $usiness, +hether primar( or inidental'

3!DB!TA#T.AI EACT!4Atua""y, t&ere a! a %!re(a'y /etee' t&e ta$a/"e ree%(t! (er La(a'ay! VAT retur'! a' t&e ta$a/"e ree%(t! (er e$am%'er!%'ve!t%gat%o'La(a'ay! Argume't!:

• Iapanda( su$mits that the differene represents interestinome on loans to affiliates for the (ear =999 in the amount of 0/M

• Iapanda( alleges that the disrepan( of 0@/% representsmisellaneous harges +hih +ere su$eted to VAT, $ut not inluded inthe B. omputation and the B.Os under ta%e-up of proeeds from sale of euipment in the omputation

• .n&o%ing MC @=-=99, La(a'ay (o!%t! t&at !%'e %t oe!'ot ua"%ty a! a J"e'%'g %'ve!tor, ea"er %' !eur%t%e!, #%'a'%a"%'!t%tut%o' a! e#%'e %' RR 5-5, or a'y ot&er e't%ty (er#orm%'g!%m%"ar #%'a'%'g at%v%t%e!, t&e %'tere!t %'ome o' "oa'! %t gra'te toa##%"%ate! %! 'ot !u/2et to VAT

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 CIR! Argume't!: a' SC Argume't=

• !uh interest inome is su$et to VAT pursuant to !e >9/ of Tax Code +hih learl( imposes VAT on an( person +ho renders ser&ie inthe ourse of its $usiness

• The term Pin the ourse of $usinessQ inludes transationsinidental thereto'

302C"DAI EACT!4• ?A#DA =>, =99@: Iapanda( reei&ed a Eormal Assessment

#otie, together +ith se&eral Assessment #oties, o&ering the taxa$le(ear =999 for alleged defiien( &alue added tax

• E"B' =9, =99@: The( filed a protest against the assessments,• MAC =, =99@: and also supplemental protest• A0.I =9, =99@: Iater on, Iapanda( ompleted the

su$mission of all rele&ant douments it deemed neessar( to pro&e thedefenes raised in its protest and supplemental protest• 2CT' =7, =99@: Iapanda( reei&ed from C. the Einal

eision on isputed Assessment dated 2t' =, =99@, +ithaompan(ing Amended Assessment #oties'

• .n the final deision, the VAT and !T assessments +ereredued, the final +ithholding tax assessment +as anelled

ISSUE 12# the interest inome on loans to affiliates is su$et to >9H VATES=

HELD ES• Iapanda( +as inorporated primaril( to engage in the

managing, promoting, administering, or assisting in an( $usiness or ati&it(of orporations, partnerships, assoiations, indi&iduals or firms'

• Thus, in extending loans to its affiliates, Iapanda( is engagedin transations inidental to its $usiness of pro&iding assistane to itsaffiliates'

• !e >9/ pro&ides that an( person +ho, in the ourse of tradeor $usiness, sells, $arters, exhanges, leases goods or properties, rendersser&iesR shall $e su$et to VAT

• The phrase Pin the ourse of trade or $usinessQ means theregular ondut or pursuit of a ommerial or an eonomi ati&it(,inluding transations inidental thereto

• VAT is imposed on a sale or transation entered into $( aperson in the ourse of an( trade or $usiness'

• A transation +ill $e harateri)ed as ha&ing $een entered into$( a person in the ourse of trade or $usiness if it is 3>4 regularl(

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onduted; 3=4underta%en in pursuit of a ommerial or eonomi ati&it(• Ii%e+ise, transations that are made inidental to the pursuit

of a ommerial or eonomi ati&it( are onsidered as entered into in theourse of trade or $usiness

• .nidental: primar(, neessar(

D)CTRI*E: • !e >9/ pro&ides that an( person +ho, in the ourse of trade

or $usiness, sells, $arters, exhanges, leases goods or properties, rendersser&iesR shall $e su$et to VAT

• The phrase Pin the ourse of trade or $usinessQ means theregular ondut or pursuit of a ommerial or an eonomi ati&it(,inluding transations inidental thereto

• VAT is imposed on a sale or transation entered into $( aperson in the ourse of an( trade or $usiness'

DECISI)*: VAT is imposed

Meaning of Nin the ourse of tradeN: 1ater#ro't P&%"%((%'e! v. CIRFACTS1aterfront Matan Casino otel +as assessed $( B. for defiien( taxespertaining to VAT' 1aterfront laims that the assessment +as $ased on their sales to 0ASC2 to +hih the( did not impose VAT'

ISSUE12# 0ASC2 is exempted from VAT

HELDes' 0ASC2 is exempt from the assessment or olletion of tax, in an( %ind or form, +hether national or loal'

02 #o' >

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KKK KKK KKK

3B4 *ransactions %ub"ect to ero ercent 7&89o: )ate.

- The follo+ing ser&ies performed in the 0hilippines $( VAT- registered persons

shall $e su$et to )ero perent 39Go4 rate:

KKK KKK KKK

34 !er&ies rendered to persons or entities +hose exemption under !(e%a""a!

D)CTRI*E!er&ies rendered to persons or entities +hose exemption is pro&ided $( speialla+s shall $e su$et to )ero perent 39H4 rate VAT'

Meaning of Nin the ourse of tradeN: CIR v. )'gte'goFACTS

C. assessed 2ngteno for VAT defiien( for the interest inome earned onloans extended to his affiliates for taxa$le (ear =99

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ISSUE

1G# 2ngtengo is lia$le for the defiien( VATJ

HELD#2T I.ABI"' The loan extended to .CC is not an inidental transation, not is itpart of the ordinar( ourse of trade or $usiness' Eor 2ngtengo to $e held lia$le for defiien( VAT, the transation in&ol&ed, theat of extending loan to .CC, must ha&e $een made Pin the ourse of trade or $usiness'Q P.n the ourse of trade or $usinessQ speifiall( means Pthe regular ondut or pursuit of a ommerial or eonomi ati&it(, inluding transations inidentalthereto' To onstitute as FinidentalO, it must $e Pdepending upon or appertainingto something else as primar(; something neessar(, appertaining to or depending upon another, +hih is termed the prinipal; something inidental tothe main purpose'Q .n the ourse of trade or $usiness means the regular ondut or pursuit of aommerial or an eonomi ati&it(, including transactions incidental thereto,regardless of +hether or not the person engaged therein is non-sto%, non-profitpri&ate organi)ation or go&ernment entit(' .n this ase, there is no Ptrade or $usinessQ (et at the time of the su$et

transation +ith .CC' 1hen 2ngtengo extended a loan to .CC in =99@, he +asnot (et engaged in an( trade or $usiness, as his motor(le $usiness onl(started in #o&' =99< and su$seuentl( registered +ith B. on e =99

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pursuit of a ommerial or eonomi ati&it(, inluding transations inidentalthereto' To onstitute as FinidentalO, it must $e Pdepending upon or appertainingto something else as primar(; something neessar(, appertaining to or depending upon another, +hih is termed the prinipal; something inidental tothe main purpose'Q

Meaning of Nin the ourse of tradeN: CIR v. CA K Commo'ea"t&FACTS

• Common+ealth Management and !er&ies Corporation

3C2MA!"C24, is a orporation dul( organi)ed and existingunder the la+s of the 0hilippines' .t is an affiliate of 0hilamlife,organi)ed $( the latter   to (er#orm o""et%o',o'!u"tat%ve a' ot&er te&'%a" !erv%e!, %'"u%'g#u't%o'%'g a! a' %'ter'a" au%tor , of 0hilamlife and its other 

affiliates'• B. issued an assessment to pri&ate respondent

C2MA!"C2 for e#%%e'y va"ue-ae ta$ VAT=amou't%'g to P;,>;., for taxa$le (ear >7'

• C2MA!"C2Us annual orporate inome taxretur n ending eem$er >, >7 indiated a 'et "o!! %' %t!o(erat%o'! in the amount of 0

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• CA re&ersed the CTA deision upholding that, in one asein&ol&ing the same parties ,C2MA!"C2 +as not lia$le to pa( fixed andontratorOs tax for ser&ies rendered to 0hilamlife and its affiliates,therefore sine it +as not engaged in $usiness of pro&ing ser&ies to0hilamlife and its affiliates, it +as not lia$le to pa( VAT

ISSUE• 1hether or not C2MA!"C2 +as engaged in the sale of 

ser&ies, and thus lia$le to pa( VAT thereonJ

HELD• 0etitioner a&ers that to Nengage in $usinessN and to Nengage in

the sale of ser&iesN are t+o different things' 0etitioner maintains that theser&ies rendered $( C2MA!"C2 to 0hilamlife and its affiliates, for a fee

or onsideration, are su$et to VAT' VAT %! a ta$ o' t&e va"ue

ae /y t&e (er#orma'e o# t&e !erv%e. It %!%mmater%a" &et&er (ro#%t %! er%ve #rom re'er%'gt&e !erv%e.

• 1e agree +ith the Commissioner • !etion 77 of the #ational .nternal e&enue Code of >799 to >9= of this Code

• C)MASERC) o'te'! t&at t&e term%' t&e our!e o# trae or /u!%'e!! reu%re!t&at t&e /u!%'e!! %! arr%e o' %t& a v%e to(ro#%t or "%ve"%&oo' .t a&ers that the ati&ities of the entit( must$e profit- oriented' C2MA!"C2 su$mits that it is not moti&ated $( profit,as defined $( its primar( purpose in the artiles of inorporation, statingthat it is operating o'"y o' re%m/ur!eme't-o#-o!t /a!%!, %t&out a'y(ro#%t.N 0ri&ate respondent argues that profit moti&e is material inasertaining +ho to tax for purposes of determining lia$ilit( for VAT'

• 1e disagree'• Contrar( to C2MA!"C2Us ontention the a$o&e pro&ision

larifies that e&en a  non$stoc!+ non$profit+ organi)ation or go&ernmententit(, is lia$le to pa( VAT on the sale of goods or ser&ies' VAT is a tax ontransations, imposed at e&er( stage of the distri$ution proess on the

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sale, $arter, exhange of goods or propert(, and on the performane of 

ser&ies, e&en in the a$sene of profit attri$uta$le thereto' T&e term%' t&e our!e o# trae or /u!%'e!! reu%re! t&eregu"ar o'ut or (ur!u%t o# a ommer%a" or a'eo'om% at%v%ty, regar"e!! o# &et&er or 'ott&e e't%ty %! (ro#%t-or%e'te.

• The definition of the term Nin the ourse of trade or $usinessNinorporated in the present la+ applies to all transations e&en to those

made prior to its enatment' "xeuti&e 2rder #o' =8 stated that  a'y(er!o' &o, %' t&e our!e o# trae or /u!%'e!!, !e""!,/arter! or e$&a'ge! goo! a' !erv%e!, a! a"reay"%a/"e to (ay VAT. The present la+ merel( stresses that e&en a

nonsto%, nonprofit organi)ation or go&ernment entit( is lia$le to pa( VATfor the sale of goods and ser&ies'• !etion >9 of the #ational .nternal e&enue Code of >778

defines the phrase Nsale of ser&iesN as the Nperformane of all %inds of ser&ies for others for a fee, remuneration or onsideration'N .t inludesNthe suppl( of tehnial ad&ie, assistane or ser&ies rendered inonnetion +ith tehnial management or administration of an( sientifi,industrial or ommerial underta%ing or proet

• ene, it is immaterial +hether the primar(purpose of a orporation indiates that it reei&es

pa(ments for ser&ies rendered to its affiliates on areim$ursement-on-ost $asis onl(, +ithout reali)ingprofit, for purposes of determining lia$ilit( for VAT onser&ies rendered' A! "o'g a! t&e e't%ty (rov%e!!erv%e #or a #ee, remu'erat%o' or o'!%erat%o', t&e't&e !erv%e re'ere %! !u/2et to VAT

• At an( rate, it is a rule that $eause taxes are the life$lood of the nation, statutes that allo+ exemptions are onstrued stritl( against the

grantee and li$erall( in fa&or of the go&ernment' 2ther+ise stated, an(exemption from the pa(ment of a tax must $e learl( stated in thelanguage of the la+; it annot $e merel( implied therefrom' .n the ase of VAT, !etion >97, epu$li At @=@ learl( enumerates the transationsexempted from VAT' The ser&ies rendered $( C2MA!"C2 do not fall+ithin the exemptions'

•

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D)CTRI*EMeaning of Nin the ourse of tradeN: CIR v. So'y P&%"%((%'e!FACTS+ C. issued a Ietter of Authorit( 3I2A4 authori)ing ertain re&enue offiers toexamine !on(Os $oo%s of aounts and other aounting reords regarding

re&enue taxes for Nthe period >778 and un&erified prior (ears'Q• A preliminar( assessment for >778 defiien( taxes and penalties +asissued $( the C. +hih !on( protested'• Thereafter, ating on the protest, the C. issued final assessment noties,the formal letter of demand and the details of disrepanies'• The audit (ielded assessments against !on( 0hilippines for defiien( VATon su$sid(Greim$ursement reei&ed $( !on( 0hilippines from its offshoreaffiliate, !on( .nternational !ingapore 3!.!4'• C. argues that !on(Os defiien( VAT should ha&e $een reali)ed from itsad&ertising expense'

• C. further argues that under !etion >>9 of the >778 Tax Code that anad&ertising expense dul( o&ered $( a VAT in&oie is a legitimate $usinessexpense'

ISSUE12# !on( 0hilippines is lia$le for defiien( Value Added Tax'

HELD• #2

• Court does not agree that the same su$sid( should $e su$et to the >9HVAT'• The su$sid( or reim$ursement +as not e&en exlusi&el( reser&ed for !on(Osad&ertising expense for it +as $ut an assistane or aid in &ie+ of !on(Os dire or ad&erse eonomi onditions, and +as onl( Neui&alent toQ !on(Os ad&ertisingexpenses'• Thus, there must $e a sale, $arter or exhange of goods or properties$efore an( VAT ma( $e le&ied'• Certainl(, there +as no suh sale, $arter or exhange in the su$sid( gi&en$( !.! to !on('• .t +as $ut a dole out $( !.! and not in pa(ment for goods or properties sold,$artered or exhanged $( !on('

• !on( also did not render an( ser&ie to !.! at all'• The ser&ies rendered $( the ad&ertising ompanies, paid for $( !on( using!.! dole-out, +ere for !on( and not !.!'• !.! ust ga&e assistane to !on( in the amount eui&alent to the latterOsad&ertising expense $ut ne&er reei&ed an( goods, properties or ser&ie from!on('

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D)CTRI*E+ !on( 0hilippines annot $e deemed to ha&e reei&ed thesu$sid(Greim$ursement as a fee for a VAT-taxa$le ati&it('

• The a$sene of a sale, $arter or exhange of goods or properties supportsthe non-VAT nature of the su$sid(Greim$ursement'

Vat treatment of eo)one: CIR v. To!&%/a GR ;7;86=FACTS

• Toshi$a is a domesti orporation engaged in the $usiness of manufaturing and exporting of eletri mahiner(, euipment s(stems,aessories, parts, omponents, materials and goods of all %inds'

W .t is registered +ith the 0"ZA as an "C2Z2#" exportenterprise in the Iaguna Tehnopar%, .n'

W .t is also registered in the 2 of the B. in !an 0edro,Iaguna as a VAT-taxpa(er'

• Eor the VAT returns of the first and seond uarters of >778,Toshi$a delared input VAT pa(ments on its domesti purhases of taxa$legoods and ser&ies +ith no )ero-rated sales'

• T+o (ears later, Toshi$a filed +ith the 2E 2ne-!top !hopt+o separate appliations for tax reditGrefund for the input VAT pa(mentsfor the first half of >778' The next da(, Toshi$a filed +ith the CTA a 0etitionfor e&ie+ to toll the running of the t+o-(ear presripti&e period aordingto the Tax Code of >788, as amended'

• CTA: Sranted the laim for reditGrefund of Toshi$a in theamount of 0>,/,=='9'

W The C. admitted that the export sales of Toshi$a +eresu$et to 9H VAT $ased on the Tax Code, hene Toshi$a ouldlaim tax redit or refund of input VAT'

W M $( Toshi$a: disallo+ed $( CTAW M $( C.: Toshi$a +as not entitled to reditGrefund

$eause as a 0"ZA-registered "C2Z2#" export enterprise,Toshi$a +as not su$et to VAT' The C. ontended that under !e'=@ of A 87>

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+ere VAT-exempt, not )ero-rated transations'

ISSUE1G# the C. timel( raised the issue on VAT-exemptions of Toshi$a and its exportsales

1G# the C. +as $ound $( the admission that Toshi$a +as VAT-registered and+as su$et to VAT at 9H rate

HELD• Dpon issuane of MC 8@-77, the rule +as learl( esta$lished

that follo+ing the ross-$order dotrine, $ased on the fition that eo)onesare foreign territor(, a sale $( a supplier in the ustoms territor( to a 0"ZA-registered enterprise is onsidered an export sale and therefore su$et to)ero VAT'

• Dpon the failure of the C. to timel( plead and pro&e $efore

the CTA the defenses and o$etions that Toshi$a +as VAT-exempt andthat its export sales +ere VAT-exempt transations, the C. is deemed toha&e +ai&ed the same' .t should ha&e done the same in its ans+er and notin its motion for reonsideration in the CTA'

• The C. +as li%e+ise $ound $( the ?oint !tipulation at the endof the pre-trial onferene' !uh +as appro&ed $( the CTA' The admissionha&ing $een made in a stipulation of fats at pre-trial $( the parties, it must$e treated as a udiial admission'

D)CTRI*EEailure $( the Commissioner of .nternal e&enue 3C.4 to timel( plead and pro&e$efore the CTA the defenses that Toshi$a +as VAT-exempt under epu$li At#o' 87>< and that its export sales +ere VAT-exempt under the Tax Code isdeemed a +ai&er of suh defenses'VAT treatment of eo)ones: CIR v. To!&%/a GR ;;6=FACTS

• espondent Toshi$a +as organi)ed and esta$lished as adomesti orporation, dul(-registered +ith the !eurities and "xhangeCommission

• espondent Toshi$a also registered +ith the 0hilippine"onomi Zone Authorit( 30"ZA4 as an "C2Z2#" "xport "nterprise

• espondent Toshi$a filed its VAT returns for the first andseond uarters of taxa$le (ear >77,>>,/@='99586and 0/,>=,8'7@,56  respeti&el(, or a total of 0>,=@8,9'7@

• espondent Toshi$a filed +ith the 2ne-!top !hop .nter- Agen( Tax Credit and ut( ra+$a% Center of the epartment of Einane 32E4 appliations for tax reditGrefund of its unutili)ed input VAT

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for 9> ?anuar( to > Marh >77< in the amount of 0>@,>8>6 for a total of 0>7,,@=='98

• espondent Toshi$a filed a 0etition for e&ie+ +ith CTA to tollthe running of the =-(ears presripti&e period'

• CTA ordered petitioner C. to refund, or in the alternati&e, toissue a tax redit ertifiate to respondent Toshi$a in the amount of 0>,9@/'@@'

• CA affirmed'

ISSUE +hether respondent Toshi$a is entitled to the tax reditGrefund of its inputVAT on its purhases of apital goods and ser&ies

HELD e!• An "C2Z2#" enterprise is a VAT-exempt entit(' !ales of 

goods, properties, and ser&ies $( persons from the Customs Territor( to"C2Z2#" enterprises shall $e su$et to VAT at )ero perent 39H4'• espondent Toshi$a $ases its laim for tax reditGrefund on

!etion >9788• 0etitioner C., on the other hand, opposes suh laim on

aount of !etion @'>93$4 of e&enue egulations 34 #o' 8-7/,other+ise %no+n as the VAT egulations

W efund of input taxes on apital goods shall $e allo+edonl( to the extent that suh apital goods are used in VAT taxa$le$usiness

W 0etitioner C. argues that although respondent Toshi$ama( $e a VAT-registered taxpa(er, it is not engaged in a VAT-taxa$le$usiness' Aording to petitioner C., respondent Toshi$a is atuall(VAT-exempt' !ine respondent Toshi$a is a 0"ZA-registeredenterprise, it is su$et to the fi&e perent 3/H4 preferential tax rateimposed under Chapter ..., !etion =@ of epu$li At #o' 87><• C. failed to differentiate $et+een VAT-exempt transations

from VAT-exempt entitiesW An exempt transaction, on the one hand, in&ol&es goods

or ser&ies +hih, $( their nature, are speifiall( listed in andexpressl( exempted from the VAT under the Tax Code, +ithout

regard to the tax status VAT-exempt or not of the part( to thetransation

W An exempt party , on the other hand, is a person or entit(granted VAT exemption under the Tax Code, a speial la+ or aninternational agreement to +hih the 0hilippines is a signator(, and$( &irtue of +hih its taxa$le transations $eome exempt from VAT• !etion >934 of the Tax Code of >788, as amended, relied

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upon $( petitioner C., relates to VAT-exempt transations' !etion >934of the Tax Code of >788, as amended, annot appl( to transations of respondent Toshi$a $eause although the said setion reogni)es thattransations o&ered $( speial la+s ma( $e exempt from VAT, the &er(same setion pro&ides that those falling under 0residential eree #o'

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!ales of goods, properties and ser&ies $( a VAT-registered supplier from theCustoms Territor( to an "C2Z2#" enterprise shall $e treated as export sales' .f suh sales are made $( a VAT-registered supplier, the( shall $e su$et to VAT at)ero perent 39H4!er&ies performed in 0hilippines to a eipient outside: CIR v. @urme%!ter 

FACTS

BDM".!T" A# 1A.# !CA#.#AV.A# C2#TACT2"#MAX enteredinto a foreign onsortium +ith Mitsui "ngineering, Mitsui and Co', and#A02C2 for the operation and maintenane of latterOs t+o po+er $arges' The Consortium appointed Burmeister as its oordination manager' Burmeister enmar% su$ontrated the atual operation and maintenane and theperformane of other duties +hih +ould $e done in the 0hils to Burmeister-Mindanao 3respondent4, orporation dul( organi)ed in the 0hilippines +ith

address in a&ao Cit(' .ts ser&ies +ill $e paid in foreign urren( in+ardl(remitted to the 0hils through the $an%ing s(stem' Burmeister-Mindanao sought a B. ruling to asertain the tax impliations' @IR Ru"%'g:  .t shall $e su$et to 9H VAT if it register as VAT person and itsser&ies $e paid in foreign urren( and aounted for in aordane +ith rulesof B!0' espondent hoose to register as Vat taxpa(er and filed its tax returns refleting)ero rated sales'

 Iater, the 9/-7< $eame effeti&e' Thus, respondent su$eted its sales to>9H VAT' 

 After t+o (ears, respondent +as a$le to seure VAT Ru"%'g +hih reonfirmedthe pre&ious B. uling, that its ser&ies are su$et to 9H VAT' espondent filed a laim for issuane of tax redit ertifiate +ith B.' 3"#."4

CTA and CA: ruled .E2 respondent; C. to issue tax redit ertifiate

 espondent relied in B. rulings' .!!D"1G# ser&ies rendered $( respondent to onsortium is su$et to 9H VATJ

"Ies' .t is entitled to )ero-rated status and to the refund $ut onl( for the period

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o&ered prior to the filing of the C.Os ans+er in the CTA' This is so $eauseprior, Burmeister +as a$le to seure a ruling from the B. allo+ing )ero-rating of its sales' o+e&er, suh ruling is &alid onl( until the time that the C. filed itsans+er in the CTA +hih amounted to a re&oation of the said ruling' !uhre&oation of C. annot $e made retroati&e effet if preudiial to taxpa(er as

pro&ided in !etion =@< of Tax Code' .t must $e noted, ho+e&er, that +ithout this speial irumstane, Burmeister +ould not ha&e $een entitled to a )ero-rated status' This is $eause theConsortium, +hih +as the reipient of the ser&ies rendered $( Burmeister, +asdeemed doing $usiness +ithin the 0hilippines' 

Eor ser&ies other than proessing, manufaturing or repa%ing of goods, the onsideration for +hih paid for in aepta$le foreignurren( and aounted for in aordane +ith the rules and regulations

of the B!0' Another essential ondition for ualifiation to )ero-ratingunder !etion >9=3$43=4 is that the reipient of suh ser&ies is doing$usiness outside the 0hilippines' 1hen !etion >9=3$43=4 stipulatespa(ment in Paepta$le foreign urren(Q under B!0 rules, the la+learl( en&isions the pa(er-reipient of ser&ies to $e doing $usinessoutside the 0hilippines 

.n this ase, +hile the ConsortiumOs prinipal mem$ers are non-resident foreignorporations, the Consortium itself is doing $usiness in the 0hilippinesonsidering that it has >/-(ear ontrat to operate and maintain #A02C2Os t+o>99-mega+att po+er $arges in Mindanao' ene, the transations of B1!CMindanao are not su$et to VAT at )ero perent'

D)CTRI*EEor ser&ies other than proessing, manufaturing or repa%ing of goods, theonsideration for +hih paid for in aepta$le foreign urren( and aounted for in aordane +ith the rules and regulations of the B!0' Another essentialondition for ualifiation to )ero-rating under !etion >9=3$43=4 is that thereipient of suh ser&ies is doing $usiness outside the 0hilippines'

!er&ies to persons and entities exempt under !peial Ia+s: CIR v. Ae!%te P&%"FACTS

• Aesite is the o+ner and operator of the olida( .nn Manila0a&ilion otel along Dnited #ations A&enue in Manila'

• .t leases its hotelOs premises to 0ASC2 for asinooperations' .t also aters food and $e&erages to 0ASC2Os asino patronsthrough the hotelOs restaurant outlets'

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• Aesite inurred VAT amounting to 09,>/=,7='9= from itsrental inome and sale of food and $e&erages to 0ASC2 during saidperiod'

• Aesite tried to shift the said taxes to 0ASC2 $(inorporating it in the amount assessed to 0ASC2 $ut the latter refused

to pa( the taxes on aount of its tax exempt status• Thus, Aesite paid the VAT to the C. as it feared the legal

onseuenes of non-pa(ment of the tax'• o+e&er, Aesite $elatedl( arri&ed at the onlusion that its

transation +ith 0ASC2 +as su$et to )ero rate as it +as rendered to atax-exempt entit('

• Aesite filed an administrati&e laim for refund +ith the C. $utthe latter failed to resol&e the same' Thus on =7 Ma( >77, Aesite filed apetition +ith the CTA +hih +as deided in its fa&or +hih +as affirmed $(the CA'

ISSUE• 12# 0ASC2Os tax exemption pri&ilege inludes the indiret

tax of VAT to entitle Aesite to )ero perent VAT rate; and• 12# the )ero perent 39H4 VAT rate under then !etion >9=

3$434 of the Tax Code 3no+ !etion >9 3B434 of the Tax Code of >7784legall( applies to Aesite'

HELD. ES• .t is undisputed that 0'' >/=,7='9= VAT and neither is Aesite as the latter is effeti&el(

su$et to )ero perent rate under !e' >9 B 34' 'A' @=@'• .ndeed, $( extending the exemption to entities or indi&iduals

dealing +ith 0ASC2, the legislature learl( granted exemption also fromindiret taxes' .t must $e noted that the indiret tax of VAT, as in the instantase, an $e shifted or passed to the $u(er, transferee, or lessee of thegoods, properties, or ser&ies su$et to VAT' Thus, $( extending the taxexemption to entities or indi&iduals dealing +ith 0ASC2 in asino

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operations, it is exempting 0ASC2 from $eing lia$le to indiret taxes'+ VAT e$em(t%o' e$te'! to Ae!%te• Thus, +hile it +as proper for 0ASC2 not to pa( the >9H VAT

harged $( Aesite, the latter is not lia$le for the pa(ment of it as it isexempt in this partiular transation $( operation of la+ to pa( the indiret

tax' !uh exemption falls +ithin the former !etion >9= 3$4 34 of the >788Tax Code, as amended 3no+ !e' >9 5$6 56 of 'A' @=@4, +hihpro&ides:

W !etion >9=' Value-added tax on sale of ser&ies 3a4ate and $ase of tax There shall $e le&ied, assessed andolleted, a &alue-added tax eui&alent to >9H of gross reeiptsderi&ed $( an( person engaged in the sale of ser&ies x x x;0ro&ided, that the follo+ing ser&ies performed in the 0hilippines $(VAT-registered persons shall $e su$et to 9H'

W 3$4 Transations su$et to )ero perent 39H4 rated'Y

W 34 Serv%e! re'ere to (er!o'! or e't%t%e! &o!ee$em(t%o' u'er !(e%a" "a!  or international agreements to+hih the 0hilippines is a signator( effeti&el( su$ets the suppl( of suh ser&ies to )ero 39H4 rate 3emphasis supplied4'

D)CTRI*E!ale of 0o+er generated through rene+a$le soures:  M%'a'ao Geot&erma"Part'er!&%( v. CIRFACTS

• Mindanao entered into a ontrat of Build-2perate-Transfer 3B2T4 +ith the0hilippine #ational 2il Corporation "nerg( e&elopment Corporation30#2C-"C4 for the onstrution of a geothermal po+er plant'• Dnder the B2T ontrat, 0#2C-"C shall suppl( and deli&er steam toMindanao at no ost'• Mindanao +ill on&ert the steam into eletri apait( and energ( for 0#2C-"C and shall su$seuentl( suppl( and deli&er the same to the #ational0o+er Corporation 3#0C4 in $ehalf of 0#2C-"C'• 2n ?une =, Congress enated N"letri 0o+er .ndustr( eform At of 

=99>Q 3"0.A4'• Dnder "0.A, the deli&er( and suppl( of eletri energ( $( generationompanies $eame VAT )ero-rated, +hih pre&iousl( +ere su$et to tenperent 3>9H4 VAT'• Mindanao adopted the VAT )ero-rating of the "0.A in omputing for its VATpa(a$le +hen it filed its VAT eturns, on the $elief that its sales ualif( for VAT)ero-rating'

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ISSUE12# Mindanao is ualified for VAT )ero-rating'

HELD

• #2'• The taxpa(er +as not a$le to pro&e that it is a generation ompan( ualifiedfor VAT )ero rating as reuired $( la+ - 3legal $asis: !etion >93B4384 of the>778 #.C, as amended $( 'A' #o' 78, and in relation to !etion @'>9-of #o' >93B4384 of the #.C, as

amended, the taxpa(er must $e a$le to pro&e that it is a generation ompan(and that it is engaged in the sale of po+er or fuel generated through rene+a$lesoure of energ('

D)CTRI*E• .n order to ualif( for VAT )ero-rating under !etion >93B4384 of the #.C, asamended, the taxpa(er must $e a$le to pro&e that it is a generation ompan(and that it is engaged in the sale of po+er or fuel generated through rene+a$lesoure of energ('• Mindanao failed to su$mit its "nerg( egulator( Commission 3"C4registration and Certifiate of Compliane +hih +ill sho+ that it is dul(authori)ed to operate failities used in the generation of eletriit('

VAT-exempt Transations: CIR v. P&%" Hea"t& CareFACTS

• 2n >78, C. issued VAT uling #o' =>- stating that0hilhealth, as a pro&ider of medial ser&ies, is exempt from the VATo&erage'

• 1hen A @=@ or the ne+ Tax Code +as implemented itadopted the pro&isions of VAT and "-VAT'

• 2n >777, the B. sent 0hilhealth an assessment notie for 

defiien( VAT and doumentar( stamp taxes for taxa$le (ears >77< and>778'

• After C. did not at on it, 0hilhealth filed a petition for re&ie++ith the CTA' The CTA +ithdre+ the VAT assessment' The C. then filedan appeal +ith the CA +hih +as denied'

ISSUE

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1hether 0hilhealth is su$et to VAT'

HELD• "!' !etion >9 of the #.C exempts taxpa(ers engaged in

the performane of medial, dental, hospital, and &eterinar( ser&ies from

VAT'W But, in 0hilhealthUs letter reuesting of its VAT-exempt

status, it +as held that it sho+ed 0hilhealth pro&ides medial ser&ieonl( $et+een their mem$ers and their aredited hospitals, that itonl( pro&ides for the pro&ision of pre-need health are ser&ies, itontrats the ser&ies of medial pratitioners and esta$lishmentsfor their mem$ers in the deli&er( of health ser&ies' Thus, 0hilhealthdoes not fall under the exemptions pro&ided in !etion >9, $utmerel( arranges for suh, ma%ing 0hilhealth not VAT-exempt'• The Court held that 0hilhealth ated in good faith' The term

health maintenane organi)ation +as first reorded in the 0hilippinestatute $oo%s in >77/' .t is apparent that +hen VAT uling #o' =>- +asissued in 0hilhealthUs fa&or, the term health maintenane organi)ation +asun%no+n and had no signifiane for taxation purposes' 0hilhealth,therefore, $elie&ed in good faith that it +as VAT exempt for the taxa$le(ears >77< and >778 on the $asis of VAT uling #o' =>-' The rule isthat the B. rulings ha&e no retroati&e effet +here a grossl( unfair deal+ould result to the preudie of the taxpa(er'

D)CTRI*E0hilhealth is #2T exempt $eause it sho+ed that it ontrats the ser&ies of 

medial pratitioners and esta$lishments for their mem$ers in the deli&er( of health ser&ies' .t does not fall +ithin !etion >9, $ut merel( arranges for suh,ma%ing 0hilhealth #2T VAT-exempt'VAT-exempt Transations: Herma'o !a'= m%gue" Fe/re! v. CIR  3CTA CA!"#2' >7@, Ma( >/ =9>=4FACTS:

>' 0etitioner ermano !an Miguel Ee$res Cordero Medial"duation Eoundation 3I!D ealth !ienes .nstitute or I!D-!.4 +asassessed ='

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presented +ere insuffiient@' 0etitioner maintains that it is a hospital and the sale of drugs is

part of its ser&ies'

ISSUE:1&et&er Pet%t%o'er mu!t (ay VATN ES1&et&er Pet%t%o'er %! a &o!(%ta"N *)

HELDFIRST ISSUE!C disagrees +ith C. that the drugs are o&ered $( VAT' !C held that sale of drugs or pharmaeutial items to in-patients is onsidered part of the termPhospital ser&iesQ o&ered $( the exemption from VAT under #.C !>973S4' .t isa neessar( and essential ser&ie rendered $( an( hospital' Also, the( ited

erpetual %occour ;ospital . C()  as $asis' o+e&er, petitioner is still lia$le for VAT sine the( are not a hospital as disussed $( seond issue'

SEC)*D ISSUE0etitioner failed to esta$lish $( ompetent e&idene that it is an entit( thatoperates a hospital' !>973S4 exempts taxpa(ers from VAT if the( are sellingdrugs or pharmaeutial items to %'-(at%e't! o# t&e &o!(%ta"'

 A perusal of 0etitionerOs artiles of inorporation re&eals that 0etitioner is a non-sto%, non-profit euat%o'a" orporation' Eurther, 0etitioner itself represented inthis 0etition for e&ie+ that it is a 'o'-!to3, 'o'-(ro#%t euat%o'a"

or(orat%o'' !till, 0etitioner alleges that it is engaged in pro&iding medial andhospital ser&ies' o+e&er, although its artiles of inorporation implies theoperation of a hospital, the reords of the ase and e&idene presented does notindiate so' #o+here in the reords an at least infer the fat that petitioner atuall( operates a hospital'

"&en if 0etitioner is a$le to pro&e that it operates a hospital, the( +ould still $elia$le for VAT $eause it failed to su$stantiate $( ompetent e&idene that thesale of drugs onsist of sales to %'-(at%e't!

D)CTRI*EBefore a taxpa(er ma( laim exemption, the( must first esta$lish that:

. T&ey o(erate a &o!(%ta"=' said hospital has a pharma(Gdrugstore' that the sale of drugs laimed to $e VAT exempt +as made $(

the hospital drugstore to %'-(at%e't! o# t&e &o!(%ta"Vat-exempt Transations: So'0a v. A@S-C@*

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FACTS• espondent AB!-CB# Broadasting Corporation 3AB!-CB#4

signed an Agreement 3Agreement4 +ith the Mel and ?a( Management ande&elopment Corporation 3M?MC4

• M?MC 3ating as Agent4 agreed to pro&ide !on)aOs ser&ies

exlusi&el( to AB!-CB# as talent for radio and tele&ision• M?MC +rote a letter to AB!-CB# resigning from the program

due to hanges made $( AB!-CB# +hih allegedl( is in &iolation of the Agreement' .n the same letter ser&ed as notie of resission of the Agreement'

• !on)a filed a omplaint against AB!-CB# $efore theepartment of Ia$or and "mplo(ment' !on)a omplained that AB!-CB#did not pa( his salaries, separation pa(, ser&ie inenti&e lea&e pa(, > th

month pa(, signing $onus, tra&el allo+ane and amounts due under the"mplo(ees !to% 2ption 0lan 3"!204'

• AB!-CB# filed a Motion to ismiss on the ground that noemplo(er-emplo(ee relationship existed $et+een the parties

• IA dismissed ase for la% of urisdition' !on)a is anindependent ontrator'

• #IC affirmed• CA affirmed' The alleged $reah of Agreement is a $reah of 

ontratual o$ligations ogni)a$le $( regular ourts, not $( the la$or ourts'

ISSUE 1G# CA erredJ 3Basiall( this ase is a la$or ase4

HELD #o, CA did not err' !on)a is an independent ontrator'• !C applied the four-fold test in la$or ases'

W "lements of an emplo(er-emplo(ee relationship are: 3a4the seletion and engagement of the emplo(ee; 3$4 the pa(ment of +ages; 34 the po+er of dismissal; and 3d4 the emplo(ers po+er toontrol the emplo(ee on the means and methods $( +hih the +or%is aomplished'

W The last element, the so-alled ontrol test, is the mostimportant element• The #ational .nternal e&enue Code 3#.C4 in relation to

epu$li At #o' 88>9H&alue-added tax 3VAT4 on ser&ies the( render'

• "xempted from the VAT are those under an emplo(er-emplo(ee relationship'

• This different tax treatment aorded to talents and

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$roadasters $olters the onlusion that the( are independent ontrators,pro&ided all the $asi elements of a ontratual relationship are present'

D)CTRI*EThe #ational .nternal e&enue Code 3#.C4 in relation to epu$li At #o' 88>9H &alue-added tax3VAT4 on ser&ies the( render' "xempted from the VAT are those under anemplo(er-emplo(ee relationship'

Vat-exempt Transations: PAGC)R v. CIRFACTS:

• 0ASC2 +as reated pursuant to 0residential eree 30''4

#o' >9, >788'• !imultaneous to its reation, 0'' #o' >978, 0'' #o' >77 +as issuedexpanding the sope of 0ASC2Us exemption'

• To onsolidate the la+s pertaining to the franhise and po+ersof 0ASC2, 0'' #o' >' ,xemptions. Y x x xW 3>4 Customs uties, taxes and other imposts on

importations' - All importations of euipment, &ehiles, automo$iles,$oats, ships, $arges, airraft and suh other gam$lingparaphernalia, inluding aessories or related failities, for the soleand exlusi&e use of the asinos, the proper and effiientmanagement and administration thereof and suh other lu$s,rereation or amusement plaes to $e esta$lished under and $(&irtue of this Eranhise shall $e exempt from the pa(ment of duties,taxes and other imposts, inluding all %inds of fees, le&ies, or harges of an( %ind or nature'

W Vessels andGor aessor( ferr( $oats imported or to $eimported $( an( orporation ha&ing existing ontratualarrangements +ith the Corporation, for the sole and exlusi&e use of the asino or to $e used to ser&ie the operations and reuirementsof the asino, shall li%e+ise $e totall( exempt from the pa(ment of allustoms duties, taxes and other imposts, inluding all %inds of fees,le&ies, assessments or harges of an( %ind or nature, +hether 

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#ational or Ioal'W 3=4 .nome and other taxes' - 3a4 Eranhise older: #o

tax of an( %ind or form, inome or other+ise, as +ell as fees,harges, or le&ies of +hate&er nature, +hether #ational or Ioal,shall $e assessed and olleted under this Eranhise from the

Corporation; nor shall an( form of tax or harge attah in an( +a( tothe earnings of the Corporation, exept a Eranhise Tax of fi&eperent 3/H4of the gross re&enue or earnings deri&ed $( theCorporation from its operation under this Eranhise' !uh tax shall$e due and pa(a$le uarterl( to the #ational So&ernment and shall$e in lieu of all %inds of taxes, le&ies, fees or assessments of an(%ind, nature or desription, le&ied, esta$lished, or olleted $( an(muniipal, pro&inial or national go&ernment authorit('

[ 3$4 2thers: The exemption herein granted for earnings deri&ed from the operations onduted under the

franhise, speifiall( from the pa(ment of an( tax, inome or other+ise, as +ell as an( form of harges, fees or le&ies, shallinure to the $enefit of and extend to orporation3s4,assoiation3s4, agen(3ies4, or indi&idual3s4 +ith +hom theCorporation or operator has an( ontratual relationship inonnetion +ith the operations of the asino3s4 authori)ed to$e onduted under this Eranhise and to those reei&ingompensation or other remuneration from the Corporation asa result of essential failities furnished andGor tehnialser&ies rendered to the Corporation or operator'

W The fee or remuneration of foreign entertainersontrated $( the Corporation or operator in pursuane of thispro&ision shall $e free of an( tax'

W 34

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[ 3$4 So&ernment $onds, seurities, treasur( notes,or go&ernment de$entures; or 

[ 34 B2.-registered or export-orientedorporation3s4'8

• 0ASC2Us tax exemption +as remo&ed in ?une >7@ through

0'' #o' >7>, $ut it +as later restored $( Ietter of .nstrution #o' >@9,+hih +as issued in !eptem$er >7@'

• 2n ?anuar( >, >77, 'A' #o' @=@, other+ise %no+n as the'ational (nternal )eenue Code of 1== , too% effet' !etion =8 34 of 'A'#o' @=@ pro&ides that go&ernment-o+ned and ontrolled orporations3S2CCs4 shall pa( orporate inome tax, exept petitioner 0ASC2, theSo&ernment !er&ie and .nsurane Corporation, the !oial !eurit(!(stem, the 0hilippine ealth .nsurane Corporation, and the 0hilippineCharit( !+eepsta%es 2ffie, thus:

W 34 >oernment$o0ned or Controlled Corporations+

 ?gencies or (nstrumentalities' - The pro&isions of existing speialgeneral la+s to the ontrar( not+ithstanding, all orporations,agenies or instrumentalities o+ned and ontrolled $( theSo&ernment, exept the So&ernment !er&ie and .nsuraneCorporation 3S!.!4, the !oial !eurit( !(stem 3!!!4, the0hilippine ealth .nsurane Corporation 30.C4, the 0hilippineCharit( !+eepsta%es 2ffie 30C!24, and the 0hilippine Amusementand Saming Corporation 30ASC24, shall pa( suh rate of tax upontheir taxa$le inome as are imposed $( this !etion uponorporations or assoiations engaged in similar $usiness, industr(,

or ati&it('• 1ith the enatment of 'A' #o' 78 on Ma( =@, =99/, ertainsetions of the #ational .nternal e&enue Code of >778 +ere amended'The partiular amendment that is at issue in this ase is !etion > of 'A'#o' 78, +hih amended !etion =8 34 of the #ational .nternal e&enueCode of >778 $( exluding 0ASC2 from the enumeration of S2CCs thatare exempt from pa(ment of orporate inome tax, thus:

W 34 >oernment$o0ned or Controlled Corporations+ ?gencies or (nstrumentalities.  - The pro&isions of existing speialgeneral la+s to the ontrar( not+ithstanding, all orporations,agenies, or instrumentalities o+ned and ontrolled $( theSo&ernment, exept the So&ernment !er&ie and .nsuraneCorporation 3S!.!4, the !oial !eurit( !(stem 3!!!4, the0hilippine ealth .nsurane Corporation 30.C4, and the 0hilippineCharit( !+eepsta%es 2ffie 30C!24, shall pa( suh rate of tax upontheir taxa$le inome as are imposed $( this !etion uponorporations or assoiations engaged in similar $usiness, industr(,or ati&it('

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• ifferent groups ame to this Court &ia petitions for certiorari and prohi$ition assailing the &alidit( and onstitutionalit( of 'A' #o' 78,

ISSUE: 12# 0ASC2 is still exempt from VAT +ith the enatment of 'A' #o'78'

HELD: "!• Anent the &alidit( of #o' >9H VAT is in&alid for $eing ontrar( to'A' #o' 78' #o+here in 'A' #o' 78 is it pro&ided that petitioner an$e su$eted to VAT' 'A' #o' 78 is lear onl( as to the remo&al of petitionerUs exemption from the pa(ment of orporate inome tax, +hih+as alread( addressed a$o&e $( this Court'

 As pointed out $( the 2!S, 'A' #o' 78 itself exemptspetitioner from VAT pursuant to !etion 8 3%4 thereof, +hihreads:

!e' 8' !etion >97 of the same Code, as amended, is here$(further amended to read as follo+s:!etion >97' ,xempt *ransactions' - 3>4 !u$et to thepro&isions of !u$setion 3=4 hereof, the follo+ing transationsshall $e exempt from the &alue-added tax:x x x x3%4 Transations +hih are exempt under internationalagreements to +hih the 0hilippines is a signator( or under speial la+s, exept 0residential eree #o' /=7'

• 0etitioner is exempt from the pa(ment of VAT, $eause

0ASC2Os harter, 0'' #o' >9 3B4 34 of 'A'#o' @=@, thus:

5'A' #o' 786, !"C'

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x x x x34 !er&ies rendered to persons or entities +hose exemptionunder speial la+s or international agreements to +hih the0hilippines is a signator( effeti&el( su$ets the suppl( of suhser&ies to )ero perent 39H4 rate;

x x x x• As pointed out $( petitioner, although 'A' #o' 78

introdued amendments to !etion >9 of 'A' #o' @=@ $( imposing VATon other ser&ies not pre&iousl( o&ered, it did not amend the portion of !etion >9 3B4 34 that su$ets to )ero perent rate ser&ies performed$( VAT-registered persons to persons or entities +hose exemption under speial la+s or international agreements to +hih the 0hilippines is asignator( effeti&el( su$ets the suppl( of suh ser&ies to 9H rate'

• 0etitionerUs exemption from VAT under !etion >9 3B4 34 of 'A' #o' @=@ has $een thoroughl( and extensi&el( disussed in

Commissioner of (nternal )eenue .   ?cesite @hilippines: ;otel Corporation. The Court ruled that 0ASC2 and Aesite +ere $oth exemptfrom pa(ing VAT, thus:

x x x x0ASC2 is exempt from pa(ment of indiret taxes.t is undisputed that 0'' >' ,xemptions' Yx x x x

3=4 (ncome and other taxes' - 3a4 Eranhise older: #o tax of an( %ind or form, inome or other+ise, as +ell as fees, hargesor le&ies of +hate&er nature, +hether #ational or Ioal, shall $eassessed and olleted under this Eranhise from theCorporation; nor shall an( form of tax or harge attah in an(+a( to the earnings of the Corporation, exept a Eranhise Taxof fi&e 3/H4 perent of the gross re&enue or earnings deri&ed $(the Corporation from its operation under this Eranhise' !uhtax shall $e due and pa(a$le uarterl( to the #ationalSo&ernment and shall $e in lieu of all %inds of taxes, le&ies, feesor assessments of an( %ind, nature or desription, le&ied,esta$lished or olleted $( an( muniipal, pro&inial, or nationalgo&ernment authorit('3$4 -thers: The exemptions herein granted for earnings deri&edfrom the operations onduted under the franhise speifiall(from the pa(ment of an( tax, inome or other+ise, as +ell asan( form of harges, fees or le&ies, shall inure to the $enefit of and extend to orporation3s4, assoiation3s4, agen(3ies4, or 

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indi&idual3s4 +ith +hom the Corporation or operator has an(ontratual relationship in onnetion +ith the operations of theasino3s4 authori)ed to $e onduted under this Eranhise andto those reei&ing ompensation or other remuneration from theCorporation or operator as a result of essential failities

furnished andGor tehnial ser&ies rendered to the Corporationor operator'

• A lose srutin( of the a$o&e pro&isos learl( gi&es 0ASC2a $lan%et exemption to taxes +ith no distintion on +hether the taxes arediret or indiret' 1e are one +ith the CA ruling that 0ASC2 is alsoexempt from indiret taxes, li%e VAT, as follo+s:

• Dnder the a$o&e pro&ision 5!etion > 3=4 3$4 of 0'' >/=,7='9= VAT and neither is Aesite as the latter is effeti&el( su$et to)ero perent rate under !e' >9 B 34, 'A' @=@' 3"mphasis supplied'4

• .ndeed, $( extending the exemption to entities or indi&idualsdealing +ith 0ASC2, the legislature learl( granted exemption also from

indiret taxes'• .t must $e noted that the indiret tax of VAT, as in the instantase, an $e shifted or passed to the $u(er, transferee, or lessee of thegoods, properties, or ser&ies su$et to VAT'

• Thus, $( extending the tax exemption to entities or indi&idualsdealing +ith 0ASC2 in asino operations, it is exempting 0ASC2 from$eing lia$le to indiret taxes'

• The manner of harging VAT does not ma%e 0ASC2 lia$le tosaid tax'

• .t is true that VAT an either $e inorporated in the &alue of thegoods, properties, or ser&ies sold or leased, in +hih ase it is omputedas >G>> of suh &alue, or harged as an additional >9H to the &alue' Veril(,the seller or lessor has the option to follo+ either +a( in harging its lientsand ustomer' .n the instant ase, Aesite follo+ed the latter method, thatis, harging an additional >9H of the gross sales and rentals' Be that as itma(, the use of either method, and in partiular, the first method, does notdenigrate the fat that 0ASC2 is exempt from an indiret tax, li%e VAT'

• !ine 0ASC2 is exempt from VAT under 'A' #o' 78, the

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B. exeeded its authorit( in su$eting 0ASC2 to >9H VAT under #o' >9, #.C' .t ontends that the nature of the$usiness of pa+nshop does not fall under Pser&ieQ as defined under the IegalThesaurus of 1illiam Burton: 

Paommodate, administer to, ad&ane, afford, aid, assist,attend, $e of use, are for, ome to the aid of, ommodere,ompl(, onfer a $enefit, ontri$ute to, ooperate, deser&ire,disharge oneUs dut(, do a ser&ie, do oneUs $idding, fill anoffie, for+ard, furnish aid, furnish assistane, gi&e help, lend,aid, minister to, promote, render help, ser&ire, su$mit, suor,suppl( aid, ta%e are of, tend, +ait on, +or% for'Q

ISSUE:1hether pa+nshops are lia$le to pa( VATJ

HELD:0etitioner is not lia$le for VAT for the tax (ear >777' 

The Court, in Airst lanters a0nshop+ (nc. . Commissioner of (nternal )eenue, held that:

PR'prior to the passage of the "VAT Ia+ in >77@, pa+nshops+ere treated as lending in&estors su$et to lending in&estorUstax' !u$seuentl(, +ith the CourtUs ruling in Ihuillier,pa+nshops +ere then treated as VAT-a$le enterprises under the general lassifiation of Nsale or exhange of ser&iesN

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under !etion >9 3A4 of the Tax Code of >778, as amended''A' #o' 7= 5+hih +as passed in 566 finall( "a!!%#%e(a'!&o(! a! )t&er *o'- /a'3 F%'a'%a" I'terme%ar%e!. x x x x

 %t& t&e e'atme't o# R.A. *o. 85> %' 56, the ser&iesof $an%s, non-$an% finanial intermediaries, finaneompanies, and other finanial intermediaries not performinguasi-$an%ing funtions +ere speifiall( exempted from VAT,and t&e < to ;< (ere'tage ta$ o' gro!! ree%(t! o'ot&er 'o'-/a'3 #%'a'%a" %'terme%ar%e! a! re%m(o!eu'er Set%o' 55 o# t&e Ta$ Coe o# 887. 

 At the time of the disputed assessment, that is, for the (ear 

=999, pa+nshops +ere not su$et to >9H VAT under thegeneral pro&ision on Nsale or exhange of ser&iesN as definedunder !etion >9 3A4 of the Tax Code of >778, +hih states:NUsale or exhange of ser&iesU means the performane of all%inds of ser&ies in the 0hilippines for others for a fee,remuneration or onsideration ' ' ' 'N .nstead, due to the speifinature of its $usiness, pa+nshops +ere then su$et to >9HVAT under the ategor( of non-$an% finanial intermediaries'

Coming no+ to the issue at hand Y S%'e (et%t%o'er %! a 'o'-/a'3 #%'a'%a" %'terme%ary, %t %! !u/2et to "< VAT #or t&eta$ year! 889 to 55? ho+e&er, +ith the le&(, assessmentand olletion of VAT from non-$an% finanial intermediaries$eing speifiall( e#erre /y "a, then petitioner is not lia$lefor VAT during these tax (ears' But %t& t&e #u""%m("eme'tat%o' o# t&e VAT !y!tem o' 'o'-/a'3 #%'a'%a"%'terme%ar%e! !tart%'g Qa'uary , 5, petitioner is lia$lefor >9H VAT for said tax (ear' And /eg%''%'g 56 u( to t&e(re!e't, $( &irtue of 'A' #o' 7=, petitioner is no longer lia$le for VAT $ut it is !u/2et to (ere'tage ta$ o' gro!!ree%(t! #rom < to ;

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general lassifiation of Psale or exhange of ser&iesQ' A 7=, +hih +asenated in =99@, lassified pa+nshops as Pother non-$a% finanialintermediariesQ and is su$et to the 9H to /H perentage tax on gross reeipts'0urhasesG .mportations of apital goods: Taga'%to M%'%'g v. CIRFACTS

Taganito Mining is primaril( engaged in $usiness of exloring, extrating, mining,selling and exporting preious metals and all %inds of ores, metals, and their $(-produts, filed through the B. omputeri)ed filing s(stem' .t filed its ]uarterl(VAT eturns in =99< and then filed an Amended one in 2to$er =99< for the >stand =nd uarter of =99< and on Marh =99 for the @th uarter of =99>= +hih applied tolaims for tax redit ertifiates and tax refunds arising from sales of VATregistered persons that are )ero-rated or effeti&el( )ero-rated 3unutili)edredita$le input VAT4 and 'ot !etion ==7 of the #.C'

 Aording to !etion >>=3A4, the taxpa(er ma(, +ithin = (ears after the lose of the taxa$le uarter +hen the sales +ere made, ia an administrati&e laim +iththe C., appl( for the issuane of a tax redit ertifiate or refund of redita$leinput tax due or paid attri$uta$le to suh sales' And under !etion >>=34, theC. mu!t t&e' at o' t&e "a%m %t&%' 5 ay! #rom t&e !u/m%!!%o' o# t&eta$(ayer! om("ete oume't!. 

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.n ase of 3a4 a full or partial denial $( the C. of the laim, or 3$4 the C.Osfailure to at on the laim +ithin >=9 da(s, the taxpa(er ma( file a udiial laimvia a' a((ea"  +ith the CTA of the C. deision or u'ate "a%m, %t&%' ay! a= #rom ree%(t o# t&e e%!%o'? or /= a#ter t&e e$(%rat%o' o# t&e 5-ay (er%o. 

!etion ==7 pertains to the reo&er( of taxes erroneousl(, illegall(, or exessi&el(olleted' %an )oque stressed that Pinput VAT is not Fexessi&el(O olleted asunderstood under !etion ==7 $eause, at the time the input VAT is olleted,the amount paid is orret and proper'Q .t is, therefore, !etion >>= +hih appliesspeifiall( +ith regard to laiming a refund or tax redit for unutili)ed redita$leinput VAT'Dpholding the ruling in  ?ichi , %an )oque  held that the >=99-da( periodpresri$ed under !etion >>=34 mandator( and urisditional' The urisdition of the CTA o&er deisions or ination of the C. is onl( a((e""ate  %' 'ature and,

thus, neessaril( reuires the prior filing of an administrati&e ase $efore the C.under !etion >>=' The CTA an onl( auire urisdition o&er a ase after theC. has rendered its deision, or after the lapse of the period for the C. to at,in +hih ase suh ination is onsidered a denial' A (et%t%o' #%"e (r%or to t&e"a(!e o# t&e 5-ay (er%o (re!r%/e u'er !a% Set%o' ou" /e(remature #or v%o"at%'g t&e otr%'e o' t&e e$&au!t%o' o# am%'%!trat%vereme%e!.

There is, ho+e&er, an e$e(t%o' to the mandator( and urisditional nature of the>=99-da( period' The Court in %an )oque noted that B. uling #o' A-@7-9, dated eem$er >9, =99, expressl( stated that the Ptaxpa(er-laimant need'ot +ait for the lapse of the >=9-da( period $efore it ould see% udiial relief +iththe CTA $( +a( of 0etition for e&ie+'Q ene, taxpa(ers an rel( on B. uling#o' A-@7-9 from the time of its issuane on Deem/er , 5 u(  to itsre&ersal $( this Court in ?ichi   on )to/er 9, 5, +here it +as held that the>=99-da( period +as mandator( and urisditional'

TD!, the S"#"AI DI" .!: the >=99-da( period is mandator( and urisditional from the effeti&it( of the >778 #.C on ?anuar( >, >77, up to thepresent'T" "KC"0T.2# .!: udiial laims filed from Deem/er , 5 to )to/er 

9, 5 need not +ait for the exhaustion of the >=9-da( period'.# T.! CA!": Taganito filed its udiial laim +ith the CTA on A(r%" 7, 5>,learl( +ithin the period of exeption of eem$er >9, =99 to 2to$er 9'TD!, .ts udiial laim +as, therefore, 'ot prematurel( filed'

Su##%%e'y o# C"a%m:Dnder !etions >>93A4 and >>3A4 of the #.C, an( input tax that is su$et of a

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laim for refund must $e e&idened $( a VAT in&oie or offiial reeipt' 1ithregard to the %m(ortat%o' o# goo! or (ro(ert%e!, ho+e&er, !etion @'>>9- of '' #o' >>= that applies, this, the>=9 9 da( period presri$ed therein is mandator( and urisditional innature'

' Ta%e note, ho+e&er, that As an exeption to the mandator(and urisditional nature of the >=9 9 da( period, udiial laims #%"e#rom  the issuane of B. DI.#S A-@7-9 on Deem/er , 5

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u't%" its re&ersal in C. &' A.C. E2S.#S C2 on )to/er 9, 5, neednot +ait for the lapse of the >=9 9 da( period in onsonane +ith thepriniple of euita$le estoppel'

Transational .nput Tax Credits: Fort @o'%#a%o v. CIR S >8/89, >99/ ^>>97=, #o& >7 =9>@

FACTS0etitioner +as a real estate de&eloper that $ought from the national go&ernmenta parel of land that used to $e the Eort Bonifaio militar( reser&ation' At the timeof the said sale there +as as (et no VAT imposed so 0etitioner did not pa( an(VAT on its purhase' !u$seuentl(, 0etitioner sold t+o parels of land to Metro0aifi Corp' .n reporting the said sale for VAT purposes 3$eause the VAT hadalread( $een imposed in the interim4, 0etitioner laimed transitional input VATorresponding to its in&entor( of land' The B. disallo+ed the laim of presumpti&e input VAT and there$( assessed 0etitioner for defiien( VAT'

ISSUE.s 0etitioner entitled to laim the transitional input VAT on its sale of realproperties gi&en its nature as a real estate dealer and if so 3i4 is the transitionalinput VAT applied onl( to the impro&ements on the real propert( or is it applied onthe &alue of the entire real propert( and 3ii4 should there ha&e $een a pre&ioustax pa(ment for the transitional input VAT to $e redita$leJ

HELD"!' 0etitioner is entitled to laim transitional input VAT $ased on the &alue of not onl( the impro&ements $ut on the &alue of the entire real propert( andregardless of +hether there +as in fat atual pa(ment on the purhase of the

real propert( or not'

The amendments to the VAT la+ do not sho+ an( intention to ma%e those in thereal estate $usiness su$et to a different treatment from those engaged in thesale of other goods or properties or in an( other ommerial trade or $usiness'2n the sope of the $asis for determining the a&aila$le transitional input VAT, theC. has no po+er to limit the meaning and o&erage of the term NgoodsN in!etion >9/ of the Tax Code +ithout statutor( authorit( or $asis' The transitionalinput tax redit operates to $enefit ne+l( VAT-registered persons, +hether or notthe( pre&iousl( paid taxes in the auisition of their $eginning in&entor( of goods,materials and supplies

D)CTRI*E0etitioner is entitled to laim transitional input VAT $ased on the &alue of not onl(the impro&ements $ut on the &alue of the entire real propert( and regardless of +hether there +as in fat atual pa(ment on the purhase of the real propert( or not'

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 ACC"#TD" & C. 3from re&ie+er4

EACT!:

Taxpa(er filed an appliation for refund of unutili)ed input taxes alloated to its)ero-rated sale of ser&ies to foreign lients' .n order to pro&e that its sales areVAT )ero-rated, taxpa(er presented as e&idene the 2ffiial eeipts, Billing!tatements, Memo .n&oies, eei&a$le, Memo .n&oies-0a(a$le and Ban%!tatements' Taxpa(er argued that these douments sho+ that the )ero-ratedsales +ere paid in foreign urren( and dul( aounted for in aordane +iththe rules and regulations of the Bang%o !entral ng 0ilipinas 3B!04'

"I:

The Court ruled that for sale of ser&ies to $e VAT )ero-rated under !etion>93B4 of the #.C, the reipient of ser&ie must $e doing $usiness outside the0hilippines' Aording to the Court, the douments presented $( taxpa(er merel(su$stantiated the existene of sales, reeipt of foreign urren( pa(ments andin+ard remittane of the proeeds of suh sales' There is no e&idene that thelients +ere doing $usiness outside the 0hilippines' Aordingl(, the Courtdenied the laim on the ground that no e&idene +as presented to pro&e the fatthat the foreign lients to +hom the taxpa(er rendered ser&ies are lients doing$usiness outside the 0hilippines

2CT.#":

Eor VAT )ero-rating of ser&ies rendered to non-resident foreign orporationunder !etion >93B433=4 of the #.C, it is not enough that the reipient of ser&ies $e pro&en to $e a foreign orporation, it must $e pro&en to $e a non-resident foreign orporation'