The Supreme Court of the Philippines denied Eastern Telecommunications Philippines, Inc.'s (ETPI) claim for a refund of excess input VAT attributable to its zero-rated sales from 1999 to 2000. While ETPI and the Commissioner of Internal Revenue agreed on the amounts of excess input VAT reported, the Court ruled that ETPI failed to meet the invoicing requirements to claim a VAT refund. Specifically, Revenue Regulations No. 7-95 requires taxpayers to imprint the word "zero-rated" on invoices or receipts for zero-rated sales. As ETPI did not do this, its claim for refund was denied even though it was engaged in zero-rated telecommunications services. The Court affirmed the requirement as reasonable and in accordance
The Supreme Court of the Philippines denied Eastern Telecommunications Philippines, Inc.'s (ETPI) claim for a refund of excess input VAT attributable to its zero-rated sales from 1999 to 2000. While ETPI and the Commissioner of Internal Revenue agreed on the amounts of excess input VAT reported, the Court ruled that ETPI failed to meet the invoicing requirements to claim a VAT refund. Specifically, Revenue Regulations No. 7-95 requires taxpayers to imprint the word "zero-rated" on invoices or receipts for zero-rated sales. As ETPI did not do this, its claim for refund was denied even though it was engaged in zero-rated telecommunications services. The Court affirmed the requirement as reasonable and in accordance
The Supreme Court of the Philippines denied Eastern Telecommunications Philippines, Inc.'s (ETPI) claim for a refund of excess input VAT attributable to its zero-rated sales from 1999 to 2000. While ETPI and the Commissioner of Internal Revenue agreed on the amounts of excess input VAT reported, the Court ruled that ETPI failed to meet the invoicing requirements to claim a VAT refund. Specifically, Revenue Regulations No. 7-95 requires taxpayers to imprint the word "zero-rated" on invoices or receipts for zero-rated sales. As ETPI did not do this, its claim for refund was denied even though it was engaged in zero-rated telecommunications services. The Court affirmed the requirement as reasonable and in accordance
The Supreme Court of the Philippines denied Eastern Telecommunications Philippines, Inc.'s (ETPI) claim for a refund of excess input VAT attributable to its zero-rated sales from 1999 to 2000. While ETPI and the Commissioner of Internal Revenue agreed on the amounts of excess input VAT reported, the Court ruled that ETPI failed to meet the invoicing requirements to claim a VAT refund. Specifically, Revenue Regulations No. 7-95 requires taxpayers to imprint the word "zero-rated" on invoices or receipts for zero-rated sales. As ETPI did not do this, its claim for refund was denied even though it was engaged in zero-rated telecommunications services. The Court affirmed the requirement as reasonable and in accordance
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Imprinting of the word zero-rated on the invoices or receipts is required
EASTERN TELECOMMUNICA TIONS PHILIPPINES, INC., v. THE
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 168856, 29 August 2012 MENDOZA, J.: Facts: Petitioner Eastern Telecommunications Philippines, Inc. (ETPI) is a duly authorized corporation engaged in telecommunications services by virtue of a legislative franchise. To broaden the coverage of its distribution of telecommunications services, it executed several interconnection agreements with local carriers for the receipt of foreign calls relayed by it and the distribution of such calls to the intended local end-receiver. From these services to non-resident foreign telecommunications companies, ETPI generates foreign currency revenues, which are inwardly remitted in accordance with the rules and regulations of the BSP to its US dollar accounts in banks. ETPI seasonably filed its Quarterly Value-Added Tax (VAT) Returns for the year 1999, but these were later amended on February 22, 2001.Both ETPI and respondent Commissioner of Internal Revenue (CIR) confirmed the veracity of the entries under Excess Input VAT. Of the total excess input tax for the period from January 1999 to December 1999, ETPI claims that the following are allocable to its zero- rated transactions: First Quarter-P 6,020,246.15, Second- 5,394,646.08, Third- 5,533,129.35, Fourth- 6,122,890.17. Believing that it is entitled to a refund for the unutilized input VAT attributable to its zero-rated sales, ETPI filed with the Bureau of Internal Revenue (BIR) an administrative claim for refund and/or tax credit in the amount of P 23,070,911.75 representing excess input VAT derived from its zero-rated sales for the period from January 1999 to December 1999. On March 26, 2001, without waiting for the decision of the BIR, ETPI filed a petition for review before the Court of Tax Appeals (CTA) to toll the running of the two-year prescriptive period. The CTA denied the petition for lack of merit, finding that ETPI failed to imprint the word zero-rated on the face of its VAT invoices or receipts, in violation of Revenue Regulations No. 7-95. In addition, ETPI failed to substantiate its taxable and exempt sales, the verification of which was not included in the examination of the commissioned independent certified public accountant. ETPI elevated the case to the CTA-En Banc, which dismiss the petition and affirming the decision of the CTA-Division. Issue:
Whether ETPIs failure to imprint the word zero-rated on its invoices or
receipts is fatal to its claim for tax refund or tax credit for excess input VAT? Held: Yes. Section 244 of the NIRC explicitly grants the Secretary of Finance the authority to promulgate the necessary rules and regulations for the effective enforcement of the provisions of the tax code. Consequently, the following invoicing requirements enumerated in Section 4.108-1 of Revenue Regulations No. 7-95 must be observed by all VAT-registered taxpayers: Sec. 4.108-1. Invoicing Requirements. All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: xxx 5. the word zero-rated imprinted on the invoice covering zero-rated sales; The need for taxpayers to indicate in their invoices and receipts the fact that they are zero-rated or that its transactions are zero-rated became more apparent upon the amendment of the tax code. The Court has consistently held that the absence of the word zero-rated on the invoices and receipts of a taxpayer will result in the denial of the claim for tax refund. In Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal Revenue,21 the Court affirmed the decision of the CTA denying a claim by petitioner for refund on input VAT attributable to zero-rated sales for its failure to print the word zero-rated on its invoices, ratiocinating that: Section 4.108-1 of RR 7-95 proceeds from the rulemaking authority granted to the Secretary of Finance under Section 245 of the 1977 NIRC (Presidential Decree 1158) for the efficient enforcement of the tax code and of course its amendments. The requirement is reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services. As aptly explained by the CTAs First Division, the appearance of the word "zero-rated" on the face of invoices covering zerorated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually paid. Further, the printing of the word zero-rated on the invoice helps segregate sales that are subject to 10% (now 12%) VAT from those sales that are zero-rated. ETPI should be reminded of the well-established rule that tax refunds, which are in the nature of tax exemptions, are construed strictly against the taxpayer and liberally in favor of the government. This is because taxes are the lifeblood of the nation. Thus, the burden of proof is upon the claimant of the tax refund to prove the factual basis of his claim. Unfortunately, ETPI failed to discharge this burden. The CIR is correct in pointing out that ETPI is engaged in mixed
transactions and, as a result, its claim for refund covers not only its zerorated sales but also its taxable domestic sales and exempt sales. Therefore, it is only reasonable to require ETPI to present evidence in order to substantiate its claim for input VAT. Hence, petition is denied.
