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    Bir Ruling Da (Vat 050) 282 09

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    doraemoan
    The Bureau of Internal Revenue (BIR) issued a ruling in response to Maple Resources Development Corporation's request regarding value-added tax (VAT) obligations. The BIR ruled that: 1) The taking of capital assets and non-trade inventories by creditors is deemed a sale subject to 12% VAT based on acquisition cost or market price, whichever is lower; 2) Input taxes can be credited against output tax obligations after verification by the BIR; and 3) Any excess input taxes may be refunded after obtaining a tax credit certificate from the BIR.

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    Bir Ruling Da (Vat 050) 282 09

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    doraemoan
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    The Bureau of Internal Revenue (BIR) issued a ruling in response to Maple Resources Development Corporation's request regarding value-added tax (VAT) obligations. The BIR ruled that: 1) The taking of capital assets and non-trade inventories by creditors is deemed a sale subject to 12% VAT based on acquisition cost or market price, whichever is lower; 2) Input taxes can be credited against output tax obligations after verification by the BIR; and 3) Any excess input taxes may be refunded after obtaining a tax credit certificate from the BIR.

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    The Bureau of Internal Revenue (BIR) issued a ruling in response to Maple Resources Development Corporation's request regarding value-added tax (VAT) obligations. The BIR ruled that: 1) The taking of capital assets and non-trade inventories by creditors is deemed a sale subject to 12% VAT based on acquisition cost or market price, whichever is lower; 2) Input taxes can be credited against output tax obligations after verification by the BIR; and 3) Any excess input taxes may be refunded after obtaining a tax credit certificate from the BIR.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    56 views3 pages

    Bir Ruling Da (Vat 050) 282 09

    Uploaded by

    doraemoan
    The Bureau of Internal Revenue (BIR) issued a ruling in response to Maple Resources Development Corporation's request regarding value-added tax (VAT) obligations. The BIR ruled that: 1) The taking of capital assets and non-trade inventories by creditors is deemed a sale subject to 12% VAT based on acquisition cost or market price, whichever is lower; 2) Input taxes can be credited against output tax obligations after verification by the BIR; and 3) Any excess input taxes may be refunded after obtaining a tax credit certificate from the BIR.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    June 5, 2009

    BIR RULING [DA-(VAT-050) 282-09]

    110; 112; BIR Ruling No. 415-93

    P.L. Roldan Accounting Office


    Unit 2806 Jollibee Plaza Condominium
    F. Ortigas, Jr. Road
    Ortigas Center, Pasig City

    Attention: Mr. Pedro Q. Roldan, Sr.

    Gentlemen :

    This refers to your letter dated October 23, 2008 requesting, in behalf of your
    client, Maple Resources Development Corporation, a company engaged in the business
    of wood processing, lumbering & wood-working, for a ruling on the following:
    1. Were the capital assets and company's non-trade inventories taken by
    creditors subject to value-added tax (Output tax)?
    2. Could the Company offset the accumulated input taxes against its
    obligation to the Government (Bureau of Internal Revenue)?
    3. Could the company ask for refund of the excess input taxes after applying
    the latter against its obligations?
    It is represented that the Company imported its raw materials from foreign
    countries and paid the value-added tax (input taxes) to the appropriate district of the
    Bureau of Internal Revenue, though the sellers were foreigners and not covered by the
    Laws of the Philippine government; that the Company has accumulated input taxes, but
    unfortunately, the Company stopped its operation two (2) years ago due to unfavorable
    economic conditions in our country, lack of raw materials and high exchange rate; that
    the Company was left with no income thus, cannot pay anymore its payables to its
    creditors; and that the Company's capital assets and defective company's non-trade
    inventories were taken by creditors.
    In reply, please be informed as follows:
    Section 106 (B) of the Tax Code of 1997 provides viz.:
    "SEC 106. Value-Added Tax on Sale of Goods or Properties. —

    xxx xxx xxx


    (B) Transactions Deemed Sale. — the following transactions shall be deemed
    sale:

    (2) Distribution or transfer to:

    (a) Shareholders or investors as share in the profits


    of the VAT-registered persons; or

    (b) Creditors in payment of debt.


    CD Technologies Asia, Inc. © 2018 cdasiaonline.com
    xxx xxx xxx

    Likewise, Sec. 4.106-7 (a) (2) of Revenue Regulations No. 16-2005 provides, viz.:
    "Sec. 4.106-7. Transactions Deemed Sale. —
    (a) The following transactions shall be "deemed sale" pursuant to Sec. 106(B) of
    the Tax Code:

    xxx xxx xxx

    (2) Distribution or transfer to:


    i. Shareholders or investors share in the pro ts of VAT-registered
    person:

    Property dividends which constitute stocks in trade or properties


    primarily held for sale or lease declared out of retained earnings
    on or after January 1, 1996 and distributed by the company to its
    shareholders shall be subject to VAT based on the zonal value or
    fair market value at the time of distribution, whichever its
    applicable. aIAHcE

    ii. Creditors in payment of debt or obligation."

    xxx xxx xxx


    For transactions deemed sale, the output tax shall be based on the market value
    of the goods deemed sold as of the time of the occurrence of the transactions
    enumerated in Sec. 4.106-7(a)(1), (2), and (3) of the these Regulations. However,
    in the case of retirement or cessation of business, the tax base shall be the
    acquisition cost or the current market price of the goods or properties, whichever
    is lower."

    Thus, the taking of the capital assets and company's non-trade inventories by the
    creditors of Maple Resources Development Corporation are subject to value-added tax
    at the rate of 12% based on the acquisition cost or the current market price of the
    goods or properties, whichever is lower.
    For transactions deemed sale, the output tax, in case of retirement or cessation
    of business, shall be the acquisition cost or the current market price of the goods or
    properties, whichever is lower. This likewise applies to all goods on hand, whether
    capital goods, stock in trade, supplies or materials as of the date of retirement or
    cessation of business.
    Furthermore, Sec. 4.110-1 (d) of Revenue Regulations No. 16-2005 provides, viz.:
    "Any input tax on the following transactions evidenced by a VAT invoice or
    o cial receipt issued by a VAT-registered person in accordance with Secs. 113
    and 237 of the Tax Code shall be creditable against the output tax: SEDIaH

    xxx xxx xxx

    (d) Transactions "deemed sale" under Sec. 106(B) of the Tax Code;

    xxx xxx xxx"

    On the issue of offsetting, the Supreme Court in Philex Mining Corporation vs.
    Commissioner of Internal Revenue, Court of Appeals, and The Court of Tax Appeals
    CD Technologies Asia, Inc. © 2018 cdasiaonline.com
    (G.R. No. 125704 dated August 28, 1998) citing the cases of Francis v. Intermediate
    Appellate Court (162 SCRA 753) and Caltex Philippines v. Commission on Audit (208
    SCRA 726) ruled that —
    ". . . taxes cannot be subject to compensation for the simple reason that the
    government and the taxpayer are not creditors and debtors of each other. There is
    a material distinction between a tax and debt. Debts are due to the Government in
    its corporate capacity, while taxes are due to the Government in its sovereign
    capacity. . . ."

    Thus, any claim for tax credit or refund of alleged excess input tax by a VAT
    registered taxpayer pursuant to Sections 110 and 112 both of the Tax Code of 1997,
    shall be subject to veri cation by this O ce pursuant to existing rules and regulations.
    Accordingly, until after the amount claimed as input taxes have been nally determined
    to be legally due to the taxpayer, and a tax credit certi cate issued therefore, no
    automatic offsetting of the amount claimed as input tax against the tax liability of the
    taxpayer can be allowed. (BIR Ruling No. 415-93 dated October 15, 1993)
    Moreover, should there be an excess input tax, Maple has the option to apply for
    a tax credit or a refund of the same. A Tax Credit Certi cate duly issued by this O ce
    shall upon proper application, be allowed to be used in payment of its other tax
    liabilities.
    This ruling is being issued on the basis of the foregoing facts as represented.
    However, if upon investigation, it will be disclosed that the facts are different, then this
    ruling shall be considered null and void.

    Very truly yours,

    Commissioner of Internal Revenue


    By:

    (SGD.) JAMES H. ROLDAN


    Assistant Commissioner
    Legal Service

    CD Technologies Asia, Inc. © 2018 cdasiaonline.com

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