CIR vs. Magsayasay Lines Gr no. 146984Doctrine: What Section 100 and Section 4(E)(i) of R.R. No. 5-87 elaborate on is not the meaning of "in the course of trade or business," but instead the identification of the transactions which may be deemed as sale.If the transaction transpired outside the course of trade or business, it would be irrelevant for the purpose of determining VAT liability whether the transaction may be deemed sale, since it anyway is not subject to VAT.Facts:Pursuant to a government program of privatization, NDC decided to sell to private enterprise all of its shares in its wholly-owned subsidiary the National Marine Corporation (NMC).The NMC shares and the vessels were offered for public bidding. Among the stipulated terms and conditions for the public auction was that the winning bidder was to pay "a value added tax of 10% on the value of the vessels."3On 3 June 1988, private respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy the shares and the vessels forP168,000,000.00.Private respondents through counsel received VAT Ruling, holding that the sale of the vessels was subject to the 10% VAT. Ruling cited that NDC is VAT-registered enterprise, and thus its "transactions incident to its normal VAT registered activity of leasing out personal property including sale of its own assets that are movable, tangible objects which are appropriable or transferable are subject to the 10% [VAT]."7Private respondents moved for the reconsideration of VAT Ruling but it was denied.CTA rejected the CIR's arguments and granted the petition. The CTA ruled that the sale of a vessel was an "isolated transaction," not done in the ordinary course of NDC's business, and was thus not subject to VAT. The CIR appealed the CTA Decision to the Court of Appeals,10which on 11 March 1997, rendered a Decision reversing the CTA.Issue:W/n the sale was made in the ordinary course of its business making it liable to 10% VAT?Held:"doing business" conveys the idea of business being done, not from time to time, but all the time."Course of business" is what is usually done in the management of trade or business.What is clear therefore, based on the aforecited jurisprudence, is that "course of business" or "doing business" connotes regularity of activity. In the instant case, the sale was an isolated transaction. The sale which was involuntary and made pursuant to the declared policy of Government for privatization could no longer be repeated or carried on with regularity. It should be emphasized that the normal VAT-registered activity of NDC is leasing personal propertyThe fact that the sale was not in the course of the trade or business of NDC is sufficient in itself to declare the sale as outside the coverage of VAT.

CIR vs. Seagate TechnologyGr. No. 153866Doctrine:Business companies registered in and operating from the Special Economic Zone -- like herein respondent -- areentitiesexempt from all internal revenue taxes and the implementing rules relevant thereto, including the value-added taxes or VAT. Although export sales are not deemed exempttransactions, they are nonetheless zero-rated.Terms to remember:Zero-Rated and EffectivelyZero-Rated TransactionsZero-rated transactions generally refer to the export sale of goods and supply of services. The tax rate is set at zero. The seller of such transactions charges no output tax,but can claim a refund of or a tax credit certificate for the VAT previously charged by suppliers.Effectively zero-rated transactions, however, refer to the sale of goodsor supply of servicesto persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such transactions to a zero rate.Zero Rating and Exemption:In both instances of zero rating, there istotal relieffor the purchaser from the burden of the tax.But in an exemption there is onlypartial relief because the purchaser is not allowed any tax refund of or credit for input taxes paid.Exempt Transaction and Exempt PartyExempt transaction are specifically listed in and expressly exempted from the VAT under the Tax Code, without regard to the tax status -- VAT-exempt or not -- of the party to thetransaction-seller is not allowed any tax refund of or credit for any input taxes paid.Exempt party, on the other hand, is a person or entity granted VAT exemption under the Tax Code, a special law or an international agreement to which the Philippines is a signatory, and by virtue of which its taxable transactions become exempt from the VAT.- allowed a tax refund of or credit for input taxes paid, depending on its registration as a VAT or non-VAT taxpayer.

Facts:[Respondent] is registered with the Philippine Export Zone Authority (PEZA) and has been issued PEZA Certificate No. 97-044 pursuant to Presidential Decree No. 66, as amended, to engage in the manufacture of recording components primarily used in computers for export. Respondent is VAT [(Value Added Tax)]-registered entity.An administrative claim for refund of VAT input taxes in the amount ofP28,369,226.38 with supporting documents, was filed on 4 October 1999 with Revenue District Office No. 83, Talisay Cebu. No final action has been received by [respondent] from [petitioner] on [respondents] claim for VAT refund.Tax Court rendered a decision granting the claim for refund. The CA affirmed the Decision of the CTA granting the claim for refund or issuance of a tax credit certificate (TCC) in favor of respondent.The appellate court reasoned that respondent had availed itself only of the fiscal incentives under Executive Order No. (EO) 226 (otherwise known as the Omnibus Investment Code of 1987), not of those under both Presidential Decree No. (PD) 66, as amended, and Section 24 of RA 7916. Respondent was, therefore, considered exempt only from the payment of income tax when it opted for the income tax holiday in lieu of the 5 percent preferential tax on gross income earned. As a VAT-registered entity, though, it was still subject to the payment of other national internal revenue taxes, like the VAT.

Issue:W/N respondent is entitled to a tax refund or credit representing alleged unutilized input VAT paid on capital goods purchased for the period April 1, 1998 to June 30, 1999?Held:Having determined that respondents purchase transactions are subject to a zero VAT rate, the tax refund or credit is in order.Respondent complied with all the requisites for claiming a VAT refund or credit. First, respondent is a VAT-registered entity.Second,the input taxes paid on the capital goods of respondent are duly supported by VAT invoices and have not been offset against any output taxes. There was a very clear intent on the part of our legislators, not only to exempt investors in ecozones from national and local taxes, but also to grant them tax credits.As such, respondent is exempt from all internal revenue taxes, including the VAT, and regulations pertaining thereto. It has opted for the income tax holiday regime, instead of the 5 percentpreferential tax regime.As a matter of law and procedure, its registration status entitling it to such tax holiday can no longer be questioned. Its sales transactions intended for export may not be exempt, but like its purchase transactions, they are zero-rated. No prior application for the effective zero rating of its transactions is necessary. Being VAT-registered and having satisfactorily complied with all the requisites for claiming a tax refund of or credit for the input VAT paid on capital goods purchased, respondent is entitled to such VAT refund or credit.Microsoft Philippines vs. CIRGr no. 180173

Doctrine: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 among others:5.the word "zero-rated" imprinted on the invoice covering zero-rated sales; Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoices or receipts and this shall be considered as a "VAT invoice." All purchases covered by invoices other than a "VAT invoice" shall not give rise to any input tax.SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. (A) Invoicing Requirements. A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt:(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. x x xFacts:Petitioner Microsoft Philippines, Inc. (Microsoft) is a value-added tax (VAT) taxpayer duly registered with the Bureau of Internal Revenue (BIR). Microsoft renders marketing services to Microsoft Operations Pte Ltd. (MOP) and Microsoft Licensing, Inc. (MLI), both affiliated non-resident foreign corporations. The services are paid for in acceptable foreign currency and qualify as zero-rated sales for VAT purposes under Section 108(B)(2) of the National Internal Revenue Code (NIRC) of 1997.For the year 2001, Microsoft yielded total sales in the amount ofP261,901,858.99. On 27 December 2002, Microsoft filed an administrative claim for tax credit of VAT input taxes in the amount ofP11,449,814.99 with the BIR.In a Decision dated 31 August 2006, the CTA Second Division denied the claim for tax credit of VAT input taxes.The CTA stated that Microsoft's official receipts do not bear the imprinted word "zero-rated" on its face, thus, the official receipts cannot be considered as valid evidence to prove zero-rated sales for VAT purposes.Issue:The main issue is whether Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes on domestic purchases of goods or services attributable to zero-rated sales for the year 2001 even if the word "zero-rated" is not imprinted on Microsoft's official receipts.Held:A tax credit or refund, like tax exemption, is strictly construed against the taxpayer.9The taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to the refund or credit.The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributable to zero-rated sales.InPanasonic v. Commissioner of Internal Revenue,12we held that the appearance of the word "zero-rated" on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid. Absent such word, the government may be refunding taxes it did not collect.

CIR vs. Sony PhilippinesGr no.178697Doctrine: There must be a sale, barter or exchange of goods or properties before any VAT may be levied. Certainly, there was no such sale, barter or exchange in the subsidy given by SIS to Sony.It was but a dole out by SIS and not in payment for goods or properties sold, bartered or exchanged by Sony.*SIS-Sony SingaporeFacts:On November 24, 1998, the CIR issued Letter of Authorityauthorizing certain revenue officers to examine Sonys books of accounts and other accounting records regarding revenue taxes forthe period 1997 and unverified prior years.On December 6, 1999, a preliminary assessment for 1997 deficiency taxes and penalties was issued by the CIR which Sony protested.Sony sought re-evaluation of the aforementioned assessment by filing a protest on February 2, 2000.After trial, the CTA-First Division disallowed the deficiency VAT assessment because the subsidized advertising expense paid by Sony which was duly covered by a VAT invoice resulted in an input VAT credit.In sum, the CTA-First Division partly granted Sonys petition by cancelling the deficiency VAT assessment but upheld a modified deficiency EWT assessment as well as the penalties. CTA-First Division denied the motion for reconsideration.Issue:W/n petitioner is liable for deficiency value added tax?Held:NO. advertising expense paid by Sony which was duly covered by a VAT invoice resulted in an input VAT credit.The fact that due to adverse economic conditions, Sony-Singapore has granted Sony Philippines a subsidy equivalent to the latters advertising expenses will not affect the validity of the input taxes from such expenses. Thus, at the most, this is an additional income subject to income tax. We submit further that it is not subject to VAT on the subsidy income as this was not derived from the sale of goods or services.Thus, there must be a sale, barter or exchange of goods or properties before any VAT may be levied. Certainly, there was no such sale, barter or exchange in the subsidy given by SIS to Sony.It was but a dole out by SIS and not in payment for goods or properties sold, bartered or exchanged by Sony.Court had the occasion to rule that services rendered for a fee even on reimbursement-on-cost basis only and without realizing profit are also subject to VAT. This is not true in the present case. Sony did not render any service to SIS at all. The services rendered by the advertising companies, paid for by Sony using SIS dole-out, were for Sony and not SIS. SIS just gave assistance to Sony in the amount equivalent to the latters advertising expense but never received any goods, properties or service from Sony.