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SOLON, Donnie Ray O - Taxation 2 Case Digest

1) The case involved Taganito HPAL Nickel Corporation claiming a tax refund for unutilized input VAT payments from 2013. The Court ruled Taganito was entitled to the refund as it met the requirements of being VAT-registered, engaged in zero-rated sales, had creditable input taxes attributable to zero-rated sales, and filed the proper application on time. 2) The case also involved Chevron Holdings claiming a tax refund for input VAT attributable to services provided to foreign affiliates. However, the Court denied the refund as Chevron failed to adequately prove the affiliates were foreign corporations doing business outside the Philippines and failed to substantiate inward remittances for some sales.

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DONNIE RAY SOLON
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541 views3 pages

SOLON, Donnie Ray O - Taxation 2 Case Digest

1) The case involved Taganito HPAL Nickel Corporation claiming a tax refund for unutilized input VAT payments from 2013. The Court ruled Taganito was entitled to the refund as it met the requirements of being VAT-registered, engaged in zero-rated sales, had creditable input taxes attributable to zero-rated sales, and filed the proper application on time. 2) The case also involved Chevron Holdings claiming a tax refund for input VAT attributable to services provided to foreign affiliates. However, the Court denied the refund as Chevron failed to adequately prove the affiliates were foreign corporations doing business outside the Philippines and failed to substantiate inward remittances for some sales.

Uploaded by

DONNIE RAY SOLON
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© © All Rights Reserved
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SOLON, Donnie Ray O Taxation 2

20-1-01343 Atty Dela Rosa


Case Digest

Republic of the Philippines v. Taganito HPAL Nickel Corporation


G.R. No. 259024, September 28, 2022

Facts:
Taganito HPAL Nickel Corporation is a corporation duly organized and
existing under the laws of the Republic of the Philippines with principal
address at Taganito Special Economic Zone, Brgy. Taganito, Claver, Surigao del
Norte. It is engaged in the business of manufacturing and exporting of
nickel/cobalt mixed sulfide. After being classified as a Large Taxpayer,
Taganito filed a Letter Re: Application For Tax Credit Certificate and
Application for Tax Credits/Refunds in the amount of P39,820,736.62
representing its unutilized input VAT payments for the taxable year 2013.
However, BIR denied the petition and pointed out that the input taxes subject
to petitioner's claim were from domestic purchase of service for the
construction of a building outside PEZA which is not directly attributable to
zero-rated sales. On Court of Tax Appeals, it has been ruled that Taganito was
qualified and entitled for Tax refund for unutilized input taxes for taxable year
2013.

Issue:
Whether Taganito HPAL is entitled for tax refund or issuance of tax credit
certificate as governed by Section 112 of the Tax Code.

Ruling:
Yes, the court rules that a taxpayer engaged in zero-rated or effectively
zero rated transactions may claim refund or tax credit certificate for input
taxes attributable to such sales upon compliance with the following essential
requisites: one, the taxpayer-claimant is VAT-registered; two, the taxpayer
claimant is engaged in zero-rated or effectively zero-rated sales; three, there are
creditable input taxes due or paid attributable to the zero-rated or effectively
zero-rated sales; four, that the input tax has not been applied against the
output tax; and five, that the application and the claim for a refund have been
filed within the prescribed period.
In this case, Taganito have established the requisites for a successful
application for claim refund or tax credit certificate for input taxes. The court
also cited that creditable input tax does not arise solely from purchases that
form part of the finished goods. A plain reading of Section 110 of the Tax Code
readily reveals that it did not limit creditable input tax to purchases or
importation of goods which are to be converted into or intended to form part of
a finished product for sale, or to be used in the chain of production.
SOLON, Donnie Ray O Taxation 2
20-1-01343 Atty Dela Rosa
Case Digest

Chevron Holdings, Inc. v. Commissioner of Internal Revenue


G.R. No. 215159. July 5, 2022

Facts:

Chevron Holdings is a corporation organized under the laws of the State


of Delaware, United States of America. It is licensed by the Securities and
Exchange Commission (SEC) to transact business in the Philippines as a
Regional Operating Headquarter. It is registered with the Bureau of Internal
Revenue (BIR) as a VAT taxpayer. For the taxable year 2006, Chevron Holdings
rendered services to its affiliates in the Philippines and abroad. The services
rendered to foreign affiliates were subjected to the zero percent (0%) rate, while
those rendered to its Philippine affiliates to the regular twelve percent (12%)
rate. It also incurred input taxes on purchases of goods and services
concerning these services. Chevron Holdings filed an administrative claim for
refund or issuance of a tax credit certificate on the unutilized input VAT
attributable to the sale of services to its foreign affiliates. As regards input VAT
attributable to zero-rated sales, the CTAEn Banc ruled that only Pl
55,654,748.2221 qualified for VAT zero-rating of sales of services to non-
resident foreign affiliate clients under Section 108 (B)(2)22 of the 1997 National
Internal Revenue Code, as amended (Tax Code). 23 The CTA En Banc held that
to be considered as a non-resident foreign corporation doing business outside
the Philippines, each entity must be supported by both SEC Certificate of Non-
Registration and Certificate or Article of foreign incorporation/association or
printed screenshots of the United States (US) SEC website showing the
state/province/country where the entity was organized. The CTA En Banc
observed that some of the foreign affiliate clients were not adequately
supported by these two documents. The CTA En Banc added that VAT official
receipts issued to foreign affiliates must have the corresponding foreign
currency inward remittances. Sales in the amount of P l0,025,869.35 did not
have the required inward remittances.

After comparing the reported output taxes from the substantiated input
taxes, the CTA En Banc observed that there was no excess input VAT that may
be the subject of a claim for refund or tax credit for the second, third, and
fourth quarters of 2006, while the excess input tax of 807,609.07 for the first
quarter shall be allocated to Chevron Holding's valid zero-rated sales; thus,
only Pl5,085.24 shall be refundable. The CTA En Banc ruled that the input tax
carry-over of P56,564,096.77 reported in the Quarterly VAT Return for the first
quarter cannot be validly applied against the output tax for the year 2006
because Chevron Holdings failed to present VAT invoices or receipts to prove its
existence.

Issue:
SOLON, Donnie Ray O Taxation 2
20-1-01343 Atty Dela Rosa
Case Digest
Whether Chevron Holdings' sale of services to its foreign affiliates
qualifies as zero-rated.

Ruling:

No. the court ruled that Chevron holding failed to adequately established
to be qualified to VAT zero-rating, as prescribed by the Tax Code.

The court cited that to qualify for VAT zero-rating, Section l08 (B)(2)
requires the concurrence of four conditions: first, the services rendered should
be other than "processing, manufacturing or repacking of goods; second, the
services are performed in the Philippines; third, the service-recipient is (a) a
person engaged in business conducted outside the Philippines; or (b) a
nonresident person not engaged in a business which is outside the Philippines
when the services are performed; and, fourth, the services are paid for in
acceptable foreign currency inwardly remitted and accounted for in conformity
with BSP rules and regulations.

The first and second requisites are undisputed. As an ROHQ, Chevron


Holdings performs services to its affiliates in the Asia-Pacific, North American,
and African Regions, such as general administration and planning, business
planning and coordination, sourcing and procurement of raw materials and
components, corporate finance advisory services, marketing control, and sales
promotion, training and personnel management, logistics services, research
and development services, and product development, technical support and
maintenance, data processing and communications, and business
development. Certainly, the services it renders in the Philippines are not in the
same category as "processing, manufacturing or repacking of goods."

As for the third requisite, the Court rules that for sales to a non-resident
foreign corporation to qualify for zero-rating, the following must be proved: "(1)
that their client was established under the laws of a country, not the
Philippines or, simply, is not a domestic corporation; and (2) that it is not
engaged in trade or business in the Philippines. The taxpayer-claimant must
present, at the very least, both the SEC Ce1iificates of Non-Registration - to
prove that the affiliate is foreign; and the Articles or Certificates of Foreign
Incorporation, from which Chevron failed to present.

The fourth condition the Court stressed that the certification of inward
remittances proves the fact of payment in acceptable foreign currency and
accounted for under the rules and regulations of the BSP. In this case,
however, apart from the JP Morgan Reports, which Chevron Holdings readily
admitted to being a mere "online application," and VAT zero-rated receipts,
Chevron Holdings failed to substantiate the inward remittance of the proceeds

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