A taxpayer claiming for a refund of its unutilized input VAT from zero-rated transactions must show that it has an excess input VAT over the output VAT.

The core of the issue is the presence of the fourth requisite to validly claim a refund or tax credit of unutilized input VAT, that is, whether the valid input VAT attributable to petitioner's zero-rated sales has not been applied against its output VAT liability. Taxpayer claims that there is no law or regulation requiring that input VAT must first be proven to exceed output VAT for a claim of refund to prosper.

The SC held that Section 110(B) of the NIRC, as amended, when taken together with Section 112 of the NIRC, as amended, shows that a taxpayer must have excess input VAT amount to cover its output VAT liability for the pertinent period or periods to apply for a refund. In other words, a taxpayer claiming for a refund of its unutilized input VAT from zero-rated transactions must show that it has an excess input VAT over the output VAT. Moreover, a closer reading of Section 112(A) of the NIRC, as amended, shows that the excess or unutilized input VAT from zero-rated transactions may be refunded or credited to other internal revenue taxes to the extent that it has not been applied against the output tax. (Total (Philippines) Corporation v. CIR, G.R. No. 247341, November 18, 2020)

Cases involving only questions of law, between and among departments, bureaus, offices, agencies and instrumentalities of the National Government, including GOCCs, shall be submitted to and settled or adjudicated by the Secretary of Justice (SOJ).

Taxpayer, a government-owned and controlled corporation (GOCC), filed its Petition for Review before the Court in Division, assailing the BIR's Decision affirming the Final Decision on Disputed Assessment against taxpayer. The BIR filed its Answer interposing that the case pertains to a tax dispute between government agencies, including GOCCs, involving purely questions of law. In such a case, the Secretary of Justice has jurisdiction to settle or adjudicate the tax dispute.

The Court en banc held that the CTA has no jurisdiction to hear, try and decide the petition filed by the taxpayer. Under Sections 66, 67, and 68 of Chapter 14, Book IV of the Administrative Code of 1987, cases involving only questions of law, between and among departments, bureaus, offices, agencies and instrumentalities of the National Government, including GOCCs, shall be submitted to and settled or adjudicated by the Secretary of Justice (SOJ).

In order to harmonize the seemingly conflicting provisions of the NIRC of 1997 and PD No. 242 (which is now embodied in Chapter 14, Book IV of the Administrative Code of 1987), the Supreme Court has adopted the following interpretation in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR, to wit:

1. As regards private entities and the BIR, the decision of petitioner is subject to the exclusive appellate jurisdiction of this Court, in accordance with Section 4 of the NIRC; and
2. Where the disputing parties are all public entities, the case shall be governed by PD No. 242 where the dispute shall be administratively settled or adjudicated by the Secretary of Justice, the Solicitor General, or the Government Corporate Counsel, depending on the issues and government agencies involved. (Philippine Pharma Procurement, Inc. v. BIR, CTA EB No. 2096, January 25, 2021)

Note: (Dissenting Opinion of Ringpis-Liban, J.) The only way to harmonize two (2) seemingly contradictory laws it to declare that when the controversy between or among government offices, agencies and instrumentalities, including GOCCs involve any of the matters listed in Section 7(a) of R.A. No. 9282, then it is the CTA who has exclusive appellate jurisdiction. All other controversies between or among the aforementioned parties that do not involve taxation matters or interpretation of the provisions of the NIRC of 1997, as amended, may properly follow the procedure for administrative settlement or adjudication of disputes laid down in P.D. No. 242 and the Administrative Code of 1987. Thus, the instant Petition for Review should be granted.

The date of the post office stamp on the envelope or the registry receipt is considered the date of filing of a pleading sent by registered mail.

As found by the CTA Third Division, taxpayer's administrative protest was timely filed by registered mail on May 17, 2013. The CIR asserts that the administrative protest was filed out of time, having been dispatched only on June 19, 2013 as contained in the Certification by postmaster Mr. Quiogue.

The CTA en banc ruled that the administrative protest was timely filed. The Certification was only with respect to the dispatch of said mail matter on June 19, 2013. Clearly, taxpayer's protest was filed through registered mail on May 17, 2013, notwithstanding its dispatch by the Post Office only on June 19, 2013. This is in accordance with Section 3, Rule 13 of the Revised Rules of Court which states that the date of the post office stamp on the envelope or the registry receipt is considered the date of filing of a pleading sent by registered mail. (Commissioner of Internal Revenue v. Lorenzo Shipping Corporation, CTA EB No. 1964, January 26, 2021)

While tax cases are practically imprescriptible, such doctrine only applies for as long as the period from the discovery and institution of judicial proceedings for its investigation and punishment, up to the filing of the information in court does not exceed five (5) years.

The BIR filed a Complaint Affidavit with the DOJ on January 30, 2014 then separately filed three lnformations before the Court in Division on March 18, 2019. The taxpayer insists that the five-year prescriptive period for criminal violation under the NIRC of 1997 began when the case was referred to the DOJ for preliminary investigation.

The CTA en banc ruled that prescription had already set in when BIR separately filed the three lnformations before the Court in Division. The Supreme Court has considered both the fact of discovery of the offense and the institution of judicial proceeding for investigation and punishment as significant in determining the commencement of the five-year prescriptive period of the Tax Code. It is likewise provided that the preliminary investigation is considered a proceeding for investigation and punishment of a crime which commences the period for prescription.

While tax cases are practically imprescriptible, such doctrine only applies for as long as the “period from the discovery and institution of judicial proceedings for its investigation and punishment, up to the filing of the information in court does not exceed five (5) years". Considering that in the instant case, the period from the filing of the preliminary investigation with the DOJ up to the filing of the Informations before the Court in Division exceeded five (5) years, the BIR is barred from instituting the subject tax cases against respondent. (People of the Philippines v. Ulysses Palconet Consebido, CTA EB Crim. No. 076, January 27, 2021)

A PAN delivered to a different entity is not an actual receipt of the taxpayer under audit and constitutes a denial of such taxpayer's right to due process.

The CIR argues that the fact of mailing of the PAN was supported by the corresponding Master List of Mail Matters and even a certification from the Post Office. If indeed the onus probandi had shifted to the CIR, he maintains his position that he has sufficiently proven with overwhelming evidence that respondent indeed received the PAN in the due course of mail. The Court in division found that a perusal of the Certification proves that the letter was addressed and delivered to a certain Mindanao Sanitarium and Hospital. Records reveal that the taxpayer and Mindanao Sanitarium and Hospital, Inc. are two different entities.

The CTA en banc held that there is no actual receipt of PAN by the taxpayer. A PAN is part of the due process rights of taxpayer. Absence of PAN renders any assessment void. Taxpayer did not receive the subject PAN because it was addressed and delivered to a different entity. Such omission by CIR constitutes a denial of taxpayer's right to due process. Hence, the subject assessment is void. (CIR v. Mindanao Sanitarium and Hospital College, Inc., CTA EB No. 2139, January 27, 2021)

The taxpayer is allowed to introduce evidence in the judicial proceedings which was not presented during the administrative proceedings, provided that the denial of the VAT refund is not due to failure to submit complete documents despite notice or request.

The taxpayer’s VAT refund claims for the first, third, and fourth quarters of taxable year 2003 were deemed denied due to inaction by CIR. On the other hand, the VAT refund claim for the second quarter of TY2003 was denied by petitioner allegedly because it was carried over to the succeeding periods. The Court considered all of the evidence presented by taxpayer to substantiate its claims for VAT refund for the said periods even though these have not been presented before the CIR at the administrative level. The CIR argues that the taxpayer should not be allowed to present evidence which were not submitted at the administrative level.

The CTA en banc discussed that a distinction must be made between a) an administrative VAT refund claim that was dismissed due to failure to submit complete documents despite notice or request; and b) administrative VAT refund claims that were either deemed denied due to inaction or denied by CIR other than due to failure to submit complete documents despite notice or request. In the first instance, a taxpayer-claimant must show this Court during the judicial proceedings not only his entitlement to a VAT refund under substantive law, but that he also submitted complete documents as requested by CIR. In the second instance, a taxpayer-claimant may present all evidence to prove its entitlement to a VAT refund, and the Court will consider all evidence offered even those not presented before CIR at the administrative level. In this case, since the denial of the VAT refund is not due to failure to submit complete documents despite notice or request, the Court may consider all evidence presented by taxpayer in the judicial proceedings to support its claim for VAT refund (CIR v. CE Luzon Geothermal Power Company, Inc., CTA EB No. 2132, January 28, 2021).

Taxpayer should secure VAT-registered official receipts from the third-party service providers relative to reimbursable expenses in order for the former to claim the related input tax.

To support its claim for refund of input tax, the taxpayer presented non-VAT official receipts from NGCP containing a statement that "[t]his document is not valid for claim of input taxes except for VAT on ancillary services collected for the account of other third-party service provider."

The CTA disallowed the input tax on purchases of services from NGCP because these are supported with non-VAT official receipts. If NGCP collected from the taxpayer the payment and the corresponding VAT on account of other third party service providers, NGCP and such third party service provider should have nonetheless complied with the conditions laid down in RMC 9-2006 which specifically requires that VAT registered official receipts be issued in the name of the ultimate customer in order for the latter to claim the related input tax. Accordingly, the taxpayer should have secured VAT-registered official receipts from the third-party service providers relative to such reimbursable expenses. (Maibarara Geothermal, Inc. v. CIR, CTA Case No. 9662, January 29, 2021)

On the basis of the provisions of the WTO Agreement, beginning July 1, 2017, since the Philippines' Special Treatment for rice has already expired, there is no need for taxpayer to secure a prior Import Permit from the NFA to import rice.

On several dates in May 2018, three (3) shipments of white rice were consigned to the taxpayer. Various customs officers issued Reports of Seizure against the subject shipments for alleged lack of NFA Import Permits prior to importation. The taxpayer prays that the Bureau of Customs (BOC) refund the costs of taxpayer's rice importations forfeited by the latter in the three (3) forfeiture cases and sold in public auction amounting to P112,874,700.00. BOC invokes the provisions of the Memorandum Circular No. A0-20 17-08-002 dated August 4, 2017 of the NFA, specifically as regards the requirement of prior issuance of an import permit for the importation of rice.

The Court ruled that there is no need for taxpayer to secure Import Permits from the NFA for the subject shipments. Pursuant to the WTO Agreement, which was concurred in by the Senate and became "a part of the law of the land", WTO member countries like the Philippines are prohibited from imposing quantity restrictions (QRs) on imported products. However, certain countries were accorded a Special Treatment allowing them to impose discretionary import licensing, which was until June 30, 2017 in the Philippines’ case. Thus, on the basis of the provisions of the WTO Agreement, beginning July 1, 2017, since the Philippines' Special Treatment for rice has already expired, the prohibition from imposing QRs on imported rice has already taken effect. As a consequence, there was no need for taxpayer to secure a prior Import Permit from the NFA to import rice, beginning on the said date.

The NFA's Memorandum Circular No. A0-2017-08-002 dated August 4, 2017 governs only the "in quota" importations of rice and does not cover "out-quota" importations thereof. Since the subject importations of taxpayer have been identified by the NFA as "out-quota", there is no need for the latter to issue import permits therefor under Memorandum Circular No. A0-20 17-08-002 dated August 4, 2017. (Sta. Rosa Farm Products Corporation v. Commissioner of Customs, CTA Case No. 9932, February 3, 2021)

When the CIR fails to take action on the administrative claim, the "inaction shall be deemed a denial" of the application for tax refund or credit; thus, the taxpayer must strictly comply with the mandatory period by filing an appeal with this Court within 30 days from such inaction.

In 2011, taxpayer filed with the BIR its administrative claims for the issuance of TCCs, for excess and unutilized input value-added tax (VAT) attributable to zero-rated sales for TY 2010. On 18 October 2018, the BIR denied all of taxpayer's administrative claims in a letter which the latter received on 13 November 2018. Within thirty (30) days from receipt thereof, taxpayer then filed its judicial claim for refund with the CTA. The CTA First Division granted CIR's Motion for Early Resolution and dismissed the taxpayer's Petition for Review for lack of jurisdiction on the basis that the judicial claim was filed out of time.

The Court en banc ruled that the taxpayer’s judicial claim was filed out of time. In a long line of cases, the Supreme Court, has ruled consistently that the 120+30-day period in refund or tax credit cases, pursuant to Section 112(C) of the Tax Code, as both mandatory and jurisdictional. Under such provision, taxpayers must await either for the decision of the CIR or for the lapse of the 120 days before filing their judicial claims with this Court. Pertinently, RA No. 1125, as amended, expressly provides that when the CIR fails to take action on the administrative claim, the "inaction shall be deemed a denial" of the application for tax refund or credit. The taxpayer-claimant must thus strictly comply with the mandatory period by filing an appeal with this Court within 30 days from such inaction, otherwise the court cannot validly acquire jurisdiction over it. (Lapanday Foods Corporation v. CIR, CTA EB No. 2200, February 3, 2021)

Issues not duly raised before the proceedings in the Court below may not be ventilated for the first time in a motion for reconsideration or on appeal.

The Court in Division partially granted taxpayer's claim for refund/tax credit representing its unutilized input VAT attributable to its zero-rated sales of services. CIR argues that the documentary exhibits presented by taxpayer, specifically, the PEZA Certification, the Service Agreement, and official receipts, should be declared inadmissible since the witnesses who identified the same have no firsthand knowledge with regard to the authenticity and due execution of the said pieces of evidence.

The Court held that the CIR is now precluded to question the competence of taxpayer's witness to identify the said documents. Issues not duly raised before the proceedings in the Court below may not be ventilated for the first time in a motion for reconsideration or on appeal. CIR did not assail the competence of taxpayer's witness during trial. In fact, he did not even file his Comment to taxpayer's Formal Offer of Evidence. It was only in his Motion for Reconsideration where he raised the same. The Service Agreement referred to by CIR was not even offered by taxpayer during trial. Thus, the Court cannot be made to rule on an evidence that was not even formally offered by any of the parties. (CIR v. Kurimoto (Philippines) Corporation, CTA EB No. 2108, February 3, 2021)

The FAN /FLD must be received by the taxpayer or its authorized representative.

The CIR failed to present a certification of the postmaster that the assessment notice was duly issued and delivered to the taxpayer. Furthermore, the signatures in the registry return receipts remained unidentified and unauthenticated. Neither was the signatures thereon belonged to the taxpayer's authorized representatives. The FAN was received by the security guard of the new lessee of taxpayer's old premises and was not even taxpayer's employee.

The Court noted that Section 3.1.4 of RR 12-99 requires that the FAN /FLD must be received by the taxpayer or its authorized representative. Furthermore, under RMO 40-2019, a detailed record of all assessment notices issued by the CIR is required. Notably, among the details to be recorded by the Chief of the Assessment Division or the Head of the Reviewing Office are the name of taxpayer/person who received the assessment notice and, more importantly, the position/designation/relationship to the taxpayer, if not served to the taxpayer named in the assessment notice. (CIR v. Vitalo Packaging International, Inc., CTA EB No. 2148, February 3, 2021)

An assessment against taxpayer based on unverified amounts extracted from BIR's own database must be cancelled for lack of factual basis.

CIR assessed the taxpayer on the undeclared sales. Allegedly, taxpayer failed to submit all the required documents to overturn the assessment that there was a discrepancy which resulted in unrecorded gross profit from CIR's verification from taxpayer's Summary of List of Purchases (SLP) vis-a-vis taxpayer's suppliers or income payments per SLS.

The Court held that the assessment against taxpayer based on under-declaration of sales must be cancelled for lack of factual basis as the same was based on unverified amounts extracted from BIR's own database. Records do not show that the amount from the purported third-party information (TPI) provided by the BIR was confirmed or verified. Without confirmation from third parties, the findings become doubtful as to the reliability and correctness of the assessment on the alleged undeclared sales. While tax assessments have the presumption of correctness and regularity in its favor. However, it is equally true that assessments should not be based on mere presumptions no matter how reasonable or logical the presumption might be. (Surplus Marketing Corporation v. CIR, CTA Case No. 9290, February 3, 2021)

Domestic purchases of goods and services that were destined for consumption within the ecozone are deemed exports of a taxpayer’s suppliers and should be free of VAT; hence, no input VAT should therefore be paid on such purchases.

The taxpayer, a PEZA-registered entity, filed a claim for refund allegedly representing its unutilized input value-added tax (VAT) attributable to its zero-rated sales. The CIR based his denial of the claim for refund on the provisions of RMC 74-99 stating that for invoices/receipts issued upon the effectivity of RMC No. 74-99, the claims for input VAT by PEZA-registered companies, regardless of the type or class of PEZA-registration, should be denied.

The Court cannot allow the taxpayer’s claim for refund. To begin with, no VAT should have been passed on to taxpayer by virtue of its status as a duly registered PEZA entity. Under the Destination Principle and the Cross Border Doctrine, actual export of goods and services from the Philippines to a foreign country must be free of VAT, and conversely, those destined for use or consumption within the Philippines shall be imposed with 12% VAT. For tax purposes, ecozones are effectively considered as a foreign territory separate and distinct from the customs territory, as provided under the Special Economic Zone Act of 1995. Thus, the domestic purchases of goods and services by the taxpayer that were destined for consumption within the ecozone are deemed exports of taxpayer's suppliers and should be free of VAT; hence, no input VAT should therefore be paid on such purchases. (Wells Fargo Enterprise Global Services, LLC-Philippines v. CIR, CTA Case No. 9849, February 8, 2021)

The prevailing rule, in view of the issuance of RMC No. 54-2014, is that all complete documents are to be submitted upon the filing of the taxpayer's administrative claim for refund.

The taxpayer claims that the BIR's revenue officers requested additional documents during the course of the processing of its administrative claim for refund. The taxpayer complied with the BIR officials' written and verbal requests for additional documents as evidenced by the series of transmittal letters. In a letter dated November 11, 2014, petitioner indicated that "the Company has already submitted the complete documents in support of its application for refund of excess and unutilized input VAT for TY 2011”. Upon CIR’s denial of its application for refund, the taxpayer eventually filed its judicial claim on April 8, 2015.

The Court en banc finds that the factual milieu in the present case is analogous to the 2020 Zuellig case, involving the same parties and issue albeit referring to different taxable periods, where the Supreme Court ruled that verbal requests for additional documents are not prohibited provided they are duly made by authorized BIR officials. Thus, both verbal and written requests for additional documents made by authorized BIR officials may be used as basis in determining the date of submission of complete documents in support of an administrative claim for refund or tax credit of input VAT. In the present case, the 120-day period for the CIR to act on taxpayer's administrative claim should be reckoned from the November 11, 2014 Letter, the last letter of taxpayer indicating that it had already submitted the complete documents in support of its refund claim. Thus, counting 120 days from November 11, 2014, CIR had until March 11, 2015 to act on the administrative claim. In view of CIR's inaction on the subject claim, taxpayer then timely filed its judicial claim on April 8, 2015.

However, the prevailing rule now, in view of the issuance of RMC No. 54-2014, is that all complete documents are to be submitted upon the filing of the taxpayer's administrative claim for refund. (Zuellig Pharma Asia Pacific Ltd. Phils. ROHQ v. CIR, CTA EB No. 1915, February 10, 2021)

A foreign corporation is taxable only for its income from sources within the Philippines.

CIR argues that taxpayer failed to obtain a tax treaty relief in order for its transaction to be exempt from withholding tax, in accordance with RMO No. 1-2000. The BIR, through an ITAD ruling, would have been the proper authority to conclude whether these transactions are subject or not to Philippine tax pursuant to the provisions of the applicable treaties. The taxpayer maintains that it is not obliged to withhold taxes arising from payments of service fees to its affiliates for services rendered outside the Philippines, on the basis of the Tax Code and not of a tax treaty.

The Court held that a foreign corporation is taxable only for its income from sources within the Philippines. Compensation for services performed in the Philippines is treated as an income from sources within the Philippines, while those performed outside of it are considered income from sources without the Philippines. In this case, taxpayer has sufficiently proven that the recipients of its payment of service fees are foreign corporations whose services were performed outside the Philippines. Taxpayer was able to demonstrate that the services performed by such foreign corporations were performed outside the Philippines, as shown by the Certifications on Offshore Services stating that no physical work was conducted in the Philippines, as all the services rendered were performed outside the Philippines and are not effectively connected to a permanent establishment in the Philippines. (CIR v. NCR Cebu Development Center, Inc., CTA EB No. 2150, February 10, 2021)

The rule that tax exemptions should be construed strictly against the taxpayer presupposes that the taxpayer is clearly subject to the tax being levied against him. Where there is doubt, tax laws must be construed strictly against the government and in favor of the taxpayer.

The crux of the controversy lies on whether alkylate is encompassed as "other products of distillation" subject to excise tax under Section 148(e) of the Tax Code. In the assailed Decision, the CTA Second Division denied the taxpayer’s claim for refund for excise tax paid on the importation of alkylate, on the ground that alkylate, while not directly produced through the process of distillation, its raw materials, such as olefins and isobutane, are nevertheless products of distillation, without which alkylate cannot be formed.

The Court, on the MR filed by the taxpayer, finds the taxpayer's importation of alkylate as not subject to excise tax under Section 148(e) of the Tax Code. An article to be subject to excise tax, it must belong to any of the categories of goods enumerated in Title VI of the Tax Code. Therefore, goods are generally not subject to excise tax, unless otherwise provided. The rule that tax exemptions should be construed strictly against the taxpayer presupposes that the taxpayer is clearly subject to the tax being levied against him. Where there is doubt, tax laws must be construed strictly against the government and in favor of the taxpayer. Applying the strict interpretation doctrine to the instant case visa-vis the Court's finding that alkylate is not a product of distillation, but of alkylation, the logical conclusion is that alkylate is not subject to excise tax. Since the Congress did not clearly, expressly and unambiguously impose tax on alkylate (or those which are not directly produced by distillation) under Section 148(e) of the Tax Code, taxpayer's claim should have been resolved in its favor. (Petron Corporation v. CIR, CTA Case Nos. 9327 and 9460, February 15, 2021)

Note: (Dissenting Opinion of Casteñeda, Jr.,J.) Evidently, while alkylate is not directly produced through the process of distillation but by alkylation, still, it cannot be denied that its very existence was derived from the utilization of these two raw materials, namely. olefins and isobutane, which are both products of crude oil distillation. Thus, alkylate would not have come into existence without the presence of the said raw materials. Further, there is no double taxation in this case. The first imposition is simply concerned with the importation of articles, while the subsequent imposition is on the manufacturing or production of goods in the Philippines for domestic sale or consumption of for any other disposition. Such being the case, the imposition of excise tax is on two different subject matters. Therefore, no double taxation exists. In view of the foregoing, I vote to deny the present MR for lack of merit.

Considering that the Court En Banc has appellate jurisdiction over decisions and resolutions of the Court in Division, it follows that it also has the power to issue all auxiliary writs in the exercise of said jurisdiction.

CIR argues that the Court in Division committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying his Petition for Relief from Judgment. He contends that Court in Division should have relaxed the application of the technical rules of procedures given the special circumstances in this case. The taxpayer, on the other hand, contends that the filing of the Petition for Certiorari is improper. It explains that the CIR did not cite any basis to show that the Court in Division acted arbitrarily when it issued the assailed Resolutions. It points out that the Petition for Certiorari must fail since the CIR’s arguments are mere reiterations of his allegations in CTA Case No. 8830 which were already passed upon by the Court in Division.

The question pose in this case is whether the Court En Banc has jurisdiction to take cognizance of the present Petition for Certiorari. The Court En Banc in recent cases has ruled to take cognizance of Petitions for Certiorari questioning that propriety of the Court in Division’s decisions and resolutions, one of which is the case of CIR vs. The CTA Special 3rd Division, et. Al., where this Court, similar to this case, resolved a Petition for Certiorari questioning the Resolution issued by the Court in Division denying the Petition for Relief from Judgment filed by the CIR. Further, the Court En Banc finds the rationale in Kepco Case incompatible with the Revised Rules of the Court of Tax Appeals (RRCTA). In the Kepco Case, it was rationalized that this Court, as a collegial body, may not reverse, annul, or void a final decision rendered by its division. However, this is not the case in the CTA considering that Sec. 2 of the RRCTA specifically confers to the Court En Banc jurisdiction to review the decisions or resolutions promulgated by the Court in Division. Considering that the Court En Banc has appellate jurisdiction over decisions and resolutions of the Court in Division, then it follows that this Court also has the power to issue all auxiliary writs in the exercise of said jurisdiction consistent with the mandate of Sec. 6, Rule 135 of the Rules of Court. (Commissioner of Internal Revenue v. Court of Tax Appeals - Second Division, CTA EB No. 2062, February 16, 2021)

Note: (Dissenting Opinion of Bacorro-Villena, J.) The CTA En Banc has no jurisdiction over a petition for certiorari under Rule 65 of the Rules of Court involving its own division. This is undeniable given the Supreme Court’s declaration in CBK and taking into account the rulings in Land Bank and Kepco since, if the Court En Banc is not superior to any of its divisions and a petition for certiorari seeks the rectification of a lower court’s mistake, logic and reason dictate that the CTA En Banc has no jurisdiction to issue a writ of certiorari against the resolutions of its own divisions.

In claims for input VAT under Section 112 (C) of the NIRC, should the BIR find that the grant of refund is not proper, it must state in writing the legal and factual basis for the denial.

The Petitioner filed an administrative claim for refund of its unutilized input VAT attributable to its zero-rated sales for taxable year 2016. The Respondent granted a portion of the refund being claimed but denied the majority thereof without specifying the reason for the denial.

Petitioner argues that respondent violated its right to due process when he failed to put in writing the facts and the law on which the denial of its input VAT refund was based.

The Court, in finding that Respondent failed to state the legal and factual basis for the denial of Petitioner’s claim, stated that in claims for input VAT under Section 112 (C) of the National Internal Revenue Code of 1997, as amended, should the respondent find that the grant of refund is not proper, said respondent must state in writing the legal and factual basis for the denial. This is consistent with one of the fundamental requirements of due process. Since no statement of the legal and factual basis for the denial was made in, then there was a violation of Petitioner’s right to due process. (North Luzon Renewable Energy Corp. v. Commissioner of Internal Revenue, CTA Case No. 9886, February 19, 2021)

Note: Notwithstanding the foregoing failure to state the factual and legal basis for the denial of taxpayer’s claim for refund, however, taxpayer is not automatically entitled to its claim. Here, the taxpayer’s claim for refund was denied for failure to prove that its sales qualify for VAT zero-rating since there is no showing that it has been issued with a Certificate of Endorsement by the DOE.

Actions for tax refund or credit are in the nature of a claim for exemption and the law is not only construed in strictissimi juris against the taxpayer, but also the pieces of evidence presented entitling a taxpayer to an exemption must be strictly scrutinized and duly proven.

The taxpayer contends that it is entitled to a tax refund/credit under Section (B)(2) of the Tax Code. It argues that its transaction with Amadeus SA, allegedly a non-resident foreign corporation not doing business in the Philippines are considered zero-rated sale of services.

The CTA dismissed the claim for tax refund/credit. It ruled that the taxpayer failed to prove that it is engaged in zero-rated or effectively zero-rated sales of services. The following requirements are laid down by the Supreme Court to successfully prosecute a VAT refund claim under Section 108(B)(2) of the NIRC: (1) The services must be other than processing, manufacturing or repacking of goods; (2) The recipient of such services is doing business outside the Philippines; and (3) The payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulation.

In this case, the taxpayer did not satisfy the second requirement. A perusal of the submitted Amadeus Commercial Organization (“ACO”) Agreement clearly shows that such agreement paved the way for Amadeus SA, through the taxpayer, to further its purpose to continually promote, market and distribute the Amadeus System in the Philippines consistent with the definition of “doing business” in the Philippines under Section 3(d) of the Foreign Investment Act. The Court reiterated its consistent ruling that actions for tax refund or credit are in the nature of a claim for exemption and the law is not only construed in strictissimi juris against the taxpayer, but also the pieces of evidence presented entitling a taxpayer to an exemption must be strictly scrutinized and duly proven. (Amadeus Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9664, February 22, 2021)

The Rules of Court apply suppletorily to the CTA’s own rules.

The CIR, in its petition, argues that the assessment against the taxpayer is valid. He alleged that the officer who issued the LOA is clothed with authority to issue the same. He likewise insists on the validity of the waivers that the taxpayer executed and that his right to assess the taxpayer for deficiency VAT has not yet prescribed since the latter filed a false return which is subject to 10-year prescription period from the discovery of the fraud pursuant to Section 222 of the NIRC, as amended.

The CTA En Banc denied the CIR’s petition for lack of merit. It ruled that he failed to prove that the OIC-ARD was clothed with authority to issue the LOA in the absence of a permanent RD. It is well-settled that only the CIR, Deputy Commissioner and RD possess the power to issue an LOA. Clearly an ARD is not one of the persons to issue the LOA. Here, the CIR attempted to remedy his lapse by attaching to his Motion for Partial Reconsideration (MPR) a copy of RTAO 44-2012 and Certification showing the officer’s status as an RD at the time of the LOA’s issuance. The Court ruled that while it is true that the CTA is not governed by the technical rules of evidence, it is equally true that the Rules of Court apply suppletorily to the CTA’s own rules. In this case, in asking to take cognizance of the said documents, the CIR essentially prayed for new trial and not a mere reconsideration, however, the MPR reveals that he did not cite any circumstances to justify the consideration of these documents. As a result, the trial was not re-opened for the presentation and reception of the said additional documents.

Finally, the first waiver executed by the taxpayer bears no date of acceptance, hence it failed to prevent the assessment’s eventual prescription. (Commissioner of Internal Revenue vs. Amparo Shipping Corporation (CTA EB No. 2165 (CTA Case No. 9387), February 23, 2021)

The filing of an administrative appeal before the CIR does not give the taxpayer a fresh 180-day period, despite the lapse of the original 180-day period.

The taxpayer filed a petition before the CTA arguing that the defects in the Waivers resulted to the non-extension of the period to assess or collect taxes, thus the assessments issued by the BIR beyond the three-year prescriptive period is void.

The CTA dismissed the petition for lack of jurisdiction. It ruled that according to Section 3.1.5 of RR No. 12-99, as amended by RR No. 18-2013, the taxpayer has a 30-day period within which to appeal after the expiration of the 180-day period in case of administrative appeal counted from the date of filing of the protest.

In this case, the protest was filed on March 21, 2016, hence the 180- day period ended on September 17, 2016. Thus, should he have chosen to appeal the inaction before the Court, he can do so until October 17, 2016. correspondingly, the instant Petition for Review filed on July 16, 2018 was belatedly made. Apparently, once the said 180-day period lapses, there is no other remedy for the taxpayer except to wait for the decision of the respondent over the administrative appeal, and upon receipt thereof, appeal such decision with the Court within thirty (30) days. The CTA further ruled that the filing of an administrative appeal before the CIR does not give the taxpayer a fresh 180-day period, despite the lapse of the original 180-day period. But even assuming that a fresh 18-period is given by law, the instant petition is still belatedly filed. (Larry E. Segaya vs. Commissioner of Internal Revenue, CTA Case No. 9875, February 26, 2021)

RMC No. 22-2021, February 18, 2021
This provides for the Reportorial Requirements on the Exemption from DST Relief for qualified loans pursuant to RR No. 24-2020.

Covered institutions on the exemption from documentary stamp tax (DST) of loans extended or restructured granted, shall submit in hard and soft copy, a summary listing of all pre-existing loans, pledges and other instruments as of September 15, 2020 (effectivity of RA No. 11494) which were granted extension of payment and/or maturity periods based on the following format:

The summary of listing shall be submitted in soft and hard copy to the RDO/LTS/LTDO where the taxpayer is registered within sixty (60) days from December 31, 2020, and within fifteen (15) days from the date of receipt, the RDO/LTS/LTDO shall submit a soft copy to the BIR National Office, through Audit Information, Tax Exemption and Incentives Division (AITIED).

RMO No. 8-2021, January 27, 2021
This provides for the New Policies and Procedures in the Issuance of Notice of Denial of the application for compromise settlement cases.

The Polies and Procedures for the Notice of Denial (NOD), Certificate of Availment (CA) and Authority to Cancel Assessment (ATCA) are now governed as follows:

a) NOD involving basic deficiency of:

- P500,000 and below shall be signed by the concerned Regional Director; and
- more than P500,000 basic tax shall be signed by the Commissioner of Internal Revenue.

b) The CA shall be signed by:

- the Assistant Commissioner of the Large Taxpayers Service for large taxpayers cases; and
- the Assistant Commissioner of the Collection Service for other cases.

The duly signed CA with its entire docket shall be transmitted back to the concerned office having jurisdiction thereto and shall prepare the corresponding Notice of Lifting on the issued Warrants and Notices.

ATCA shall be signed by the concerned Regional Director or the Assistant Commissioner where the case originated.

Memorandum No. M-2021-012,
February 5, 2021
Extension of Temporary Measures Implemented in the Bangko Sentral ng Pilipinas (BSP) Rediscounting Facilities.

The Memorandum provides for the approval of the extension of the temporary measures implemented in the BSP's rediscounting facilities until 30 April 202I, subject to further extension as may be approved by the Monetary Board. This includes:

a. Reduction of the term spread on Peso rediscounting loans, relative to the BSP's Overnight Lending Rate, to zero, regardless of maturity (i.e. 1to 180 days);
b. Reduction of the term spread on rediscounting loans under the Exporters' Dollar and Yen Rediscount Facility (EDYRF);
c. Acceptance for rediscounting with the BSP under the EDYRF of the USD and JPY-denominated credit instruments related to the economic activities enumerated in Department of Trade and Industry Memorandum Circular No. 20-08 dated 20 March 2020, except for loans to banks and capital markets; and
d. Acceptance for rediscounting with the BSP of credit instruments compliant with the requirements on eligible papers and collaterals under Section 282 of the MORB, which were granted one-time sixty (50)-day grace period or longer as may be mutually agreed by the parties, pursuant to Section 4(uu) of the Bayanihan to Recover as One Act.

Circular Letter No. CL-2021-013,
February 10, 2021 
Dissemination of AMLC Regulatory Issuances on the Amendments to Certain Provisions of the 2018 Implementing Rules and Regulations (IRR) of the AMLA, as amended.

This Circular is issued to disseminate to all BSFIs the following AMLC regulatory issuances (ARI) relative to the amendments to certain provisions of the 2018 IRR of the AMLA, as amended, targeted financial sanctions (TFS) related to proliferation of weapons of mass destruction (WMD) and proliferation financing (PF), and amendments to certain provisions of ARI No. 4, series of 2020.

This contains amendments to the 2018 IRR of the AMLA, as amended, which include the following, among others:

a. expansion of the list of covered persons to include real estate developers and brokers as well as the offshore gaming operators and their service providers;
b. inclusion in the list of unlawful activities the violations of Section 19 (A)(3) of Republic Act No. 10697, otherwise known as the “Strategic Trade Management Act”, in relation to the proliferation of weapons of mass destruction (WMD) and its financing and Section 254 of Chapter II, Title X of the National Internal Revenue Code of 1997, as amended); and
c. the additional authority of the AMLC to apply for the issuance of a search and seizure order or a subpoena ad testificandum and/or subpoena duces tecum with any competent court, in the conduct of its investigation; and to implement TFS in relation to the proliferation of WMD and its financing including ex parte freeze.

It also provides amendments to ARI No. 4, specifically incorporating provisions relating to the implementation of TFS for PF, such as the legal basis of TFS related to terrorism and terrorist financing, list of AMLC resolutions/freeze orders (FOs) to implement TFS, directive and coverage of the FOs, who needs to comply with the TFS, and filing of detailed return before the AMLC. It also provides new chapters to cover administrative remedies (Chapter 5), authorized dealings and exemptions (Chapter 6), TFS related to PF (Chapter 7), and sanctions (Chapter 8).

Insurance Commission Ruling No. 2021-01, February 5, 2021
Guidance on the Application of PFRS and Circular Letter No. 2020-22.

The IC ruled that the company is enjoined recognize Membership Fee Receivables in the Financial Statements and value its reserves using the Total Contract Value, especially for yearly renewable contracts as this approach would allow simpler valuation of reserves.

HMO companies are allowed not to avail of the relief based on CL No. 2020-100 on the Valuation Standards for HMO Agreement Liabilities.

IC CL No. 2020-22-Addendum provides that the data maintenance is a must. The company should already have 2-3 years data for yearly renewable policies since it is imperative for each company to keep these records for businesses operations. ln fact, these data are used to determine the price of HMO agreements. Thus, the company is enjoined to adopt the retrospective approach as provided under PAS I paragraphs '19 and 22, otherwise provide proof why the company cannot comply with the standard.

Circular Letter No. 2021-09,
February 16, 2021
Guidelines on Electronic Commerce of Pre-need Companies.

This Guidelines applies to pre-need companies engaging in electronic commerce of their pre-need products.

Information on the Website
Pre-need companies engaging in electronic commerce through its website shall:

a) Provide consumers with sufficient information to make an informed choice about whether and how to complete a transaction;
b) Ensure that their marketing practices, information and links on their web sites are current, accurate and not deceptive or misleading to consumers, and that all objective claims can be substantiated;
c) Identify themselves on their websites and provide information about their policies, including to whom consumers should direct claims, ask questions, register complaints, and obtain support related to the pre-need contract or services available through the sites.

Contract Formation and Execution
The Circular Letter requires that the pre-need companies shall ensure that consumers are well-informed about the pre-need products they sell, by making the information about the products available and ensure that all terms and conditions related to the transactions are available to consumers, prior to conclusion of transactions. Pre-need companies should prevent the consequences of errors considering that consumers themselves complete the pre-need application form on the internet. The exclusions and limitations must be highlighted or provided in a separate section for it and consumers must be required to confirm that they have read and understood the said information. Pre-need companies should make available on the website the contract form which the consumer may read information on the complete terms and conditions.

Information Technology Facilities
Applications for authority to issue pre-need contacts in electronic form shall be supported by a certification under oath that there is an established safeguards over the data processing systems to ensure that information are protected against unauthorized access, alteration, destruction, and disclosure, as well as unlawful processing.

Online Privacy and Other Legal Requirements
Pre-need companies shall adhere to the relevant provisions of the Data Privacy Act of 2012 and other applicable laws with respect to the personal information collected. The privacy policy should be easily accessible on the home page of their website or at a reasonably early stage of consumers’ navigation.

Complaint Handling and Dispute Resolution
Pre-need companies are required to provide consumers with access to fair, timely and effective means to resolve problems with any transaction, which should be easily accessible online and offline, available to consumers free of charge, easy to use, acknowledges complaints within seven (7) business days of receipt, and records and monitors complaints. Unresolved complaints should be referred to the Insurance Commission through the Public Assistance and Mediation Division.

Pre-need companies shall ensure that the Philippines shall retain jurisdiction over electronic pre-need contracts regardless of the location of its data servers.

Transitory Application
Pre-need companies who are already engaging in electronic commerce shall be given six (6) months to comply with this Circular and submit the documentary requirements under Section 17.2 to IC for approval, otherwise, the pre-need products sold online shall no longer be allowed to be sold after the said period.

Circular Letter No. 2021-11,
February 17, 2021
Guidelines on the Adoption of a Regulatory Sandbox Framework for Financial Technology
(FinTech) Innovations for HMOs and Pre-need Companies.

Regulatory Sandbox Definition
A controlled environment with a system set up by a licensed Health Maintenance Organization (HMO) or pre-need company, as the case may be, in collaboration with another person, natural or juridical, licensed or not by this Commission, that allows a small scale and live testing of technological innovations operating under special circumstance/s, allowance/s, and/or other limited and time-bound supervision.

All Regulatory Sandbox that involves the doing of HMO or pre-need business, or the performance of any act that will require licensing and/or regulation by this Commission shall be adopted and implemented only upon approval of the Commission.

Businesses not regulated by this Commission and whose collaboration will require the performance of acts that will result in business or transactions that will require licensing, regulation or approval by this Commission, are required to first comply with existing regulations issued by this Commission, insofar as applicable, before submitting any application for participation in a Regulatory Sandbox.

Experimentation Cycle
A Regulatory Sandbox shall be operated in Experimentation Cycle/s that will be implemented one at a time, and if approved by this Commission, shall last for a maximum period not exceeding one (1) year, subject to extension for a period not exceeding six (6) months.

Documentary Requirements/Formal Proposal
Any person/s intending to apply for participation in a Regulatory Sandbox shall submit a formal proposal and shall submit the following documents to this Commission's Regulation, Enforcement and Prosecution Division (REPD) whether in hard copy, flash drive or compact disc:

1. Certified true copy of DTI or SEC registration documents, if applicable;
2. Certified true copy of the signed contract or agreement between the parties intending to develop any technological innovations within this Framework, if applicable;
3. Certified true copy of signed agreements signifying the consent of the test subjects;
4. The Applicant's by-laws and constitution, if applicable;
5. Outline of business modelfor the product, solution or service; and
6. A written projected plan and clear strategy for exit ("Exit Plan") from the Regulatory Sandbox.

Application Screening Parameters
ln the screening of applications, the following parameters shall be considered based on the documents submitted:

a. lnnovative idea/s;
b. Financial inclusion, indicative that the proposed technological solution can promote or provide equal opportunity to access HMO/pre-need services and will increase financial literacy;
c. Consumer benefit and protection;
d. Readiness for testing indicative of the adequate resources to support the testing and clear methodology and control, among others; and
e. Soundness of the Exit Plan

Other Regulatory Provisions
The REPD shall receive all applications under this Circular Letter and determine whether or not the required documentation is complete and whether the applications exhibit the parameters outlined in Section 7 of this Circular Letter.

Upon determination of the completeness, it shall submit its recommendation to the Insurance Commissioner who will finally determine whether a letter of approval ("Approval") shall be issued to the successful Applicant, who will be allowed to operate and proceed with live testing or experiments within the period contained in Section 6(e)(vii). Afterwhich, the successful applicant shall submit a monthly written progress and percentage of completion report to the Commission, through the REPD.

Completion
At the end of the Experimentation Cycle, or if he successful Applicant achieves the results desired earlier than the end of the Experimentation Cycle, the successful Applicant shall submit a written Completion Report to the REPD, which shall contain the overall results and statistics of the testing, An objective assessment of the potential impact of the technological solution to be scaled out, and Proof that the sum required per Section 6(0(iii) of this Circular Letter had already been deposited and earmarked for the purpose.

DISCLAIMER: The contents of this Insights are summaries of selected issuances from various government agencies, Court decisions and articles written by our experts. They are intended for guidance only and as such should not be regarded as a substitute for professional advice.

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