THE COURT of Tax Appeals (CTA) has partially granted Maxima Machineries, Inc.’s appeal to refund its excess input value-added tax (VAT) traced to zero-rated sales in the amount of P4.7 million out of its initial P90 million claim for the fiscal year 2014.
In a 27-page decision dated July 18 and made public on July 21, the CTA full court affirmed its First Division’s finding of the firm only having input VAT attributable to zero-rated sales worth P60 million but substantiated only P4.7 million by presenting official receipts.
“Well-settled is the rule that tax refunds or credits, just like tax exemptions, are strictly construed against the taxpayer,” according to the ruling penned by Associate Justice Lanee S. Cui-David.
“The burden is on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or credit.”
Zero-rated sales are transactions made by VAT-registered taxpayers that do not translate to any output tax. Taxpayers must present official receipts that are attributable to a specific fiscal period, with the term “zero-rated” being written on them to qualify for a 0% rating.
The company is a subsidiary of the Japanese business conglomerate Marubeni Corp.
The tribunal also denied its export sales of services allegedly traced to zero-rated sales worth P2.5 million to the conglomerate since it is doing business outside the Philippines, citing its failure to present the Securities and Exchange Commission (SEC) certificate of non-registration.
Under the Tax Code, taxpayers that engage with foreign firms doing business outside the Philippines are entitled to zero-rated sales that do not translate to output tax.
Companies must also be supported by an SEC certificate of non-registration of the corporation and proof of incorporation/registration in a foreign country.
The law requires that input tax subject to a refund claim must not have been applied against output tax. — John Victor D. Ordoñez
