View full case

AT&T COMMUNICATIONS SERVICES PHILIPPINES v. CIR

FACTS:

The case involves AT&T Communications Services Philippines, Inc. (petitioner) which is engaged in the business of providing information, promotional, supportive, and liaison services to foreign corporations. Under Service Agreements with these corporations, petitioner receives remuneration in US dollars and inwardly remits the amount in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP). During the calendar year 2002, petitioner incurred input value-added tax (VAT) in connection with its zero-rated sales in the amount of P56,898,744.05. Despite utilizing its input VAT against its output VAT, petitioner still had an excess of unutilized input VAT amounting to P2,050,736.69. An allocation of the input VAT was made, resulting in the claim of P1,801,826.82 attributable to petitioner's zero-rated sales. Petitioner filed an application for tax refund and/or tax credit of the excess/unutilized input VAT with the Commissioner of Internal Revenue (respondent) but it was denied for lack of substantiation. Petitioner filed a petition for review with the Court of Tax Appeals (CTA) which was denied by both the CTA First Division and En Banc. The petitioner then filed a petition for review before the Supreme Court. The Court held that petitioner has complied with the substantiation requirements to prove entitlement to refund/tax credit and remanded the case to the CTA for determination and computation of the refund/tax credit.

ISSUES:

  1. Whether petitioner is entitled to a tax refund or tax credit certificate for its unutilized input VAT from zero-rated sales.

  2. Whether the presentation of VAT official receipts is necessary to substantiate petitioner's claim of zero-rated sales.

RULING:

  1. Petitioner is entitled to a tax refund or tax credit certificate for its unutilized input VAT from zero-rated sales. A taxpayer engaged in zero-rated transactions may apply for a tax refund or tax credit certificate, subject to certain requirements.

  2. The presentation of VAT official receipts is not necessary to substantiate petitioner's claim of zero-rated sales. There is no distinction in the Tax Code between a sales invoice and an official receipt for the purpose of claiming tax credits. A sales invoice is a recognized commercial document that can substantiate a claim for tax refund, as long as it meets the requirements under the Tax Code.

PRINCIPLES:

  • A taxpayer engaged in zero-rated transactions may apply for a tax refund or tax credit certificate for unutilized input VAT, subject to certain requirements.

  • Zero-rated transactions refer to the export sale of goods and supply of services, with a tax rate set at zero. The seller can claim a refund or tax credit certificate for the VAT previously charged by suppliers.

  • Revenue Regulation No. 3-88 provides the requirements for claiming tax credits or refunds, including the submission of a purchase invoice or receipt evidencing the value-added tax paid.

  • Section 113 of the Tax Code does not create a distinction between a sales invoice and an official receipt for invoicing and accounting requirements of VAT-registered persons.

  • Section 110 of the Tax Code allows creditable input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 to be creditable against the output tax.

  • Sales invoices are recognized commercial documents that can substantiate a claim for tax refund, as long as they meet the requirements under the Tax Code. The preponderance of evidence threshold is needed to substantiate a claim for tax refund.