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COMMISSIONER INTERNAL REVENUE v. FILMINERA RESOURCES CORPORATION

FACTS:

Filminera Resources Corporation (Filminera Resources) entered into an Ore Sales and Purchase Agreement with Philippine Gold Processing and Refining Corporation (PGPRC). Filminera Resources filed claims for refund or issuance of tax credit certificates (TCC) for its unutilized input VAT attributable to its zero-rated sales to PGPRC. The Commissioner of Internal Revenue (CIR) denied the claims. Filminera Resources sought reconsideration and submitted a BOI Certification to establish that PGPRC was a BOI-registered enterprise that exported its total sales volume. The CIR argued that the BOI Certification failed to prove actual exportation of PGPRC's products. The Court of Tax Appeals (CTA) Division initially denied Filminera Resources' petitions but later amended its decision to grant the refund. The CIR filed a motion for reconsideration which was denied by the CTA En Banc. The CIR then filed a petition for review on certiorari before the Supreme Court. Filminera Resources countered that the CIR's petition should be dismissed for failure to comply with the prescribed format.

The case involves a dispute over the tax treatment of export sales in the Philippines. The taxpayer, a manufacturer-exporter, sold its products to another producer within the Economic Zone (ECOZONE). The taxpayer claimed that the sales should be subject to the zero percent rate because they are considered export sales under the Omnibus Investment Code of 1987. The Bureau of Internal Revenue (BIR) denied the taxpayer's claim and imposed a 10% VAT on the sales. The taxpayer argued that the sales made to PEZA-registered enterprises within the ECOZONE should qualify for zero-rating pursuant to the cross-border doctrine. The BIR maintained that the sales do not qualify as export sales because the goods were not actually exported. The Court of Tax Appeals (CTA) ruled in favor of the BIR, while the Court of Appeals (CA) reversed the decision of the CTA. The BIR filed a petition for review with the Supreme Court.

ISSUES:

  1. Whether the sales made by Filminera Resources to Phil. Gold Processing & Refining Corp. (PGPRC) for the third and fourth quarters of FY 2010 qualify as export sales subject to zero percent VAT.

  2. Whether the BOI Certification issued by the Board of Investments (BOI) to PGPRC is sufficient evidence to support the zero-rating of the sales.

  3. Whether the failure to comply with invoicing requirements in the issuance of sales invoices, specifically the failure to write or print "zero-rated sale" prominently on the invoice or receipt, will result in the denial of a claim for refund or tax credit.

  4. Whether the BOI Certification, which attests that a buyer has exported 100% of its products, allows the seller to accord zero-rating status to sales made to the buyer while the certification is valid.

  5. Whether the BOI Certification can be used as proof that the buyer actually exported its entire products during the validity period of the certification.

  6. Who has the burden of proving the legal and factual bases of a claim for tax credit or refund.

  7. Whether the sales made by Filminera Resources to PGPRC for the third and fourth quarters of FY 2010 are export sales.

  8. Whether Filminera Resources is entitled to a refund or the issuance of a tax credit certificate for its unutilized input value-added tax attributable to zero-rated sales for the third and fourth quarters of the fiscal year ending June 30, 2010.

RULING:

  1. The Supreme Court rules in favor of the CIR. The CIR was required to attach all material portions of the record to support the allegations in the petition. While the BOI Certification was not attached to the petition, it was reproduced in the Dissenting Opinion of Presiding Justice Del Rosario. The issue in this case is the proper interpretation of the provisions on tax refund and the scope of the BOI Certification. The Court determines that the sales made to PGPRC do not qualify for zero-rating, and Filminera Resources is not entitled to a refund or credit of input VAT attributable to such sales.

  2. The sales made by Filminera Resources to PGPRC for the third and fourth quarters of FY 2010 do not qualify as export sales subject to zero percent VAT. Without the certification from the BOI indicating that the goods sold were actually exported and consumed in a foreign country, the sales cannot be considered export sales.

  3. The BOI Certification issued by the BOI to PGPRC is not sufficient evidence to support the zero-rating of the sales. The certification merely states that PGPRC exported 100% of its total sales volume/value for the calendar year covering January 1 to December 31, 2009. It does not provide any information regarding the exportation of goods for the third and fourth quarters of FY 2010. The certification is only valid for the specific period mentioned and does not automatically extend to subsequent fiscal years.

  4. The failure to comply with invoicing requirements, including the failure to write or print "zero-rated sale" prominently on the invoice or receipt, will result in the denial of a claim for refund or tax credit.

  5. The BOI Certification, which attests that a buyer has exported 100% of its products, allows the seller to accord zero-rating status to sales made to the buyer while the certification is valid.

  6. The BOI Certification cannot be used as proof that the buyer actually exported its entire products during the validity period of the certification. The certification merely serves as authority for the seller to accord zero-rating status to sales made to the buyer within one year from its validity.

  7. The taxpayer-claimant has the burden of proving the legal and factual bases of its claim for tax credit or refund. Tax refunds are regarded as in derogation of the sovereign authority and should be construed in strictissimi juris against the claimant. The burden of proof rests upon the taxpayer to establish its entitlement to a claim for refund.

  8. Filminera Resources failed to prove that its sales to PGPRC for the third and fourth quarters of FY 2010 are export sales. Without the required certification from the B 01 attesting actual exportation by PGPRC, the sales made during that period are not zero-rated export sales. Therefore, Filminera Resources is not entitled to a refund or tax credit for those sales.

  9. Filminera Resources is not entitled to a refund or the issuance of tax credit certificate in the amount of P111,579,541.76, representing its unutilized input value-added tax attributable to zero-rated sales for the third and fourth quarters of the fiscal year ending June 30, 2010.

PRINCIPLES:

  • Cross Border Doctrine - No VAT shall be imposed to form part of the cost of goods destined for consumption outside the territorial border of the taxing authority.

  • Destination Principle - Goods and services are taxed only in the country where they are consumed.

  • Zero-rating - Sales made by VAT-registered suppliers to BOI-registered enterprises whose products are 100% exported qualify for zero-rating.

  • Sales made to a BOI-registered buyer can be considered export sales subject to zero percent VAT if certain conditions are met, including the exportation of goods and the certification from the BOI that the buyer exported 100% of its products.

  • To claim a refund or tax credit for zero-rated sales, the taxpayer must prove not only the existence of zero-rated sales but also the issuance of valid invoices or official receipts, as well as compliance with other requirements under the National Internal Revenue Code and related regulations.

  • Failure to comply with invoicing requirements will result in the denial of a claim for refund or tax credit.

  • The BOI Certification allows the seller to accord zero-rating status to sales made to the BOI-registered buyer while the certification is valid.

  • The BOI Certification is not proof of actual exportation of the buyer's entire products during the validity period of the certification.

  • The taxpayer-claimant has the burden of proving the legal and factual bases of its claim for tax credit or refund.

  • In order for sales to be considered zero-rated export sales, the actual exportation of the products must be proven with the required certification.

  • Without meeting the requirements for zero-rated export sales, a taxpayer is not entitled to a refund or tax credit for input value-added tax attributable to those sales.