Continuation on VAT
V. VAT Claim for Refund
Grounds – Section 112 (C)
CIR v. Cargill Philippines, Inc. - G.R. No. 255470-71 - May 19, 2023
Doctrine:
The decision reinforced that for VAT refund claims related to zero-rated sales, direct attributability of
input VAT to the finished product for sale is not a mandatory requirement under the Tax Code. It
broadened the interpretation to include input VAT from purchases related to zero-rated sales as
creditable against the output tax.
Facts:
Cargill Philippines, Inc., a VAT-registered domestic corporation engaged in various agricultural and food
production activities, filed quarterly VAT returns from April 1, 2001, to August 31, 2004, indicating
overpayments due to zero-rated export sales. These overpayments totaled approximately PHP 76.8
million across two separate periods. Cargill initially filed an administrative claim for a refund of its
unutilized input VAT for the first period on June 27, 2003, with the BIR and followed with a judicial claim
on June 30, 2003, before the Court of Tax Appeals (CTA) due to inaction by the BIR. A second
administrative and judicial claim for a subsequent period was filed on May 31, 2005. The Commissioner
of Internal Revenue challenged the refund claims citing insufficient documentation.
The CTA Special First Division initially partially granted Cargill’s refund but later dismissed the
consolidated cases as prematurely filed based on the mandatory 120-day waiting period stipulated by
the Tax Code, a point it based on the Supreme Court’s decision in *Aichi*. Cargill appealed to the CTA En
Banc, which maintained the Division’s dismissal. Cargill then appealed to the Supreme Court, which
remanded the case for fresh proceedings based on exceptions outlined in *CIR v. San Roque Power
Corporation*.
Upon return to the CTA Division, the amended decision was rendered partially in favor of Cargill, leading
to further appeals by both parties on various grounds, eventually arriving back at the Supreme Court for
the final decision.
ISSUE:
Whether input VAT must be directly attributable to zero-rated sales of the taxpayer for it to be
refundable.
RULING:
The Supreme Court affirmed the CTA En Banc’s ruling in favor of Cargill, clarifying that:
1. The law does not exclusively demand direct attributability of input VAT to the taxpayer’s zero-rated
sale for the claim to be refundable.
2. The taxpayer is only required to establish that the purchases related to such input VAT are
attributable to the zero-rated sales, broadening the scope beyond purchases that form part of the
finished product.
3. The Court highlighted that changes in Revenue Regulations post the *Atlas* and *Atlas Consolidated*
cases no longer necessitate the direct and entire attributability of input VAT, aligning with Revenue
Regulations No. 16-2005.
CBK Power Company Limited v. CIR - G.R. No. 247918 - February 1, 2023
Doctrine:
The case clarified the application of fiscal incentives under Republic Act No. 9513, explicitly stating that
Renewable Energy Developers must comply with registration requirements to avail of VAT-related
incentives. Additionally, it reiterated principles concerning the entitlement to VAT refunds, specifying
conditions under which taxpayers can claim such refunds per the National Internal Revenue Code.
Facts:
CBK Power Company Limited (CBK), a partnership involved in hydroelectric plants in Laguna, Philippines,
and engaged in zero-rated sales, claimed a refund for PHP 50,060,766.08 as alleged unutilized or excess
creditable input taxes for 2012 under Sections 108(B)(7) and 112(A) of the National Internal Revenue
Code (NIRC), as amended. This followed timely filed administrative and judicial claims after the Bureau
of Internal Revenue (BIR) failed to act on the administrative claim. The Court of Tax Appeals (CTA)
Special First Division and subsequently the CTA En Banc denied the claim, ruling that as a Renewable
Energy Developer, CBK’s transactions were zero-rated under the Renewable Energy Act of 2008
(Republic Act No. 9513), hence, no input VAT could be claimed. CBK contended it did not fall under this
act as it wasn’t registered as a Renewable Energy Developer with the Department of Energy.
Issues:
Is CBK entitled to a tax refund?
Ruling:
The Supreme Court denied referral to the En Banc, ruling on a straightforward application of laws. It
determined CBK is not entitled to fiscal incentives under Republic Act No. 9513 due to non-compliance
with registration requirements. The Court overturned the CTA’s decision and resolved that CBK’s
transactions are subject to 12% VAT. It remanded the case to the CTA Special First Division to determine
if CBK has duly established its entitlement to a tax refund under the NIRC, instructing a thorough review
of the evidence relating to compliance with VAT and refund requirements.
Chevron Holdings, Inc. (Formerly Caltex Asia Limited), v. CIR GR 215159, July 05, 2022 (uploaded
January 25, 2023)
Doctrine:
This case establishes that unutilized input VAT attributable to zero-rated sales may be claimed for a
refund or tax credit without needing to first apply such input VAT against output VAT liabilities. The
Court clarified that the remedies of applying input VAT against output VAT and seeking a refund or tax
credit are alternative and cumulative options for the taxpayer in a VAT regime.
Facts:
Chevron Holdings, Inc. (formerly Caltex Asia Limited), a corporation organized under the laws of the
State of Delaware, USA, and registered as a Value-Added Tax (VAT) taxpayer in the Philippines, primarily
provides various services to its affiliates in Asia-Pacific, North America, and Africa. For the taxable year
2006, Chevron Holdings rendered zero-rated services to its foreign affiliates and regular VAT-able
services to its Philippine affiliates. It accumulated unutilized input taxes from its purchases of goods and
services related to these services. The input VAT attributable to its zero-rated sales was not offset as
credit against the output VAT due to substantial carry-forward amounts from previous quarters.
Following the Commissioner of Internal Revenue’s (CIR) inaction on Chevron Holdings’ administrative
claim for refund filed on March 28, 2008, Chevron Holdings initiated a judicial claim before the Court of
Tax Appeals (CTA) Division seeking a refund of its unutilized input VAT for the first quarter of 2006
amounting to P5,391,252.04, and for the second to fourth quarters a total of P31,411,704.68. The cases
were consolidated, resulting in the CTA Division denying the petitions for being prematurely filed. Upon
appeal to the CTA En Banc, the court partly granted the taxpayer’s petitions, ordering a refund or
issuance of a tax credit certificate amounting to P47,409.24 representing the substantiated unutilized
input tax for the first quarter of 2006. Unconvinced with the CTA En Banc’s computation, Chevron
Holdings elevated the case to the Supreme Court.
Issues:
The key issues resolved by the Supreme Court included
(1) whether Chevron Holdings’ services to non-resident foreign affiliates qualified for VAT zero-rating,
(2) if the foreign currency payment of P10,025,869.35 was inwardly remitted in acceptable foreign
currency,
(3) whether the CTA En Banc erred in not recognizing an excess input VAT carried over from previous
quarters, and (4) if the CTA En Banc erred in disallowing the refund of unutilized input VAT in the
amount of P24,598,395.58.
Ruling:
The Supreme Court partly merited Chevron Holdings’ petition. The Court reiterated that a VAT-
registered taxpayer whose sales are zero-rated may apply for a refund or tax credit of unutilized input
VAT attributable to such sales, provided certain conditions are met. The Court concluded that Chevron
Holdings is entitled to a refund of unutilized input VAT in the amount of P1,140,381.22, in contrast to
the CTA En Banc’s order.
c. Periods
CIR vs. Mirant Pagbilao Corp. GR No. 172129 dated September 12, 2008
