Propriety of Claim of Input VAT Credit for Value-added Tax Paid Despite Lack of Substantiation

November 8, 2000 BIR RULING NO. 061-00 237 000-00 Baniqued & Baniqued Attorneys at Law Suite 803, 8/F Jollibee Centre San Miguel Avenue, Ortigas Center Pasig City Attention: Atty . Carlos G . Baniqued and Atty . Laura Victoria A . S . Yuson Gentlemen : This refers to your letter dated January 25, 2000 requesting for a ruling as to whether or not your client, Asia Pacific Primestar, Inc. ("APPI"), may claim an input VAT credit for the value-added tax paid on its transaction with AGL notwithstanding that the same is not supported by a duly registered official receipt. It is represented that APPI engaged the services of AGL Consolidated Trading ("AGL") on December 12, 1999 and paid the latter the amount of One Hundred Twenty Nine Thousand Two Hundred Fifty Pesos (P129,250.00) for equipment rental and technical service fees, inclusive of value-added tax; that AGL issued APPI an official receipt bearing number 1260A and dated December 12, 1999; that the official receipt does not appear to be registered with the Bureau of Internal Revenue (BIR) inasmuch as the Tax Identification Number of AGL is merely handwritten thereon; that the name and business address of the printer, as well as the number of the taxpayer's Authority to Print, are not indicated on the aforesaid official receipts; that APPI called the attention of AGL to this matter in a letter dated December 27, 1999, and requested that it should issue a duly registered official receipt; that AGL pointed out that the failure of AGL to issue a BIR-registered official receipt would cause undue damage and prejudice to APPI since the input value-added tax credit that it claimed on the transaction might subsequently be disallowed by the BIR; that APPI likewise mentioned that the non-issuance of a BIR-registered official receipt by AGL is in clear violation of Sections 237 and 238 of the Tax Code of 1997; that in a letter that was received by APPI on January 6, 2000, AGL responded by saying that it was duly registered with the BIR and that it regularly paid its annual registration fees; that thus, AGL claimed that the official receipt issued to APPI was accordingly included in such registration; that in a letter dated January 10, 2000, APPI informed AGL that although it appeared that the letter paid its Annual Registration Fee, a separate registration was nonetheless required for its official receipts; and that notwithstanding APPI's clarification, AGL continued, and still continues, to refuse to issue a duly registered official receipt to APPI. In reply, please be informed that Section 110 of the Tax Code of 1997 provides for the persons who can avail of the input tax credit, to wit: SEC. 111. Tax Credits . (A) Creditable Input Tax . (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: (a) Purchase or importation of goods . . . (b) Purchase of services on which a value-added tax has been actually paid . (2) . . . (3) . . . (Italics provided.) Moreover, Sec. 4.104-5 of Revenue Regulations No. 7-95 provides that SEC. 4.104-5. Substantiation of claims for input tax credits . (a) Input taxes shall be allowed only if the domestic purchase of goods, properties or services is made in the course of trade or business. The input tax should be supported by an invoice or receipt showing the information as required under Section 108(a) and 238 of the Code. Input tax on purchases of real property should be supported by a copy of the public instrument i.e., deed of absolute sale, deed of conditional sale. contract/agreement to sell, etc., together with the VAT receipt issued by the seller. A cash-register machine tape issued to a VAT registered buyer by a VAT-registered seller from a machine duly registered with the BIR in lieu of the regular sales invoice, shall constitute valid proof of substantiation of tax credit only if the name and TIN of the purchaser is indicated in the receipt and authenticated by a duly authorized representative of the seller. DSHcTC It is clear from the foregoing, that before a VAT-registered person can claim input taxes, the input tax should be supported by an invoice or receipt showing the information as required under then Sections 108(a) and 238 of the Code (now Sections 113(A) and 237 of the Tax Code of 1997). Accordingly, Asia Pacific Primestar, Inc. ("APPI") cannot claim an input VAT credit for the value-added tax paid on its transaction with AGL since the VAT paid by APPI is nor supported by a duly registered official receipt. The recourse of APPI is to file a complaint with the Special Investigation Division (SID) of the Revenue Region concerned. The SID shall then conduct the proper investigation to determine the liability of AGL for violation of Sections 113(A) and 237 of the Tax Code of 1997. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue