BIR Ruling No. 341-11

September 8, 2011 BIR RULING NO. 341-11 Secs. 113 & 238 Maersk Global Service Centres (Phils.) Ltd. Ortigas Center, Pasig City Attention: Mr. Arthur T. Arana AGM-Finance Gentlemen : This refers to your claim for refund of creditable input value-added tax (VAT) for the years 2004 and 2006, inclusive, in the aggregate amount of Php18,078,332.57. It is represented that your company is duly authorized to do business in the Philippines as a regional operating headquarters; that your revenues in 2004 were all derived from affiliates; that revenues for the year 2006 were all derived from only one customer, A.P. Moller Maersk A/S, an affiliate of your company; and that sales for the year 2006 consist purely of zero-rated transactions. You likewise admitted that the Department of Finance (DOF) is not inclined to grant claims of the company on the ground that the company failed to obtain an Authority to Print from the Bureau of Internal Revenue (BIR) pursuant to Section 238 of the National Internal Revenue Code of 1997, as amended (NIRC) and hence, failed to issue VAT invoices or receipts. In view of that, it is the DOF's view that your company likewise failed to prove you are engaged in zero-rated transactions that would entitle you to creditable input tax. You now request for clarification on what constitutes sufficient proof to substantiate zero-rated transactions entered into by the taxpayers. It is your contention that there is no requirement that a taxpayer should prove its zero-rated transactions by virtue of VAT invoices or receipts pursuant to the decision of the Supreme Court in Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue (G.R. No. 166732, April 7, 2007) wherein it was declared that the documentation submitted by petitioner Intel was "sufficient to prove Intel's zero-rated transactions, despite the fact that no BIR authority to print was indicated in Intel's invoices". In reply, please be informed that pursuant to the Intel case, the BIR Authority to Print need not be reflected or indicated in the invoices/receipts, however, the Supreme Court in the same case stressed that entities engaged in business are required to secure from the BIR an authority to print receipts or invoices and to issue duly registered receipts or invoices . This requirement was further squarely settled in the recent decision of the Supreme Court in Silicon Phils., Inc. vs. CIR, G.R. 172378, Jan. 17, 2011, viz.: "It has been settled in Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue that the ATP need not be reflected or indicated in the invoices or receipts because there is no law or regulation requiring it. Thus, in the absence of such law or regulation, failure to print the ATP on the invoices or receipts should not result in the outright denial of a claim or the invalidation of the invoices or receipts for purposes of claiming a refund. "But while there is no law requiring the ATP to be printed on the invoices or receipts, Section 238 of the NIRC expressly requires persons engaged in business to secure an ATP from the BIR prior to printing invoices or receipts. Failure to do so makes the person liable under Section 264 of the NIRC. "This brings us to the question of whether a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has secured an ATP from the BIR prior to the printing of its invoices or receipts. "We rule in the affirmative. "Under Section 112(A) of the NIRC, a claimant must be engaged in sales which are zero-rated or effectively zero-rated. To prove this, duly registered, invoices or receipts evidencing zero-rated sales must be presented. However, since the ATP is not indicated in the invoices or receipts, the only way to verify whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from the BIR. Without this proof, the invoices or receipts would have no probative value for the purpose of refund. In the case of Intel, we emphasized that: "It bears reiterating that while the pertinent provisions of the Tax Code and the rules and regulations implementing them require entities engaged in business to secure a BIR authority to print invoices or receipts and to issue duly registered invoices or receipts, it is not specifically required that the BIR authority to print be reflected or indicated therein. Indeed, what is important with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are duly registered. "Similarly, failure to print the word "zero-rated" on the sales invoices or receipts is fatal to a claim for credit/refund of input VAT on zero-rated sales. "In Panasonic Communications Imaging Corporation of the Philippines (formerly Matsushita Business Machine Corporation of the Philippines) v. Commissioner of Internal Revenue (G.R. No. 178090, Feb. 8, 2010, 612 SCRA 28 , we upheld the denial of Panasonic's claim for tax credit/refund due to the absence of the word "zero-rated" in its invoices. We explained that compliance with Section 4.108-1 of RR 7-95, requiring the printing of the word "zero-rated" on the invoice covering zero-rated sales, is essential as this regulation proceeds from the rule-making authority of the Secretary of Finance under Section 244 of the NIRC. "All told, the non-presentation of the ATP and the failure to indicate the word "zero-rated" in the invoices or receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales. The failure to indicate the ATP in the sales invoices or receipts, on the other hand, is not. In this case, petitioner failed to present its ATP and to print the word "zero-rated" on its export sales invoices. Thus, we find no error on the part of the CTA in denying outright petitioner's claim for credit/refund of input VAT attributable to its zero-rated sales." As what has been decided repeatedly in numerous decisions of the Supreme Court, tax refunds partake of the nature of tax exemptions and are strictly construed against the taxpayer claiming such exemption. As such, strict compliance with the requirements laid down by the NIRC is expected from taxpayers applying for tax refund and failure to comply will more likely result in the denial of the same. In view thereof, we concur with the opinion of the Department of Finance One-Stop-Shop Inter-agency Tax Credit and Duty Drawback Center, that your claim for refund of creditable input VAT for the years 2004 and 2006 cannot be given due course. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue