CIR vs. Seagate Technology (Philippines), G.R. No.

153866, February 11, 2005

FACTS:
Seagate Technology is a resident foreign corporation duly registered to operate in
the Special Economic Zone in Naga, Cebu, and a VAT-registered entity, it filed an
administrative claim for a refund of VAT input taxes before the Revenue District
Office.
This claim included VAT input taxes for the period April 1, 1998 to June 30, 1999.
The Commissioner of Internal Revenue did not act on this claim, prompting Seagate
to elevate the case to the Court of Tax Appeals (CTA) to toll the running of the two-
year prescriptive period. The CTA ruled in favor of Seagate, a decision affirmed by
the Court of Appeals leading to this appeal to the Supreme Court by the
Commissioner of Internal Revenue.
ISSUE: Whether or not Seagate, as a PEZA-registered enterprise and VAT-
registered entity, is entitled to a refund or issuance of a Tax Credit
Certificate for the alleged unutilized input VAT paid on capital goods?
HELD:
The Supreme Court denied the petition, affirming the decisions of the CTA and the
CA, holding that Seagate is entitled to the refund or tax credit. The Court clarified
that as a PEZA-registered enterprise operating within a special economic zone,
Seagate is exempt from internal revenue laws and regulations, including VAT.
However, its transactions qualified for zero-rated VAT since the entity is VAT-
registered and has fully complied with requisites for claiming a tax refund or credit for
the input VAT paid on capital goods. The Court emphasized the difference between
exempt entities and exempt transactions under VAT laws, noting that Seagate’s
transactions are effectively zero-rated, entitling it to a refund or credit.
Although both are taxable and similar in effect, zero-rated transactions differ from
effectively zero-rated transactions as to their source. Zero-rated transactions
generally refer to the export sale of goods and supply of services. The tax rate is set
at zero. When applied to the tax base, such rate obviously results in no tax
chargeable against the purchaser. The seller of such transactions charges no output
tax, but can claim a refund of or a tax credit certificate for the VAT previously
charged by suppliers. Effectively zero-rated transactions, however, refer to the sale
of goods or supply of services to persons or entities whose exemption under special
laws or international agreements to which the Philippines is a signatory effectively
subjects such transactions to a zero rate. Again, as applied to the tax base, such
rate does not yield any tax chargeable against the purchaser. The seller who
charges zero output tax on such transactions can also claim a refund of or a tax
credit certificate for the VAT previously charged by suppliers.
WHEREFORE, the Petition is DENIED and the Decision AFFIRMED.
CIR vs. Tours Specialists, Inc., and CTA, G.R. No. L-66416, March 21, 1990

FACTS:
Tours Specialists, Inc. (TSI), a travel agency, engaged in offering services to foreign
tourists, travelers, and Filipino ‘Balikbayan. Their services included booking hotel
accommodation, arranging local tours, and other activities. The financial
arrangements for these services varied; often, tourists or their foreign agencies paid
the local hotels directly, but sometimes, they entrusted TSI to pay the hotels on their
behalf.
The Commissioner of Internal Revenue (CIR) assessed TSI for a deficiency in the
3% independent contractor’s tax for including the entrusted hotel room charges in its
gross receipts. TSI protested the assessment, arguing that the funds for hotel
accommodation were held in trust and were not part of its gross receipts. Despite its
protest, the CIR issued a warrant of distraint and levy, prompting TSI to appeal to the
Court of Tax Appeals (CTA).
The CTA found in favor of TSI, ruling that the entrusted funds for hotel
accommodations did not form part of TSI’s gross receipts subject to the 3%
independent contractor’s tax. The CIR then petitioned the Supreme Court for review.
ISSUE: Whether or not the amounts received by a local tourist and travel
agency, intended for hotel accommodation as part of a package fee
from tourists or foreign travel agencies, form part of gross receipts
subject to the 3% contractor’s tax?
HELD:
The Court held that the entrusted funds for hotel accommodations paid through TSI
did not form part of its gross receipts. These funds, specifically earmarked for hotel
payments, did not benefit TSI directly and were held in trust for the purpose specified
by the foreign agencies.
Furthermore, the Court dismissed the CIR’s argument about PD 31’s irrelevance,
stating that imposing the contractor’s tax on these entrusted funds would indirectly
subject foreign tourists to a tax on hotel room charges, counteracting the intent of PD
31 to promote tourism.

WHEREFORE, the instant petition is DENIED. The decision of the Court of Tax
Appeals is AFFIRMED.
CIR vs. Federation of Golf Clubs of the Philippines, Inc., G.R. No. 226449, July
28, 2020

FACTS:
The FEDGOLD filed a petition questioning the validity of RMC No. 35-2012 issued
by the CIR. The RMC No. 35-2012 was issued to clarify the taxability of clubs which
are organized and operated exclusively for pleasure, recreation, and other non-profit
purposes. Said RMC subjects the income of recreational clubs from whatever
source, including but not limited to membership fees, assessment dues, rental
income, and service fees, to income tax; and the gross receipts of such clubs
including but not limited to membership fees, assessment dues, rental income, and
service fees to value-added tax (VAT).
In its Petition, FEDGOLF, among others, alleged that the implementation of the RMC
has adverse consequences to its members considering that prior to the issuance of
the same, membership fees, dues, and assessments received by it and its member
golf clubs had not been subjected to income tax and VAT.
ISSUE: Whether or not the CIR insists on the validity of RMC No. 35-2012 as it
stemmed from the CIR's exercise of delegated rule-making power?
HELD:
The CIR issued RMC No. 35-2012 as a result of the apparent inconsistency among
BIR rulings, exempting recreational clubs from income tax and VAT, despite the
express and clear mandate of the 1997 NIRC on their taxability. Thus, to establish
uniform interpretation of the 1997 NIRC, RMC No. 35-2012 clarified the taxability of
recreational clubs and categorically subjected their income and gross receipts,
including but not limited to membership fees, assessment dues, rental income,
service fees to both income tax and VAT, respectively, thus: a. Income tax Clubs
which are organized and operated exclusively for pleasure, recreation, and other
non-profit purposes are subject to income tax under the National Internal Revenue
Code of 1997, as amended.
The provision in the National Internal Revenue Code of 1977 which granted income
tax exemption to such recreational clubs was omitted in the current list of tax exempt
corporations under National Internal Revenue Code of 1997, as amended. Hence,
the income of recreational clubs from whatever source, including but not limited to
membership fees, assessment dues, rental income, and service fees are subject to
income tax. b. Value-added tax Section 105 of the National Internal Revenue Code
of 1997, as amended, provides:
SECTION 105. Persons Liable. — Any person who, in the course of trade or
business, sells, barters, exchanges, leases goods or properties, renders services,
and any person who imports goods shall be subject to the value-added tax (VAT)
imposed in Sections 106 to 108 of this Code.
Clearly, the gross receipts of recreational clubs including but not limited to
membership fees, assessment dues, rental income, and service fees are subject to
VAT.
WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of
the Regional Trial Court are REVERSED and SET ASIDE insofar as it declared
Revenue Memorandum Circular No. 35-2012 invalid in its entirety.
Mindanao Geothermal Partnership vs. CIR, G.R. No. 193301 and 194637,
March 11, 2013

FACTS:
This case is a consolidated petitions of Mindanao II Geothermal Partnership
(Mindanao II) and Mindanao I Geothermal Partnership (Mindanao I), both registered
as value-added taxpayers and accredited Block Power Production Facilities. The
dispute revolves around claims for refund or tax credit of accumulated unutilized and
excess input value-added tax (VAT) due to VAT zero-rated sales in 2003.
The Mindanao II and I entered into Built-Operate-Transfer contracts with the
Philippine National Oil Corporation – Energy Development Company for the
operation of geothermal power plants. Under the Electric Power Industry Reform Act
of 2000 (EPIRA), sales of power by generation companies were subject to a zero
rate of VAT.
Believing their sales qualified for VAT zero-rating, both partnerships filed claims with
the CIR for a refund/tax credit of their accumulated input VAT. After receiving no
action from the CIR, they filed petitions with the Court of Tax Appeals (CTA).
The CTA First Division denied the claims due to them being filed out of time. The
CTA En Banc affirmed this decision, based on the ground that the claims were filed
beyond the prescribed period and without adherence to procedural requirements.
Both Mindanao II and Mindanao I elevated their cases to the Supreme Court via
petitions for review.
ISSUES:
1. Whether or not the determination of the prescriptive period for filing an
administrative claim and a judicial claim for a VAT refund or tax credit?
2. Whether or not the transactions considered “isolated” can be deemed
“incidental” to a petitioner’s VAT zero-rated operations, making such sales
subject to VAT??
HELD:
1. The Court clarified the rules concerning the prescriptive period for filing VAT
refund or tax credit claims, emphasizing the mandatory and jurisdictional
nature of the 120+30 day periods outlined in Section 112 of the 1997 Tax
Code. The Court held that administrative claims must be filed within two years
after the close of the taxable quarter when the sales were made. If the CIR
does not act within 120 days from the filing, a judicial claim must be filed
within 30 days thereafter. However, due to BIR Ruling No. DA-489-03, which
allowed taxpayers to file a judicial claim without waiting for the 120-day period
to lapse, taxpayers who filed their claims from December 10, 2003 to October
6, 2010 were deemed to have an exception to the 120+30 day mandatory and
jurisdictional periods.
 2. The Court affirmed that the sale of a fully depreciated Nissan Patrol by
Mindanao II was incidental to its business operations and thus subject to VAT,
rejecting the argument that isolated transactions cannot be incidental.

WHEREFORE, we PARTIALLY GRANT the petitions. The Decision of the Court of

Tax Appeals En Bane in CTA, as well as the Resolution, and the Decision of the
Court of Tax Appeals En Bane in CTA, are AFFIRMED with MODIFICATION.
Manila Peninsula Hotel, Inc. vs. CIR, CTA EB No. 1408 (CTA Case No. 8519),
January 17, 2017

FACTS:
Petitioner Manila Peninsula Hotel is a duly registered domestic corporation with the
following primary purpose, among others to own, lease, operate, manage and
administer hotels, apartment hotel.
An agreement was executed between Delta Air and Manila Peninsula wherein the
latter would provide room accommodations and food and beverage services to the
former's pilots and cabin crew during flight layovers in the Philippines. The cost of
hotel services would be directly charged to Delta Air and would not constitute
compensable income for its crew but a business expense of the airline, and all other
facilities, accommodations.
Manila Peninsula Hotel paid CIR the amount of PHP 74,764,3131, net of VAT.
However, an administrative claim for refund of alleged erroneously paid or illegally
collected VAT for TY 2010 amounting to PHP 3,807,771.77, consisting of the 12%
VAT payments on its sales to Delta Air.
On July 24, 2012, Manila Peninsula filed with the CTA Division a claim for tax refund
or issuance of tax credit certificate (TCC), claiming inaction on the part of the CIR on
its application for refund.
ISSUE: Whether the hotel room accommodations and food and beverage
services rendered by Manila Peninsula to Delta Air's pilots and crew
members during flight layovers are subject to VAT?
HELD:
The Hotel Room Agreement outlines that Manila Peninsula agreed to offer room
accommodations and other hotel services to Delta Air's guests. It further defines
Delta Air guests to include two main categories: (a) flight crew guests; and (b) non-
crew guests, who are Delta Air's employees on company business, non-crew
employees of Delta Air's subsidiaries or affiliates, and contractors engaged in work
for any of Delta Air's subsidiaries or affiliates. In essence, Manila Peninsula's
contractual obligations extend beyond the flight crew of Delta Air. While the flight
crew members are directly involved in international air transport operations, non-
crew guests may not be involved in such operations at all, making the services
provided to them not directly related to, or attributable to, the international transport
of goods and passengers.
Accordingly, that portion of hotel services rendered to Delta Air's non crew guests is
subject to 12% VAT for the simple reason that they are not related to the
international air transport of passengers and cargoes of Delta Air. This
notwithstanding, the Court holds and so rules that the hotel services rendered to
Delta Air's flight crew members during layovers in the Philippines are directly related
to international air transport operations. Consequently, such services are subject to
VAT at 0%.
ACCORDINGLY, the Petition for Review on Certiorari is PARTLY GRANTED.
Winternitz Associates Insurance Brokers Corp. vs. CIR, CTA Case No. 7971,
June 9, 2011

FACTS:
Petitioner Winternitz Associates Insurance Brokers Corporation is a domestic
corporation. It is registered with the Securities and Exchange Commission (SEC)
under SEC Registration No. 34409.
The respondent CIR issued a Letter Notice No. 047-R-03- 00-S-00053, advising the
latter that based on the report of investigation it is liable for deficiency Income Tax
and Value added Tax (VAT) for the year 2003. In the same letter. Wenternitz,
however, avers that the alleged undeclared income found by respondent in the
represent premium payments made by clients which were received by petitioner as
broker-of-record of different insurance companies.
Thus, CIR respondent issued a Formal Assessment Notice (FAN) together with the
Details of Discrepancies and Assessment Notices reiterating the findings in the PAN.
Consequently, petitioner filed its letter-protest attaching the pertinent documents
supporting its claim.
ISSUE: Whether or not petitioner, an insurance broker, is liable for deficiency
taxes on income and value-added tax for taxable year 2003?
HELD:
Section 301 of Presidential Decree No. 6121 defines an "insurance broker" as "any
person who for any compensation, commission or other thing of value acts or aids in
any manner in soliciting, negotiating or procuring the making of any insurance
contract or in placing risk or taking out insurance, on behalf of an insured other than
himself.
The court held that an insurance broker is different from an insurance agent since
the former acts as a middleman between the insured and the insurance company,
and who solicits insurance from the public under no employment from any special
company and places order of insurance with company selected by insured or in the
absence of any selection, with company selected by broker.
From the foregoing, it can be clearly conceived that an insurance broker does not
receive any income or salary from the insurance company but rather derives income
mainly from commissions for insurance policies that it places with the insurance
company upon remittance of the premiums collected from its clients.
It is indisputable that petitioner's income arises from commissions, and not from
premium payments. Hence, the basis for the imposition of tax on petitioner should be
the commissions received by it and not the premium payments remitted to the
insurance company.
Consequently, only commissions received by petitioner for services rendered
to the insurance company are subject to VAT since the insurance broker is
subject to output tax only on the commission it receives and not on the
premium payments given by clients. Thus, it is the insurance company that is
liable for the VAT on premium payments and should issue the VAT receipt which can
be the basis for a VAT input credit.
WHEREFORE, the instant Petition for Review is hereby GRANTED.
Diaz and Timbol vs. Secretary of Finance and CIR, G.R. No. 193007, July 19,
2011

FACTS:
Renato V. Diaz and Aurora Ma. F. Timbol filed a petition for declaratory relief against
the imposition of value-added tax (VAT) on toll fees by the Bureau of Internal
Revenue (BIR). Diaz, a former sponsor of tax-related laws, and Timbol, a former
assistant secretary and consultant to the Toll Regulatory Board, challenged the BIR’s
move as it would lead to increased toll fees and, they argued, violated the
constitution.
The BIR had deferred its plan to impose VAT on toll fees during President Gloria
Macapagal-Arroyo’s administration due to opposition but revived it under President
Benigno C. Aquino III, with implementation set to begin on August 16, 2010. The
Supreme Court issued a temporary restraining order (TRO) against the imposition on
August 13, 2010, and later treated the petition as one for prohibition.
The government, represented by the Secretary of Finance and the Commissioner of
Internal Revenue, contended that the NIRC imposes VAT on services of franchise
grantees, including tollway operations, unless exempted by the law. They argued
that the petitioners lacked legal standing and that the BIR’s action did not violate the
non-impairment clause of the constitution since it was an exercise of the State’s
sovereign taxing power.
ISSUES :
1. Whether or not the inclusion of tollway operations under “sale of services” and
subjecting them to VAT unlawfully expands VAT coverage?
2. Whether or not the VAT imposition on tollway operations amounts to a tax on
tax, impairs tollway operators’ right to reasonable return on investments, and
is not administratively feasible?
HELD:
1. It was established that toll fees are not considered a “user’s tax” but rather
payments for the use of facilities, thus can be subjected to VAT without being
deemed a tax on tax. The Court also clarified that the burden of VAT falls on
the tollway operator, not the user, further dismissing the argument that VAT
on toll fees amounts to taxing a tax.

2. The Court rejected claims related to the non-impairment of contracts and

practicality of imposing VAT on toll operations, stating they were speculative
 or based on unproven assumptions about administrative feasibility and the
impact on tollway operators’ revenue.

WHEREFORE, the Court DENIES respondents Secretary of Finance and

Commissioner of Internal Revenue’s motion for reconsideration, DISMISSES the
petitioners Renato V. Diaz and Aurora Ma. F. Timbol’s petition for lack of merit.
Coral Bay Nickel Corp vs. CIR, G.R. No. 190506, June 13, 2016

FACTS:
Coral Bay Nickel Corporation, a domestic corporation engaged in manufacturing
nickel/cobalt and a registered VAT entity, submitted an Amended VAT Return on
August 5, 2003, declaring unutilized input tax.
On June 14, 2004, it filed for a tax credit/refund with the BIR, which remained
unacted upon, prompting it to escalate the matter to the Court of Tax Appeals. The
CTA in Division denied the claim for a refund based on Section 106(A)(2)(a)(5) of the
National Internal Revenue Code (NIRC) of 1997, in relation to Article 77(2) of the
Omnibus Investment Code, and consonant with the Cross Border Doctrine,
referencing Commissioner of Internal Revenue v. Toshiba Information Equipment
(Phils) Inc., and Revenue Memorandum Circular (“RMC”) No. 42-03.
The Coral Bay appealed to the Supreme Court, arguing the inapplicability of the
Toshiba case since their unutilized input VAT claims were from a period when it was
not yet PEZA-registered.
ISSUE: Whether or not Coral Bay Nickel Corporation, located within an
Ecozone and later registered as a PEZA entity, is entitled to the refund
for its unutilized input taxes incurred before its PEZA registration?
HELD:
The Supreme Court affirmed the CTA’s denial of the refund. It noted that despite the
procedural aspect concerning the premature filing of the judicial claim in the CTA
(not having waited for the lapse of the 120-day period), the key issue pertained to the
VAT implications for PEZA-registered and ECOZONE-located enterprises.
The Court clarified that the purchases destined for consumption within the
ECOZONE should be free of VAT, thereby negating the basis for a claim for input
VAT refund. It emphasized the Cross Border Doctrine and the Destination Principle,
under which sales from a customs territory to an ECOZONE purchaser are
considered export sales subject to a 0% VAT rate. Thus, the Court ruled Coral Bay,
located in an ECOZONE, was not entitled to a VAT refund for input taxes as it was
considered a VAT-exempt entity due to the location of its operations within an
ECOZONE.
WHEREFORE, the Court AFFIRMS the decision promulgated on May 29, 2009 in
CTA EB Case No. 403.

Maibarara Geothermal, Inc. vs. CIR, G.R. No. 250479. July 18, 2022

FACTS:
Maibarara Geothermal, Inc. (MGI), a corporation engaged in geothermal power
generation and registered as a VAT taxpayer, filed its quarterly VAT returns for 2011.
Later on it submitted administrative claims to the BIR for a refund of its unutilized
input VAT for the four quarters of 2011, citing inactivity in sales during the period but
anticipating sales in the future.
The claims, totaling approximately P15.8 million, were not acted upon, prompting
MGI to escalate the matter to the Court of Tax Appeals (CTA) through four separate
petitions. The CTA First Division consolidated and denied the petitions, a decision
upheld by the CTA En Banc. MGI then filed a Petition for Review on Certiorari with
the Supreme Court.
ISSUES:
1. Whether or not MGI is entitled to a refund of its unutilized input VAT for the
taxable year 2011?
2. Whether or the correct interpretation and application of the two-year
prescriptive period for filing VAT refund claims as provided under Section
112(A) of the NIRC?
HELD:
1. The Supreme Court denied MGI’s petition, affirming the CTA’s decision. The
Court clarified key points regarding VAT refund claims:

a. Attributability of Input VAT to Zero-Rated Sales: Input VAT must be directly

attributable to zero-rated or effectively zero-rated sales to qualify for a
refund. MGI failed to establish the existence of such sales during 2011.
b. Reconciliation of Input and Output VAT: MGI could not provide evidence
showing that the input VAT claimed was attributable to any sales, let alone
zero-rated sales.

2. The Court reaffirmed the ruling that the two-year period for filing a VAT refund
claim starts from the close of the taxable quarter when the relevant sales were
 made, underscoring that purchases leading to input VAT must be connected
to zero-rated sales within this timeframe.

The assailed Decision of the Court of Tax Appeals En Banc dated March 14, 2019
and Resolution dated November 15, 2019 are AFFIRMED. Consequently, the CTA
First Division's Decision dated August 18, 2017 and Resolution dated January 3,
2018 are AFFIRMED.

Chevron Holdings, Inc. (Caltex Asia Ltd) vs. CIR, G.R. No. 215159. July 05,
2022

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.
ISSUE: Whether or not Chevron Holdings’ services to non-resident foreign
affiliates qualified for VAT zero-rating?
HELD:
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.
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.

The Court of Tax Appeals En Banc's Decision dated May 6, 2014, and Amended
Decision dated October 28, 2014, in CTA EB No. 940 are AFFIRMED with
MODIFICATIONS.