PANASONIC COMMUNICATIONS IMAGING CORPORATION OF THE PHILIPPINES (formerly MATSUSHITA BUSINESS MACHINE CORPORATION
OF THE PHILIPPINES) versus COMMISSIONER OF INTERNAL REVENUE
G.R. No. 178090 February 8, 2010
Facts:
1. Petitioner Panasonic produces and exports plain paper copiers and their subassemblies, parts, and components.
2. It is a registered value-added tax (VAT) enterprise.
3. Petitioner Panasonic generated export sales amounting to US$12,819,475.15 and US$11,859,489.78, respectively, for a total of US$24,678,964.93.
4. Believing that these export sales were zero-rated for VAT, Panasonic paid input VAT of P4,980,254.26 and P4,388,228.14 for the two periods or a total of P9,368,482.40 attributable to its zero-rated sales.
5. Claiming that the input VAT it paid remained unutilized or unapplied, petitioner Panasonic filed with the BIR two separate applications for refund or tax credit of what it paid.
6. When the BIR did not act on the same, Panasonic filed a petition for review with the CTA, averring the inaction of the CIR on its applications.
7. The First Division said that, while petitioner Panasonics export sales were subject to 0% VAT under Section 106(A)(2)(a)(1) of the 1997 NIRC, the same did not qualify for zero-rating because the word zero-rated was not printed on Panasonics export invoices.
Issue:
Whether or not the CTA correctly denied petitioner Panasonics claim for refund of the VAT it paid as a zero-rated taxpayer on the ground that its sales invoices did not state on their faces that its sales were zero-rated
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Ruling:
Under the VAT method of taxation, which is invoice based, an entity can subtract from the VAT charged on its sales or outputs the VAT it paid on its purchases, inputs and imports. For example, when a seller charges VAT on its sale, it issues an invoice to the buyer, indicating the amount of VAT he charged. For his part, if the buyer is also a seller subjected to the payment of VAT on his sales, he can use the invoice issued to him by his supplier to get a reduction of his own VAT liability. The difference in tax shown on invoices passed and invoices received is the tax paid to the government. In case the tax on invoices received exceeds that on invoices passed, a tax refund may be claimed.
But when petitioner Panasonic made the export sales subject of this case, i.e., from April 1998 to March 1999, the rule that applied was Section 4.1081 of RR 795, otherwise known as the Consolidated Value-added Tax Regulations, which the Secretary of Finance issued on December 9, 1995 and took effect on January 1, 1996. It already required the printing of the word zero-rated on invoices covering zerorated sales. When R.A. 9337 amended the 1997 NIRC on November 1, 2005, it made this particular revenue regulation a part of the tax code. This conversion from regulation to law did not diminish the binding force of such regulation with respect to acts committed prior to the enactment of that law.
Zero-rated transactions generally refer to the export sale of goods and services. The tax rate in this case is set at zero. When applied to the tax base or the selling price of the goods or services sold, such zero rate results in no tax chargeable against the foreign buyer or customer. But, although the seller in such transactions charges no output tax, he can claim a refund of the VAT that his suppliers charged him. The seller thus enjoys automatic zero rating, which allows him to recover the input taxes he paid relating to the export sales, making him internationally competitive.
For the effective zero rating of such transactions, however, the taxpayer has to be VAT registered and must comply with invoicing requirements.
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