Chevron Holdings, Inc. v. Commissioner of Internal Revenue, G.R. No. 215159, [July 5, 2022]

CASE DIGEST

CHEVRON HOLDINGS, INC. V. COMMISSIONER OF INTERNAL REVENUE

 G.R. No. 215159, [July 5, 2022]

EN BANC, LOPEZ, M.V

 

Value Added tax; Input Tax on Zero-rates Sales; Substantiation of Unutilized Input VAT not required for VAT Refund on Zero-rated Sales; 

There is nothing in the law and rules that mandate the taxpayer to deduct the input tax attributable to zero-rated sales from the output tax from regular twelve percent (12%) VAT-able sales first and only the "excess" may be refunded or issued a tax credit certificate. The crediting of input taxes, including input tax attributable to zero-rated sales, from the output tax should be discretionary to the taxpayer. The taxpayers are entitled to segregate and refund the full amount of input VAT that is attributable to their zero-rated sales.

  

Chevron Holdings for the taxable year 2006, rendered services to both foreign and Philippine affiliates, with zero-rated and 12% VAT sales, respectively. The company incurred input taxes, a portion of which was attributable to zero-rated sales. Due to substantial input taxes carried forward from previous quarters, these credits were not offset against output taxes. Seeking a refund, Chevron Holdings filed a claim in 2008 for unutilized input VAT related to services provided to foreign affiliates. The Commissioner of Internal Revenue (CIR) did not act on the claim, leading to Chevron's petition. 

The CTA En Banc ruled that the input tax carry-over of P56,564,096.7726 reported in the Quarterly VAT Return for the first quarter cannot be validly applied against the output tax for the year 2006 because Chevron Holdings failed to present VAT invoices or receipts to prove its existence. After comparing the reported output taxes from the substantiated input taxes, the CTA En Banc observed that there was no excess input VAT that may be the subject of a claim for refund or tax credit for the second, third, and fourth quarters of 2006, thus, only P15,085.24 shall be refundable according to CTA. 

 

Whether the request for refund of unutilized input VAT from zero-rated requires that the taxpayer have 'excess' input VAT from the output VAT of the quarter of claim.

NO.  The SC En Banc held that it would not deny the request for refund of unutilized input VAT from zero-rated sales on the ground that the taxpayer does not have 'excess' input VAT from the output VAT of the quarter of claim since the law does not require it. There is nothing in the law and rules that mandate the taxpayer to deduct the input tax attributable to zero-rated sales from the output tax from regular twelve percent (12%) VAT-able sales first and only the "excess" may be refunded or issued a tax credit certificate. The crediting of input taxes, including input tax attributable to zero-rated sales, from the output tax should be discretionary to the taxpayer as it is the taxpayer who is more interested in reducing its output tax payable. Also, to require entities engaged in zero-rated transactions to charge their input tax from zero-rated sales against their output VAT from regular twelve percent (12%) VAT-able sales would defeat the very object of the tax measure, which is to generate more income for the government.

  

Whether or not the Substantiation of Unutilized Input VAT is required for the entitlement to a refund of unused or unutilized input VAT from zero-rated sales. 

NO. The taxpayer is not required to substantiate its excess input tax carried over from the previous quarter as it is not a requirement for entitlement to a refund of unused or unutilized input VAT from zero-rated sales. The SC En Banc held that the CTA erred in requiring the taxpayer to substantiate its excess input tax carried over from the previous quarter before it may be utilized. The Tax Code merely requires that the input tax claimed for refund "has not been applied against the output tax." Taxpayers can now fully claim the input VAT of the current quarter that is attributable to its zero-rated sales. It need not subtract its current output VAT from the current input VAT before it may refund what remains. The unutilized input vat of the prior quarters may now be utilized to pay for the current quarter’s output tax without the need for substantiation.

 

 

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