Saturday, January 16, 2016

Microsoft Philippines, Inc. vs. Commissioner of Internal Revenue [GR No. 180173, April 6, 2011]


FACTS: In December 2002, Microsoft filed an administrative claim for tax credit of VAT input taxes with the BIR for the year 2001. Due to the BIR's inaction, Microsoft filed a petition for review with the CTA claiming that it is entitled to a refund of unutilized input VAT attributable to its zero-rated. The CTA denied the claim for tax credit of VAT input taxes, ruling that Microsoft failed to comply with the invoicing requirements of NIRC and the corresponding Revenue Regulation. It stated that Microsoft's official receipts do not bear the imprinted word “zero-rated” on its face, thus, the official receipts cannot be considered as valid evidence to provide zero-rated sales for VAT purposes. Hence, this petition.

ISSUE: Whether or not Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes even if the “zero-rated” is not imprinted on Microsoft's official receipts

RULING: No. At the outset, a tax credit or refund, like tax exemption, is strictly construed against the taxpayer. The taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to the refund or credit, in this case VAT input tax, by submitting evidence that he has complied with the requirements laid down in the Tax Code and the BIR's Revenue Regulations under which such privilege of credit or refund is accorded.

The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and Revenue Regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributable to zero-rated sales. A “VAT invoice” is an invoice that meets the requirements of Section 4.108-1 of RR 7-95. Contrary to Microsoft's claim, RR 7-95 expressly states that “All purchases covered by invoices other than a VAT invoice shall not give rise to any input tax.” Microsoft's invoice, lacking the word “zero-rated” is not a “VAT invoice” and thus cannot give rise to any input tax.

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