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Context Vs Cir

1) The petitioner is a manufacturing company registered with the Subic Bay Metropolitan Authority and exempt from local and national taxes except for a preferential tax under the law. 2) The petitioner paid VAT on supplies purchased for its business believing it was exempt, but the BIR denied its application for refund or credit. 3) The Court of Appeals found that the petitioner's VAT exemption as a purchaser did not apply, as VAT is an indirect tax where the burden but not the liability can be passed to the purchaser. As an exempt VAT taxpayer, the petitioner was not entitled to a tax credit or refund.

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Mariel Grace Delin
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121 views2 pages

Context Vs Cir

1) The petitioner is a manufacturing company registered with the Subic Bay Metropolitan Authority and exempt from local and national taxes except for a preferential tax under the law. 2) The petitioner paid VAT on supplies purchased for its business believing it was exempt, but the BIR denied its application for refund or credit. 3) The Court of Appeals found that the petitioner's VAT exemption as a purchaser did not apply, as VAT is an indirect tax where the burden but not the liability can be passed to the purchaser. As an exempt VAT taxpayer, the petitioner was not entitled to a tax credit or refund.

Uploaded by

Mariel Grace Delin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CONTEXT VS CIR

Facts: Petitioner is a domestic corporation engaged in the business of manufacturing


hospital textiles and garments and other hospital supplies for export. It is duly registered with
the Subic Bay Metropolitan Authority (SBMA) as a Subic Bay Freeport Enterprise, pursuant to
the provisions of Republic Act No. 7227. As an SBMA-registered firm, petitioner is exempt from
all local and national internal revenue taxes except for the preferential tax provided for in
Section 12 (c) of Rep. Act No. 7227. Petitioner also registered with the Bureau of Internal
Revenue (BIR) as a non-VAT taxpayer under Certificate of Registration RDO Control No. 95-180-
000133. petitioner purchased various supplies and materials necessary in the conduct of its
manufacturing business. The suppliers of these goods shifted unto petitioner the 10% VAT on
the purchased items, which led the petitioner to pay input taxes in the amounts of P539,411.88
and P504,057.49 for 1997 and 1998, respectively.

Acting on the belief that it was exempt from all national and local taxes, including VAT, pursuant
to Rep. Act No. 7227, petitioner filed two applications for tax refund or tax credit of the VAT it
paid. However, the revenue officer denied such application. Unfazed with the denial, petitoner
applied again, this time directly to the RD of BIR. However, there was ni response to such
application, petitioner elevated such to the CTA.

In opposing the claim for tax refund or tax credit, the BIR asked the CTA to apply the rule that
claims for refund are strictly construed against the taxpayer. Cta partially granted the petition.
Cir filed a petition before ca, reversed the decision of cta. Hence, this petition.

Issue: won ca is correct in saying that the VAT exemption embodied in Rep. Act No. 7227
does not apply to petitioner as a purchaser.

Held: it must be stressed that the VAT is an indirect tax. As such, the amount of tax paid
on the goods, properties or services bought, transferred, or leased may be shifted or passed on
by the seller, transferor, or lessor to the buyer, transferee or lessee. Unlike a direct tax, such as
the income tax, which primarily taxes an individual’s ability to pay based on his income or net
wealth, an indirect tax, such as the VAT, is a tax on consumption of goods, services, or certain
transactions involving the same. The VAT, thus, forms a substantial portion of consumer
expenditures.

Further, in indirect taxation, there is a need to distinguish between the liability for the tax and
the burden of the tax. As earlier pointed out, the amount of tax paid may be shifted or passed
on by the seller to the buyer. What is transferred in such instances is not the liability for the tax,
but the tax burden. In adding or including the VAT due to the selling price, the seller remains the
person primarily and legally liable for the payment of the tax. What is shifted only to the
intermediate buyer and ultimately to the final purchaser is the burden of the tax.
it may not be amiss to re-emphasize that the petitioner is registered as a NON-VAT taxpayer and
thus, is exempt from VAT. As an exempt VAT taxpayer, it is not allowed any tax credit on VAT
(input tax) previously paid. In fine, even if we are to assume that exemption from the burden of
VAT on petitioners purchases did exist, petitioner is still not entitled to any tax credit or refund
on the input tax previously paid as petitioner is an exempt VAT taxpayer. Rather, it is the
petitioners suppliers who are the proper parties to claim the tax credit and accordingly refund
the petitioner of the VAT erroneously passed on to the latter.

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