G.R. No. 236325 - Commissioner of Internal Revenue vs. Filminera Resources Corp.

Case Summary (G.R. No. 236325)

Procedural history before the CTA

Filminera’s petitions for refund were initially denied by the CTA Division for insufficiency of evidence (Sept. 25, 2014). On reconsideration and after presentation of the BOI certification, the CTA Division amended its decision (May 25, 2015) to order refund/TCC in favor of Filminera for P111,579,541.76. The CIR’s challenge to that ruling was dismissed by the CTA En Banc (Mar. 29, 2017), which, upon reconsideration, denied the CIR’s motion and affirmed that the BOI certification showing 100% exportation and its validity period entitled Filminera’s sales to zero-rating.

Issue presented to the Supreme Court

Whether Filminera’s sales to PGPRC during the third and fourth quarters of the fiscal year ending June 30, 2010 (January 1 to June 30, 2010) qualified as zero-rated export sales on the basis of the BOI certification issued January 27, 2010, and consequently whether Filminera is entitled to refund or issuance of a TCC for its claimed amount.

Legal framework for zero-rating of sales to BOI-registered buyers

Under Section 106(A)(2)(a)(5) of the 1997 NIRC and related regulations, sales by a VAT-registered supplier to a BOI-registered manufacturer/producer are accorded zero percent VAT only if the buyer’s products are 100% exported and the BOI issues a certification to that effect. RMO No. 09-00 codified conditions for automatic zero-rating for suppliers to BOI-registered exporters, including that (1) both parties are VAT-registered, (2) the BOI-registered buyer is a manufacturer/producer whose products are 100% exported, (3) the BOI must issue a certification attesting to 100% exportation (good for one year unless reissued), (4) the buyer must furnish suppliers a copy of the BOI certification, and (5) supplier invoices must be duly registered and reflect “zero-rated” and the buyer’s BOI registry number. The Cross Border Doctrine and Destination Principle require that VAT not form part of the cost of goods intended for consumption outside the taxing jurisdiction; thus, actual exportation by the buyer remains central.

Supreme Court’s analysis of the BOI certification’s scope and relevance

The Court examined the BOI certification text and found it explicitly attested that PGPRC exported 100% of its total sales volume for the calendar year January 1 to December 31, 2009. The Court emphasized that the certification does not affirm that PGPRC exported 100% of its products for January 1 to June 30, 2010 (the period covered by Filminera’s refund claims). The Court rejected the CTA En Banc’s reliance on the certification’s stated validity period (January 1 to December 31, 2010) as establishing that PGPRC exported 100% for the January–June 2010 period. The validity period authorizes the supplier to treat relevant sales as zero-rated during that year but does not constitute proof that the buyer actually exported 100% of its products for every sub-period within the validity year.

Distinction between certification validity and the period of actual exportation

The Court underscored that the BOI can only properly attest to actual exportation after the relevant period has concluded and supporting evidence (e.g., annexes and audited reports) has been submitted and reviewed. The BOI certification in this case attested to 100% export for 2009; the fact that the certification, once issued, is valid for a specified succeeding period does not operate retroactively or substitute for an attestation that the buyer exported 100% for different calendar or fiscal subperiods. Accordingly, the BOI certification issued on January 27, 2010, could not be taken as certifying export performance for the January–June 2010 period.

Invoicing and documentation requirements as a separate but related condition

The Court reiterated that, beyond BOI certification, the claimant must comply with invoicing and documentary requirements under Sections 113 and 237 of the NIRC and Section 4.113-1(B) of RR No. 16-2005. Revenue Memorandum Circular No. 42-2003 and RMO No. 09-00 require that VAT invoices for zero-rated sales be properly marked “zero-rated” and contain requisite information; failure to comply with such invoicing requirements can result in denial of refund claims irrespective of other proof. The BOI certification functions as the authority for the supplier to accord zero-rating while valid, but it does not relieve the claimant of the duty to demonstrate the underlying factual basis of zero-rated sales (i.e., that the buyer actually exported the products

Case Syllabus (G.R. No. 236325)

Case Title, Citation, and Decision Author

G.R. No. 236325; 885 Phil. 515; First Division; Decision dated September 16, 2020.
Decision penned by Justice Abigail S. Lopez (LOPEZ, J.).
Parties: Commissioner of Internal Revenue (CIR) as petitioner; Filminera Resources Corporation (Filminera Resources) as respondent.

Nature of the Case and Relief Sought

Petition for Review on Certiorari filed under Rule 45 of the Rules of Court.
CIR assails the Court of Tax Appeals (CTA) En Banc Decision dated March 29, 2017 and Resolution dated November 16, 2017 in CTA EB No. 1362.
Underlying CTA Division Amended Decision (May 25, 2015) and Resolution (September 10, 2015) ordered CIR to refund or issue a Tax Credit Certificate (TCC) to Filminera Resources in the amount of P111,579,541.76 representing unutilized input VAT attributable to claimed zero-rated sales.

Antecedents / Factual Background

On July 5, 2007, Filminera Resources entered into an Ore Sales and Purchase Agreement with Philippine Gold Processing and Refining Corporation (PGPRC), a domestic corporation registered with the Board of Investments (BOI).
For the third and fourth quarters of the fiscal year ending June 30, 2010, Filminera Resources' sales were all made to PGPRC.
Filminera Resources filed amended quarterly VAT returns for those quarters on March 30, 2012 and June 29, 2012, and simultaneously filed administrative claims for refund or issuance of TCC for its unutilized input VAT attributable to its declared zero-rated sales.
Filminera Resources filed separate petitions for review before the CTA on August 16, 2012 and November 23, 2012, docketed as CTA Case Nos. 8528 and 8576; the CIR filed answers on October 23, 2012 (Case No. 8528) and December 12, 2012 (Case No. 8576).
The two CTA cases were consolidated and proceeded to trial on the merits.

Procedural History in the CTA

CTA Division initially denied Filminera Resources' petitions on September 25, 2014 for insufficiency of evidence, holding that the taxpayer failed to prove its sales to PGPRC qualified as zero-rated export sales under Section 106(A)(2)(a)(5) of the 1997 NIRC, as amended by RA No. 9337, and Section 4.106-5(a)(5) of RR No. 16-2005.
On reconsideration, Filminera Resources submitted a certified true copy of a BOI Certification dated January 27, 2010 claiming PGPRC exported 100% of its total sales volume from July 1, 2009 to June 30, 2010; the CIR countered that the BOI Certification did not prove actual exportation for January 1 to June 30, 2010.
CTA Division amended its decision on May 25, 2015 and granted Filminera Resources partial relief: ordered CIR to refund or issue a TCC in favor of Filminera Resources in the amount of P111,579,541.76 (unutilized input VAT attributable to the third and fourth quarters of FY ending June 30, 2010).
CIR's motion for reconsideration to the CTA Division was denied on September 10, 2015; CIR elevated the case to the CTA En Banc.
CTA En Banc dismissed CIR's petition for lack of merit on March 29, 2017. On reconsideration, the CIR argued the BOI certification was inadequate and was “forgotten evidence” not presented at trial; on November 16, 2017 the CTA En Banc denied CIR's motion, concluding that the formal offer and admission into evidence of the BOI Certification that PGPRC exported 100% of its total sales volume meant the sales qualified for VAT zero-rating.

Issue Presented to the Supreme Court

Whether the sales made by Filminera Resources to PGPRC during the third and fourth quarters of the fiscal year ending June 30, 2010 are zero-rated export sales under the 1997 NIRC and implementing regulations based on the BOI Certification dated January 27, 2010 — in particular, whether that certification sufficiently establishes that PGPRC actually exported 100% of its products for the period January 1 to June 30, 2010.

Procedural Questions Addressed by the Supreme Court

Whether the CIR substantially complied with Section 4, Rule 45 of the Rules of Court in filing the petition given the alleged absence of the BOI Certification among attachments to the petition.
Whether the question raised is one of law (properly raised in a Rule 45 petition) or a question of fact (generally not cognizable in Rule 45).

Supreme Court Ruling on Procedural Compliance (Rule 45 Attachments)

Section 4, Rule 45 requires the petitioner to attach material portions of the record supporting the petition.
CIR did not attach an independent copy of the BOI Certification dated January 27, 2010 to the petition; however, the BOI Certification was reproduced verbatim in the Dissenting Opinion of Presiding Justice Del Rosario, which CIR attached as a duplicate original to the petition.
The Court cited prior jurisprudence (Cusi-Hernandez v. Sps. Diaz; Cadayona v. Court of Appeals) holding that strict rigidity is not required and that not all documents must be certified true copies when the petition substantially complies and the records reproduced the material document.
The Court concluded CIR substantially complied with Rule 45 by attaching the Dissenting Opinion reproducing the BOI Certification; strict technicality should not defeat substantial justice.

Supreme Court Ruling on Question of Law vs. Question of Fact

The Court reiterated the rule that only questions of law may be raised in a Rule 45 petition; questions of fact are generally proscribed.
Distinction articulated: interpretation of provisions on tax refund that does not call for reevaluation of the probative value of evidence is a question of law; re-examination of probative value of evidence raises a question of fact.
The issue here — the legal scope of the BOI Certification and whether it sufficiently establishes actual exportation for a specified period — was characterized as a question of law suitable for Rule 45 review.

Governing Legal Framework — Statutes, Regulations, and Memoranda

1997 National Internal Revenue Code (NIRC), as amended (e.g., RA No. 8424): Section 106 (Value-Added Tax on Sale of Goods or Properties), including subsection (A)(2)(a)(5) which subjects to zero percent rate "Those considered export sales under Executive Order No. 226... and other special laws."
Executive Order No. 226 (Omnibus Investments Code of 1987): definition of "export sales" and Article 23 referenced.
RR No. 16-2005 (Consolidated VAT Regulations of 2005): Section 4.106-5(a)(5) treats sales to BOI-registered manufacturers/producers whose products are 100% exported as zero-rated, provided a BOI certification to that effect exists and is valid for one year unless re-issued.
Revenue Memorandum Circular (RMC) No. 74-99: clarified that sales to PEZA-registered enterprises can qualify for zero-rating under the Cross Border Doctrine.
Revenue Memorandum Order (RMO) No. 09-00 (Feb. 2, 2000): (1) Rationale applying cross-border doctrine to BOI-registered enterprises whose products are 100% exported; (2) Section 3 conditions for automatic zero-rating to sales made by VAT-registered suppliers to BOI-registered exporters without necessity of separate application under RR No. 7-95.

Conditions for Automatic Zero-Rating under RMO No. 09-00 (Section 3)

(1) The supplier must be VAT-registered.
(2) The BOI-registered buyer must likewise be VAT-registered.
(3) The buyer must be a BOI-reg