Case Summary (G.R. No. 256720)
Key Dates
- Date of Decision: August 7, 2024
- Claims Filed: MGI filed claims for tax refunds corresponding to the first, second, third, and fourth quarters of taxable year (TY) 2013 between March 26, 2015, and December 10, 2015.
Applicable Law
The governing legal framework includes the 1987 Philippine Constitution, the National Internal Revenue Code (NIRC) as amended, particularly Section 112 concerning refunds or tax credits of input tax, and Republic Act No. 9513, the Renewable Energy Act of 2008.
Overview of Claims and Proceedings
MGI sought the refund of unutilized input value-added taxes (VAT) attributed to allegedly zero-rated sales during 2013. Four administrative claims were filed for a total of PHP 81,572,707.81. As the CIR failed to act on these claims, MGI escalated the matter to the Court of Tax Appeals (CTA), resulting in multiple petitions.
Ruling of the CTA Division
The CTA Special First Division denied MGI's petitions for lack of merit, emphasizing the requirement for a taxpayer to engage in zero-rated or effectively zero-rated sales to qualify for a VAT refund. MGI's quarterly VAT returns indicated no sales during the relevant period, and evidence presented, including testimonies from the company's own employees, confirmed that MGI did not conduct any sales until February 2014. The CTA concluded that MGI could not substantiate its claim for a refund of input VAT since it failed to demonstrate any qualifying zero-rated sales during the asserted period.
Ruling of the CTA En Banc
The CTA En Banc affirmed the Division's rulings, reiterating that while Section 112(A) of the NIRC does not mandate that zero-rated sales occur within the same period as the incurred input taxes, it still requires the existence of zero-rated sales during the claim period. The En Banc stressed that MGI's failure to demonstrate zero-rated sales was fatal to its claim for tax refunds and noted that MGI had not properly substantiated its claim with sufficient documentation, including VAT official receipts.
Argument Regarding Certificate of Endorsement
MGI contended that a DOE Certificate of Endorsement was not necessary to qualify for VAT zero-rating incentives. However, the CTA En Banc supported the requirement that the DOE Certificate of Registration and BOI registration are essential, but indicated that a Certificate of Endorsement is not explicitly needed for VAT zero-rating claims. The CTA's rulings consistently noted that MGI did not substantiate its claim to invoke the 0% VAT rate benefits available to renewabl
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Parties and Procedural History
- Maibarara Geothermal, Inc. (MGI), a Philippine corporation registered as a Renewable Energy (RE) Developer and VAT taxpayer, filed claims for refund of unutilized input VAT for all four quarters of 2013.
- MGI's refund claims totaling PHP 81,572,707.81 were initially filed administratively but were not acted upon by the Commissioner of Internal Revenue (CIR).
- MGI filed petitions before the Court of Tax Appeals (CTA) Special First Division (Division) and subsequently appealed to the CTA En Banc (EB), which affirmed denial of MGI's claims.
- The case was elevated to the Supreme Court via a Petition for Review on Certiorari under Rule 45, assailing the CTA EB Decision dated November 26, 2020, and Resolution dated June 2, 2021.
Facts
- MGI is a registered 20 MW geothermal power generation RE Developer with Certificates of Registration from the Department of Energy (DOE) and the Board of Investments (BOI).
- MGI is a registered VAT taxpayer with the Bureau of Internal Revenue (BIR).
- MGI filed four administrative claims for refund of alleged unutilized input VAT for the four quarters of 2013, totaling over PHP 81 million.
- The CIR failed to act on MGI's claims, prompting the filing of petitions for review with the CTA.
- MGI had no sales declared during the entire 2013 taxable year, as admitted by its Accounting Manager and Legal Officer; its first sale to a third party was in February 2014.
CTA Division and En Banc Rulings
- The CTA Division denied MGI's refund claims for lack of merit, emphasizing the jurisprudential rule that a taxpayer must have engaged in zero-rated sales to claim credit/refund of input VAT.
- The CTA Division found MGI did not prove it had zero-rated sales for 2013; no sales were reported in its quarterly VAT returns.
- The CTA EB affirmed the Division's decision, agreeing that while zero-rated sales do not have to occur during the same period as the input VAT was incurred, the presence of such sales during the period of claim or subsequently must be established.
- The CTA EB reiterated the necessity of zero-rated sales for refund claims and found MGI failed to substantiate sales during 2013 or subsequent years.
- The CTA EB also held that MGI failed to establish its qualification as an RE Developer for VAT zero-rating due to lack of DOE Certificate of Endorsement on a per transaction basis, citing IRR requirements.
Legal Issues
- Whether the CTA EB erred in ruling that MGI failed to establish engagement in zero-rated sales under Republic Act No. 9513 and its implementing rules and regulations (IRR).
- Whether the CTA EB erred in affirming that MGI is not entitled to refund of input VAT under Section 112(A) of