Question & AnswerQ&A (POEA ADVISORY NO. 03, S. 2014)
For VAT purposes, the transfer of merchandise inventories of absorbed corporations pursuant to a merger is considered a "deemed sale." The absorbed corporation must pay VAT on the merchandise inventory, after applying any input tax credits it has. This transfer is not exempt from VAT.
No, unused input taxes of absorbed corporations cannot be legally transferred to the surviving corporation for its use as tax credits. Input taxes can only be claimed as a credit by the direct buyer to whom the input taxes were passed on under the VAT law.
It is under Section 106, (B)(4) of the Tax Reform Code that the transfer of merchandise inventory in a merger is deemed a sale for VAT purposes.
Section 4.104-1 (d) of Revenue Regulations No. 7-95 provides that input tax credits are non-transferable and can only be claimed by the party that actually purchased the goods or services where the input taxes were passed on.
The filing must be done within 30 days after the retirement or cessation from business as per Section 4.108-2 (second paragraph) of Revenue Regulations No. 7-95.
The statute of limitations for tax assessment is three (3) years from the filing of the return (Section 203) and ten (10) years from discovery of omission to file the return (Section 222) of the Tax Code.
No, BIR Ruling No. S34-263-97 is declared illegal and void because it conflicts with the VAT law and relevant Tax Code provisions. Administrative issuances must be consistent with the law and cannot override it.
The government can assess and collect all unpaid VAT tax liabilities of entities involved in mergers under the revoked ruling within the statute of limitations, as there are no vested rights created by a wrong interpretation of law.
No, taxpayers do not acquire vested rights under invalid administrative issuances issued in error, and thus exemptions or preferential treatments granted without legal basis can be revoked and collection enforced.
The Supreme Court ruled that administrative regulations cannot override laws enacted by Congress and erroneous interpretations do not preclude the government from collecting taxes legally due. Regulations in conflict with the law are null and void.