Western Mindanao Corp vs CIR digest

Western Mindanao Power Corp vs CIR Case Digest GR 181136 June 13 2012

Facts: WMPC, engaged in the production and sale of electricity, is r egistered as a VAT taxpayer. It sells electricity solely to the National Power Corporation (NPC), which is in turn exempt from the payment of all forms of taxes, duties, fees and imposts, pursuant to its charter. Also, pursuant to Section 108(B) (3) of the NIRC, WMPC’s power generation services to NPC is zero -rated. Thus, WMPC tried to file an application for tax credit certificates on input VAT paid to its zero-rated sales. However, its application was denied because of WMPC’s failure to comply with the invoicing requirements under Section 113 of the NIRC in relation to Sec 4.108-1 of RR 7-95.

Issue: W/N denial of application for tax refund or tax credit on the ground that the taxpayer’s Official Receipts do not contain the phrase “zero -rated” is proper

Yes. Failure to indicate the term zero-rated in the invoice or receipt for zero-rated transactions is fatal.

In a claim for tax refund or tax c redit, the taxpayer must prove not only entitled to the grant of c laim under substantive law, but must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim of a refund or tax cr edit. Hence, the mere fact that the applicant’s zero -rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit. The taxpayer must further comply with the invoicing and accounting requirements mandated by the NIRC, as well as the revenue regulations implementing them.

Under the NIRC, a creditable input tax should be evidenced by a VAT receipt or Official Receipt, which may only be considered as such when it complies with the requirements of RR 7-95 particulary Section 4.1081 thereof. This section requires, among others, that if the sale is subject to zero-percent VAT, the term zero-rated sale shall be written or printed prominently on the invoice or receipt