G.R. No. 140230, December 15, 2005 COMMISSIONER OF INTERNAL REVENUE versus PHILIPPINE LONG DISTANCE COMPANY Facts: PLDT is a grantee of a franchise under Republic Act (R.A.) No. 7082 to install, operate and maintain a telecommunications system throughout the Philippines. For equipment, machineries and spare parts it imported for its business on different dates from October 1, 1992 to May 31, 1994, PLDT paid the BIR the amount of P164,510,953.00, broken down as follows: (a) compensating tax of P126,713,037.00; advance sales tax of P12,460,219.00 and other internal revenue taxes of P25,337,697.00. For similar importations made between March 1994 to May 31, 1994, PLDT paid P116,041,333.00 value-added tax (VAT).
On March 15, 1994, PLDT addressed a letter to the BIR seeking a confirmatory ruling on its tax tax exemption privilege under Section 12 of R.A. 7082. Sec. 12. xxx and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof : xxx Then the BIR issued Ruling No. UN-140-94 PLDT shall be subject only to the following taxes, to wit: xxx The 3% franchise tax on gross receipts which shall be in lieu of all taxes on its franchise or earnings thereof. xxx The “in lieu of all taxes” provision under Section 12 of RA 7082 clearly exempts PLDT from all taxes including the 10% value-added tax (VAT) prescribed by Section 101 (a) of the same Code on its importations of equipment, machineries and spare parts necessary in the conduct of its business covered by the franchise, except the aforementioned enumerated taxes for which PLDT is expressly made liable. Thus PLDT filed on December 2, 1994 a claim for tax credit/refund of the VAT, compensating taxes, advance sales taxes and other taxes it had been paying “ in connection with its importation of various equipment, machineries and spare parts needed for its operations” . With its claim not having been acted upon by the BIR, and obviously to forestall the running runni ng of the prescriptive period therefor, PLDT filed with the CTA a petition for review. CTA rendered a decision in favor of PLDT. BIR moved for a reconsideration but to no avail. Hence this petition. petition. Issue: Whether or not PLDT, given the tax component of its franchise, is exempt from paying VAT, compensating taxes, advance sales taxes and internal revenue taxes on its importations. Held: Time and again, the Court has stated that taxation is the rule, exemption is the exception. Accordingly, statutes granting tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. To him, therefore, who claims a refund or exemption from tax payments rests the burden
of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted. As may be noted, the clause “in lieu of all taxes” in Section 12 of RA 7082 is immediately followed by the limiting or qualifying clause “on this franchise or earnings thereof” , suggesting that the exemption is limited to taxes imposed directly on PLDT since taxes pertaining to PLDT’s franchise or earnings are its direct liability. Accordingly, indirect taxes, not being taxes on PLDT’s franchise or earnings, are outside the purview of the “in lieu ” provision. If we were to adhere to the appellate court’s interpreta tion of the law that the “in lieu of all taxes” clause encompasses the totality of all taxes collectible under the Revenue Code, then, the immediately following limiting clause “ on this franchise and its earnings” would be nothing more than a pure jargon bereft of effect and meaning whatsoever. Needless to stress, this kind of interpretation cannot be accorded a governing sway following the familiar legal maxim redendo singula singulis meaning, take the words distributively and apply the reference. Under this principle, each word or phrase must be given its proper connection in order to give it proper force and effect, rendering none of them useless or superfluous.
G.R. No. 152609, June 29, 2005 COMMISSIONER OF INTERNAL REVENUE versus AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH) Facts: Respondent is a Philippine branch of American Express International, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, U.S.A., with office in the Philippines. It is a servicing unit of American Express International, Inc. - Hongkong Branch (Amex-HK) and is engaged primarily to facilitate the collections of Amex-HK receivables from card members situated in the Philippines and payment to service establishments in the Philippines.
Amex Philippines registered itself with the Bureau of Internal Revenue (BIR), as a value-added tax (VAT) taxpayer effective March 1988 and was issued VAT Registration Certificate No. 088445 bearing VAT Registration No. 32A-3-004868. For the period January 1, 1997 to December 31, 1997, [respondent] filed with the BIR its quarterly VAT returns. On March 23, 1999, however, respondent amended the aforesaid returns. On April 13, 1999, respondent filed with the BIR a letter-request for the refund of its 1997 excess input taxes in the amount of P3,751,067.04, which amount was arrived at after deducting from its total input VAT paid of P3,763,060.43 its applied output VAT liabilities only for the third and fourth quarters of 1997 amounting to P5,193.66 and P6,799.43, respectively. Respondent cites as basis therefor, Section 110 (B) of the 1997 Tax Code. There being no immediate action on the part of the petitioner, respondent’s petition was filed on April 15, 1999. In addition, respondent relied on VAT Ruling No. 080-89, dated April 3, 1989, the pertinent portion of which reads as follows: “In Reply, please be informed that, as a VAT registered entity whose service is paid for in acceptable foreign currency which is remitted inwardly to the Philippines and accounted for in accordance with the rules and regulations of the Central [B]ank of the Philippines, your service income is automatically zero rated effective January 1, 1998. [Section 102(a)(2) of the Tax Code as amended]. For this, there is no need to file an application for zero-rate.” The CTA rendered a decision in favor of the respondent. The CA reasoned that reliance on VAT Ruling No. 040-98 was unwarranted. Hence this petition. Issue: Whether or not the respondent’s services meets the requirement under which the supply of service shall be zero-rated.
Held: The law is very clear. Under the last paragraph quoted above, services performed by VAT-registered persons in the Philippines (other than the processing, manufacturing or repacking of goods for persons doing business outside the Philippines), when paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP, are zero-rated. Respondent is a VAT-registered person that facilitates the collection and payment of receivables belonging to its non-resident foreign client, for which it gets paid in acceptable foreign currency inwardly remitted and accounted for in conformity with BSP rules and regulations. Certainly, the service it renders in the Philippines is not in the same category as "processing, manufacturing or repacking of goods" and should, therefore, be zero-rated. In reply to a query of respondent, the BIR opined in VAT Ruling No. 080-89 that the income respondent earned from its parent company’s regional operating centers (ROCs) was automatically zero-rated effective January 1, 1988. Service has been defined as "the art of doing something useful for a person or company for a fee” or "useful labor or work rendered or to be rendered by one person to another." For facilitating in the Philippines the collection and payment of receivables belonging to its Hong Kong-based foreign client, and getting paid for it in duly accounted acceptable foreign currency, respondent renders service falling under the category of zero rating. Pursuant to the Tax Code, a VAT of zero percent should, therefore, be levied upon the supply of that service.
G.R. No. 147295, February 16, 2007 THE COMMISIONER OF INTERNAL REVENUE versus ACESITE (PHILIPPINES) HOTEL CORPORATION Facts: Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along United Nations Avenue in Manila. It leases 6,768.53 square meters of the hotel’s premises to the Philippine Amusement and Gaming Corporation [hereafter, PAGCOR] for casino operations. It also caters food and beverages to PAGCOR’s casino patrons through the hotel’s restaurant outlets. For the period January (sic) 96 to April 1997, Acesite incurred VAT amounting to P30,152,892.02 from its rental income and sale of food and beverages to PAGCOR during said period. Acesite tried to shift the said taxes to PAGCOR by incorporating it in the amount assessed to PAGCOR but the latter refused to pay the taxes on account of its tax exempt status.
PAGCOR paid the amount due to Acesite minus the P30,152,892.02 VAT while the latter paid the VAT to the Commissioner of Internal Revenue as it feared the legal consequences of non-payment of the tax. However, Acesite belatedly arrived at the conclusion that its transaction with PAGCOR was subject to zero rate as it was rendered to a tax-exempt entity. On 21 May 1998, Acesite filed an administrative claim for refund with the CIR but the latter failed to resolve the same. Thus on 29 May 1998, Acesite filed a petition with the Court of Tax Appeals which rendered an affirmative decision. Upon appeal by petitioner, the CA affirmed in toto the decision of the CTA holding that PAGCOR was not only exempt from direct taxes but was also exempt from indirect taxes like the VAT and consequently, the transactions between respondent Acesite and PAGCOR were "effectively zero-rated". Issue: Whether PAGCOR’s tax exemption privilege includes the indirect tax of VAT to entitle Acesite to zero percent (0%) VAT rate. Held: PAGCOR is exempt from payment of indirect taxes. It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the payment of taxes. Section 13 of P.D. 1869 pertinently provides:
Sec. 13. Exemptions. xxx (2) Income and other taxes. – (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation , except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority.
(b) Others: The exemptions herein granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the Corporation or operator.
A close scrutiny of the above provisos clearly gives PAGCOR a blanket exemption to taxes with no distinction on whether the taxes are direct or indirect. We are one with the CA ruling that PAGCOR is also exempt from indirect taxes, like VAT.
