Refund 157-M excess VAT payment, tax court tells BIR

The Court of Tax Appeals (CTA) has instructed the Bureau of Internal Revenue (BIR) to refund or issue tax credit certificate to Nokia (Philippines) Inc. totaling to 157.5 million for excess value-added tax (VAT) payment for the four quarters of 2010.

In a 16-page resolution, the court en banc affirmed the earlier verdict of its Second Division for the return of the VAT payment, as the transaction between local Nokia subsidiary and its mother company in Finland is considered zero-rated sales under the VAT input/output mechanism.

Nokia elevated the case to the tax court after the BIR refused to issue a tax credit certificate on the ground that the former failed to submit the necessary documents enumerated under Revenue Memorandum order No. 53-98, as provided for under Section 112 of the Tax Code.

The court, however, ruled that the revenue order misinterpreted or misapplied the provisions of Section 112 of the Tax Code, stressing that the BIR cannot demand what type of supporting documents should be submitted.

"Otherwise, a taxpayer will be at the mercy of the BIR which may require the submission of documents that a taxpayer cannot produce," the court stated.

It said it was sufficient that Nokia was able to present documents that it was doing a service to its mother company to qualify the transaction as VAT zero-rated, or the return of VAT it paid for the purchase of local and imported goods used to service or deliver goods to a foreign company.

The court also said that zerorated status is granted to a local firm if the services are performed here for companies doing business outside the country and that such services and sales of goods are paid in acceptable foreign currency.

The court said the telecommunication company has proven that its client is a non-resident foreign corporation.

"Once a taxpayer has established by sufficient evidence that it is entitled to a refund or issue of a tax credit certificate in accordance with the requirements of Section 112 of the Tax Code, its claim should be granted," the court stated.