Proof establishing VAT zero-rated direct export sales

Under Section 112(A) of the Tax Code, a VAT-registered taxpayer with input taxes attributable to zero-rated or effectively zero-rated sales is entitled to claim for refund of its unutilized input VAT within the two-year period from the close of the taxable quarter when such sales were made.

As one of the transactions subject to zero-percent rate, direct export sales qualify as VAT zero-rated sale pursuant to Section 106(A)(2)(a)(1) of the Tax Code if the following conditions are present: (1) there was a sale and actual shipment of goods from the Philippines to a foreign country; (2) the sale was made by a VAT-registered person; (3) the sale was paid for in acceptable foreign currency or its equivalent in goods or services; and (4) the payment was accounted for in accordance with the Bangko Sentral ng Pilipinas (BSP) rules and regulations.

On the other hand, the documents that should be presented by the taxpayer to prove that there is direct export sales are: (1) sales invoice as proof of sale of goods; (2) export declaration and bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country; and (3) the bank credit advice, certificate of bank remittance or any other document proving payment for the goods in acceptable foreign currency or its equivalent in goods and services.

While the taxpayer-refund claimant was able to prove that it was a VAT-registered taxpayer, the CTA held that the documents such as official receipts, and bank certificates/cash statements submitted by the taxpayer cannot be linked to its export sales due to its failure to submit its VAT zero-rated sales invoices and export documents, such as export declarations and bills of lading, or airway bills. Hence, for failure to submit the aforesaid documents, the CTA held that its sales cannot qualify for VAT zero-rating and its input VAT cannot be refunded.

(Philippine Gold Processing & Refining Corporation v. Commissioner of Internal Revenue, CTA Case No. 8270, June 11, 2013)

Tax Brief – July 2013

Punongbayan and Araullo