Invoicing requirement for zero-rated sale of service

A taxpayer whose claim for refund or issuance of tax credit is based on the existence of zero-rated sales must comply with the invoicing requirements on the documents supporting the sale of goods and services.

Under Section 113 of the Tax Code, a VAT-registered taxpayer is required to issue a VAT invoice for every sale, barter or exchange of goods or properties, while a VAT official receipt must be issued for every lease of goods or properties and for every sale, barter or exchange of services.

To prove compliance with substantiation and invoicing requirements, the taxpayer refund claimant presented the intercompany invoices it issued to its foreign affiliate clients. However, considering that the taxpayer is engaged in the sale of services, its transactions should be properly supported by VAT official receipts as required under Section 113 of the Tax Code.

The CTA held that the invoicing requirement is mandatory in nature and, consequently, for failure to present the proper documents to prove the existence of its zero-rated sales, its claim for refund of its unutilized or excess of input taxes on its alleged zero-rated sales was denied.

(Galileo Asia, LLC-Philippines v. Commissioner of Internal Revenue, CTA Case No. 8134, August 22, 2012)

Tax Brief – September 2012

Punongbayan and Araullo