Perception Gaming, Inc. vs. Bureau of Internal Revenue

AMENDED DECISION

BAUTISTA, ].

For resolution is petitioner's "Motion for Reconsideration (RE: Decision Dated November 12, 2014)" filed by registered mail on November 28, 2014, without any comment from respondent despite notice thereof.

On November 12, 2014, the Court promulgated a Decision, the dispositive portion thereto reads: "WHEREFORE, in view of the foregoing, the Petition for Review is hereby DENIED for lack of jurisdiction.

(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. The fee or remuneration of foreign entertainers contracted by the Corporation or operator in pursuance of this provision shall be free of any tax." (Emphases ours) From the above-quoted Section of the P AGCOR Charter, three (3) entities shall enjoy exemption from taxes, viz: 1.

The Corporation, or PAGCOR; 2.

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 the P AGCOR Charter; and 3.

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.

It is thus apparent from the foregoing enumeration that the tax- exempt status of PAGCOR extends to other entities with whom P AGCOR or Operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under the J former's Charter.

( ~

PageS of13 In the present case, petitioner has leased gaming machines and furnished technical services to PAGCOR and Operators4• On the said transactions, petitioner alleges that it paid 12% output VAT. However, based on the P AGCOR Charter, the said transaction should have been subjected to zero percent (0%) VAT. Thus, petitioner is claiming a refund or an issuance of a TCC on the alleged erroneous payment of output VAT.

In order to be entitled to refund, of its erroneously paid output VAT, petitioner must show that it timely filed its administrative and judicial claims and that it made the corresponding payments thereon pursuant to Sections 204(C) and 229 of the Tax Code. Sections 204 (C) and 229 of the Tax Code are reproduced below: "SECTION 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed showing an Emphasis ours.

Testimony of Ms. Rona Magsakay (Exhibit "XX"): "Q9: Ms. Witness, you mentioned that PGI supplies gaming equipment to PAGCOR-operated gaming venues and various Gaming Operators. What is your basis for saying this? A9: PGI was issued Certificates of Registration by PAGCOR stating that PGI is a registered supplier I distributor I manufacturer I contractor of PAGCOR. Moreover, under several Memoranda of Agreement and Lease and Technical Support Agreements, PGI undertook to supply several Gaming Operators with Electronic Bingo gaming machines to be used in their casino operations. PGI likewise undertook to provide technica( assistance to PAGCOR and the Gaming Operators to ensure the efficient functioning of the gaming machines."

overpayment shall be considered as a written claim for credit or refund." (Emphasis ours) "SECTION 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis ours) Pursuant to the above-quoted Sections, a taxpayer has to file both the administrative and judicial claims for refund of erroneously paid taxes within 2 years from the date of payment of tax. Employing the two- year prescriptive period under Sections 204 (C) and 229 of the Tax Code, below are the material dates when petitioner filed its administrative and judicial claims:

Period Date of End of Two Date of Filing of Date Filing of Payment Year Administrative Judicial Claim Prescriptive Claim for Refund for Refund Period 2nd Quarter July 20, 2010 July 20, 2012 June 27, 2012 June 28, 2012

CY 2010

3rd Quarter October 26, October 26, 2012

CY 2010

2010 4th Quarter January 25, January 25, 2013

CY 2010

2011 1st Quarter May 20,2011 May 20,2013

CY 2011

2nd Quarter July 25, 2011 July 25, 2013

CY 2011

CIA Case No. 8509

3rd Quarter October 19, CY2011 2011 4th Quarter January 20,

CY 2011

2012 October 19, 2013 January 20, 2014 Evidently, the above table demonstrates that petitioner timely filed its administrative and judicial claim, in accordance with Sections 204(C) and 229 of the Tax Code. The Court shall now proceed to determine the refundable amount of erroneous payment of output VAT. For the 2nd to 4th quarters of CY 2010 and the 1st to 4th quarters of CY 2011, petitioner made the following output VAT payments on the sale of service toP AGCOR and P AGCOR-Authorized Bingo Operators in the total amount of Two Million Nine Hundred Fifty-Seven Thousand Thirteen Pesos and Eleven Centavos (PhP2,957,013.11), as follows: Period Output VAT Payment 2nd Quarter PhP427,240.20i

CY 2010

3rd Quarter 835,726.18ii

CY 2010

4th Quarter 711,436.7 4iii

CY 2010

1st Quarter 641,458.35iv

CY 2011

2nd Quarter 341,151.64v

CY 2011

TOTAL PhP2,957,013.11 Section llO(B) of the Tax Code states that "if at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarter xxx" Clearly from the foregoing, there is a need to determine the correct output VAT after charging the input VAT from the output VAT and if there is an excess input VAT after charging the output VAT, the excess input VAT shall be carried over to the succeeding quarter. In the present case, to determine the "correct output VAT" for the quarter, the erroneously paid 12% VAT relating to effectively zero-rated j sales of services to PAGCOR and Operators shall be deducted from the (Y

CfA Case No. 8509 output VAT declared per Quarterly VAT returns for the 2nd to 4th quarters of CY 2010 and the 1st to 4th quarters of CY 2011. Thereafter, the computed" correct output VAT" shall be reduced by the Creditable Input Taxes for the same period, namely: (a) input tax carried over from the previous period; (b) domestic purchases of services for the same period; and (c) domestic purchases of goods for the same period to determine the Net VAT Payable or Overpayment for the quarter. The Net VAT Payable or Overpayment for the quarter shall then be reduced by the VAT payments from the first two (2) months of each quarter to determine the correct Quarterly VAT Payable, to wit: For Calendar Year 2010 Output Tax (per Quarterly VAT Return) Less: Erroneously paid Output Tax for Zero-Rated Transactions Correct Output Tax for the period Less:

Input Tax Carried Over from Previous Period Domestic Purchases of Services for the periodt7 Domestic Purchases of Goods for the periodtS Total Creditable Input Tax Net VAT Payable Less: Tax Credits (Monthly VAT Payments- previous two months) (Monthly VAT Return) Total Amount PayablP/(Overpayment) For Calendar Year 2011 Output Tax (per Quarterly VAT Return) 14 Id., pages 1109-1110. 1s Id., pages 1118-1119. 16 Id., pages 1124-1125. For the vear ended December 31, 2010 Second Quarter Third Quarter Fourth Quarter 649,146.4714 860,065.2215 938,488.3716 427,240.20 835,726.18 711,436.74 221,906.27 24,339.04 227,051.63 - 112,249.53 621,633.55 23,445.17 94,353.02 95,286.55 1,561.77 683.14 302.69 25,006.94 207,285.69 717,222.79 196,899.33 (182,946.65) _(490,171.16) 309,148.86 438,686.90 477,016.42 (112,249.53) (621,633.55) (967,187.58) For the year ended December 31, 2011 Second Third Fourth First Quarter Quarter Quarter Quarter 967,011.5122 1,042,374.8223 982,998.0024 1,171,446.0525 17 Input Tax is less than input taxes declared per VAT returns for failure to comply with the invoicing requirements as provided in Section 113 of the Tax Code. ;;

18 Input Tax is less than input taxes declared per VAT returns for failure to comply with the invoicing requirements as provided in Section 113 of the Tax Code. 22 Id., pages 1128-1129. 23 Id., pages 1133-1134. 24 Id., pages 1136-1137. 25Id., pages 1128-1129.

Less: Erroneously paid Output Tax for Zero-Rated Transactions Correct Output Tax for the period Less:

Input Tax Carried Over from Previous Period Domestic Purchases of Services for the period26 Domestic Purchases of Goods for the period27 Total Creditable Input Tax Net VAT Payable Less: Tax Credits (Monthly VAT Payments- previous two months) (Monthly VAT Return) Total Amount Payable/(Overpayment) 641,458.35 325,553.16 967,187.58 95,578.08 1,655.36 1,064,421.02 (738,867.86) 489,102.93 (1,227,970.79) 341,151.64 - - 701,223.18 982,998.00 1,171,446.05 1,227,970.79 1,164,706.72 767,631.10 78,467.14 35,268.44 54,125.36 600.00 3,818.99 587.04 1,307,037.93 1,203,794.15 822,343.50 (605,814.75) (220,796.15) 349,102.55 558,891.97 546,834.95 591,149.12 (1,164,706.72) (767,631.10) (242,046.57) However, since petitioner made VAT payments for the 2nd to 4th quarters of CY 2010 and the 1st to 4th quarters of CY 2011, it is imperative that the Court deducts the VAT Payments for each quarter to ascertain the amount petitioner is entitled for refund or issuance of TCC, as shown below:

For Calendar Year 2010 For the year ended December 31, 2010 Second Quarter Third Quarter Fourth Quarter Output Tax (per Quarterly VAT Return) 649,146.47 860,065.22 938,488.37 Less: Erroneously paid Output Tax for Zero-Rated Transactions 427,240.20 835,726.18 711,436.74 Correct Output Tax for the period 221,906.27 24,339.04 227,051.63 Less:

Input Tax Carried Over from Previous Period - 294,973.05 991,186.80 Domestic Purchases of Services for the period32 23,445.17 94,353.02 95,286.55 Domestic Purchases of Goods for the period33 1,561.77 683.14 302.69 Total Creditable Input Tax 25,006.94 390,009.21 1,086,776.04 Net VAT Payable 196,899.33 (365 ,670.0_ (859,724.41) Less: Tax Credits Monthly VAT Payments - previous two months (Monthly VAT Return) 309,148.86 438,686.90 477,016.42 VAT Paid for the Quarter 182,723.52 186,829.73 300,801.46 26 Input Tax is less than input taxes declared per VAT returns for failure to comply with the invoicing requirements as provided in Section 113 of the Tax Code. 27 Input Tax is less than input taxes declared per VAT returns for failure to comply with the invoicing" I requirements as provided in Section 113 of the Tax Code. fV 32 Same Note as 21.

I~ 33 Same Note as 22.

CfA Case No. 8509

For Calendar Year 2011 Output Tax (Quarterly VAT Return) Less: Erroneously paid Output Tax for Zero-Rated Transactions Correct Output Tax for the period Less:

Input Tax Carried Over from Previous Period Domestic Purchases of Services for the period34 Domestic Purchases of Goods for the period3S Total Creditable Input Tax Net VAT Payable Less: Tax Credits Monthly VAT Payments - previous two months (Monthly VAT Return) VAT Paid for the Quarter Total Amount Payable,/( Overpayment) First Quarter 967,011.51 641,458.35 325,553.16 1,637,542.29 95,578.08 1,655.36 1,734,775.73 _(1,409,222.5Z)_ 489,102.93 316,298.22 (2,214,623.72) For the _year ended December 31,2011 Fourth Second Quarter Third Quarter Quarter 1,042,374.82 982,998.00 1,171,446.05 341,151.64 - - 701,223.18 982,998.00 1,171,446.05 2,214,623.72 2,490,876.79 2,402,883.24 78,467.14 35,268.44 54,125.36 600.00 3,818.99 587.04 2,293,690.86 2,529' 964.22 2,457,595.64 {_1,592,467.68) _{1,546,966.2~ _{1,286, 149 .59} 558,891.97 546,834.95 591,149.12 339,517.14 309,082.07 (893,039.05) (2,490,876.79) (2,402,883.24) (984,259.66) From the above table, petitioner may rightfully claim the Total Amount Payable or Overpayment reflected in the 4th quarter of CY 2011, or the amount of Nine Hundred Eighty-Four Thousand Two Hundred Fifty-Nine Pesos and Ninety-Nine Centavos (PhP984,259.99).

Consequently, petitioner is entitled to a VAT refund or TCC in favor of petitioner in the amount of PhP984,259. 99, representing erroneously paid VAT Payable for the 2nd to 4th quarters of CY 2010 and the 1st to 4th quarters of CY 2011.

WHEREFORE, the "Motion for Reconsideration" is hereby PARTIALLY GRANTED.

Accordingly, respondent is hereby ORDERED to refund or issue a tax credit certificate in favor of petitioner in the reduced amount of PhP984,259.99, representing erroneously paid VAT Payable for the 2nd to 4th quarters of CY 2010 and the 1st to 4th _) quarters of CY 2011.

(