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BIR found to have illegally collected VAT from Semirara

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THE tax appeals court ordered the Bureau of Internal Revenue (BIR) to pay back Semirara Mining and Power Corp. (Semirara) over P27 million worth of illegally collected Value Added Taxes (VAT).

In a decision by the Court of Tax Appeals (CTA) promulgated on July 27, 2018, the court ruled that the Commissioner of Internal Revenue, must “refund in favor of petitioner the amount P27,340,714.00,representing the VAT illegally collected from or erroneously paid by the petitioner on its importation/partial shipment of diesel.”

Semirara was directed to pay VAT after an assessment on Sept. 2, 2013 for the diesel importation, which was not released until VAT was paid.

The CTA ruled that Semirara holds a Coal Operating Contract (COC) and is thus exempt “from national taxes (including VAT and excise tax), other than income tax and on duties and taxes on importations of its materials (diesoline, in this case) required for its operations.”

Section 5.2 (a) of the Department of Energy’s(DoE) COC states that operators have the right to have an “Exemption from all national taxes except income tax.”

Section 5.2 (b) of the same contract said operators also enjoy “Exemption from payment of tariff duties, compensating tax and value-added tax on importations of machinery and equipment, spare parts and materials required for the Coal Operation” subject to conditions.

The court ruled that the payment of Semirara in pursuant to Section 3 of Revenue Regulations No. 2-2012 “is without valid basis.”

In its website, BIR said RR No. 2-2012 “prescribes the tax administration treatment of petroleum and petroleum products imported into the Philippines including those coming in through freeport zones and economic zones and registration of all storage tanks, facilities, depots and terminals.”

This was later struck down by the Supreme Court.

“As such, the payment of VAT by petitioner on its importation of diesel is erroneous and illegal,” the tax appeals court said.

It added, “It is an unreasonable burden for petitioner to pay the tax which by law specifically exempts petitioner.” — Gillian M. Cortez





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