THE COURT of Tax Appeals (CTA) has upheld its decision to grant Philippine Geothermal Production Co., Inc.’s (PGPCI) refund claim in the amount of P23.27 million representing its excess input value-added tax (VAT) traced to zero-rated sales for the first three quarters of 2016.

In a decision dated Feb. 20, the tribunal said the PGPCI did not need to directly trace its input tax to 0% VAT for it to seek a valid refund.

“The Tax Code does not require the input tax to be directly attributable to zero-rated sales to be refundable or creditable,” CTA Associate Justice Maria Rowena Modesto-San Pedro said in the ruling.

The commissioner of internal revenue (CIR) argued that the tribunal should have denied its claim since PGPCI failed to prove that its input taxes were directly traced to zero-rated sales.

Under the Tax Code,  zero-rated sales are transactions made by VAT-registered taxpayers that do not translate to any output tax.

The term “zero-rated sale” must be written on the company’s official receipts.

The CTA said no provision in the law requires input tax to be directly attributable to a zero-rated sale to be refundable.

It said zero-rated sales only require that the transaction paid in connection with the entity’s business should be backed by official invoices or receipts.

“The High Court ruled that ‘the findings of fact by the CTA in Division are not to be disturbed without any showing of grave abuse of discretion…,” it said.

“Evidently, contrary to the CIR’s allegation, the attribution of the input VAT to the zero-rated sales need not always be direct.” — John Victor D. Ordoñez