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  • CIR v. Acesite Hotel Corporation

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    Jemima Falinchao
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    Acesite Hotel Corporation filed a claim for refund of value-added tax (VAT) payments made for services rendered to the Philippine Amusement and Gaming Corporation (PAGCOR). PAGCOR is exempt from direct and indirect taxes under its charter. The Court of Tax Appeals and the Court of Appeals ruled that Acesite was entitled to a refund, as the transactions with PAGCOR were effectively zero-rated due to PAGCOR's tax exemption. The Supreme Court affirmed this ruling, holding that Acesite was not liable to pay VAT on the transactions as PAGCOR's tax exemption extended to Acesite. As Acesite proved its VAT payments and registration, and the CIR did not dispute these

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    CIR v. Acesite Hotel Corporation case digest

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    Acesite Hotel Corporation filed a claim for refund of value-added tax (VAT) payments made for services rendered to the Philippine Amusement and Gaming Corporation (PAGCOR). PAGCOR is exempt from direct and indirect taxes under its charter. The Court of Tax Appeals and the Court of Appeals ruled that Acesite was entitled to a refund, as the transactions with PAGCOR were effectively zero-rated due to PAGCOR's tax exemption. The Supreme Court affirmed this ruling, holding that Acesite was not liable to pay VAT on the transactions as PAGCOR's tax exemption extended to Acesite. As Acesite proved its VAT payments and registration, and the CIR did not dispute these

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    68 views2 pages

    CIR v. Acesite Hotel Corporation

    Uploaded by

    Jemima Falinchao
    Acesite Hotel Corporation filed a claim for refund of value-added tax (VAT) payments made for services rendered to the Philippine Amusement and Gaming Corporation (PAGCOR). PAGCOR is exempt from direct and indirect taxes under its charter. The Court of Tax Appeals and the Court of Appeals ruled that Acesite was entitled to a refund, as the transactions with PAGCOR were effectively zero-rated due to PAGCOR's tax exemption. The Supreme Court affirmed this ruling, holding that Acesite was not liable to pay VAT on the transactions as PAGCOR's tax exemption extended to Acesite. As Acesite proved its VAT payments and registration, and the CIR did not dispute these

    Copyright:

    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 2

    ZERO-RATED

    CIR v. Acesite Hotel Corporation

    Guide Questions:

    1. Is Acesite VAT registered?


    2. Is the transaction zero-rated?
    3. Is Acesite entitled to a refund under Section 112?

    Facts:

    Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along United Nations
    Avenue in Manila. It incurred VAT liability amounting to P30,152,892.02 from its rental income and sale
    of food and beverages to PAGCOR. Acesite tried to shift the burden to PAGCOR, but the latter refused.

    Acesite paid the corresponding VAT out of fear of the legal consequences of non-payment of
    tax. However, Acesite belatedly realized that the transaction with PAGCOR was subject to zero rate as it
    was rendered to a tax-exempt entity. Acesite filed an administrative claim for refund with the
    Commission of Internal Revenue (CIR). The CIR did not act on the same, thus it was appealed to the
    Court of Tax Appeals. The CTA and the Court of Appeals (CA) granted the refund. The CA decided in this
    wise:

    “Upon appeal by petitioner, the CA affirmed in toto the decision of the CTA holding that
    PAGCOR was not only exempt from direct taxes but was also exempt from indirect taxes like the
    VAT and consequently, the transactions between respondent Acesite and PAGCOR were
    "effectively zero- rated" because they involved the rendition of services to an entity exempt from
    indirect taxes. Thus, the CA affirmed the CTA’s determination by ruling that respondent Acesite was
    entitled to a refund of PhP 30,054,148.64 from petitioner.”

    A Petition for Review on Certiorari was filed by the CIR questioning the decision of the CA.

    Issues:

    1. Whether PAGCOR’s tax exemption privilege includes the indirect tax of VAT to entitle Acesite
    to zero percent (0%) VAT rate;

    2. Whether the zero percent (0%) VAT rate under then Section 102 (b)(3) of the Tax Code (now
    Section 108 (B)(3) of the Tax Code of 1997) legally applies to Acesite.

    Held:

    The Supreme Court held that Acesite is not liable for the payment of VAT as it is exempt in this
    particular transaction by operation of law to pay the indirect tax.

    The Court states that Sec. 108 [b] [3] of the Tax Code provides that services rendered to persons
    or entities whose exemption under special laws or international agreements to which the Philippines is a
    signatory effectively subjects the supply of such services to zero (0%) rate. In other words, such
    provision provides for an exemption from VAT.
    In this case, it is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an
    exemption from the payment of taxes. A close scrutiny of the charter clearly gives PAGCOR a blanket
    exemption to taxes with no distinction on whether the taxes are direct or indirect. Thus, the exemption
    can be extended to entities or individuals dealing with PAGCOR in casino operations, the charter clearly
    is exempting PAGCOR from being liable to indirect taxes. Such exemption, also extends to Acesite.

    It is worth noting that since an action for a tax refund partakes of the nature of an exemption,
    which cannot be allowed unless granted in the most explicit and categorical language, it is strictly
    construed against the claimant who must discharge such burden convincingly. In the instant case,
    respondent Acesite had discharged this burden as found by the CTA and the CA. Indeed, the records
    show that Acesite proved it is a VAT-registered, and that it actually made VAT payments that are subject
    to refund, as attested to by an independent Certified Public Accountant who was duly commissioned by
    the CTA. On the other hand, petitioner never disputed nor contested respondent’s testimonial and
    documentary evidence. In fact, petitioner never presented any evidence on its behalf.

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