MICROSOFT PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE- VAT Zero Rating

FACTS:

Microsoft renders marketing services to two affiliated nonresident foreign corporations with their services being paid for in foreign currency. Microsoft filed a claim for refund for unutilized input VAT but the CTA denied the same on the basis that the official receipts issued did not bear the imprinted word “zero-rated” on its face and are thus not valid evidence of Microsoft’s sales.

ISSUE:

Is Microsoft entitled to a refund?

HELD:

NO. The regulations in effect when the sales were made by Microsoft clearly indicate in the portion outlining the “Invoicing Requirements” that the word “zero-rated” must be imprinted in the invoice. Without such, the invoice are not considered as VAT invoices and thus could not give rise to any input tax. The Court added that the reason for enforcing this rule even if only based on regulation is that it prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid.