Vol. XXII, No. 77 [ BusinessWorld Online ]
Tuesday, November 11, 2008 | MANILA, PHILIPPINES
FORT BONIFACIO Development Corp. (FBDC) has asked the Supreme Court to compel the government to pay it almost half-a-million pesos in tax refund for the sale of lots at the Bonifacio Global City in Taguig in 1997.
In a 145-page memorandum, the state corporation sought the reversal of the decisions of the Court of Appeals and Court of Tax Appeals, which both favored the Bureau of Internal Revenue in the tax refund case.
FBDC argued it was eligible to a so-called transitional input tax credit under Section 105 of the Tax Code.
The clause grants an 8% tax credit to person or entity that becomes liable to value-added tax (VAT) for his starting inventory of goods, materials and supplies.
FBDC said the tax credit covers not only improvement on real properties but the cost of land as well.
In 1995 the National Government transferred to FBDC properties in Fort Bonifacio that the corporation may develop or sell. At that time, the sale of real properties was not yet subject to VAT. The Expanded Value-Added Tax Law took effect a year later.
The BIR earlier denied FBDC’s tax refund claim worth P486.36 million, saying the tax credit could not be applied to the cost of land.
A revenue circular later clarified that the input tax will only cover improvements, such as buildings, roads, drainage systems and similar structures.
In effect, FBDC was not entitled to a transitional input tax credit on its land inventory.
The tax court, and later the appellate court, upheld the circular.
In its motion however, the firm stressed that Section 105 of the law is clear on the matter.
The lat imposing VAT included properties in the goods that would be taxed. Once a firm becomes subject to VAT, it can invoke its right to enjoy the tax credit, FBDC said.
"What the Internal Revenue commissioner and Secretary of Finance did, in issuing the regulations, was to change the definition of goods insofar as the application of section 105 of the Tax Code is concerned. This is unwarranted legislation beyond [their] powers," it added.
"[Their] transgression of the basic principle of separation of powers, among other well established legal principles, is clear," FBDC said. — IPP
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