Cases related to Omnibus Investment

Case #1: “COMMISIONER OF INTERNAL REVENUE v. FILMINERA RESOURCES

CORPORATION CTA EB NO. 1362 (CTA CASE NOS. 8528 & 8576)

Issue: Whether the respondent is entitled for a refund?

Facts:

The court in Division previously held: respondent failed to prove that its buyer,
Philippine Gold Processing and Refining Corporation (PGPRC), had exported 100% of its
products; and BOI Certification merely established latter’s products were geared for export
but not all its products were actually exported. In addition, the transactions between
petitioner and PGPRC were allegedly zero-rated.

The respondent filed for a Motion for Reconsideration with the Certified True
Copies of the BOI certification and the Certified Reproduced Copy of the Tax Credit
Certificate as supplemental evidence.

Decision:

The respondent is not entitled for a refund because the respondent’s quarterly VAT
returns reveal that it had no output tax liability against which the claimed input VAT may
be applied to or credited from. Also, they may no longer avail of the carry-over or
application of input taxes for the next taxable quarter/s because its reported unutilized
input taxes for the third and fourth quarters of Fiscal year 2010 were already deducted as
“VAT Refund/TCC Claimed” in the Quarterly VAT Returns for the same taxable quarter.

Also, it was found out that the unsupported input taxes shall be disallowed due to
respondent’s failure to substantiate with VAT invoices or official receipts.

Case #2: “TOLENDO POWER COMPANY v. COMMISSIONER OF INTERNAL REVENUE CTA

CASE NO. 8792, JUNE 06, 2017”

Issue: Whether the petitioner is entitled to a VAT refund?

Facts:

The petitioner is claiming for a refund of its unutilized input VAT in relation to its
zero-rated sales. The sales were made to three main entities, the first, Carmen Copper
Corporation (CCC) is a BOI-registered entity with 100% export sales, second is BEC, a
PEZA-registered entity. Lastly, the CEBECO III, an electric cooperative which eventually
sells the electricity purchased from the petitioner to CCC and BEC.

Decision:
 The petitioner is still entitled to a VAT refund.However, the court have decided to
disallow the claim in connection to the sales of CEBECO III. The court ruled that since
CEBECO III is neither a PEZA-registered company, nor a BOI-registered 100% export
company, it should not be subject to zero-rating, despite the sales of CEBECO III being
merely pass-through sales to entities actually entitled to VAT zero-rating sales.

Case #3: “GARCIA v. THE BOARD OF INVESTMENTS, ET AL., G.R. NO. 88637, 07
SEMPTEMBER 1989 [GRINO-AQUINO, J.]"

Issue: Is the amended application needs to be published in a newspaper of general

circulation?

Facts:

Congressman Garcia assails the approval by the Board of Investments and the
Department of Trade and Industry of the amended application for registration of the
Bataan Petrochemical Corporation (BPC), which seeks to transfer the site of its
petrochemical complex from Bataan (the original situs) toBatangas. The BPC’s original
application for registration was published in the Philippine Daily Inquirer but the amended
application, changing the site from Bataan to Batangas was not published.

Decision:

The amended application still needs to be published in a newspaper of general

circulation since the law requires the “publication of application for registration”, hence,
the payment of publication and other necessary fees prior to the processing and approval
of such applications.

Case #4: “PHIL. GOLD PROCESSING & REFINING CORPORATION v. CIR CTA CAE NO. 8763
FEBRUARY 15, 2017”

Issue: WhetherWON PGPRC is entitled to a refund in the amount of Php 58,773,075.12

representing unutilized creditable input VAT?

Facts:

Phil. Golf Processing & Refining Corporation (PGPRC) is a domestic corporation and
VAT-registered entity. On February 2008, it was issued a BOI Certificate of Registration. On
September 18, 2013, PGPRC filed its application for tax credits asking specifically for TCC
covering the periods January 1 to March 21, 2012 and April 1 to June 30, 2012 in the
amounts of Php 35,340,374.12 and Pho 23,432,701, respectively.

Decision:

Regarding to the entitlement of PGPRC to the issuance of a TCC, the court reiterates
that the tax refunds are in the nature of tax exemptions and so should be strictly construed.
Thus, PGPRC must prove their compliance with the requisites of Section 112 (a) of the
1997 NIRC. Also, the Court noted that PGPRC cites Section 109 (b)(1) of the 1997 NIRC as
basis for its claim that its revenues derived from export sales are subject to VAT at zero
percent rate. However, testimonies of its witnesses show that the basis of its claim is
section 106(a)(2)(1)(1) of the 1997 NIRC. Thus, given its failure to prove that it has
complied with all the requirements of the law, its claim for refund shall be denied.

News related to Omnibus Investments:

News Article: “BOI PROPOSES INCLUSION OF MARAWI AND AFFECTED AREAS IN LDA
LIST, SEEN TO JUMPSTART RECOVERY OF FORMER WAR-TORN ZONE”

Date: 2017

To support the government’s effort to jumpstart the rehabilitation of Marawi and its
nearby affected localities, Board of investments (BOI) is proposing the inclusion of such
areas in the list of Less Developed Areas (LDAs).

The Trade Undersecretary and BOI Managing Ceferino Rodolfo said “listing these
areas as LDAs will encourage more investors, both local and foreign, to seriously look into
investment opportunities in the said areas”. In addition, these potential investments will
mean more employment and income opportunities, and eventually lead into normalcy or
better quality of life for returning residents and internally-displaced persons (IDPs) in the
affected areas.

Putting up investment projects in LDAs are entitled to maximum incentives

provided under the Omnibus Investments Code including a 100 percent deduction from
taxable income of necessary and major infrastructure works. As provided for in the 2017
Investment Priorities Plan (IPP)—a listing of the preferred priority investment activities
that maybe given incentives, among the activities entitled to incentives are manufacturing,
agribusiness, services, infrastructure, logistics, power generation, and mass housing.
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News Article: “BOI INVESTMENTS UP 28% IN FIRST 4 MONTHS OF 2018”

Date: May 4, 2018

For the first four(4) months of 2018 (January – April), Board of Investments (BOI)
recorded a Php 195.7 billion worth of investment approvals, an increase of 28 percent as

1
BOI proposes inclusion of Marawi and affected areas in LDA list, seen to jumpstart recovery of former war-torn
zone. (n.d.). Retrieved July 07, 2018, from https://www.dti.gov.ph/overseas/berlin/berlin-news/1101-main-
content/bangon-marawi-news/11570-boi-proposes-inclusion-marawi-lda
compared to the same period last year where it only recorded investments worth Php
153.1 billion.

According to the Trade Secretary and BOI Chairman Ramon Lopez, what sustained
the increase on investments in the Philippines is the strong macroeconomic fundamentals
and continuous policy reforms. On the other hand, according to Trade Undersecretary and
BOI Managing Head Ceferino Rodolfo, the bulk investment projects for the month of April
came from the six (6) air transport projects of Philippine Airlines (PAL) with a combined
investment amount of P19.05 billion while the biggest single project approved was the P5.2
billion project of MWM Terminals, Inc., a public-private partnership (PPP) known as the
Paranaque Integrated Terminal Exchange in Coastal Road.

Countryside investments continue to dominate the figures from January to April

with an aggregate P165.5 billion, or 84.6 percent of the total investment pie with the
National Capital Region (NCR), accounting for the remaining 15.6 percent share. Overall,
Central Luzon (Region III) continues to be the frontrunner among all regions with P77.4
billion in investments approvals, up 501 percent from last year’s P12.9 billion during the
four-month frame. Calabazon (Region IVA) is runner-up with P52.8 billion. NCR is third
with Davao Region (Region XI) and Western Visayas (Region VI) completing the top five
with P14.1 billion and P3.5 billion, respectively.2

Photo Source: Philippine Information Agency (PIA)

News Article: “BOI DRAWS FLAK FOR ‘VAGUE’ PH CAR PROGRAM RULES”

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BOI, & Google. (2018, May 04). BOI investments up 28% in first 4 months of 2018. Retrieved July 07, 2018, from
http://pia.gov.ph/news/articles/1007562
Date: November 21, 20173

Senators blamed the Board of Investments (BOI) for local car industry’s stunned
growth, saying that its failure to set clear-cut rules to guide investors and questionable
decisions on issues affecting the industry.

Chaired by Quirino Rep. DaxCua, the panel launched its investigation into BOI’s
reported move to cancel Hyundai Asia Resources Inc.’s (HARI) license to participate in the
MVDP due to alleged failure to comply with requirements set under Executive Order 156.
According to Trade Undersecretary Ceferino Rodolfo, the agency’s board decided for the
cancellation of HARI’s license for allegedly lacking painting and welding activities in its
assembly plant.He insisted that violations of EO 156 has disqualified HARI from the tax
privileges extended under the program that encourages firms to engage in assembly and
manufacture of completely knocked down vehicles.

At the hearing, Alex Cabrera, HARI senior technical adviser, said the company is
operating under the BOI authority provided under EO 877A, an amendment to EO 156,
which governs the manufacture of knocked down (KD) vehicles.

Saying that HARI only started operations less than six months before the BOI
cancelled its license, Cabrera stressed that they have submitted all requirements like its
technical license agreement (TLA) with Hyundai Motor Company of Korea that clearly lays
down HARI’s assembly process, including the complete list of “knocked down” car parts
and components for importation. All these were received and approved by BOI, he said.

Cua ordered an ocular inspection of the HARI assembly plant in Sta. Rosa, Laguna, to
confirm whether or not BOI’s claims against the company are accurate.

News Article: “DUTERTE SIGNS EOs EXTENDING INCENTIVE ON CAPITAL EQUIPMENT,

ZERO-DUTY ON AGRI PRODUCTS”

Date: May 22, 2017

The capital equipment incentive for enterprises registered with the Board of
Investments and the reduced most-favored-nation rates of duty on agricultural products is
extended by President Rodrigo Duterte, according to executive orders Malacañang.

Executive No. 22 or “Reducing the rates of duty on capital equipment, spare parts
and accessories imported by Board of Investments-registered new and expanding
enterprises,” was signed by the President on April 28. It replaced EO No. 20 (s. 2012) that

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I. (2017, November 21). BOI draws flak for 'vague' PH car program rules. Retrieved July 07, 2018, from
http://business.inquirer.net/241139/board-of-investments-boi-car-industry-growth-investor-motor-vehicle-
development-program
provided for zero percent duty on certain items imported by BOI-linked firms for five
years. It expired on May 9.

According to the EO, “The grant of duty-free importation of capital equipment will
further enhance industry competitiveness in line with the Philippine Development Plan
(PDP) 2017-2022”.

Duterte also signed EO No. 23 on April 27. The EO is titled “Extending the effectivity
of the most-favored-nation rates of duty on certain agricultural products under Republic
Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, and the
other Philippine commitments under the World Trade Organization Decision on Waiver
Relating to Special Treatment for Rice of the Philippines.”

Other EOs released on Monday were EO No. 20 or “Modifying the nomenclature and
rates of import duty on various products under Section 1611 of Republic Act No. 10863 or
the Customs Modernization and Tariff Act,” and EO No. 21 or “Modifying the nomenclature
and the rates of import duty on certain information technology products under Section
1611 of the Customs Modernization and Tariff Act, in order to implement the Philippines’
tariff commitments under the World Trade Organization–Information Technology
Agreement.”
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4
Macas, T. (2017, May 22). Duterte signs EOs extending incentive on capital equipment, zero-duty on agri products.
Retrieved July 11, 2018, from http://www.gmanetwork.com/news/money/economy/611723/duterte-signs-eos-
extending-incentive-on-capital-equipment-zero-duty-on-agri-products/story/