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    CIR v. Acesite

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    Acesite owns and operates a hotel where it leases space and provides food and beverages to PAGCOR for casino operations. PAGCOR is exempt from taxes by law. Acesite paid VAT taxes on its income from PAGCOR but later claimed it should be exempt. The court ruled that PAGCOR's tax exemption extends to indirect taxes like VAT. As such, Acesite's transactions with PAGCOR are subject to a 0% VAT rate and Acesite is entitled to a refund of the VAT taxes it paid. The intent of PAGCOR's tax exemption is to prevent any taxes from being shifted to PAGCOR, so Acesite's exemption from VAT on these transactions is allowed

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    CIR v. Acesite

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    ATR
    111 views2 pages
    Acesite owns and operates a hotel where it leases space and provides food and beverages to PAGCOR for casino operations. PAGCOR is exempt from taxes by law. Acesite paid VAT taxes on its income from PAGCOR but later claimed it should be exempt. The court ruled that PAGCOR's tax exemption extends to indirect taxes like VAT. As such, Acesite's transactions with PAGCOR are subject to a 0% VAT rate and Acesite is entitled to a refund of the VAT taxes it paid. The intent of PAGCOR's tax exemption is to prevent any taxes from being shifted to PAGCOR, so Acesite's exemption from VAT on these transactions is allowed

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    Acesite owns and operates a hotel where it leases space and provides food and beverages to PAGCOR for casino operations. PAGCOR is exempt from taxes by law. Acesite paid VAT taxes on its income from PAGCOR but later claimed it should be exempt. The court ruled that PAGCOR's tax exemption extends to indirect taxes like VAT. As such, Acesite's transactions with PAGCOR are subject to a 0% VAT rate and Acesite is entitled to a refund of the VAT taxes it paid. The intent of PAGCOR's tax exemption is to prevent any taxes from being shifted to PAGCOR, so Acesite's exemption from VAT on these transactions is allowed

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    111 views2 pages

    CIR v. Acesite

    Uploaded by

    ATR
    Acesite owns and operates a hotel where it leases space and provides food and beverages to PAGCOR for casino operations. PAGCOR is exempt from taxes by law. Acesite paid VAT taxes on its income from PAGCOR but later claimed it should be exempt. The court ruled that PAGCOR's tax exemption extends to indirect taxes like VAT. As such, Acesite's transactions with PAGCOR are subject to a 0% VAT rate and Acesite is entitled to a refund of the VAT taxes it paid. The intent of PAGCOR's tax exemption is to prevent any taxes from being shifted to PAGCOR, so Acesite's exemption from VAT on these transactions is allowed

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    © All Rights Reserved
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    Facts: (Super Short Case lang)

    Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along United Nations Avenue in
    Manila. It leases 6,768.53 square meters of the hotels premises to the Philippine Amusement and Gaming
    Corporation [hereafter, PAGCOR] for casino operations. It also caters food and beverages to PAGCORs
    casino patrons through the hotels restaurant outlets. Acesite incurred VAT amounting to P30,152,892.02
    from its rental income and sale of food and beverages to PAGCOR during said period. Acesite tried to shift
    the said taxes to PAGCOR by incorporating it in the amount assessed to PAGCOR but the latter refused to
    pay the taxes on account of its tax exempt status. Acesite paid the VAT. However, Acesite belatedly arrived
    at the conclusion that its transaction with PAGCOR was subject to zero rate as it was rendered to a taxexempt entity. Acesite now files claim for refund
    CTA ruling:
    Acesite is subject to zero percent tax pursuant to Section 102 (b)(3) [now 106(A)(C)] insofar as
    its gross income from rentals and sales to PAGCOR, a tax exempt entity by virtue of a special
    law. Accordingly, the amounts of P21,413,026.78 and P8,739,865.24, representing the 10%
    EVAT on its sales of food and services and gross rentals, respectively from PAGCOR shall, as a
    matter of course, be refunded to the petitioner for having been inadvertently remitted to the
    respondent.
    ISSUES:
    Whether PAGCORs tax exemption privilege includes the indirect tax of VAT to entitle Acesite to zero
    percent (0%) VAT rate; --- YES
    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. --- YES
    Held:
    Petition DENIED.
    Decision of lower court AFFIRMED
    Ratio:PAGCOR is exempt from payment of indirect taxes
    It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the
    payment of taxes. Section 13 of P.D. 1869 pertinently provides:
    Sec. 13. Exemptions.
    (2) Income and other taxes. (a) Franchise Holder: No tax of any kind or form, income or
    otherwise, as well as fees, charges or levies of whatever nature, whether National or Local,
    shall be assessed and collected under this Franchise from the Corporation; nor shall any form
    of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of
    five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under
    this Franchise. Such tax shall be due and payable quarterly to the National Government and shall be in
    lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established
    or collected by any municipal, provincial, or national government authority.
    (b) Others: The exemptions herein granted for earnings derived from the operations conducted
    under the franchise specifically from the payment of any tax, income or otherwise, as well as
    any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s),
    association(s), agency(ies), or individual(s) with whom the Corporation or operator has any
    contractual relationship in connection with the operations of the casino(s) authorized to be
    conducted under this Franchise and to those receiving compensation or other remuneration from the
    Corporation or operator as a result of essential facilities furnished and/or technical services rendered to
    the Corporation or operator.
    A close scrutiny of the above provisos clearly gives PAGCOR a blanket exemption to taxes with no
    distinction on whether the taxes are direct or indirect. We are one with the CA ruling that PAGCOR is also
    exempt from indirect taxes, like VAT,
    The manner of charging VAT does not make PAGCOR liable to said tax
    It is true that VAT can either be incorporated in the value of the goods, properties, or services sold or
    leased, in which case it is computed as 1/11 of such value, or charged as an additional 10% to the value.
    Verily, the seller or lesser has the option to follow either way in charging its client and customer. In the
    instant case, Acesite followed the latter method, that is, charging an additional 10% of the gross sales and
    rentals. Be that as it may, the use of either method, does not denigrate the fact that PAGCOR is exempt
    from indirect tax, like VAT.
    VAT EXEMPTION EXTENDS TO ACESITE

    Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by Acesite, the latter is not liable
    for the payment of it as it is exempt in this particular transaction by operation of law to pay the indirect
    tax. Such exemption falls within the former Section 102 (b) (3) of the 1977 Tax Code, as amended (now,
    Sec. 108[b] [3] of R.A. 8424), which provides:
    Section 102. Value-added tax on sale of services (a) Rate and base of tax There shall be levied,
    assessed and collected, a value-added tax equivalent to 10% of gross receipts derived by any person
    engaged in the sale of services x x x; Provided, that the following services performed in the Philippines by
    VAT-registered persons shall be subject to 0%.
    3) 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.
    The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the extension of such
    exemption to entities or individuals dealing with PAGCOR in casino operations are best elucidated from the
    1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons, Inc., where the absolute
    tax exemption of the World Health Organization (WHO) upon an international agreement was upheld. We
    held in said case that the exemption of contractee WHO should be implemented to mean that the entity or
    person exempt is the contractor itself who constructed the building owned by contractee WHO, and such
    does not violate the rule that tax exemptions are personal because the manifest intention of the
    agreement is to exempt the contractor so that no contractors tax may be shifted to the
    contractee WHO. Thus, the proviso in P.D. 1869, extending the exemption to entities or individuals
    dealing with PAGCOR in casino operations, is clearly to proscribe any indirect tax, like VAT, that may be
    shifted to PAGCOR.

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