G.R. No. 216656 , April 26, 2021
Taganito Mining Corporation, Petitioner, vs. Commissioner of Internal Revenue, Respondent.

FACTS

Taganito Mining Corporation (TMC), an exporter of beneficiated nickel silicate ores and chromite ores and a registered VAT taxpayer, generated zero-rated export sales from January 1 to December 31, 2007. During this period, it paid input VAT on its domestic purchases and importation of goods. TMC filed an application for refund/credit of its input VAT. The Bureau of Internal Revenue recommended a partial refund but disallowed the amount of P7,572,550.29, representing deferred input VAT on capital goods with an acquisition cost exceeding P1,000,000.00, recommending its amortization over 60 months. TMC pursued a claim for this disallowed amount before the Court of Tax Appeals (CTA). The CTA Division and later the CTA En Banc dismissed TMC’s petition, ruling that the input VAT on capital goods exceeding P1,000,000.00 must be amortized over the useful life of the goods, and only the amortized portion is creditable or refundable. TMC filed a Petition for Review before the Supreme Court.

ISSUE

Whether the input tax credit for the purchase of capital goods exceeding P1,000,000.00, which are directly attributable to zero-rated export sales, is required to be amortized over the useful life of the goods.

RULING

Yes. The Supreme Court affirmed the rulings of the CTA. A zero-rated taxpayer is entitled to claim a refund or tax credit for input VAT from domestic purchases or importation of capital goods used for its trade or business. However, under Section 110(A)(2)(b) of the National Internal Revenue Code (NIRC), if the aggregate acquisition cost of such capital goods (excluding VAT) exceeds P1,000,000.00, the creditable input tax shall be spread evenly over the month of acquisition and the fifty-nine succeeding months, or over a shorter period if the estimated useful life is less than five years. This amortization rule applies regardless of whether the input VAT is to be credited against output tax or claimed as a refund/tax credit attributable to zero-rated sales. The law does not distinguish between these scenarios. The “creditable input tax” under Section 110(A) includes input taxes on capital goods, and the option to refund or credit “any input tax attributable to zero-rated sales” under Section 110(B) is subject to the amortization provision. Therefore, TMC’s claim for a refund of the full input VAT on capital goods costing over P1,000,000.00, without amortization, was correctly denied. Only the amortized amount as of the end of the claim period is refundable or creditable. The Petition was dismissed.