Section 4.110-3 does not amend Section 110(B) of the tax code.[55] Section 4.
110-3 merely
bridges the gap between Section 110(A) and Section 112(A) as it provides the requirements
for claiming input tax credit or refund for: (1) depreciable assets with estimated useful life
greater than 1 year; (2) that is used "directly or indirectly in the production or sale of taxable
goods or services;"[56] and (3) with acquisition cost in excess of P1,000,000.00. It fills in the
details for the implementation of claiming refund or tax credit for depreciable goods. Absent any
showing that the Section 4.110-3 contravenes the tax code, this Petition must necessarily fail.
there was nothing in the Tax Code or in RR No. 16-2005 that would suggest that the subsidiary
journals and monthly VAT declarations are part of the substantiation requirements that must be
complied with to support a claim for tax refund or credit.
Under Section 110 (A)[36] of the Tax Code, creditable input taxes must be evidenced by a VAT
invoice or official receipt, which must, in turn, be issued in accordance with Sections 113 [37] and
237.[38] Related to these provisions, Sections 4.110-8, 4.113-1 (A) and (B) of RR No. 16-2005
enumerate the documents required and information that must appear on the face of the official
receipt, to substantiate the input tax on importation of goods other than capital goods and on
domestic purchases of services,
(c) If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be written or
printed prominently on the invoice or receipt[.] x x x. (Emphases supplied.)
From the foregoing, it is apparent that importation of non-capital goods must be evidenced by
import entry declarations or any equivalent document; and the domestic purchase of services,
by VAT official receipts showing: (1) that the seller is a VAT-registered person; (2) the Tax
Identification Number (TIN) of the seller; (3) the word "zero-rated sale" was written or printed
prominently on the receipt in case of zero-rated sales; (4) the date of transaction, nature of
service, as well as the name, business style, if any, and address of the purchaser; and (5) the
TIN of the purchaser.[39] Case law states that failure to comply with the invoicing requirements is
sufficient ground to deny the claim for refund or tax credit. [40] Too, Revenue Memorandum
Circular No. 42-2003[41] only provides for non-compliance with the invoicing requirements as a
ground for denial of the claim for refund or credit.
Q-13: Should penalty be imposed on TCC application for failure of claimant to comply with certain invoicing
requirements, (e.g., sales invoices must bear the TIN of the seller)?
A-13 Failure by the supplier to comply with the invoicing requirements on the documents supporting the sale of
goods and services will result to the disallowance of the claim for input tax by the purchaser-claimant.
If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer but it fails to comply
with the invoicing requirements in the issuance of sales invoices (e.g. failure to indicate the TIN), its claim for
tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its
customers does not depict its being a VAT-registered taxpayer whose sales are classified as zero-rated sales
The reason for strict compliance with invoicing requirements is only a "VAT invoice/official
receipt" can give rise to any input tax from domestic purchase of goods or service. [42] Without
input tax, there is nothing to refund. On the other hand, the particulars recorded in the
subsidiary journals do not affect the character of an invoice or receipt as a "VAT invoice/official
receipt." A taxpayer's books of accounts include the journal and the ledger and their
subsidiaries, or their equivalents.[43] The general journal is a book of original entry in which the
transactions affecting the taxpayer's business are recorded consecutively day by day as they
occur.[44] It is a chronological, or date order, record of the transactions of a business. The
general journal may consist of several books such as sales book, purchase book, cash book,
and such other books as the taxpayer may find convenient for his business. [45] A subsidiary
sales journal is a repository of day-to-day sales, while a subsidiary purchase journal records all
purchases. Evidently, subsidiary journals may be sources of information from which the CIR
may utilize in making assessments[46] but their submission is not indispensable to substantiate
the input taxes.
The language used in Section 110 is plain, clear, and unambiguous. To be creditable, the input
taxes must be evidenced by validly issued invoices and/or official receipts containing the
information enumerated in Sections 113 and 237. The law does not require that subsidiary
journals where the sales and purchases (and the output taxes and their corresponding input
taxes) were recorded, are also kept. Indeed, courts may not, in the guise of interpretation,
enlarge the scope of a statute and include therein situations not provided nor intended by the
lawmakers. To do so would be to do violence to the language of the law and to invade the
legislative sphere.
