CTA denies P1.2B tax refund sought by Nestle for its MILO products

The Court of Tax Appeals (CTA) has denied the petition of Nestle Philippines, Inc. for a refund of P1.26 billion for Sweetened Beverage Tax (SBT) for its MILO products.

Nestle claimed it is not liable to pay the SBT on its removals of MILO products, which is a powdered chocolate malt flavored drink. 

The tax was imposed because of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN Law), which took effect on Jan.1, 2018. 

Section 150-B of the National Internal Revenue Code (NIRC) of 1997 imposed, for the first time, an excise tax on sweetened beverages. Revenue Regulations No. 20-2018 was issued later and imposed the same tax. 

Nestle filed a written claim for refund for what it said was erroneously paid SBT to the Bureau of Internal Revenue (BIR) on April 7, 2020. The company sought a tax refund of P1,266,599,459.91 covering the period of May 1 to Dec. 31, 2018.

The firm said that the Food and Drug Administration (FDA) issued Certificates of Product Registration for MILO Products with the product name Choco Malt Powdered Milk Drink or Powdered Choco Malt Milk Drink. 

Thus, it said that MILO products are choco malt powdered milk drinks that fall under Category 01.1.4 "Flavored Fluid Milk Drinks" of Codex Stan 192-1995 and are not "sweetened beverages."

However, the CTA said that Nestle failed to prove that there was an illegal or erroneous collection of SBT at the time of the removal of MILO products. 

The tax court said that based on documents it reviewed, it found that the "MILO products of petitioner are under the category of sweetened beverages because such are non-alcoholic beverages that is in powdered form, which are pre-packed and sealed in accordance with the FDA standards."

"Moreover, MILO products contain caloric sweetener such as sugar, which is widely known as a substance that is sweet. Therefore, undoubtedly, MILO products fall within the taxing provision under Section 150-B(A)(1) in relation to (B)(1) of the NIRC of 1997, as amended by R.A. No. 10963, it also said."

The 23-page decision was written by Associate Justice Ma. Belen M. Ringpis-Liban with the concurrence of Associate Justice Maria Rowena Modesto-San Pedro.