The Court of Tax Appeals (CTA) has ruled in favor of the Bureau of Internal Revenue (BIR) as it denied the petition filed by Valle Verde Country Club, Inc. which sought a P7.449 million refund for output value-added tax (VAT) on membership fees, assessment dues, and other charges from April 2018 to July 2019.

The case started on Aug. 3, 2012 when the BIR issued Revenue Memorandum Circular (RMC) No. 35-2012, which clarified the taxability of clubs organized and operated exclusively for pleasure, recreation, and other non-profit purposes. 

The BIR subjected to VAT the gross receipts of recreational clubs, including but not limited to membership fees, assessment dues, rental income, and service fees.

The Association of Non-Profit Clubs Inc. (ANPC), a group of recreational clubs wherein Valle Verde Country Club is a member, filed a petition for declaratory relief before the regional trial court (RTC) of Makati City, Branch 134 on Sept. 17, 2014 to declare the BIR's RMC as "invalid, unjust, oppressive, confiscatory, and in violation of the due process clause of the Constitution."

It was subsequently denied, so ANPC elevated the case to the Supreme Court which granted the petition.  Valle Verde Country Club then filed an administrative claim for refund for P7,449,368.98, which represented the VAT paid on membership fees, assessment dues, and other charges for April 2018 to July 2019.

However, the CTA ruled that Valle Verde Country Club failed to meet the burden of proof required for a taxpayer in a claim for refund or tax credit because it was not able to provide supporting documents to prove the veracity of the breakdown of the gross receipts with its corresponding alleged erroneous payment of output tax.

The CTA said: "In the present case, the Court cannot simply give credence to the ICPA's unsubstantiated assertion that the total amount of P61,772,133.25 with its corresponding output tax of P7,412,656 were verified to represent the total membership dues, assessment fees and other similar charges erroneously paid by the petitioner for the period April 2018 to July 2019."

It also said: "Actions for tax refunds or credit are in the nature of tax exemptions which must be construed in strictissimi juris (strictest right or law) against the taxpayer and the pieces of evidence entitling him or her to an exemption must also be strictissimi scrutinized and duly proven. The claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. "Petitioner (Valle Verde Country Club), unfortunately, failed to discharge this burden."

The decision dated Oct. 6, 2023 was written by Presiding Justice Roman G. Del Rosario with the concurrence of Associate Justices Catherine T. Manahan and Marian Ivy F. Reyes-Fajardo.