The Court of Tax Appeals (CTA) has denied the plea of Monarch Agricultural Products, Inc. (MAPI) for a tax refund of P5 million representing its alleged unutilized input value added tax (VAT) on importation of goods and services in 2018.

MAPI's application for tax credits/refunds in the amount of P5,024,148.07 was denied for lack of legal and factual basis by the Bureau of Internal Revenue (BIR) in a letter dated Sept. 17, 2020.

The denial prompted MAPI to file a petition for review before the CTA on Feb. 3, 2021, arguing that the BIR cannot disallow excess input VAT which is not covered by the subject claim for refund, since such determination is within the realm of a regular tax audit.

The firm also said the only matter for determination in the case is whether its input VAT on importation is directly attributable to its zero-rated sales.

In denying the claim, the CTA found that MAPI failed to meet the requisites of a valid claim for refund, particularly the failure to prove that it is a VAT-registered entity.

Even assuming that petitioner is a VAT-registered entity, the present claim shall be denied as petitioner failed to prove before the Court that it is engaged in zero-rated or effectively zero-rated sales, the CTA said.

It also said that MAPI should have presented its customers' BIR registration and Board of Investments (BOI) Certification to prove that its sales are zero-rated. However, it failed to offer them in evidence, it added.

And even if MAPI were able to provide these documents, the CTA noted that it still failed to comply with the requirement that for each sale to BOI-registered exporters, it shall issue a duly-registered VAT invoice with the words zero-rated stamped on it.

Needless to state, it is only when the sales of a VAT-registered person are zero-rated or effectively zero-rated that such person may apply for refund or issuance of a tax credit certificate of the input VAT due or paid which are attributable to such sales, the court added.

The 17-page decision was written by Associate Justice Catherine T. Manahan with the concurrence of Associate Justices Marian Ivy F. Reyes-Fajardo and Henry S. Angeles.