The Court of Tax Appeals (CTA) has denied the P40 million tax refund sought by the Lepanto Consolidated Mining Company for its alleged unutilized input value-added tax (VAT) attributable to zero-rated sales for 2018.

In its petition, Lepanto Consolidated Mining said that it exported all of its total sales, which are purportedly eligible for VAT zero-rating under Section 106(A)(2)(a)(1) of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 10963, the Tax Reform for Acceleration and Inclusion Act (TRAIN Law).

The firm also said it had excess input VAT credits arising from its importation of goods other than capital goods, domestic purchases of services, services rendered by non-residents, and the amortization of deferred input taxes on capital goods exceeding P1 million, allocable to its zero-rated sales in the amount of P40,050,944.39 which had not been applied against output tax as reported in its VAT Returns for 2018. 

The Bureau of Internal Revenue (BIR) denied the firm's claim for refund in a letter dated Nov. 27, 2020. Within 30 days from receipt of the denial letter, Lepanto filed before the CTA a petition for feview on Feb. 10, 2021.

Lepanto told the CTA it is entitled to the refund claim because it is engaged in zero-rated sales and the proceeds thereof were duly accounted for in compliance with Bangko Sentral ng Pilipinas (BSP) rules and regulations. 

It also told the tax court that the input tax being claimed for refund is not transitional input tax, and it has not applied the input taxes being claimed for refund against its output taxes during the relevant quarter or in succeeding quarters.

While Lepanto had input VAT attributable to its zero-rated sales, the CTA, however, said that the subject input VAT refund claim was carried over by firm in its Quarterly VAT Returns. This amount was not deducted as "VAT Refund claimed" in any of the submitted Quarterly VAT Returns, it said.

"Consequently, the entire refund claim formed part of the 'Excess Input VAT' of P40,050,944.39 as of the end of the 4th quarter of 2018, which was carried over to the succeeding quarter," the tax court's decision stated. 

"Needless to say, petitioner (Lepanto) failed to prove that the subject input VAT refund claim of P40,050,944.39 was not applied against its output VAT liability in the succeeding quarters, relative to the 9th requisite for a refund of input VAT under Section 112(A) of the NIRC of 1997, as amended," the decision also stated.

The 41-page decision was written by Associate Justice Jean Marie A. Bacorro-Villena with the concurrence of Presiding Justice Roman G. Del Rosario and Associate Justice Lanee S. Cui-David.