CTA affirms partial refund of Toyota’s customs duties and excess VAT

THE Court of Tax Appeals (CTA) has upheld the ruling granting Toyota Motor Philippines Corp.’s refund claim in the reduced amount of P144.13 million for excess customs duties and value-added tax (VAT) on motor vehicles imported from Japan from January to June 2010.

In a 19-page decision on Nov. 24 and made public on Nov. 29, the CTA full court said its first division had jurisdiction to review the actions of a district collector of the Bureau of Customs.

The tribunal noted that there was an “unreasonable” delay in resolving Toyota’s administrative claims.

“From the foregoing, the CTA First Division correctly applied an exception to the doctrine of exhaustion of administrative remedies — when there is unreasonable delay or official inaction leading to prejudice,” Associate Justice Jean Marie A. Bacorro-Villena said in the ruling.

The automotive firm filed its claim on Jan. 28, 2016, more than four years after the district collector failed to act on its previous claim for refund.

It ruled that Toyota’s importations of motor vehicles in 2010 were entitled to 0% customs duties after Japan and the Republic of the Philippines Economic Partnership Agreement (JPEPA) was signed into law.

Under JPEPA, motor vehicles with cylinder capacities above 3,000 cubic centimeters are entitled to 0% customs duty rates.

In March 2011, the firm filed a claim for a refund worth P231.66 million of its overpaid VAT and customs duties.

Toyota argued that since it paid the customs duties for its knocked-down importation fees, it was entitled to zero-rated sales.

The tax court ruled the firm was able to substantiate that P144.13 million of its original claim could be traced to zero-rated sales.

Under the country’s tax code, zero-rated sales are transactions made by VAT-registered taxpayers that do not translate to output tax.

Sales subject to 0% tax must have the term “zero-rated sale” on the company’s official receipts and invoices.

“We agree that it is the intention of the said executive order to implement the 0% duties on importations of motor vehicles with a cylinder capacity exceeding 3,000 cc starting 01 January 2010,” the CTA said referring to the order establishing the JPEPA. — John Victor D. Ordoñez