COA grants P115.06-million tax refund claim by firetruck suppliers

MANILA, Philippines – The Commission on Audit (COA) has granted a P115.06 million tax refund claim filed by a joint venture that worked to get government fire truck units from 2015 to 2016.

Kolonwel Trading and Hubei Jiangnon Special Automobile Co. Ltd. signed a contract with the Bureau of Fire Protection (BFP) for the delivery of 244 units of 1,000-gallon firetrucks and 225 units of 500-gallon firetrucks on February 2, 2015. The joint venture started delivering the units months later, from May 20, 2015 to February 25, 2016.

The BFP paid the suppliers P2.44 billion, excluding the 15% advance payment of P386.59 million, the 1% withholding tax amounting to P23.01 million, and 5% value-added tax of P115.057 million.

The joint venture (JV) then filed a Claim for Refund at the Bureau of Internal Revenue (BIR) on July 19, 2017. Two years later in 2019, they would file a Petition for Review with the Court of Tax Appeals (CTA) since the BIR had yet to decide on its claim.

The CTA decided on November 20, 2020 to deny the joint venture’s P115.057 million claims. It would later deny Kolonwel’s motion for reconsideration, and since no appeal followed, the CTA ruling became final and executory on May 20, 2021.

The CTA said that the BFP was in the right when it did not include in its payment the 5% VAT, since the transaction with the joint venture is considered a sale. The tax subsidy would only apply if the firetrucks were procured by the BFP directly.

The COA’s decision to grant the joint venture’s tax refund claims was voted by the majority of commissioners sitting en banc, with COA chairperson Gamaliel Cordoba and commissioner Mario Lipana voting in favor of the joint venture. Commissioner Roland Café Pondac voted against the joint venture’s petition, noting that it was beyond the commission’s jurisdiction and because the tax refund petition had already been denied by the CTA.

“The [COA] has no jurisdiction over the JV’s Petition for Money Claim,” Pondac said in his 13-page Dissenting Opinion. “The subject money claim for VAT refund has already been decided and denied by the CTA pursuant to its exclusive appellate jurisdiction.”

“Notably, the CTA Decision has already attained finality,” he added.

Pondac also noted that the joint venture violated the rule against forum shopping.

However, government auditors noted that the reason why the joint venture reached out for their tax refund claim was for the “sound, fair, and reasonable judgement” of COA, which the BFP did not challenge.

The COA in its decision noted the opinion of a BIR Regional Director dated May 23, 2019 that tax subsidies may be granted to the supplies that would be imposed on the BFP’s importation of equipment and protective gear. The commission highlighted that the BFP could have itself decided if tax subsidies would apply to the firetruck supply transaction with the joint venture.

“In regard to this issue, the Legal Office of the BFP found that the procurement agreement that it has transacted with the petitioner entitles the latter to the grant of this money claim as it finds the claim in order,” state auditors said. – Rappler.com