Philippines Court of Tax Appeals rules against Melco Resorts

Melco Resorts has lost a tax refund claim.

The Philippines.- Melco Resorts Leisure Corp’s claim for a PHP81.12m (US$1.49m) VAT refund has been rejected by the Court of Tax Appeals (CTA). It had claimed the amount represented excess input value-added tax (VAT) for the first quarter of 2016. However, the court said the company had failed to provide sufficient evidence of filing a timely claim.

The CTA full court agreed with its Third Division’s finding that the company was entitled to tax incentives under the Philippine Amusement and Gaming Corp.’s charter and Presidential Decree 1869, which exempts licensed operators from paying taxes except for a franchise tax of 5 per cent.

The Bureau of Internal Revenue (BIR) had previously informed Melco Resorts that its application for a tax refund could not be granted, citing a 2013 BIR memo stating that income related to gaming activities is subject to a 12 per cent VAT and not eligible for tax credit. Melco Resorts, however, argued that the presidential decree exempted it from taxation.

However, in the 29-page decision, the CTA full court found an absence of proof regarding the date of the VAT return filing and payment from suppliers. According to the Tax Code, taxpayers must file their refund or tax credit claims within two years after the supposed payment of tax. In this case, Melco Resorts was unable to substantiate the timely submission of its claim.

In addition, the company also could not substantiate its engagement in zero-rated sales, which would not result in output tax. Consequently, the CTA’s jurisdiction over the tax dispute was not established. The court stressed the importance of strict compliance with jurisdictional conditions prescribed by law for successful tax refund or credit claims.