THE Commission on Audit has denied a P5.67 million claim filed by a Japanese construction firm against the Department of Public Works and Highways (DPWH) over payment of tax differentials.
In a decision released yesterday, the COA Commission Proper said Nishimatsu Construction Co., Ltd. (NCCL) is not entitled to claim a two percent (2%) Value Added Tax (VAT) differential in relation to the P3.48 billion Kalookan-Malabon-Navotas-Valenzuela Area Flood Control and Drainage System Improvement Project (Kamanava-AFCDSI).
The project, funded by a loan from the Japan Bank International Cooperation, was awarded to Nishimatsu Construction as the winning bidder on May 3, 2003.
A Notice to Commence Work was issued to the contractor on June 2, 2003 but DPWH Changer Order Nos. 1 and 2 reduced the contract price to P3.44 billion and lower to P3.061 billion with an additional 345 calendar days to finish the job.
The DPWH project director issued a certificate dated July 10, 2009 stating that actual works were completed as of September 4, 2008. The certificate of acceptance was issued October 29, 2010.
From the start of the contract, the NCCL had billed the DPWH at 10 percent VAT but in 2012 it informed the agency that further invoices will include VAT at increased rate of 12 percent, citing RA 9337 (the Expanded VAT Law).
However, the DPWH continued applying only 10 percent despite the notification of the NCCL.
The contractor filed a formal request for payment of the VAT differential on June 1, 2012 with the DPWH but was advised to submit the claim before the COA.
In its ruling, the commission held that the petition for compensation is devoid of merit.
“This Commission finds that the NCCL is not entitled to two percent VAT differential because in its VAT Returns…, the NCCL declared only 10 percent, and not 12 percent, in its output VAT corresponding to the sale to the government,” the COA pointed out.
This meant that the contractor did not shoulder the two percent VAT differential since it declared only 10 percent output tax on its billings to the government.
Likewise, the COA noted that from its Quarterly VAT Returns, the NCCL had declared 12 percent input VAT on its purchases which showed that it availed of the additional two percent VAT deduction.
“Moreover, …the claim is not supported with complete documentation. In this case, the NCCL failed to submit the certification issued by the DPWH affirming that it has not been paid its claim for the two percent VAT differential. All told, this money claim should be denied for lack of factual basis,” the COA added.
