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Claim for refund of unutilized input VAT

AZIZA HANNAH BACAY

SECTION 112 of the Tax Code (Republic Act [RA] 8424, as amended) states that a taxpayer may claim for refund or request for issuance of tax credit certificate for its excess unutilized input valueadded tax (VAT).

In computing VAT, the input tax (the VAT due or paid by the taxpayer from the purchase of goods or services) is credited against the output tax (the VAT due on the sale of goods or services paid to the taxpayer). If at the end of the taxable quarter, the output tax exceeds the input tax, then such excess shall be paid by the taxpayer. Alternatively, if the input tax exceeds the output tax, such input tax may be carried over to the succeeding quarters.

There is an additional option if the input tax is attributable to zero-rated sales. In such a case, the taxpayer may choose whether to claim for refund of the unutilized input tax or have them credited against other internal revenue taxes. Should the taxpayer opt to claim for refund, various conditions must be satisfied.

These conditions include as follows — (a) administrative claim for refund must be filed within two years after the close of the taxable quarter when the sales were made; (b) judicial claim for refund must be filed within 30 days from receipt of decision on the administrative claim or from the expiration of 120-day period (now 90-day period) given to the commissioner to act on the administrative claim; (c) the taxpayer is a VAT-registered person; (d) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (e) the payment is made in acceptable foreign currency exchange and has been duly accounted for in accordance with Bangko Sentral ng Pilipinas rules and regulations; (f) the input taxes are not transitional input taxes; (g) the input taxes are due or paid; (h) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; or shall be proportionally allocated cannot be directly and entirely attributable to any of these sales; and (i) the input taxes have not been applied against output taxes during and in the succeeding quarters (Commissioner of Internal Revenue v Carmen Copper Corp., C.T.A. EB Case 2528, C.T.A. Case 9592, April 20, 2023]) AD.

With regard to the second requirement, it should be pointed out that the previous language of Section 112 of the Tax Code gave the commissioner 120 days within which to act on the administrative claim for refund. After the lapse of the 120-day period and there had still been no decision by the commissioner, the Tax Code expressly stated that the administrative claim is deemed denied and thus, the taxpayer should file its appeal before the Court of Tax Appeals (CTA) within 30 days from the lapse of said period.

Section 112 of the Tax Code, however, was amended in 2018 through the Train Law (RA 10963). In the amended provision, the 120-day period for the commissioner to decide on the claim is reduced to 90 days. Furthermore, the express deemed denial rule was omitted in the amended language of Section 112. This omission then raised an issue on whether the taxpayer may still proceed to pursue the judicial claim should there be no decision rendered by the commissioner within the 90-day period given to the commissioner to act on the refund.

In Pacific Ocean Manning Inc. v Commissioner of Internal Revenue (CTA Case 9901, Nov. 10, 2022), the CTA held that a taxpayerclaimant who has not yet received the decision of the commissioner upon expiration of 90-day period has two options: (a) treat the administrative claim as deemed denied through inaction and file the appeal to the CTA within 30 days; or (b) wait for the decision on the administrative claim under the risk that decision is made beyond the 90-day period, in which case, the taxpayer loses the right to appeal.

Also, in Kurimoto (Philippines) Corporation v Commissioner of Internal Revenue (CTA Case 10156, Jan. 30, 2023), the CTA denied the claim for refund due to lack of jurisdiction. The taxpayer-claimant herein received the denial letter from the commissioner after the lapse of the 90-day period and proceeded to file a petition for review within 30 days from the date of receipt of denial letter. The CTA, however, held that the petition was filed out of time.

Citing RA 1125, the CTA held that it has jurisdiction to review matters involving inaction by the commissioner, and that the latter’s non-rendering a decision within the aforesaid 90-day period is an “inaction” which the CTA can review. Thus, the taxpayer-claimant should have filed the judicial claim within 30 days after the lapse of the 90-day period, instead of counting the 30-day period from the receipt of the denial letter.

These recent decisions show that, while the express deemed denial rule was deleted in Section 112 of the Tax Code, the taxpayer should still pursue the judicial claim within 30 days from expiration of the 90-day period given to the commissioner to decide claims for refund of input VAT attributable to its zero-rated sales.

Aziza Hannah A. Bacay is one the senior associates of MataPerez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@ mtfcounsel.com or visit MTF website at www.mtfcounsel.com.

Business Times

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2023-05-25T07:00:00.0000000Z

2023-05-25T07:00:00.0000000Z

https://manilatimes.pressreader.com/article/281809993265305

The Manila Times