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BY: Atty. Kathlene Guiang on April 9, 2020

The imposition of a Luzon-wide enhanced community quarantine last month has prompted government agencies to issue circulars aimed at helping ease its impact on the lives of taxpayers.

One of them, the Bureau of Internal Revenue (BIR), issued memorandum circulars and revenue regulations extending statutory deadlines for the submission and filing of various documents and returns, as well as the payment of taxes.

However, these issuances do not cover the taxpayer’s right to recover erroneously or illegally collected taxes under Section 229 of the Tax Code, as amended.

Two years to file a claim

Under Section 229, the recovery of any national internal revenue tax alleged to have been erroneously or illegally assessed or collected, any penalty claimed to have been collected without authority, or any sum alleged to have been excessively or in any way wrongfully collected, requires filing an administrative claim with the BIR within two years from the date of payment of that tax or penalty, regardless of any supervening cause that may arise after payment.

If the BIR actually denies the claim within that period, the taxpayer should file a judicial claim within 30 days from receiving the denial.

On the other hand, as confirmed by the Court of Tax Appeals (CTA) in the case of Pilipinas Shell Petroleum Corporation v. CIR, CTA Case No. 9104 dated July 27, 2018, if the BIR fails to act on the claim, the taxpayer must file a judicial claim with the CTA within those two years to preserve its judicial remedy to elevate its claim to the CTA.

Regardless of any supervening cause

The two-year period to file a claim is a strict requirement, to the extent that it categorically sets aside “any supervening cause that may arise after the payment” of tax or penalty.

The quoted phrase was originally added by Presidential Decree 69, which took effect on January 1, 1973 and was retained in both the 1977 and 1997 Tax Code.

In the case of Atlanta Land Corporation v. CIR, CTA Case No. 6987 dated May 23, 2006, the CTA en banc disregarded the supervening causes of rescission of dacion en pago arrangement and subsequent enactment of a law (i.e. Special Purpose Vehicle Act of 2002) in reckoning the two-year prescriptive period. The CTA ruled that the intent of the law is to establish as a condition sine qua non that all claims and actions for refund of any tax or penalty shall be filed within two years from the date of payment of this tax or penalty.

This rationale, the court said, is based on the basic principle that taxes are the lifeblood of the nation. If supervening causes are to be allowed to be the reckoning point of the filing of the claim for refund of taxes already paid, the availability of funds from the collection of taxes will be subject to a likely refund.

In Philippine Bank of Communications v. CIR, CA-G.R. SP No. 67996 dated July 29, 2004, the taxpayer paid its gross receipts tax on Jan. 22, 1999. However, the taxpayer only “discovered” the erroneous payment in April 1999 during an internal audit. The administrative claim was filed on Jan. 16, 2001. Subsequently, the judicial claim was filed on Jan. 25, 2001. In this case, the CTA ruled that the judicial claim was filed out of time and pointed out that the taxpayer can already determine or ascertain whether there has been an error at the moment of payment of the gross receipts tax. Thus, the two-year period should be reckoned from Jan. 22, 1999.

In the case of Technogas Philippines Manufacturing Corp. v. CIR, CTA Case No. 9509 dated January 4, 2019, the taxpayer paid the capital gains tax (CGT) arising from the sale of a property in 2004. The sale was subsequently canceled in 2014. The CTA ruled that although this cancellation gave rise to the right to claim for refund of the CGT paid on it, the claim for refund filed on Dec. 2, 2016 and the judicial claim filed on December 21 were filed out of time. The CTA explained that Section 229 was unequivocal in saying the claims for refund must be claimed within two years from the date of payment of the tax, regardless of any supervening event, and reckoning the prescriptive period from the occurrence of the supervening event would be “tantamount to overruling or supplanting an express provision of the law.”

With the strict interpretation of the court on the two-year period and the phrase “regardless of any supervening cause that may arise after the payment,” an issue now arises on whether the courts would consider the quarantine an exemption to the supervening cause phrase.

With this strict interpretation, taxpayers should take a conservative position in the filing of administrative and judicial claims under Section 229. This is particularly true with respect to erroneous or illegally collected tax arising from income tax payment in 2018, when the two-year period is about to expire, so the taxpayer is guaranteed not to lose its right to the refund claim.

With regard to the administrative claim, the taxpayer may personally file the claim with the BIR. However, if this is not feasible, he or she may also file by registered mail.

As to the judicial claim, the Supreme Court issued Administrative Circular 31-2020 and 34-2020 extending the filing of petitions and appeals that fall due up to April 30, 2020 for 30 calendar days. However, following a conservative position, taxpayers should file with the CTA. The personal filing, however, must first be coordinated through the CTA hotline for pre-arrangements. Moreover, registered mail is an option if personal filing is not feasible.


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