Claim for refund of unutilized input VAT
By: Atty. Aziza Hannah Bacay on May 25,2023
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 value-added 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.
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.
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 Mata-Perez, Tamayo & Francisco (MTF Counsel).