Published — March 20, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Read also: CASH CONVERSION OF UNUTILIZED TAX CREDIT CERTIFICATE
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A credit or refund of taxes may be allowed only when a taxpayer files in writing a claim for credit or refund
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A written claim for tax credit or refund shall be filed within two (2) years after the payment of tax or penalty
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A Tax Credit Certificate is a document reflecting the amount due to a taxpayer from the overpayment or erroneous payment of taxes
May a taxpayer claim his or her overpayment of income taxes?
For a better understanding, let us take the case of Commissioner of Internal Revenue vs. Univation Motor Philippines, Inc. (G.R. No. 231581, April 10, 2019)
In this case, Univation Motor Philippines, Inc. (Univation) filed its Annual Income Tax Return (ITR) for 2010 showing its total gross income and an overpayment of income taxes. Univation opted to claim its overpayment of income tax through the issuance of a Tax Credit Certificate. In filing its administrative claim with the Bureau of Internal Revenue (BIR) explaining that the overpayment consists of prior year’s excess credits less Minimum Corporate Income Tax (MCIT) and creditable withholding taxes accumulated during the four quarters of 2010. Since the BIR has not yet acted upon the Univation’s calim for refund, it filed a Petition for Review with the Court of Tax Appeals (CTA)
The Commissioner of Internal Revenue (CIR) explained that the claim of Univation for refund is tainted with procedural infirmity as Univation failed to submit the complete documents in support of its administrative claim for refund. However, the CTA rendered a Decision ordering the CIR to issue a Tax Credit Certificate representing Univation’s unutilized or excess creditable withholding taxes for taxable year ending December 21, 2010. The CIR elevated the case until it has reached the Supreme Court.
When should the claim for tax credit or tax refund be filed?
The law says:
No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner (CIR) a claim for credit or refund within two (2) years after the payment of the tax or penalty. However, take note that a return filed showing an overpayment of tax is considered as a written claim for credit or refund.
The two-year period as mentioned above in filing a claim for tax refund is crucial. While the law provides that the two-year period is counted from the date of payment of the tax, Supreme Court decisions, however, clarified that the two-year prescriptive period to claim a refund actually commences to run, at least at the earliest, on the date of the filing of the adjusted final tax return because this is where the figures of the gross receipts and deductions have been audited and adjusted, reflective of the results of the operations of a business enterprise. Thus, it is only when the Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures.
In the case of Univation, the two-year period to file a claim for refund is reckoned from April 15, 2011 the date when its Final Adjustment Return was filed. Also, since Univation also filed its administrative claim on March 12, 2012 and its judicial claim on April 12, 2013, therefore, both of the Univation’s administrative and judicial claim for refund were filed on time or within the two-year prescriptive period provided by law.
Furthermore, in this case, Univation was able to establish that it submitted the complete documents required for the claim of tax refund. Thus, the Supreme Court affirmed the Decision of the CTA and directed the CIR to issue a Tax Credit Certificate in favor of Univation. Such Tax Credit Certificate is a document reflecting the amount due to a taxpayer from the overpayment or erroneous payment of taxes.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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