BIR Form 2307: the only proof for tax refund?
BIR Form 2307: the only proof for tax refund? by: Diendo M. Dupal
Revenue Regulations No. (RR) 02-98, as amended, the payor/buyer is constituted
as the government’s withholding agent who is mandated to deduct and withhold
from the gross income to be received by the payee at the time of payment or
accrual of income, whichever comes first.
with the obligation to withhold and remit the amount of tax withheld due to the
Bureau of Internal Revenue (BIR), the withholding agent also has the
responsibility to furnish the payee a copy of a duly issued Certificate of
Creditable Tax Withheld at Source (BIR Form 2307) showing the amount paid and
the amount of tax withheld therefrom.
issuance of the BIR Form 2307 is very crucial to the payee as it has a direct
impact on its income tax due to the BIR.
The BIR Form 2307 is a valuable document entitling the payee for a tax
credit or refund or issuance of tax credit certificate (TCC), as the case
maybe, of any tax withheld and remitted to the BIR. However, if the BIR Form 2307 was not issued
by the withholding agent or if, by any chance, such document got lost, are
there other documents that can be used as evidence to support the claim for tax
credit or refund or issuance of TCC?
is a well settled principle that refunds and tax credits are in the nature of
tax exemptions, hence, strictly construed against the taxpayer. The taxpayer claiming for tax refund or
credit has the burden of proving that he is entitled for such refund or credit
by providing evidence of compliance of certain conditions of the law under
which the privilege of exemption is granted.
a recent Court of Tax Appeals (CTA) decision (CTA Case No. 7758, June 28,
2010), a taxpayer sought for refund or issuance of TCC of its excess/unapplied
creditable withholding taxes (CWT). In
order to be entitled to a refund or issuance of TCC, the CTA held that the petitioner
must comply with the conditions under Sections 204(C) and 229 of the Tax Code,
as amended, and under Section 2.58.3(B) of RR 02-98, as amended, which requires
that proof of withholding be established by a copy of a statement duly issued
by the payor (withholding agent) to the payee, showing the amount paid and the
amount of tax withheld therefrom.
of the BIR Form 2307, the taxpayer submitted the BIR Form 1606 (Withholding Tax
Remittance Return) which the taxpayer, as payee, used to remit the amount of
tax withheld. The CTA disallowed the
taxpayer’s claim for refund or issuance of TCC on the ground that the BIR Form
1606 does not suffice because it was not filed by the withholding agent. Further, the taxpayer failed to explain why
the withholding agent never issued the prescribed BIR Form 2307 for their
transaction in violation of its obligation stated under Section 2.58(B) of RR
02-98, as amended.
the Supreme Court (SC) ruling in Banco Filipino Savings and Mortgage Bank vs.
Court of Appeals case (G.R. No.
155682, March 27, 2007), the CTA held that the only document, which may be
accepted as evidence to establish the fact of withholding, must emanate from
the payor itself, and not merely from the payee, and must indicate the name of
the payor, the income payment basis of the tax withheld, the amount of the tax
withheld and the nature of the tax paid.
however, except for the fact that the BIR Form 1606 did not emanate from the
payor, all information required to be indicated in the BIR Form 2307 under
Section 2.58.3(B) of RR 02-98, as amended, such as the name of the payor (i.e.,
the buyer), the income payment basis of the tax withheld, the amount of the tax
withheld and the nature of the tax paid are also contained in the BIR Form
1606. However, it is the view of the CTA
that the only acceptable evidence to establish the fact of withholding is the
BIR Form 2307, and no other.
The practice of self-withholding is prevalent in
some industries on their sale of real properties to individuals not engaged in
trade or business, whether on installment or on deferred/cash basis. More often than not, these companies have
encountered difficulties in collecting the BIR Form 2307 because not all of its
individual buyers are acquainted with the proper timing of withholding the tax
and issuing of the corresponding BIR Form 2307, thereof.
As a matter of practice, these taxpayers voluntarily
remit the supposed tax due to be withheld by the buyer as the constituted
withholding agent using BIR Form 1606 and the issuance of BIR Form 2307 is
already disregarded. However, considering that the SC has already ruled that
only the BIR Form 2307 issued by the payor may be used as support of the
creditable withholding tax, taxpayers
are but obliged to comply with this requirement without regard to the
difficulty in collecting the BIR Form 2307 from individual buyers not engaged
in trade or business. Alternatively, taxpayers may still opt to
prepare the BIR Form 2307 and have the same signed by the buyer to ensure its availability
in case of request for tax refund or issuance of TCC.
This article is not intended to be a substitute for professional advice. For comments and inquiries, you may e-mail the author at Diendo.Dupal@ph.gt.com. For other tax concerns, please check out our other tax services.