Get Adobe Reader

In order to view PDF files, you need to install Adobe Reader. Please click here to download a free copy of Adobe Reader.

Importance of prescriptive period for VAT refund cases

Importance of prescriptive periof for VAT refund cases by: Arnold P. Supilanas

Under Section 112(A) of the Tax Code, any (value-added tax) VAT-registered taxpayer may file a claim for refund or issuance of tax credit of its input VAT attributable to zero-rated or effectively zero-rated sales, within two years reckoned from the close of the taxable quarter when the sales were made.

The claim must be administratively filed with the Bureau of Internal Revenue (BIR).

The Commissioner of Internal Revenue (CIR) is given 120 days from the date of submission of complete documents to grant, in proper cases, a refund or to issue a tax credit certificate for creditable input taxes due or paid attributable to zero-rated or effectively zero-rated sales.

In case of full or partial denial of the claim for tax refund or tax credit, or failure to act on the application within the 120-day period, the affected taxpayer may, within 30 days from the receipt of the decision denying the claim or after the expiration of the 120-day period, appeal the decision or the unacted claim with the Court of Tax Appeal (CTA).

This rule on prescriptive periods for judicial claim of excess input VAT was reaffirmed by the CTA in the case of Third Millenium Oil Mill, Inc. vs. CIR (CTA Case No. 7583, dated July 7, 2010).

In the said case, the taxpayer filed its administrative claim for issuance of tax credit for its unutilized input taxes for the four quarters of taxable year 2005 on June 26, 2006, which is within the two-year prescriptive period under Section 112(A) of the Tax Code.

Although the date of filing of the administrative claim is separate and distinct from the date of submission of the complete documents in support thereof, the CTA concluded that the taxpayer, upon filing its administrative claim, simultaneously submitted the complete documents in support of its claim. Thus, under Section 112(C) of the Tax Code, the taxpayer has 120 days from June 26, 2006 or up to October 24, 2006 to wait for the decision or ruling of the CIR denying its claim for issuance of tax credit.

Since there was no action on the part of the CIR, the taxpayer has 30 days from October 24, 2006 or until November 23, 2006 to file a petition for review with the CTA.  However, the taxpayer, in this case, filed its petition for review with the CTA on March 28, 2007 — months beyond the 30-day period to appeal the presumed denial of the taxpayer’s claim for tax refund through the inaction of the CIR.  Hence, the CTA had no more appellate jurisdiction to entertain the case.

In dismissing the case, the CTA quoted the Supreme Court ruling in Yao vs. Court of Appeals (GR No. 132428, October 24, 2000), thus:

“The right to appeal is not a constitutional, natural or inherent right.  It is a statutory privilege of statutory origin and, therefore, available only if granted or provided by statute.  Since the right to appeal is not a natural right nor a part of due process, it may be exercised only in the manner and in accordance with the provisions of law.  Corollarily, its requirements must be strictly complied with.

“That an appeal must be perfected in the manner and within the period fixed by law is not only mandatory but jurisdictional.  Non-compliance with such legal requirements is fatal, for it renders the decision sought to be appealed final and executory, with the end result that no court can exercise appellate jurisdiction to review the decision.”

It can be gleaned from the above decision that strict compliance with the legal requirements provided by the statute which grants the privilege to make an appeal plays an important role in making judicial claim for excess input VAT.  Taxpayers should be mindful of these legal requirements particularly the prescriptive periods in making an appeal, otherwise, they will lose their statutory privilege to appeal VAT refund cases with the CTA.