h. Tax Refund and Tax Credit

Who may claim for refund/apply for issuance of tax credit certificates

Any VAT-registered person whose sales are zero-rated or effectively zero-rated may within 2 years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of the creditable input tax due or paid attributable to such sale.

The creditable input tax allowed to be refunded does not include transitional input tax.

In case the taxpayer is engaged both in zero-rated and taxable or exempt sale, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.

In the Luzon Hydro Corporation case¹, the Supreme Court reiterated the requisites for a claim for refund or tax credit for unutilized input VAT, thus:

• The taxpayer is VAT-registered;
• The taxpayer is engaged in zero-rated or effectively zero-rated sales;
• The input taxes are due or paid;
• The input taxes are not transitional input taxes;
• The input taxes have not been applied against output taxes during and in the succeeding quarters;
• The input taxes claimed are attributable to zero-rated or effectively zero-rated sales;
• For zero-rated sales under Section 106(A)(2)(1) and (2)²; 106(B)³; and 108(B)(1) and (2)⁴, the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas;
• Where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and
• The claim is filed within two years after the close of the taxable quarter when such sales were made. (Luzon Hydro Corporation)

Coral Bay Nickel Corporation v. CIR (G.R. No. 190506, 2016)

PEZA registration alone does not exempt purchases of services rendered outside the ecozone from VAT (Coral Bay Nickel Corporation v. CIR, G.R. No. 190506, 5 March 2025). If VAT was erroneously passed on to a PEZA-registered enterprise, its right to recover the amount is against the supplier who passed it on.

Unutilized creditable input taxes attributable to zero-rated sales can only be recovered through the application for refund or tax credit. The practice of claiming as an outright (income tax) expense accumulated and unapplied input VAT credits after the expiration of the 2-year period to process the claim does not have any legal basis (RMC No. 57-13⁵).

b) Period to file claim / apply for the issuances of tax credit certificates

The CIR shall grant a TCC/refund for creditable input taxes within 90 days from the date of submission of complete documents in support of the application.

Taxpayer may appeal to the CTA within 30 days from receipt of said denial.

If no action on the claim for refund has been taken by the CIR after the 90-day period from the date of submission of the application with complete documents, the taxpayer may appeal to the CTA within 30 days from the lapse of the 90-day period. Provided, however, That failure on the part of any official, agent, or employee of the BIR to act on the application within the 90-day period shall be punishable under Section 269 of NIRC⁷.

Note: The 120-day period is now changed to 90 days as amended by TRAIN.

CIR v. Aichi Forging Company (G.R. No. 184823, 2010)

Under the law then in force, the CIR had 120 days, from the date of the submission of the complete documents within which to grant or deny the claim for refund/credit of input VAT. The 90-day period is the subsequent rule under Section 112(C) of the NIRC, as amended by TRAIN.

In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR.

Otherwise, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

Hence, if the taxpayer filed with CTA before the 120-day period expires, CTA will dismiss the appeal on the ground of prematurity. If filed with CTA after the 150-day (120+30 days), CTA will dismiss for being late. This only applies to creditable input tax refunds.

Note: The actual case applied the then-governing 120-day period; TRAIN subsequently changed that period to 90 days.

CIR v. San Roque (G.R. No. 187485, 2013)

Note: San Roque discussed the then-governing 120-day period; TRAIN subsequently changed that period to 90 days.

Two exceptions to the mandatory and jurisdictional treatments of the 120-day period under the law then in force, as pronounced in the Aichi case, as follows:

• If the Commissioner, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is applicable only to such particular taxpayer.
• If the Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code⁸, misleads all taxpayers into filing premature judicial claims with the CTA.

In these cases, the Commissioner cannot be allowed to later on question the CTA’s assumption of jurisdiction over such claim since equitable estoppel has set in as expressly authorized under Section 246 of the Tax Code⁹.

Strict compliance with the 120+30 day period was necessary for such claim to prosper under the law then in force, except for the period from the issuance of BIR Ruling No. DA-493-03 Verify the ruling number: the ruling identified above is BIR Ruling No. DA-489-03, issued on 10 December 2003. on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which reaffirmed the 120+30 day periods as mandatory and jurisdictional. TRAIN subsequently changed the 120-day period to 90 days under Section 112(C) of the NIRC.

Team Energy Corporation v. Commissioner of Internal Revenue, G.R. No. 190928, 2014

The 30-day period given to the taxpayer within which to file an appeal before the CTA need not necessarily fall within the two-year prescriptive period on applying for TCC or refund, as long as the administrative claim is filed within the two-year prescriptive period.

SUMMARY OF RULES

(CIR v. Partnership, G.R. No. 191498, 15 January 2014)¹²

A. Two-Year Prescriptive Period

It is only the administrative claim that must be filed within the two-year prescriptive period. (Aichi)¹³

The proper reckoning date for the two-year prescriptive period is the close of the taxable quarter when the relevant sales were made. (San Roque)

The only other rule is the Atlas ruling, which is applicable only from 8 June 2007 to 12 September 2008. Atlas states that the two-year prescriptive period for filing a claim for tax refund or credit of unutilized input VAT payments should be counted from the date of filing of the VAT return and payment of the tax. (San Roque)

B. 90+30 Day Period

The taxpayer can file an appeal in one of two ways: (1) file the judicial claim within thirty days after the Commissioner denies the claim within the 90-day period, or (2) file the judicial claim within thirty days from the expiration of the 90-day period if the Commissioner does not act within the 90-day period.

The taxpayers are reminded that that when the 90-day period lapses and there is inaction on the part of the CIR, they must no longer wait for it to come up with a decision thereafter. The CIR’s inaction is the decision itself. It is already a denial of the refund claim. Thus, the taxpayer must file an appeal within 30 days from the lapse of the 90-day waiting period.

The 90-day period is counted from the submission of complete documents and not from the filing of the claim. (CIR vs. GST Phils., Inc., G.R. No. 190872)¹⁶

Note: The 120-day period as discussed in the actual case was modified to reflect 90 days to incorporate the TRAIN amendment.

As of June 11, 2014, all claims must already attach complete supporting documents and this fact must be attested under oath. Under the former 120-day rule, where the administrative claim was filed with the required complete supporting documents under the applicable rules, the period ran from that filing. (Pilipinas Total Gas, Inc. v. CIR, G.R. No. 207112, 8 December 2015)¹⁷ Under the current rule, the 90-day period runs from the submission of complete documents (NIRC, Sec. 112(C), as amended by RA 10963).

Note: The 120-day period as discussed in the actual case was modified to reflect 90 days to incorporate the TRAIN amendment.

The 30-day period always applies, whether there is a denial or inaction on the part of the CIR.

As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. (Aichi¹⁸ and San Roque)¹⁹

The exception is that premature filing is allowed only if filed between 10 December 2003 and 5 October 2010, when BIR Ruling No. DA-489-03²⁰ was still in force. (San Roque)

Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force. (San Roque)

c) Manner of giving refunds

Refund shall be made upon warrants drawn by the CIR or by his duly authorized representative without the necessity of being countersigned by the Chairman of COA.

Refunds under this paragraph shall be subject to post audit by the COA

d) Destination principle or cross-border doctrine (see previous discussion)

Judicial Claim to CTA for VAT Return

See earlier discussion under Refund or tax credit of excess input tax.

Judicial Claim to CTA for VAT Return

See earlier discussion under Refund or tax credit of excess input tax.