Effect of ease of paying taxes on refund

REPUBLIC Act 11976, or the “Ease of Paying Taxes” (EOPT), amended Sections 204 and 229 of our National Internal Revenue Code, as amended (the Tax Code), and modified the rules and procedures on the claims for refund of erroneously paid or illegally collected taxes.

Section 204 still provides that a claim for credit or refund for erroneously or illegally paid taxes or penalties shall be made in writing with the Commissioner of Internal Revenue (CIR) within two years after the payment of the tax or penalty. However, it has been amended to provide that the CIR shall process and decide the refund within 180 days from the date of submission of complete documents in support of the application filed.

Section 204 was further amended to provide that failure on the part of any official, agent, or employee of the Bureau of Internal Revenue (BIR) to process and decide the application within the 180-day period shall be punishable under Section 269 of the Tax Code. Also, it now provides that should the CIR deny, in full or in part, the claim for refund, the CIR shall state the legal and/or factual basis for the denial.

Section 229 has also been amended to state that no judicial suit or proceeding shall be filed unless there is a full or partial denial of the claim for refund or credit by the CIR or there is a failure on the part of the CIR to act on the claim within the aforesaid 180day period.

Thus, a taxpayer may now file a judicial suit with the Court of Tax Appeals (CTA) within 30 days from the receipt of the decision denying its claim or within 30 days after the expiration of the 180 days, even if the 180-period is beyond the twoyear prescriptive period.

Prior to the enactment of EOPT, the 180-day period rule was applied only to tax assessments, not to tax refunds. In case of the inaction of the CIR on the protested assessment, the taxpayer has two options to either (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period or (2) await the final decision of the Commissioner and appeal such final decision to the CTA within 30 days after the receipt of such decision, these options are mutually exclusive and resort to one bars the application of the other (Lascona Land Co. Inc. v. CIR, GR 171251, March 5, 2012).

Also, under the old rule on tax refunds, both administrative claims for refund and the judicial appeal to the CTA must be made within two years from the date of payment of tax or penalty. There was no minimum period granted to the BIR to process the claim.

In CBK Power Company v. CIR, GR 193383-84 & 193407-08, Jan. 14, 2015, the Supreme Court upheld the propriety of the taxpayer’s judicial claim instituted as early as five days after the administrative claim had been filed on the ground that both claims were filed within the two-year prescriptive period. Moreover, in CIR v. Goodyear Philippines, Inc., GR 216130, dated Aug. 3, 2016, the Supreme Court found the taxpayer’s petition to the CTA to be justified, notwithstanding that its administrative and judicial claims were filed only 13 days apart. In both cases, the taxpayers were not faulted for resorting to immediate court action since the two-year prescriptive period was about to expire. Had the taxpayer awaited the action of the BIR, knowing fully well that the two-year prescriptive period was about to lapse, it would have resultantly forfeited its right to seek judicial review of its claim. (CIR v. Carrier Air Conditioning Philippines, GR 226592, July 27, 2021)

With the passage of EOPT, a specific period has now been established within which the BIR is required to process and decide on the administrative claims for refund — 180 days reckoned from the submission of complete documents in support of the application. The taxpayer can then appeal its administrative claim as follows: (a) it can appeal to the CTA within 30 days after the denial of the claim for refund by the CIR, or (b) in case of the inaction of the CIR, it can appeal to the CTA within 30 days after the expiration of the 180-day period.

Under this new rule, the requirement to file a judicial claim within two years from the date of payment was removed. However, the two-year prescriptive period for filing the administrative claim for tax refund shall continue to be applicable.

This would mean that if the taxpayer files an administrative claim early, it can go to court much earlier, within 30 days after the lapse of the aforesaid 180-day period, without waiting for the BIR to act on its claim. The BIR, on the other hand, will not only be constrained to act within said 180-day period, but it can also be assured that it has such a period within which to process claims.

The foregoing amendments introduced by EOPT, thus, establish a clear timeline for BIR to act on administrative claims. At the same time, the amendments provide taxpayers with greater certainty on the processing time of their claims. We all hope all these will reduce potential delays in taxpayer’s claims.

Keanu P. Castañeda is a CPAlawyer and an associate of MataPerez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any questions or comments regarding this article, you may email the author at info@ mtfcounsel.com or visit the MTF website at www.mtfcounsel.com.