Tax notes: Refund of LGU share of 5% PEZA tax remitted to BIR

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Tuesday, January 28, 2014


A PHILIPPINE Economic Zone Authority (PEZA) registered enterprise under the five percent preferential tax is required to file its quarterly and final income tax returns (ITRs) in two separate income tax payments: one to the Bureau of Internal Revenue (BIR) for the three percent share of the national government, and a separate payment covering the two percent for the host local government unit (LGU).

In case both the three percent share of the national government and two percent share of the LGU in the five percent preferential tax rate are all remitted to the BIR, there is a resulting overpayment of taxes as to the two percent LGU share. The overpayment shall be considered as erroneously paid tax, which should entitle the PEZA-registered enterprise to a claim for cash refund or issuance of tax credit certificate.

The Court of Tax Appeals (CTA) noted that unlike the value-added tax (VAT) refund, there is no specific regulation enumerating the documents to be presented when filing an administrative claim for refund of erroneous payment of the five percent special income tax for PEZA-registered enterprises. The Court thus held that so long as a taxpayer is able to fully substantiate the amount to be refunded, as well as show its entitlement for the refund, the taxpayer should be entitled to refund of its overpaid taxes (Acquire Asia Pacific Philippines, Inc. v. Commissioner of Internal Revenue, December 13, 2013).

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In support of its claim for refund, the PEZA-registered enterprise submitted its duly accomplished application for tax credit/refund, BIR certificate of registration, PEZA registration, and pertinent quarterly and annual ITRs. The CTA deemed the documents sufficient to determine the validity of the taxpayer’s claim for tax refund; hence, the taxpayer was entitled to a refund of its erroneously paid tax.

(Source: Punongbayan & Araullo)

Published in the Sun.Star Cebu newspaper on January 29, 2014.

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