Tax notes: Undeclared input VAT refund

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Monday, March 10, 2014


DUE to inadvertence, input taxes on purchase of services on credit incurred by a valued-added tax (VAT) registered taxpayer were not declared in its quarterly VAT return, resulting in payment of higher output tax than it otherwise should not have paid. Considering that the taxpayer already received a letter of assessment, it could no longer amend its VAT return for the subject quarter to include the undeclared input taxes.

To refund its alleged erroneously paid VAT, the taxpayer filed a claim for refund of its overpaid output tax. The Court of Tax Appeals (CTA) held that in filing for tax refund, the taxpayer is simply applying its input tax credit against the output VAT, i.e., it is merely availing of the creditable input tax mechanism under Section 110 of the Tax Code. Hence, it should be entitled to claim refund of its erroneously paid output VAT subject to verification of its output taxes and input taxes during the pertinent quarter/s. (Coca-Cola Bottlers Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 8183, January 17, 2014).

However, for failure to properly substantiate its input taxes, the taxpayer – even with the alleged undeclared input tax – would still not have an overpayment of output tax that may be the subject of a claim for refund on the ground of erroneous overpayment. Hence, the CTA denied the claim for refund of the taxpayer.

(Source: Punongbayan & Araullo)

Published in the Sun.Star Cebu newspaper on March 11, 2014.

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