Tuesday, November 25, 2008 Tax notes: Recovery of excess creditable withholding tax of dissolving corporation
TO be fully entitled to refund of its unutilized creditable withholding taxes, a corporation that has ceased operations must present a tax clearance duly issued by the Bureau of Internal Revenue (BIR) so that the Court can ascertain that the taxpayer-claimant has settled all of its liabilities.
Mere presentation of (1) Secretary’s Certificate of resolution passed by the Board of Directors and approved by the shareholders of a company, (2) BIR Form 1905 to prove that the taxpayer filed an application for cessation of registration, and (3) notice of cancellation of registration are not sufficient to determine that the taxpayer has completely paid off its tax liabilities and is therefore entitled to refund.
The requirement laid down by the National Internal Revenue Code of 1997 for corporations contemplating cessation of business operations or dissolution opting for refund is a tax clearance duly issued by the BIR. (Philaqua Consultants Inc. versus Commissioner of Internal Revenue, CTA Case No. 6942, Aug. 28, 2008)
To grant the claim of taxpayer without the tax clearance would put the government in a most disadvantageous position considering that it can no longer run after a non-existing corporation. (Source: Punongbayan & Araullo)
