* Tax lawyer Fulvio Dawilan urged a review of value-added tax refund laws to clarify inconsistent interpretations that cause disputes and denial of taxpayers’ claims.
* Under Section 112 of the tax code as amended by Republic Act 11976, taxpayers with zero-rated sales have two years to claim input VAT refunds, with decisions mandated within 90 days.
* Court rulings like the 2022 Maibarara Geothermal case require zero-rated sales within the same period as input VAT, highlighting the need for clearer rules aligned with judicial standards.
REFUND laws governing value-added tax (VAT) need to be reviewed and clarified to resolve differing interpretations that can lead to disputes and the denial of taxpayers’ refund claims, according to a tax lawyer.
Rules governing tax refund claims have at times been inconsistently applied and interpreted, including in court cases, resulting in disputes between the Bureau of Internal Revenue (BIR) and VAT refund claimants, said Fulvio Dawilan, managing partner at Du-Baladad and Associates Law Offices.
Under Section 112 of the National Internal Revenue Code, a VAT-registered taxpayer with zero-rated or effectively zero-rated sales may seek a refund of creditable input VAT attributable to those sales within two years after the close of the taxable quarter when the sales were made. The Supreme Court (SC) has ruled that the period is reckoned from the quarter when the sales occurred, not when the input VAT was incurred.
Republic Act 11976, or the Ease of Paying Taxes Act, amended Section 112 to require the commissioner to act on VAT refund claims within 90 days from submission of the required documents. A taxpayer may appeal a full or partial denial, or the BIR’s failure to act within the period, to the Court of Tax Appeals within 30 days.
Dawilan said disputes have also involved whether the input VAT and zero-rated sales must occur within the same taxable period. The law does not expressly impose such a requirement, and businesses often incur input VAT before making the related sales.
The SC, however, has ruled that taxpayers must establish zero-rated or effectively zero-rated sales to which the claimed input VAT is attributable. In a 2022 ruling involving Maibarara Geothermal Inc., the court denied a refund claim for input VAT incurred in 2011 because the company had no zero-rated or effectively zero-rated sales that year. Its sales began only in 2014.
Another issue is the period from which the two-year prescription should be reckoned. The SC has ruled that it runs from the close of the taxable quarter when the relevant zero-rated sales were made, rather than when the input VAT was paid or incurred.
Dawilan said inconsistent interpretations of these rules have resulted in refund claims being denied and created disputes between taxpayers and tax authorities.
He called for clearer statutory language, consistent administrative rules and standards aligned with court rulings to make the VAT refund system more predictable. / PHILEXPORT NEWS AND FEATURES
