Supreme Court rules RMC No. 54-2014 applies prospectively

Tax rules seem to be constantly changing. Unless the taxpayer regularly looks up the latest issuances from the Bureau of Internal Revenue (BIR) and court decisions, or has a battery of tax advisors to do these for him, or attends periodic tax seminars, keeping track of developments in the rules can be difficult.

The same can be very well said about filing tax refunds. Since tax refunds and tax credits are construed in strictissimi juris against the taxpayer, not only must he show that he is entitled to the refund under substantive law, he must also establish that the administrative and judicial claim were timely filed, lest he lose his entitlement to the claim.

Under Section 112 of the National Internal Revenue Code (NIRC), a value-added tax (VAT)-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax. The BIR has one hundred twenty (120) days from the date of submission of complete documents by the taxpayer to decide the claim. Within a period of thirty (30) days from receipt of the denial of the claim or the lapse of the 120-day period without the BIR acting on the claim, the taxpayer should appeal the decision or the unacted claim to the Court of Tax Appeals (CTA).

Prior to the effectivity of Revenue Memorandum Circular (RMC) No. 54-2014, the BIR and the taxpayer are left to argue as to when a taxpayer is deemed to have submitted the complete documents. The 120-day period is crucial since the 30-day period to appeal the VAT claim to the CTA is reckoned from the lapse of the 120-day period.

Recently, the Supreme Court (SC) squarely addressed the above issue in the recent case of Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue (G.R. No. 207112, December 8, 2015) and held in this case that the 120-day period within which the Commissioner of Internal Revenue (CIR) must decide the VAT claim is reckoned from the date the taxpayer submitted its last supporting documents and not from the date that the tax refund or tax credit application was filed.

The SC explained that it is the taxpayer who ultimately determines when complete documents have been submitted for the purpose of commencing and continuing the running of the 120-day period.

The SC clarified that the 120-day period granted to the CIR to decide an administrative claim under Section 112 is primarily intended to benefit the taxpayer, to ensure that his claim is decided judiciously and expeditiously. To allow the CIR to determine the completeness of the supporting documents would provide the BIR with unbridled power to indefinitely delay the administrative claim, which would ultimately prevent the filing of a judicial claim with the CTA.

On the other hand, with the issuance of RMC No. 54-2014 on June 14, 2014, the BIR fixed the reckoning of the 120-day period to the date when the administrative claim was filed.

Does the issuance of RMC No. 54-2014 render the foregoing discussions of the SC in the Pilipinas Total Gas case moot and academic? No. In fact, the SC stressed that the old rule (i.e., 120-day period being reckoned from the date of the complete submission of documents and not from the date of filing of the administrative claim) applies to administrative claims filed prior to June 14, 2014, which is the date when the circular took effect. The SC held that the circular should not prejudice taxpayers who have every right to pursue their claims under the rules existing at the time they were filed. It should be noted that the petitioner in this case filed its administrative claim on May 15, 2008.

Thus, taxpayers, who have pending administrative claims filed before June 14, 2014, will benefit from the recent SC decision. In this relation, the responsible tax and finance officers should review: (a) the date when the last documents were filed with the BIR; (b) the completeness and adequacy of the supporting documents; and (c) whether the company received written notices from the BIR to submit additional documents within a specified deadline. It is important to take note of these circumstances since, when taken together, the same may affect the counting of the 120-day period for the administrative claims filed with the BIR before June 14, 2014.

On the other hand, for taxpayers filing their claims after June 14, 2014, it is a prudent course of action to check on the requirements of RMC No. 54-2014, particularly on the 120-day period, which, according to the said RMC, commences from the date of the filing of the claim with the BIR.

Jean Ross Abenasa-Miso is a manager of the Tax Advisory and Compliance division of Punongbayan & Araullo.