INSIGHTS is a monthly publication of BDB LAW to inform, update and provide perspectives to our clients and readers on significant tax-related court decisions and regulatory issuances (includes BIR, SEC, BSP, and various government agencies).

DISCLAIMER: The contents of this Insights are summaries of selected issuances from various government agencies, Court decisions, and articles written by our experts. They are intended for guidance only and as such should not be regarded as a substitute for professional advice.

Copyright © 2024 by Du-Baladad and Associates (BDB Law). All rights reserved. No part of this issue covered by this copyright may be produced and/or used in any form or by any means – graphic, electronic, and mechanical without the written permission of the publisher.

Non-submission of the documents for refund would not ipso facto result in the denial of the claim for tax refund or credit.

The taxpayer filed its Annual ITR and Amended Annual ITR for CY 2018. However, due to inaction, it elevated its claim for refund to the CTA. The taxpayer argued that the claim for refund should be granted because all necessary elements are present to grant the claim. On the other hand, the BIR contends that failure on the part of the taxpayer to submit relevant documents on the administrative level makes the administrative claim for refund or credit pro forma and shall be construed as if no administrative claim was filed at all.

The Court ruled that a review of RMO No. 53-98 and RR No. 2-2006 does not indicate that the non-submission of the enumerated documents would ipso facto result in the denial of the claim for tax refund or credit. RR No. 2-2006 merely imposes a penalty of fine for non-submission of the information or statement required therein, but not the outright denial of any tax refund or credit claim.

The Court further ruled that, even if the taxpayer failed to submit the complete documents at the administrative level, it would not render its Petition for Review dismissible. The Court may give credence to all evidence presented by the taxpayer including those that may not have been submitted at the administrative level. (Ford Group Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 10507, July 10, 2024)

The Court ruled that the proper remedy for the taxpayer was to file a Petition for Review before the CTA within 30 days from receipt of the FDDA.

The taxpayer was assessed for deficiency IT, VAT, EWT, DST, and compromise penalties. The taxpayer received the FDDA in June 2021. Instead of appealing to this Court, the taxpayer opted to file a letter-reply to the FDDA before the office of the CIR. On March 2022, the taxpayer issued a WDL to collect the alleged IT and VAT liabilities. Aggrieved with the issuance of the WDL, on 24 March 2022, the taxpayer transmitted its letter, reiterating its previous request for reconsideration and re-computation of the deficiency assessments. Disregarding the taxpayer's pleas, the BIR issued WG which was received by the taxpayer on 02 May 2022. On 27 May 2022, the taxpayer filed before this Court a Petition for Review. The BIR contended that the taxpayer failed to file the Petition despite its receipt of the FDDA. Due to its failure to contest the FDDA, they accordingly became final and executory.

The Court ruled that the proper remedy for the taxpayer was to file a Petition for Review before the CTA within 30 days from receipt of the FDDA. As provided clearly in Section 3.1.4 of RR No. 12-99, as amended by RR No. 18-13, the taxpayer’s resort to file an MR with the CIR did not toll the running of the 30-day prescriptive period to appeal before the CTA.

Here, almost two (2) years have lapsed from the taxpayer's receipt of the CIR's final decision (or the FDDA) before it filed an appeal with this Court. Considering the amount of time that elapsed, this Court's lack of jurisdiction to entertain the original Petition for Review becomes indisputable. (Pentagon Gas Corporation v. Commissioner of Internal Revenue and Manuel V. Mapoy, i his capacity as OIC-Asst Commissioner, Large Taxpayers Service, CTA Case No. 10868, July 19, 2024)

For products to be classified as milk products and be excepted from sweetened beverage tax: (i) it must be determined by the FDA to fall under the milk product category; and (ii) it must not be excluded from this category

This is an appeal on the Decision of the CTA – Third Division denying the refund claim of the taxpayer on its erroneously paid Sweetened Beverage Taxes (SBT) on its product MILO®, a powdered chocolate malt-flavored milk drink.

The taxpayer submits that its MILO® products are not subject to SBT as they are properly classified as "flavored milk" based on the Food Category Descriptors of the Codex Alimentarius Food Category Descriptors (CODEX), thereby, excluded from the imposition of SBT.

The Court ruled that taxpayer’s MILO products must satisfy two criteria to be classified a milk product per CODEX: (i) they must be determined by the FDA to fall under this milk product category; (ii) they must not be excluded from this category.

As to the first criterion, the taxpayer’s MILO products apparently fall under “flavored fluid milk drinks” considering that the product names thereof commonly include "MILK DRINK" and they belong to the food categorization "HRA 1b. Dairy-based drinks, flavored and/or fermented", as indicated in the FDA-issued Certificates of Product Registration and the Application Details. Moreover, based on the description of the term "flavored fluid milk drinks," the examples enumerated under the description of the said term specifically include “chocolate malt drinks.”

As to the second criterion, taxpayer’s MILO® products cannot be classified as "mixes for cocoa (cocoa-sugar mixtures)". This is because such a sub-food category is supposed to contain only cocoa powder and sugar. Also, "finished cocoa beverages and chocolate milk" are explicitly included in Food Category for "flavored fluid milk drinks", and therefore, they are necessarily excluded from the Food Category for cocoa-sugar mixtures.

The Court finds that the taxpayer’s MILO® products as not subject to SBT for being classified as a 'milk product' under the sub-food category "flavored fluid milk drinks". Consequently, the taxpayer is entitled to the refund of the excise taxes it paid. (Nestle Philippines, Inc. v. Commissioner of Internal Revenue, CTA EB NO. 2711 (CTA Case No. 9943), July 11, 2024)

Revenue Memorandum Order No. 25-2024 July 3, 2024 - This provides for the guidelines, policies, and procedures in the processing of claims for tax credit/refund of excess/unutilized Creditable Withholding Taxes (CWT) on income.

The following are to be observed in the processing of claims for tax credit/refund of excess unutilized CWT:

• The processing offices authorized to receive the application are as follows:

1. Revenue District Office (RDO)
2. Large Taxpayers Audit Division (LTAD) or Large Taxpayers District Office (LTDO) under the Large Taxpayers Service (LTS)

• Only applications with complete documentary requirements enumerated in the attached Checklist of Mandatory Requirements shall be received and processed.

• For regular applications or those filed by taxpayers of “going-concern” status:

1. Filing of the application shall be made within two (2) years from date of filing of the AITR. A return filed showing an overpayment shall be considered as a written claim for tax credit/refund. Submission of complete documents shall commence the counting of the 180-day processing period.
2. Income upon which taxes are withheld must be included as part of gross income declared in the AITR.
3. Fact of withholding is established by a copy of the withholding tax certificate.

• Strict observance to the 180-day time frame to grant in full or in part the claims for tax credit/refund of CWT.

• The result of the verification of the claim, whether approval or denial, shall be communicated to the taxpayer-claimant.

• Should the taxpayer-claimant opt to elevate the full or partial denial of the claim of the Court of Tax Appeals (CTA):

1. In case of full or partial denial, the taxpayer may, within thirty (30) days from the receipt thereof, appeal the decision with the CTA.
2. In case the tax credit/refund is not acted upon within the 180-day period, the taxpayer may opt to appeal to the CTA within the 30-day period
3. After the expiration of the 180 days required by law to process the claim, the taxpayer may opt to forego the judicial remedy and await the final decision.
4. When no decision is rendered within the 180-day period and the taxpayer opted to seek for a judicial remedy within 30 days from such period, the administrative claim for refund shall be considered moot and shall no longer be processed.

• The claims for erroneously or illegally collected tax credit/refund must conform with the following essential requisites:

1. The tax credit/refund claim pertains to erroneously or illegally received or collected taxes or penalties imposed without authority.
2. Filing of a claim for tax credit/refund shall be done within two (2) years after payment of the tax or penalty.
3. The erroneously or illegally received or collected taxes must be supported with a copy of the duly filed tax return with the corresponding payment remitted to the Bureau.

• The processing offices authorized to receive the application are the following:

1. The Revenue District Office (RDO); or
2. The respective Large Taxpayers Audit Division (LTAD) or Large Taxpayers District Office (LTDO) under the Large Taxpayers Service (LTS).

• The following offices shall be responsible in the processing, review, and approval of claims regardless of the amount:

• The time frame to grant in full or in part the claims is 180 days from the date of submission of complete documents in support of the application.

• Only applications with complete documentary requirements shall be received and processed by the authorized processing office.

• The result of the verification of the claim, whether approval or denial, shall be communicated to the taxpayer-claimant, which shall be signed by the authorized revenue official and shall be served by the originating processing office.

• The following rules shall govern should the taxpayer-claimant opt to elevate the full or partial denial of the claim of the Court of Tax Appeals (CTA):

1. In case of full or partial denial of the claim, the taxpayer affected may, within thirty (30) days from the receipt, appeal the decision with the CTA.
2. In case the tax credit/refund is not acted upon within the 180-day period, the taxpayer may opt to appeal to the CTA within the 30-day period after the expiration of the 180 days to process the claim.
3. The taxpayer may also opt or forego the judicial remedy and await the final decision.
4. When no decision is rendered within the 180-day period and the taxpayer- claimant opted to seek for a judicial remedy within 30 days from such period, the administrative claim for refund shall be considered moot and shall no longer be processed.

RMC No. 74-2024, July 3, 2024 – This prescribes the mandatory requirements for claims for credit/refund of taxes erroneously or illegally received or collected or penalties imposed without authority, except those under the authority and jurisdiction of the Legal Group.

The claim for credit/refund must be accompanied with the following supporting documents:

• Three (3) original copies of duly accomplished Application for Tax Credit/Refund (BIR Form No. 1914);
• Letter addressed to the CIR stating therein the legal basis, facts, and other circumstances justifying the claim for tax credit/refund;
• Copy of the duly filed tax return with the corresponding proof of payment remitted to the BIR;
• Original copy of the duly notarized Taxpayer’s Attestations;
• Original copy of Notarized Secretary’s Certificate (for corporate claimant) or SPA (for individual & ROHQ claimant) stating the authorized representative/s to file, and sign documents on behalf of the claimant and/or follow-up tax credit/refund claims together with the photocopy of at least one (1) valid government-issued ID with three (3) specimen signatures of authorized representative/s;
• Original copy of Delinquency Verification Certificate (valid for 6 months) issued by the Collection Division under the respective Revenue Region or the LT-Collection Enforcement Division under the Large Taxpayers Service, whichever is applicable; and
• Other documentary requirement(s) in support of the claim.

The foregoing shall be submitted to the processing office that has jurisdiction over the taxpayer-claimant as follows:

• The RDO; or
• The respective Large Taxpayers Audit Division (LTAD) or Large Taxpayers District Office (LTDO) under the Large Taxpayers Service (LTS).

The taxpayer-claimant must file the application with complete documentary requirements within the prescribed two-(2-) year period after the payment of the tax or penalty.

Revenue Memorandum Circular No. 79-2024, July 15, 2024 - This further extends the transitory period prior to actual imposition of withholding tax on gross remittances made by digital financial services providers to sellers/merchants prescribed under RR No. 16-2023.

In order to provide additional time to the digital financial services providers, the prescribed transitory period is further extended for another ninety (90) days or until October 12, 2024.

Meanwhile, all electronic marketplace operators shall impose the withholding of tax to sellers/merchants beginning July 15, 2024.