Tax Articles

Refund Remedies of EOPT

By: Atty. Irwin C. Nidea, Jr.

Irwin C. Nidea Jr. Senior Partner   +632 8403-2001 loc.330 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

The Ease of Paying Taxes Law (EOPT) has introduced changes in claims for excess input VAT and erroneously paid taxes. The period that the BIR is mandated to act on these claims is now defined. The law is also clear on the remedies available to taxpayers in case a claim for refund is denied. But when you read the draft revenue regulations (RR) on refunds, it appears that the BIR wants to introduce additional remedies that are not provided for by law. I am afraid that this signals another vicious cycle of false hopes and dismissed judicial appeals.

First, on VAT, the EOPT Law is clear that a taxpayer may file a claim for refund of excess input VAT within two years from the end of the quarter when the sales were made. The BIR is given 90 days from submission of complete documents to grant or deny the same. In case of a decision or expiration of the 90-day period, the taxpayer is given 30 days to appeal to the Court of Tax Appeals (CTA). The draft RR on the other hand, added that in case the 90-day period has expired, and the BIR failed to issue a decision, the taxpayer has two choices: a) go directly to the CTA within 30 days, but the filed administrative claim becomes moot and academic. In other words, the BIR will no longer act on the claim for refund or b) wait for the decision of the BIR, which in effect is beyond the mandatory 90-day period. I find this additional remedy concerning on three grounds: a. giving the taxpayer an option to wait for a BIR decision after 90 days may be considered administrative legislation. It is clear that the BIR has only 90 days to decide and any decision beyond that may be considered void. The court may rule that this additional remedy is ultra vires; b. assuming that the taxpayer’s option to wait for the BIR decision beyond the 90-day period is valid, what happens when the BIR does not decide at all? Taxpayers will be in limbo, like a lost soul, hoping and praying for a BIR action.

Next, on erroneous payment of tax, under the EOPT Law, taxpayers are given 2 years to file the administrative claim for refund. Unlike the old law where taxpayers must file both the administrative and judicial claims within 2 years, the EOPT Law provides that the 2-year period is exclusive to administrative claims for refund. This time, the BIR is given 180 days to decide, counting from the time that the same is filed together with the complete documents. In case of inaction or decision, the taxpayer must appeal to the CTA within 30 days. But like the draft RR on VAT refund, the BIR is also adding another layer of remedy for taxpayers – in case the BIR fails to decide within the 180-day period, the taxpayer who does not appeal to the CTA may wait for the decision of the BIR.

The draft RR also provides that if the taxpayer files an appeal to the CTA after the expiration of the 180-day period, the administrative claim for refund becomes moot and academic. In other words, the BIR will no longer process it. Taxpayers are left with a hard choice: a. prove their entitlement to the refund in court; b. or wait for the BIR to decide. Again, this additional remedy of waiting for the decision of the BIR beyond the mandated 180-day period is not found in the law. Just like in VAT refunds, there is a great risk that the courts will rule that this additional remedy is ultra vires and consequently any refund given beyond the mandatory 180-day period is void. More importantly, can the taxpayer still appeal to the CTA if the adverse decision of the BIR was issued beyond the 180-day period for it to decide when this remedy cannot be found in the law?

We must also not forget the additional provision in the EOPT Law where the Commission on Audit (COA) may come in and disallow the refund given to taxpayers. Disallowance by the COA shall make the taxpayer liable for the disallowed amount and BIR employees who processed the claim may only be administratively charged for gross negligence.

So, after hurdling all these grey areas and the devalued money is finally awarded, COA may still take it back.

Remedies on refunds are clearly stated in the EOPT Law. I hope the revenue regulations will remain true to the words and spirit of the law. Otherwise, taxpayers will be lured not to file a Petition in court when the 90 or 180-day period expires and wait for the BIR decision, that may never come.