Tax Articles

Creditable Withholding Tax (CWT) Refund Claims

By: Atty. Mabel L. Buted

Mabel L. Buted Junior Partner   +632 8403-2001 loc.160 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

Early this year, when the Ease of Paying Taxes Act (EOPT) was passed into law, I wrote about the reforms and changes introduced by the said law in relation to the processing of claims for refund of excess and unutilized creditable withholding taxes (“CWT”) of taxpayers. It can be recalled that the EOPT has already set a definite period within which our tax authority should act upon these claims for refund. The BIR is granted a period of 180 days from submission of complete documents to decide on claims filed before its office. It is only after the lapse of the given period can the taxpayer invoke the judicial remedy and appeal to the courts. Once the claim is elevated to the tax court, the BIR loses its authority to process the claim. This effectively addressed the issues raised under the old rules on the timing of judicial appeal and on the overlapping exercise of authority by the BIR and the courts.

There were also other issues under the old rules which I have been wanting to be resolved with the enactment of the EOPT. These concern the mandatory documentary requirements in administrative claims for refund. To recall, in the past, some applications were being denied for failure to present the originals or the certified true copies of the withholding tax certificates, and the proofs of remittance of taxes withheld. As the 180-day period commences to run from the date of submission of complete documents, I was also hoping for the BIR to settle once and for all the documents needed to be submitted upon filing the applications for refund – a call which the BIR heeded recently.

Early in July, the BIR issued RMC No. 75-2024, prescribing the mandatory requirements in claiming for refund of excess and unutilized CWTs, and RMO No. 25-2024, providing the guidelines, policies, and procedures in processing CWT refund claims.

Under RMC No. 75-2024, the application must be accompanied by the following documents: (a) Application for Tax Credit/Refund (BIR Form No. 1914); (b) Audited Financial Statements (“AFS”), complete with Notes to AFS, if the AFS was not submitted in BIR eAFS; (c) original copies of the Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307) or Withholding Tax Remittance Return for Onerous Transfer of Real Property Other Than Capital Asset (BIR Form No. 1606), whichever is applicable, issued by the payor-withholding agent to the taxpayer-claimant; (d) hard and soft copies of Summary of Revenues/Income declared per Income Tax Return and the corresponding taxes withheld per BIR Form No. 2307/1606 in accordance with the BIR-prescribed format; (e) original duly notarized copy of Taxpayer’s Attestation, certifying to the taxpayer’s entitlement to the claim for refund, completeness and authenticity of the documents submitted, and availability of the taxpayer’s books of accounts and accounting records for verification; (f) proof of authority of the authorized representative of the taxpayer-claimant; and (g) original copy of Delinquency Verification Certificate which must be valid for six months. Only claims for refund filed with the documents mentioned will be accepted by the BIR.

This cleared all prior issues on refund. On the withholding tax certificates, the original copies must be submitted. Also, proofs of remittances of the withholding taxes are not required to be presented upon filing.

One particular provision in the RMO nonetheless concerns me. While the taxpayer-claimant is not mandated to submit proofs of remittance of the CWTs, the BIR may still verify whether the taxes withheld on income were remitted to the government. So, this leaves me to think on the effect of the results of that verification on the refund claims of the taxpayers. I hope that this will not adversely affect their claims.

To reiterate, one of the long-established conditions in claiming for refunds of excess and unutilized CWTs is the proof of withholding. But the proof of actual remittance by the withholding agents of the taxes withheld is not needed. The remittance of the taxes is the responsibility of the withholding tax agent, and not of the taxpayer-refund claimant. The latter precisely has no control over the remittance of the taxes withheld on its income. Hence, the taxpayer whose income has been subjected to withholding taxes should not be prejudiced by the act of the withholding agent. The withholding tax certificates will serve as proofs of actual payment of the withholding taxes to the government (G.R. No. 180290, September 29, 2014).