In a claim for Value Added Tax (VAT) refund, the Supreme Court ruled that taxpayers have the right to determine when they have submitted complete documents to the Bureau of Internal Revenue (BIR), which triggers the 120-day period for the BIR to process the claim. This decision prevents the BIR from indefinitely delaying the process by claiming documents are incomplete, thus enabling taxpayers to seek judicial relief in a timely manner. However, the BIR retains the authority to request additional documents and deny the claim if these are not provided, ensuring a balance between taxpayer rights and the BIR’s duty to verify claims.

Pilipinas Total Gas vs. CIR: Who Decides When the Clock Starts Ticking on VAT Refunds?

The case of Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue revolves around a claim for a refund of unutilized input VAT credits. Pilipinas Total Gas filed an administrative claim with the BIR and later elevated the matter to the Court of Tax Appeals (CTA) due to the BIR’s inaction. The CTA Division dismissed the petition, stating that it was prematurely filed because Total Gas had not submitted all the necessary documents. The CTA En Banc affirmed this decision, adding that the judicial claim was filed too late, beyond the prescribed period. The central legal question was whether the judicial claim for refund was filed within the allowable period and whether the submission of incomplete documents at the administrative level renders the claim premature.

Section 112 (C) of the National Internal Revenue Code (NIRC) is at the heart of this case. The provision states:

SEC. 112. Refunds or Tax Credits of Input Tax. –

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.

The Supreme Court noted that the CTA En Banc erred in counting the 120-day period from the date the application was filed, rather than from the date of submission of complete documents. The 120-day period is intended to benefit the taxpayer by ensuring a judicious and expeditious decision. Granting the CIR the authority to determine when complete documents have been submitted would undermine this objective. This would give the CIR the power to indefinitely delay the administrative claim, preventing the taxpayer from filing a judicial claim with the CTA.

To illustrate the potential abuse, the Court provided a hypothetical scenario. A taxpayer files a claim with supporting documents, and after 121 days, the CIR requests additional documents. If the 120-day period hasn’t started, the taxpayer is left in limbo, unable to file a judicial claim until the 120+30 day period expires. Thus, it is the taxpayer who ultimately decides when complete documents have been submitted to start the 120-day period. The taxpayer has the burden of providing any and all documents that would support his claim for tax credit or refund. This ensures that the taxpayer has reasonable freedom as to when and how to present his claim within the allowable period.

However, this benefit is not unbridled. Under Revenue Memorandum Circular (RMC) No. 49-2003, if additional documents are required, the taxpayer must submit them within thirty (30) days from the request of the investigating/processing office. Further, under Section 112(A) of the NIRC, a taxpayer has two (2) years, after the close of the taxable quarter when the sales were made, to apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. The Supreme Court summarized the rules as follows: from the date an administrative claim is filed, a taxpayer has thirty (30) days to submit the documentary requirements. Upon filing of complete documents, the CIR has 120 days to decide the claim. If the taxpayer states they no longer wish to submit additional documents, the 120-day period begins from the date of filing.

It is crucial to note that these rules apply only to claims filed before June 11, 2014. RMC 54-2014, issued on that date, mandates that the application must be accompanied by complete supporting documents and a statement under oath attesting to their completeness. Under this current rule, taxpayers are barred from submitting additional documents after filing their administrative claim. However, the Court found that this new rule cannot be applied retroactively as it imposes new obligations on taxpayers.

The Supreme Court also addressed the CTA Division’s reliance on Revenue Memorandum Order (RMO) No. 53-98, which provided a checklist of documents. RMO No. 53-98 is intended to guide internal revenue officers during tax audits. It is not a benchmark for determining whether documents submitted by a taxpayer are complete for a tax credit or refund. Taxpayers cannot be faulted for failing to submit all the documents listed in RMO No. 53-98, absent notice from a revenue officer that other documents are required. If the BIR finds the documents inadequate, it should notify the taxpayer and request the necessary documents.

In this case, the BIR never questioned the inadequacy of the documents submitted by Total Gas. Since Total Gas filed its judicial claim due to the inaction of the BIR, there was no decision for the CTA to review on appeal. The CTA may give credence to all evidence presented by Total Gas, including those that may not have been submitted to the CIR. Total Gas must prove every aspect of its case to the CTA, including the requirements for a successful administrative claim. Ultimately, the Supreme Court remanded the case to the CTA Third Division for trial de novo, because the CTA Division denied due course and dismissed the judicial claim without ruling on whether Total Gas was entitled to a refund.

FAQs

What was the key issue in this case?	The key issue was determining the point from which the 120-day period for the BIR to process VAT refund claims should be counted: from the date of initial filing or the date of complete document submission. The Court sided with the taxpayer’s right to determine completeness, subject to limitations.
What does Section 112(C) of the NIRC state?	Section 112(C) of the NIRC provides that the CIR has 120 days from the date of submission of complete documents to decide on a claim for tax credit or refund of creditable input taxes. The taxpayer has 30 days from receipt of the denial or after the 120-day period to appeal to the CTA.
Why did the CTA En Banc’s decision get overturned?	The CTA En Banc incorrectly counted the 120-day period from the date of the initial application rather than from the date Total Gas submitted what it considered to be complete documents. The Supreme Court corrected this, emphasizing the taxpayer’s role in determining when documents are complete.
What is the significance of RMO No. 53-98?	RMO No. 53-98 is a checklist for internal revenue officers during tax audits and not a definitive list for taxpayers to ensure complete documentation for VAT refund claims. Taxpayers cannot be penalized for not submitting every document on the list if they were not specifically requested by the BIR.
How did RMC No. 49-2003 affect the process?	RMC No. 49-2003 provided that taxpayers have 30 days to complete required documents, unless further extended. This circular clarified the process and timelines for taxpayers to comply with BIR requests for additional documentation.
What is the impact of RMC 54-2014?	RMC 54-2014, effective June 11, 2014, requires taxpayers to submit complete documents with their initial application and attest to their completeness. This effectively shifts the determination of completeness back to the BIR upon initial filing.
Does this ruling mean taxpayers have unlimited time to submit documents?	No, taxpayers must still comply with the two-year period under Section 112(A) of the NIRC to apply for a tax credit certificate or refund. All documents must be submitted before the administrative claim is barred by prescription.
What if the BIR requires additional documents?	The taxpayer must submit the requested documents within thirty (30) days from the BIR’s request. Failure to do so may result in the denial of the refund claim.
What was the final outcome of the case?	The Supreme Court reversed the CTA’s decision and remanded the case to the CTA Third Division for a new trial. This allows Total Gas to present evidence to substantiate its claim for a VAT refund.

This ruling reinforces the taxpayer’s right to control the timeline of document submission while also respecting the BIR’s authority to verify claims and request additional information. The decision clarifies the procedural requirements for VAT refund claims, balancing the interests of both taxpayers and the government.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Pilipinas Total Gas, Inc. vs. CIR, G.R. No. 207112, December 08, 2015