REVENUE MEMORANDUM CIRCULAR NO. 54-2014 issued on June 17, 2014 clarifies the issues relative to the application for Value-Added Tax (VAT) refund/credit under Section 112 of the Tax Code, as amended.

        Section 112 (A) of the Tax Code as amended, provides that any 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 sales were made, apply for the issuance of Tax Credit Certificate (TCC) or refund of creditable input tax due or attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax. As such, the taxpayer can file his administrative claim for VAT refund or credit anytime within two-year prescriptive period.

           The Commissioner shall have 120 days from the date of submission of complete documents to decide whether or not to grant the claim for refund or issuance of the TCC for creditable input taxes. If the claim for VAT refund or credit is not acted upon by the Commissioner within 120-day period, as required by law, such “inaction shall be deemed a denial” of the application for tax refund or credit.

    The application for VAT refund/tax credit must be accompanied by complete supporting documents, together with a statement under oath attesting to the completeness of the submitted documents. The affidavit shall further state that the said documents are the only documents, which the taxpayer will present to support the claim. If the taxpayer is a juridical person, there should be a sworn statement that the officer signing the affidavit has been authorized by the Board of Directors of the company.

           Upon submission of the administrative claim and its supporting documents, the claim shall be processed and no other documents shall be accepted/required from the taxpayer in the course of its evaluation. A decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer. The application for tax refund/tax credit shall be denied where the taxpayer/claimant failed to submit the complete supporting documents. For this purpose, the concerned processing/investigating office shall prepare and issue the corresponding Denial Letter to the taxpayer/claimant.

           In case of full or partial denial of the claim for tax refund or tax credit, or failure on the part of the Commissioner to act on the application within the period prescribed, the taxpayer affected may, within 30 days from the receipt of the decision denying the claim or after the expiration of the 120 day-period, appeal the decision or the unacted claim with the Court of Tax Appeals (CTA). Verily, a judicial claim must be filed with the CTA within 30 days from receipt of the Commissioner’s decision denying the administrative claim or from the expiration of the 120-day period without any action from the Commissioner, as the case may be. In this regard, the taxpayer/claimant is required to observe the 120+30 day rule before lodging a petition for review with the CTA.

          In sum, the taxpayer can file the appeal in one of two ways: (1) file the judicial claim within 30 days after the Commissioner denies the claim within the 120-day period, or (2) file the judicial claim within 30 days from expiration of the 120-day period if the Commissioner does not act within the 120-day period.

        As an exception to the mandatory and jurisdictional 120+30 day period, it was emphasized that from the time of issuance of BIR Ruling No. DA-489-03 on December 10, 2003 up to its reversal by the Supreme Court in the Aichi case on October 6, 2010 (or a period of almost 7 years), taxpayers/claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review. This exception, however, is limited to cases of premature filing (filing of judicial claim prior to the lapse of the120-day period) and does not extend to late filing of a judicial claim.

          In cases where the taxpayer has filed a “petition for review” with the CTA, the Commissioner loses jurisdiction over the administrative claim. However, the Processing Office of the Administrative Agency shall still evaluate internally the administrative claim for purposes of intelligently opposing the taxpayer’s judicial claim.

         Failure to file a judicial claim with the CTA within 30 days from the expiration of the 120-day period rendered the Commissioner’s decision, or inaction “deemed a denial”, final and unappealable. This applies to all currently pending administrative claims for refund/tax credit.