2-year period for credit, refund creditable input tax

On October 6, 2010, the Supreme Court held in the case of CIR v. Aichi Forging Company of Asia, Inc.[1] (Aichi) that the phrase "within two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA.[2] The Court gave three (3) compelling reasons for this ruling in San Roque, namely:
First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer "may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of the creditable input tax due or paid to such sales." In short, the law states that the taxpayer may apply with the Commissioner for a refund or credit "within two (2) years," which means at anytime within two years. Thus, the application for refund or credit may be filed by the taxpayer with the Commissioner on the last day of the two-year prescriptive period and it will still strictly comply with the law. The two-year prescriptive period is a grace period in favor of the taxpayer and he can avail of the full period before his right to apply for a tax refund or credit is barred by prescription.

Second, Section 112(C) provides that the Commissioner shall decide the application for refund or credit "within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A)." The reference in Section 112(C) of the submission of documents "in support of the application filed in accordance with Subsection A" means that the application in Section 112(A) is the administrative claim that the Commissioner must decide within the 120-day period. In short, the two-year prescriptive period in Section 112(A) refers to the period within which the taxpayer can file an administrative claim for tax refund or credit. Stated otherwise, the two-year prescriptive period does not refer to the filing of the judicial claim with the CTA but to the filing of the administrative claim with the Commissioner. x x x.

Third, if the 30-day period, or any part of it, is required to fall within the two-year prescriptive period (equivalent to 730 days), then the taxpayer must file his administrative claim for refund or credit within the first 610 days of the two-year prescriptive period. Otherwise, the filing of the administrative claim beyond the first 610 days will result in the appeal to the CTA being filed beyond the two-year prescriptive period. Thus, if the taxpayer files his administrative claim on the 611 day, the Commissioner, with his 120-day period, will have until the 731st day to decide the claim. If the Commissioner decides only on the 731st day, or does not decide at all, the taxpayer can no longer file his judicial claim with the CTA because the two-year prescriptive period (equivalent to 730 days) has lapsed. The 30-day period granted by law to the taxpayer to file an appeal before the CTA becomes utterly useless, even if the taxpayer complied with the law by filing his administrative claim within the two-year prescriptive period.[3] (Emphases in the original)

In fine, the taxpayer can file its administrative claim for refund or credit at any time within the two-year prescriptive period. If it files its claim on the last day of said period, it is still filed on time.[4] The CIR will have 120 days from such filing to decide the claim. If the CIR decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file its judicial claim with the CTA;[5] otherwise, the judicial claim would be, properly speaking, dismissed for being filed out of time and not, as the CTA En Banc puts it, prescribed.

It bears emphasis that Section 112 (D)[6] (now renumbered as Section 112[C]) of RA 8424, which is explicit on the mandatory and jurisdictional nature of the 120+30-day period, was already effective on January 1, 1998.[7]


[1] G.R. No. 184823, October 6, 2010, 632 SCRA 422.

[2] Id. at 444.

[3] Now Section 112 (C), as renumbered by RA 9337. (See footnote 56 of CIR v. San Roque Power Corporation, G.R. Nos. 187485, 196113, and 197156, February 12, 2013. 690 SCRA 336, 387.

[4] Id. at 392.

[5] Id.

[6] Referred to as Sec. 112 (C) in San Roque case. (See footnote 56 of CIR v. San Roque Power Corporation; id at 387.)

[7] Id. at 380-381 and 397-399.

Popular Posts