CIR v Manila Electric Company; G.R. No. 181459; 09 Jun 2014

in Legal Chyme by

Respondent obtained two loans from the Singapore branch of a German bank. Pursuant to the loan agreements, respondent paid/remitted to the BIR the corresponding 10% final withholding tax (FWT) on its interest payments on the loan covering the period from January 1999 to September 2003.

It discovered sometime in 2001 that the bank is a foreign government-owned financing institution in Germany and confirmed with the BIR that the interest payments made to the German bank are exempt from the 10% FWT.

On 13 July 2004, respondent filed with petitioner a claim for tax refund or issuance of tax credit certificate for the erroneously paid or overpaid final withholding tax on interest payments made to the German bank. Petitioner on 05 November 2004, however, denied its claim for tax refund on the basis that the same had already prescribed.

Whether or not respondent’s right to claim a tax refund/credit relative to its payment of FWT on interest payments made from January 1999 to September 2003 has prescribed.

YES. The prescriptive period provided is mandatory regardless of any supervening cause that may arise after payment. It should be pointed out further that while the prescriptive period of two (2) years commences to run from the date of payment of  tax, and not upon the discovery by the taxpayer of the erroneous or excessive payment of taxes.

Tax refunds are based on the general premise that taxes have iether been erroneously or excessively paid. Though the Tax Code recognizes the right of taxpayers to request the return of such excess/erroneous payments from the government, they must do so within the prescribed period.

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