Bureau of Local Government Finance Opinion

June 27, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer, Paraaque City for appropriate action the herein letter dated June 20, 2001 of Malinao Adan & Associates in behalf of their client, Fuego Development Corporation (FDC) regarding their claim for refund from overpayment of taxes. Representations are made that FDC, a real estate developer paid that City the business taxes for the years 1999 and 2000 the amounts of P805,145.51 and P1,322,624.23, respectively, on the basis of declared annual sales of P159,713,557.00 for the year 1998 and P263,209,300.00 for 1999. The aforesaid figures consisted of revenue from sales of Club Shares and Villas at its resort club project situated in Barangay Balaytigue, Nasugbu, Batangas. However, subsequent audit of the books of account of FDC, conducted by its external auditors, Sycip Gorres Velayo & Co., revealed that there was over declaration of annual sales in the amount of P65,885,834.00 for 1998 and P140,212,357.00 for 1999, thus resulted in overpayment of business taxes in the amount of P329,429.17 for fiscal year 1998 and P701,061.78 for 1999 or a total of P1,030,490.95. HCEcaT Under a letter dated April 14, 2000, FDC filed a request for refund with the Assistant City Treasurer of Paraaque due to over-declaration of income. A subsequent letter dated December 6, 2000 explaining in detail the circumstances surrounding the overpayment was sent to and received by that Office on December 19, 2000. It appears that the said request for refund was appropriately acted upon by that Office and the necessary audit to validate FDCs claim was conducted confirming the said overpayment. FDC claims, however, that despite such finding it was informed that the request for refund may be honored only upon proper authorization from this Bureau. In this connection, attention is being invited to the provision of Article 286 of the Implementing Rules and Regulations, implementing Section 196 of the Local Government Code (LGC), quoted as follows: "Article 286. Claim for Refund or Tax Credit. All taxpayers entitled to a refund or tax credit under this Rule shall file with the local treasurer a claim in writing duly supported by evidence of payment ( e.g. , official receipts, tax clearance, and such other proof evidencing overpayment) within two (2) years from payment of the tax, fee or charge. No case or proceeding shall be entertained in any court without this claim in writing, and after the expiration of two (2) years from the date of payment of such tax, fee or charge, or from the date the taxpayer is entitled to a refund or tax credit. "The tax credit granted a taxpayer shall not be refundable in cash but shall only be applied to future tax obligations of the same taxpayer for the same business. If a taxpayer has paid in full the tax due for the entire year and he shall have no other tax obligation payable to the LGU concerned during the year, his tax credits, if any, shall be applied in full during the first quarter of the next calendar year on the tax due from him for the same business of said calendar year. ScCIaA "Any unapplied balance of the tax credit shall be refunded in cash in the event that he terminates operations of the business involved within the locality." It is clear from the aforequoted provisions of the law that the claim for refund or tax credit shall be filed with the local treasurer. For so long as the said claim is duly supported by evidence of payment ( e.g. , official receipts, tax clearance, and such other proof evidencing overpayment) that Office has no alternative but to grant such request. In view thereof it is suggested that Office should confer with the representative of FDC for the purpose of securing the refund or tax credit to be applied to future tax obligations of said company. It must be stressed, however, that as a rule, refund of the amount of taxes erroneously paid to local governments are in the form of tax credits. It is only in case where the taxpayer concerned does not have any future tax obligations that cash refund may be allowed. Be guided accordingly. (SGD.) BENJAMIN A. GERONIMO Executive Director <www.blgf.gov.ph/downloads/opinion/localtax/2001/a2001-0609.pdf> last visited January 16, 2014.