Tax Refunds in the Philippines – A Comprehensive Legal Guide (2025 Edition)

1. Introduction

In Philippine tax practice, the term “refund” is used broadly to cover (a) the return of cash actually paid to the Bureau of Internal Revenue (BIR) or a local government unit (LGU), and (b) the issuance of a Tax Credit Certificate (TCC) that the taxpayer may apply against future liabilities. Refunds may arise from over‑payment, erroneous or illegal assessment, or from statutory incentives—most notably zero‑rated Value‑Added‑Tax (VAT) on exports. This article consolidates the governing statutes, regulations, jurisprudence, and practical procedures as of 15 July 2025.

2. Legal Foundations

Source	Key Provisions Relevant to Refunds
National Internal Revenue Code (NIRC), as amended	§112 (VAT refund); §204(C) (Commissioner’s power to refund/credit taxes), §229 (erroneous or illegal assessments/collections), §255 (statutory offenses and penalties), prescriptive periods
Republic Act (RA) 10963 — TRAIN Law (2017)	§112 adjusted the 90‑day period for administrative VAT refund decisions; created the VAT Refund Center (now eFAST)
RA 11534 — CREATE Law (2021)	clarified 120‑day period in tax incentive refunds; introduced provisional TCCs for registered export enterprises
Local Government Code (LGC, RA 7160)	§195 (protest of assessment, 60‑day rule); §196 (refund or credit of local taxes, 2‑year rule)
Customs Modernization and Tariff Act (CMTA, RA 10863)	Chapters 2 & 3 of Title VII on customs duties refund
Supreme Court jurisprudence	CIR v. Aichi Forging (G.R. 184823, Oct. 6 2010) – 120 + 30 day rule; Team Energy v. CIR (2021, CREATE’s effect); Taganito Mining v. CIR (2024, expanded documentary liberality)

Note: The Court of Tax Appeals (CTA) is a constitutionally created special court with exclusive appellate jurisdiction over disputed refund claims.

3. Types of National‑Tax Refunds

Value‑Added Tax (VAT)
- Zero‑Rated Sales / Exports (§112 A)
  - Eligible: Goods exported within 90 days; services rendered to a non‑resident engaged outside the Philippines; sales to PEZA/Bataan Freeport.
  - Statutory deadline: File administrative claim within 2 years from close of the quarter when the sales were made.
  - BIR must decide within 90 days; inaction is deemed denial.
  - Judicial action: Appeal to CTA within 30 days from receipt/inaction.
Excise Tax Refunds (§204, §229)
- For petroleum or alcohol used to generate electricity, export of locally manufactured tobacco, or double‑payment.
- Same 2‑year prescriptive period applies; no 90‑day decision limit.
Income Tax Refunds
- Corporate: Over‑withholding, double remittance, or credited foreign taxes exceeding limitation (§34 C).
- Individual Employees: Excess compensation withholding automatically refunded by employer through payroll on or before January 25 of the succeeding year (BIR RR 11‑2018). If employer fails, the employee files BIR Form 1700 and claims refund directly.
Percentage Tax and Other Internal Taxes
- Governed by the general §204(C) and §229 rules (2‑year prescriptive period).
Tax Incentive‑Driven Claims
- Registered Business Enterprises (RBEs) under CREATE may claim provisional TCCs within 90 days of export sale recognition; final validation required within 180 days (BIR RR 21‑2021).
Customs Duties Refunds
- Erroneous valuation, post‑entry adjustment, or duty drawback for re‑export.
- File with Bureau of Customs (BOC) District Collector within 1 year from payment (CMTA §1023).

4. Local Tax Refunds

Refund Type	Prescriptive Period	Venue	Notes
Protest against LGU assessment (§195)	60 days from receipt of assessment	LGU Treasurer → appeal to Sanggunian → CTA En Banc	Refund granted if assessment void/illegal
Refund of tax/fee erroneously paid (§196)	2 years from date of payment	LGU Treasurer → CTA Division	Applies even without prior assessment

LGUs often require an Audit Certificate issued by their Commission on Audit (COA) resident auditor before disbursing cash refunds.

5. The Administrative Route with the BIR

Prepare Documentation
- Core: BIR Forms 1914 (VAT/TCC), 1913 (non‑VAT), Sworn application, Summary Lists of Sales/ Purchases (SLSP), VAT returns, Sales invoices/ORs, export documents (Bill of Lading, PEZA IEIRD, etc.), certificates of withholding, proof of payment (BTR receipts).
- Electronic VAT Refund System (eFAST): As of 1 Jan 2024, all VAT refund claims must be lodged through eFAST; paper attachments scanned in PDF with SHA‑256 digital signatures.
Submit to Revenue District Office (RDO) / VAT Refund Division
- Receive acknowledgment stamp (date filing critical for prescription).
- If completeness check fails, taxpayer has 30 days to remedy; otherwise, claim is returned.
Audit / Verification
- Desk or field audit; possible Notice of Informal Conference for discrepancies.
- Claimant must appear, present books; failure may lead to denial for “failure to substantiate.”
Decision
- For VAT: 90 days to grant, partially grant (TCC), or deny.
- For other taxes: No statutory decision period, but BIR’s Citizen’s Charter targets 180 days.
Remedies When Denied or Partially Granted
- File an appeal to the CTA Division within 30 days of receipt or lapse of the 90‑day period (the “Aichi doctrine”).
- Failure to appeal on time is jurisdictional; refund right is lost.

6. The Judicial Route (Court of Tax Appeals)

Petition for Review (Rule 6, Revised CTA Rules)
- Verified petition, docket fees (₱10,000 + increments), certified copies of BIR records, motion to admit soft‑copy annexes (USB).
- Automatic raffle to a CTA Division of three justices.
Trial
- Pre‑Trial—stipulation of facts, issues, marked exhibits.
- Presentation of Evidence—BIR records officers, company accountant, independent CPA; authentication of digital copies via Judicial Affidavit Rule.
- Submission for Decision—CTA has no statutory period, but disposes on average within 18–24 months.
Appeal to CTA En Banc (Rule 8)
- Must raise only questions of law or mixed questions not factual in nature.
Final Appeal to the Supreme Court (Rule 45)
- Pure questions of law; 15‑day reglementary period.

7. Prescriptive Periods at a Glance

Tax Type	Administrative Filing	BIR Decision	Judicial Appeal
VAT	2 years from close of quarter	90 days	30 days from decision or inaction
Excise / Income / Percentage	2 years from payment	–	30 days from BIR decision/inaction*
Local Tax (LGC §195)	60 days from assessment	60 days for LGU to act	30 days to CTA En Banc
Local Tax (LGC §196)	2 years from payment	Reasonable time	30 days to CTA Division
Customs Duty	1 year from payment	30 days for District Collector	30 days to CTA Division

*Although §229 does not fix a BIR decision period, prudence dictates waiting for formal denial before going to court to avoid premature filing.

8. Practical Tips & Common Pitfalls

Maintain Contemporaneous Records
- The most frequent ground for denial is “failure to substantiate.” Ensure invoices contain BIR‑prescribed details (Authority to Print, TIN, address).
Observe the Counting of Quarters
- For VAT, the SC in Mindanao II Geothermal (G.R. #193301, 2021) clarified that “close of the quarter” refers to calendar quarters (Jan‑Mar, Apr‑Jun, etc.), not fiscal quarters.
Calendar Your Deadlines
- The 120 + 30 day rule for VAT (before CREATE) no longer applies after the TRAIN Law restored the simple 90 + 30 framework. Nevertheless, refunds covering quarters before 01 Jan 2018 still follow 120 + 30, requiring careful segregation.
Provisional vs. Final TCCs
- Under CREATE, provisional TCCs may be issued within 30 days for exporters but cannot be used until validated; mismatching credits trigger deficiency VAT with 12 % interest.
Cash vs. TCC Election
- Opting for cash requires DBM funding and may prolong processing beyond the 90‑day SLA. Exporters often choose TCCs and subsequently apply for monetization via the Bureau of the Treasury (BTr) TCC Conversion Program (2024 guidelines).
Digital Signatures & eFAST
- Claims filed without valid public‑key certificates are deemed “not received.” Invest in a properly enrolled PhilPaD (Philippine Public Key Infrastructure) certificate.
For Employees
- Check your BIR Form 2316: if tax withheld exceeds tax due after annualization, your employer must refund on or before January 25. Failure is a labor standards violation subject to penalties under the Labor Code.

9. Recent and Forthcoming Developments

Electronic Refund Workflow for Local Taxes (e‑LOCAL REFUND Bill) – Pending in the 20th Congress; seeks to harmonize LGU processes with eFAST.
Supreme Court Automation Program (SC A.M. 24‑03‑12‑CTA) – Effective 2 June 2024, all CTA pleadings shall be filed via eJudiciary Portal; hard copies optional unless evidence is oversized.
Green Incentives Act (RA 11892, 2025) – Introduces VAT‑and‑duty refund within 60 days for renewable‑energy component imports; BOC and BIR joint rules expected Q4 2025.

10. Summary Checklist

Stage	VAT	Income / Percentage / Excise	Local Taxes
File claim	eFAST, within 2 yrs from quarter’s end	RDO/LTS, within 2 yrs from payment	LGU Treasurer, 60 days (§195) or 2 yrs (§196)
Decision period	90 days	None (monitor)	60 days (§195); reasonable (§196)
Judicial recourse	CTA Div., 30 days	CTA Div., 30 days	CTA Div./En Banc, 30 days
Refund form	Cash or TCC	Cash or TCC	Cash or credit against future LGU taxes
Support docs	VAT returns, invoices, export docs, SLSP, ITRs	ITRs, W‑2 / 2316, ORs	ORs, Assessment notices, COA audit

11. Conclusion

The Philippine tax refund system remains document‑heavy and deadline‑driven. Reforms under the TRAIN and CREATE laws, coupled with digitization initiatives like eFAST, have accelerated processing, yet strict compliance with documentary and prescriptive requirements continues to determine success. Taxpayers—corporate and individual alike—should (1) keep meticulous, digitized records; (2) calendar all statutory periods; and (3) be ready to litigate before the CTA when administrative remedies stall. Engaging competent tax counsel and, where appropriate, an independent CPA will significantly improve the likelihood of recovery and mitigate exposure to surcharges and interests should the BIR counter‑assess during the refund audit.

Prepared by: [Your Name], CPA‑Lawyer Member, Philippine Institute of Certified Public Accountants (PICPA) Professor, Tax Remedies & Procedure, UP College of Law

(All information current as of 15 July 2025. This article is for educational purposes and does not constitute legal advice.)