SC clarifies two-year period for VAT refund claims

Melco Resorts Leisure (PHP) Corporation may have filed its value-added tax (VAT) refund claim on time, but the Supreme Court ultimately ruled that it was not entitled to get its PHP 81.1 million back.

In a recent ruling penned by Associate Justice Ramon Paul L. Hernando, the high court clarified that the two-year period to claim a refund for erroneously paid VAT begins from the date the taxpayer actually paid the tax to the Bureau of Internal Revenue (BIR), not from when the suppliers remitted it.

The case stemmed from Melco’s claim for a refund filed in 2017. The resort operator, licensed by the Philippine Amusement and Gaming Corporation to run casino games, sought to recover input VAT collected from its gaming revenues for the first quarter of 2016.

Melco argued that the VAT was erroneously passed on to them, but both the BIR and the Court of Tax Appeals (CTA) denied the claim. The CTA held that it was unclear if Melco filed its claim within the period required by law.

Under Section 229 of the Tax Code, claims for tax refunds must be filed within two years from the date of payment by the person legally obligated to pay.

The CTA believed that Melco was not the taxpayer legally required to pay VAT but merely bore its economic burden. It added that the two-year period should be reckoned from the time Melco’s suppliers filed their VAT returns and paid the tax.

The Supreme Court did not agree. It ruled that the two-year prescriptive period should begin from the date Melco paid the VAT to the BIR.

The tribunal also stressed the difficulty of requiring Melco to present proof of remittance by around 400 suppliers and some 1,600 VAT returns, noting that it would be “unreasonable.”

It added, “substantial justice, equity, and fair play are on the side of Melco and outweigh the gross infeasibility and impracticality espoused by the tax court.”

Despite siding with Melco on the timing of the refund claim, the high court ultimately denied the refund, finding that the payment was neither erroneous nor illegal.