In the endeavor to meet the statutory deadline to file refund claims, there are instances when taxpayers fail to submit all the documents needed to support their refund application. This may be due to logistical roadblocks such as difficulties in locating stored documents, lost invoices, and invoices pending correction/remediation. Consequently, their refund claims, or a portion thereof, are denied at the administrative level due to non-substantiation or for being unsupported.
Tax Refunds are construed “strictissimi juris,” strictly against the taxpayer. As such, taxpayers filing a refund claim have the burden of proof to present clear, positive, and convincing evidence establishing their entitlement to the refund. Accordingly, taxpayers must comply with the BIR’s documentary requirements to prove their claim. These documents would then undergo strict scrutiny from the BIR to ensure that they comply with all statutory requirements, procedures, and documentation.
The CREATE MORE Act provided an avenue for taxpayers to file a Request for Reconsideration with the Commissioner of Internal Revenue for denied VAT refund claims. Interestingly, however, Revenue Regulations (RR) No. 8-2025 limited this avenue only to questions of law thereby precluding the taxpayer from submitting additional documentation. In fact, the RR explicitly states that “only the documents previously attached to the taxpayer-claimant’s application for tax refund relevant to the issues raised may be submitted with the request for reconsideration.”
Faced with the denial of their refund claims, I often encounter taxpayers, especially first-time claimants, who consider this the end of the road. More often than not, they are under the impression that they no longer have any other opportunity to submit documents which they were not able to submit with the refund claims they filed with the BIR. However, that is not the case. The filing of a judicial appeal with the Court of Tax Appeals (CTA) gives taxpayers another opportunity to present documents not previously submitted.
Owing to the trial de novo nature of its proceedings, the CTA is not limited by the evidence presented in the administrative claim filed with the BIR. The taxpayer may present new and additional evidence to the CTA to support the case for a tax refund. This principle has been repeatedly upheld by the CTA.
In fact, the Supreme Court, in the case of Philippine Airlines, Inc. vs. Commissioner of Internal Revenue [G.R. No. 206079-80, Jan. 17, 2018] among a long line of precedents, recognized that the power of the CTA to exercise its appellate jurisdiction over the decisions of the Commissioner of Internal Revenue does not preclude it from considering documents which were not presented in the administrative claim.
Considering that the CTA is a court of record, it is authorized to make its own independent findings of fact and law based on the evidence presented to it. As such, all refund claims appealed before it are litigated anew. The parties are allowed to submit documents/evidence even if these were not presented during the administrative claim, or if the findings of the BIR arose due to the absence thereof.
While the filing of a judicial appeal before the CTA presents an opportunity to submit new or additional documents to substantiate denied refund claims, the sufficiency of these documents in establishing entitlement to the refund claim ultimately rests on the judgment of the CTA. It is also worth noting that pursuing this remedy entails the payment of filing fees, litigation/lawyer fees, and other incidental costs. In addition, the case may take six to 10 years before a final and executory decision is reached at the Supreme Court level.
As such, taxpayers should consider the following key factors when deciding on whether to pursue the filing of a judicial appeal:
a. Amount of the denied refund claim;
b. Existence of new or additional documents;
c. In case these documents are not yet available, the probability of securing such documents during the course of the proceedings before the CTA; and
d. The opportunity to set a precedent for future refund claims in case the taxpayer wishes to contest a requirement imposed by the BIR.
All things considered, being able to submit new or additional evidence for tax refunds at the judicial level gives taxpayers ample opportunity to substantiate their refund claims. To reiterate, failure to submit complete supporting documents at the administrative level is not the end of the road for tax refunds. However, if you start the journey all packed and well prepared, you can manage the potential roadblocks and get to your destination faster using the shorter administrative route. While judicial remedy is an available detour, it is a longer route with more stopovers and higher tolls. So, travel smart and remember, given the strict “traffic rules” of the road ahead, it’s not always a good idea to pack light.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Kenneth Paolo M. Lugtu is a senior legal advisor at Cabrera & Co., a Philippine member firm of the PwC network.
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