Creditable input Value Added Tax (VAT) is an indirect tax the amount of which may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. Any VAT-registered person, whose sales are zero rated or effectively zero rated may apply for the issuance of tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax.
The Supreme Court, in the case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. (G.R. No. 184823, 06 October 2010) reiterated that the prescriptive period for filing a claim for refund or credit of unutilized input VAT is governed by Section 112 (A) of the National Internal Revenue Code of 1997 (NIRC). Section 112 (A) of the NIRC provides that the claim must be filed within two (2) years after the close of the taxable quarter when the sales were made. The High Court further ruled that the prescriptive period provided for under Sections 204 (C) and 229 of the NIRC are not applicable to claims for refund or credit of unutilized input VAT since both provisions of law only apply to instances of erroneous payment or illegal collection of internal revenue taxes. The fact that the subsequent sale or transaction involves a wholly-tax exempt client, resulting in a zero-rated or effectively zero-rated transaction, does not, standing alone, deprive the VAT-registered individual of his right to a refund for any unutilized creditable input VAT, hence payment of the VAT cannot be considered as erroneous or illegal.
The computation of the two (2) year prescriptive period was also clarified by the Highest Court of the land due to the conflicting provisions of the Civil Code of the Philippines and the Administrative Code of 1987 on the computation of legal periods. Article 13 of the Civil Code states that a year is equivalent to 365 days whether it be a regular year or a leap year. On the other hand, Section 31, Chapter VIII, Book I of the Administrative Code of 1987 provides that a year is composed of 12 calendar months, regardless of the number of days in a month. The Supreme Court ruled that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Thus, the two (2) year prescriptive period provided for in Section 112 (A) of the National Internal Revenue Code means 24 months and not 365 days. The importance of this ruling comes into play when the last day for filing the claim falls on a leap year (366 days).