Tracing the development of VAT refund rules
By Francis Baybay
NO other tax refund claim has seen rules evolve as constantly as the value-added tax (VAT) refund. Since the introduction of the VAT system in 1987 until the passage of the Create Maximize Opportunities for Reinvigorating the Economy (Create More) Act, significant shifts have been seen in the VAT recovery system, from the prescriptive period to the filing of administrative claims with the Bureau of Internal Revenue (BIR), documentary requirements and their determination and the importance of respecting the BIR claims-processing period before the initiation of judicial appeals.
Taxpayers whose sales are VAT zero-rated can apply for the refund of input VAT attributable to their zero-rated sales by filing administrative claims within two years after the close of the taxable quarter when the zero-rated sales were made. Over the years, the VAT refund rules have undergone drastic changes, and those who failed to take stock and keep pace with these changes had their refund claims denied.
In the case of the Commissioner of Internal Revenue (CIR) vs. Team Sual Corp.(GR Nos. 203547 and 203561, dated December 3, 2025 and published on April 23, 2026), the Supreme Court updated the rules on processing periods and the requirements for VAT refund claims. These rules are mapped out below, with an important caveat that the dates when taxpayers filed their administrative claims with the BIR determines the legal regime applicable to their VAT refund applications.
Before Oct. 6, 2010: The BIR has 120 days from receipt of the refund claim to evaluate it. However, the taxpayer need not wait for the expiration of the 120-day period before appealing to the Court of Tax Appeals (CTA), especially if the two-year prescriptive period is about to expire.
From Oct. 6, 2010 to June 10, 2014: A taxpayer must give the BIR 120 days to evaluate the administrative claim. The 120-day period begins to run from the submission of supporting documents, the completeness of which is determined by the taxpayer. The taxpayer can only appeal to the CTA within 30 days from either the receipt of the BIR’s written decision within the 120-day period (in case of denial of the administrative claim), or the lapse of the 120-day period (in case of BIR inaction). This is called the 120+30 period rule and its observance is mandatory — failure to strictly follow it will take away the CTA’s jurisdiction over subsequent judicial appeal.
From June 11, 2014 to Dec. 31 2017: Observance of the 120+30 period rule remains compulsory and critical to any judicial appeal. However, unlike in the previous regime where the taxpayer determines the completeness of supporting documents, the taxpayer is required to submit complete supporting documents detailed in Revenue Memorandum Circular (RMC) 54-2014 when filing the administrative claim. The BIR can neither require nor accept additional documents from the taxpayer. VAT refund applications with incomplete supporting documents shall be denied.
From Jan. 1, 2018 to March 31, 2025: Despite the Tax Reform for Acceleration and Inclusion Law shortening the BIR’s claims processing period from 120 to 90 days, strict adherence to the 90+30 period rule is still required. To ensure prompt submission of documentary support, the BIR can refuse to accept administrative claims without complete supporting documents. No additional supporting documents can be required or accepted from taxpayers. Taxpayers must therefore submit the complete documents listed in the relevant RMCs prevailing at the time of the administrative claim’s filing.
From April 1, 2025 onwards: Taxpayers must submit complete supporting documents enumerated in RMC 37-2025 and observe the 90+30 period rule. Notably, the Create More Act added an appeals remedy within the BIR apparatus before any judicial recourse. If the administrative claim is denied, a taxpayer can file a request for reconsideration with the CIR, who has 15 days to resolve the administrative appeal.
Under this current regime, a taxpayer can appeal to the CTA within 30 days from the lapse of the 90-day period (in case of BIR’s inaction on administrative claim), receipt of the CIR’s timely denial of the request for reconsideration, or the lapse of the 15-day period (in case of CIR’s inaction on the request for reconsideration).
The evolution of the VAT refund landscape is driven by legislative amendments to the Tax Code, BIR regulations and judicial interpretations of these statutory and administrative rules. More changes are expected to come as Congress and the tax authority refine the VAT refund process.
It is therefore critical for concerned businesses to keep tabs on developments and, more importantly, adhere to the rules pertinent to their refund claims as any deviation may result in the denial of refund applications. After all, businesses can only fully enjoy their VAT zero-rating privilege if they are able to recover input VAT attributable to their zero-rated sales.
Francis Baybay is a tax and legal director at Deloitte Philippines, a member firm of the Deloitte network.
