CWT Refund or Carry-Over?

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By: Atty. Irwin C. Nidea, Jr.

For most taxpayers, the deadline for filing the Annual Income Tax Returns (AITR) was yesterday (April 15). It is at this moment that a decision to either refund or carry over the excess withholding tax credits must be made. The Supreme Court in one case ruled that both options are irrevocable. But in a recent case, the SC clarified that only one of the options is irrevocable.

Once a taxpayer ticks the option “To be refunded”, is that option irrevocable? In the case of University Physicians Services, Inc. (UPSI) v. CIR (G.R. No. 205955, March 7, 2018), the taxpayer ticked the said option but later carried over the same in a subsequent return. The SC ruled that once the tax credits are carried over, after electing refund, the carry-over option becomes irrevocable, and the taxpayer can no longer revert to its previous choice of refund. In other words, only the carry-over option is irrevocable and not the option to be refunded that was made earlier.

898 two doorsSeveral months later, the SC in Rhombus Energy, Inc. v. CIR (G.R. No. 206362, August 1, 2018) promulgated a decision different from the UPSI case. In this case, the SC ruled that the carry-over of the prior year’s excess credits in the subsequent Quarterly ITRs will not reverse the option “To be refunded” previously made by the taxpayer in its Annual ITR. In other words, the irrevocability rule applies not only in the option to carry-over but in the option to be refunded as well.

Contrary to the pronouncement in Rhombus, a reading of the law unmistakably discloses that the irrevocability rule applies exclusively to the carry-over option. This is the current ruling of the SC in UCPB vs CIR, (G.R. No. 104687, April 24, 2023, uploaded in December 2023). According to the SC, if the intention of the lawmakers was to make such option of cash refund or tax credit also irrevocable, then they would have clearly provided so. The law does not prevent a taxpayer who originally opted for a refund or tax credit certificate from shifting to the carry-over of the excess creditable taxes to the taxable quarters of the succeeding taxable years. However, in case the taxpayer decides to shift its option to carryover, it may no longer revert to its original choice due to the irrevocability rule. – Atty. Irwin C. Nidea, Jr., Du-Baladad and Associates Law Offices.

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