It has been more than a month since Republic Act (RA) No. 11976, otherwise known as the “Ease of Paying Taxes (EOPT) Act” was signed into law and took effect on 22 January 2024. This law was enacted as a significant milestone in the development of a modernized and easier tax system in the Philippines. The EOPT includes amendments to the National Internal Revenue Code of 1997, also known as the Tax Code, as amended, that would impact taxpayers and stakeholders in terms of processing tax refunds and other tax cases. Relevantly, in February 2024, the Bureau of Internal Revenue (BIR) conducted public consultations and forums via onsite and online with the private sector for the discussion of the draft implementing Revenue Regulations of the EOPT Act on various amended provisions introduced by the law.

One significant amendment introduced by EOPT Act is on Section 112 (C) of the Tax Code, as amended, which reverts the taxpayer’s statutory right to appeal to the Court of Tax Appeal (CTA) within 30 days after the lapse of ninety (90) days from the date of the submission of invoices and other documents in support of the application for refunds of input tax.

Prior to the Tax Reform for Acceleration and Inclusion Act, or TRAIN Law, the Tax Code, as amended (R.A. 8424) provides that the taxpayer’s right to appeal to the CTA could be made within 30 days from the full or partial denial or inaction of the CIR after the lapse of one hundred twenty (120) days from the receipt of the application of such refund. However, in 2018, the TRAIN law removed the taxpayer’s right to appeal to the CTA within 30 days from the lapsed of the 90-day period of the CIR to decide but imposed an administrative penalty for the failure on the part of any official, agent, or employee of the BIR to act on the application. With the effectivity of the EOPT Act, the taxpayer’s right to appeal to the CTA within 30 days from CIR inaction was restored. Taxpayers can now file an appeal to the CTA within 30 days from the lapse of the ninety (90) day-period of the CIR to act on the claim for refund.

This development brings back the “San Roque Doctrine,” or the Consoidated Supreme Court tax case with G.R. No. 187485, 196113, and 197156, which was promulgated on 12 February 2013. The San Roque Doctrine emphasized that compliance with the 120-day [now 90-day] waiting period is mandatory and jurisdictional. Based on the jurisprudence, the said taxpayers prematurely filed their refund application for input tax with the CIR without observing the 120-day + 30-day period which has been provided by the Tax Code, as amended. The law states that the taxpayer may apply with the CIR for a refund or credit “within two (2) years,” which means at any given time within two years. However, the 30-day period to appeal need not necessarily fall within the two-year prescriptive period if the administrative claim is filed within the two-year prescriptive period. Thus, the two-year prescriptive period does not refer to the filing of the judicial claim with the CTA but to the filing of the administrative claim with the CIR. Thus, failure to observe the 90-day period prior to the filing of a judicial claim is not mere non-exhaustion of administrative remedies, it is likewise considered jurisdictional. Such the 90-day period is a prerequisite for the 30-day period to appeal to the CTA.

In adopting the EOPT Act, the taxpayer for the application of a tax refund of input taxes pursuant to Sec. 112 of the Tax Code, as amended, has an opportunity to appeal the refund / tax credits unutilized input tax claim to the CTA within 30 days after the lapse of the 90-day period to act upon by the CIR to decide. However, the EOPT Act retains Sec. 269 (j) which penalizes government enforcement officers who deliberately fail to act on the application for refunds within the prescribed period provided under Secs. 112 and 204 of the tax code, as amended. By adopting the amended provision, the law strengthens the statutory privilege of the taxpayers to appeal the VAT refund application to the CTA.

In the BIR’s draft implementing RR, the BIR provided guidelines on taxpayers with applications for VAT refund / tax credits under to Sec. 112 particularly on the recourse of the taxpayer in case the 90-day processing period expires without the BIR’s decision on the claim. The taxpayer claimant may opt to appeal to the CTA within the 30-day period after the expiration of the 90-day period required by law to process the claim or await the final decision of the CIR. However, the coverage of the said draft may cover claims filed starting 01 July 2024.

In jurisprudence, CIR v. CE Casecnan Water and Energy Co., Inc. (G.R. No. 212727, 01 February 2023), the Supreme Court held that all claims for refund/tax credit certificate filed prior to January 1, 2018, should be governed by the 120-day processing period which is the prevailing rules prior to TRAIN law. By analogy, it can be said that for all claims before the EOPT law, the provision of the TRAIN Law will apply. This means that the taxpayers’ right to appeal the CIR’s inaction is no longer available. With the introduction of the EOPT Act, the statutory right to appeal has been restored in favor of the taxpayer subject to the issuance of the Implementing RR. Thus, for VAT refund claims after the EOPT Act but before the issuance of the Implementing RR of the EOPT Act, the question that needs clarity are the options available to the taxpayers. Do the taxpayers have the right to appeal to the CTA within 30 days from the lapse of the 90-day period or do taxpayers need to wait for the actual decision of the CIR?  This is a crucial question as taxpayers who wish to file a claim for refund may just have to wait for the Implementing rules of the EOPT to ensure that statutory right to appeal may be exercised. Thus, even though the statutory right to appeal under the amended Sec. 112 (C) of the EOPT has been restored in favor of the taxpayer, it is conservative that the said statutory right may not be exercised outrightly without the Implementing RR.

Let's Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.


As published in BusinessWorld, dated 06 March 2024