Tax Refunds: From Court Filing to Cash

When I was a young lawyer, I received my first Court of Tax Appeals decision awarding my client’s claim for a refund. I felt so victorious, I wanted to frame the decision and hang it on my wall. Little did I know that such decision is a long way from becoming actual cash my client needs. 

A refund claim can take five to six years from the time the claim is filed with the Bureau of Internal Revenue (BIR), to the CTA, to the Supreme Court, and then back to the BIR. Some cases may be resolved sooner while others can take considerably longer.

In one case, I filed a claim for P20 Million refund with the CTA in 2015 and the check was finally issued in 2025. It took ten years before I could hand the P20 Million check to the client. 

By the time the money was available, ten years of inflation had already caught up with it. Per AI, the P20 million cash is only worth P14 million in 2025. And that’s just the inflation cost. Along the way were CTA filing fees, lawyers' fees, independent CPA fees, and the less visible costs of producing the required evidence. 

The result is an important disconnect between a taxpayer's legal entitlement to a refund and the economic value of what it eventually received.

It is so frustrating that a taxpayer can spend years, and millions of pesos in professional and litigation costs, to finally win in court, only to struggle through appeals and administrative processes before getting the actual refund.

In that case, I felt supremely lucky that the BIR did not appeal to the CTA Division decision. The writ of execution was issued in 2018. I thought three years of litigation was an amazingly short time to finally get the refund check. 

However, the execution was challenged by the BIR all the way to the Supreme Court. A series of denied appeals that took another five years. I cannot really blame the government's lawyers as they are required to defend the case. However, perhaps, it is time for the government and the BIR to establish mechanisms to determine when to stop appealing for a refund case. 

After all, a court-awarded tax refund is not a government concession. It is the return of money to a taxpayer who has established through blood, sweat and tears, that it is entitled to recover. The real question, therefore, is not merely whether the law allows a refund, but whether the refund system allows the taxpayers to recover their money while it still has meaningful economic value.

Recent tax reforms have attempted to address delays at the administrative level. It has definitely improved the administrative refund process, allowing us to claim the check within a year from filing.  That is certainly an improvement. But in some not so fortunate cases, an administrative deadline addresses only the beginning of the process.

Once a refund reaches the courts, the timeline becomes far less predictable.

A refund case may be filed with the CTA Division. It may then go to the CTA En Banc and, ultimately, reach the Supreme Court through a petition for review on certiorari.

This creates an unusual commercial calculation. The question for the taxpayer is no longer simply: Are we legally entitled to the refund?

It also becomes: Is the refund large enough to justify the cost and the years required to recover it?

Winning is not the same as getting paid

Perhaps the more frustrating part of the process comes after the taxpayer has already won.

A final court victory does not necessarily translate into immediate cash. The judgment must still be executed. Then, the taxpayer still has to undertake an arduous clearance process within the BIR.

From a taxpayer's perspective, this is particularly difficult to understand. Once judgment has become final and executory, the legal question of entitlement should already have been settled. It should be separated from any liability or open case that the taxpayer has pending with the BIR. 

Should delayed refunds bear interest?

This leads to a legitimate policy question.

If the government retains money that is eventually determined by final judgment to belong to the taxpayer, should the government bear some of the economic cost of an extended delay? Without any negative consequence to the BIR, what would stop it from delaying the return of the cash to the taxpayer?

The concept is hardly novel. Other tax jurisdictions already recognize the time value of taxpayers' money and allow the taxpayer to recover interest for delayed refunds.

When taxpayers fail to pay taxes when due, the Tax Code imposes 12% annual interest on the unpaid amount on top of 25%-50% surcharge and other penalties. This reflects an economic reality familiar to every business: money has a time value.

That economic reality does not disappear when the positions are reversed.

When a taxpayer has spent years establishing its entitlement to a refund, receiving the deflated value at the end of the process does not necessarily make it economically whole. An effective refund system must ensure that the refund remains meaningful when the taxpayer finally receives it.

As a young lawyer, I wanted to frame that first favorable decision. Today, I know that the real victory is not the decision on the wall, but the cash in the client’s hands, received while it can still make a difference. At the end of the long process, a refund that comes too late may be nothing but a futile legal victory.

As published in BusinessWorld, dated 03 November 2026