Philippines tax refund rules tighten compliance, clarify excess withholding claims

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Philippines tax refund rules compliance

Highlights

Bureau of Internal Revenue issued Revenue Memorandum Circular Nos. 102-2026 and 103-2026 in August 2026, tightening documentation, timing, and venue rules for tax refund claims.
RMC No. 102-2026 clarifies that permanently ceased companies can claim excess creditable withholding tax refunds despite previous carry-over elections, impacting dissolution procedures.
RMC No. 103-2026 requires Capital Gains Tax and Documentary Stamp Tax refund claims from property sales to be filed with the Revenue District Office of the property's location, improving verification and reducing delays.

Amendments reshape refund procedures

As outlined by BusinessWorld Online, the Bureau of Internal Revenue has revised earlier circulars on tax refunds through Revenue Memorandum Circular Nos. 102-2026 and 103-2026, both issued in August 2026, to sharpen documentation, timing and venue rules for claims. The updates build on the agency's 2024 framework for taxes erroneously or illegally collected and for excess or unutilized creditable withholding taxes.

Under the system, refund claims may cover either the actual return of tax paid or the issuance of a Tax Credit Certificate that can be applied against internal revenue taxes, excluding withholding taxes for which the taxpayer is directly liable. The Bureau's earlier circulars already pushed a complete-submission approach, requiring taxpayers seeking excess CWT refunds to file BIR Form No. 1914, supporting documents listed in the checklist, and a notarized attestation confirming completeness.

RMC No. 102-2026 gives particular attention to corporate taxpayers with excess or unutilized CWT. It clarifies that while the long-standing irrevocability rule generally bars a refund after a taxpayer elects to carry over excess income tax credits in its Annual Income Tax Return, an exception remains for companies that have permanently ceased operations, allowing them to pursue a refund despite a prior carry-over election.

The circular also distinguishes between claims filed by going-concern taxpayers and those filed during dissolution or business closure. For regular taxpayers that elected a refund or tax credit in the AITR, claims generally must be filed within two years from the AITR filing date, with the Bureau's 180-day processing period starting once complete documents are submitted within that prescriptive window. For taxpayers undergoing dissolution or cessation, the processing office must decide within two years from submission of BIR Form No. 1905 and complete closure requirements, creating a separate timeline for winding-down entities.

Implications for companies and property transactions

RMC No. 103-2026 addresses another procedural issue by changing where certain refund claims must be filed. Claims involving Capital Gains Tax and Documentary Stamp Tax from the sale of real property classified as a capital asset now go to the Revenue District Office with jurisdiction over the property's location, instead of being filed only with the office covering the taxpayer's registered address.

That adjustment has practical consequences because property records and transaction monitoring typically sit with the district office where the asset is located. The change is intended to support more accurate verification and reduce jurisdictional disputes that can slow the processing of claims.

For businesses, the broader policy direction is clearer procedural guidance in exchange for stricter filing discipline. Taxpayers are expected to treat refund claims as part of tax governance and cash-flow planning, with greater attention to record-keeping, documentary completeness and the strategic choice between carry-over and refund options.

Malaysia’s extension of the income tax exemption for local shipping companies through 2036 set out a longer, more predictable incentive window intended to support ship registration and maritime asset investment. Our earlier article also noted the introduction of fixed stamp duty rates for ship financing—RM2,000 up to RM100 million and RM5,000 above RM100 million—aimed at lowering transaction costs compared with the prior percentage-based duty.

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