The Supreme Court has ruled that the two-year prescriptive period for claiming a refund on erroneously paid value-added tax (VAT) begins from the date the taxpayer actually paid the VAT to the Bureau of Internal Revenue (BIR), not from when the taxpayer’s suppliers remitted the tax.

In a decision penned by Associate Justice Ramon Paul L. Hernando, the SC’s First Division modified the ruling of the Court of Tax Appeals (CTA) En Banc and found that Melco Resorts Leisure (PHP) Corporation had timely filed its VAT refund claims, both administratively and judicially.

Melco, a licensed casino operator under the Philippine Amusement and Gaming Corporation (PAGCOR), sought a refund of PHP 81.1 million in 2017 for input VAT it claimed was erroneously passed on and collected from its gaming revenues for the first quarter of 2016. The BIR denied the claim, and the CTA upheld the denial, ruling that Melco was not the taxpayer legally required to pay the VAT and that the refund period should be counted from when its suppliers paid the tax.

The High Court reversed this interpretation, stressing that the two-year period should be based on when Melco itself made the payment to the BIR. It described the tax court’s approach—which would have required Melco to obtain 1,600 VAT returns from 400 suppliers—as “grossly infeasible and impractical.”

“Substantial justice, equity, and fair play are on the side of Melco,” the Court said.

Despite this clarification, the SC ultimately ruled that Melco was not entitled to the PHP 81.1-million refund, finding that the VAT payment was neither erroneous nor illegal.