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Published:10 Jan 2017 at 04:00 /Newspaper section:Business
Missed a tax refund deadline? Dont
lose hope
Every provision in every piece of legislation has its own
reason for being, and any act that contradicts the spirit of the law, even if
carried out by a government body, is generally disallowed if it deprives a
person of his or her rights. This principle is also applied in considering the time
limit for a taxpayer to claim a tax refund.
In general, Section 27 ter of the Revenue Code entitles the
taxpayer to request a refund of taxes paid, or withholding tax that is withheld
in excess of the required amount or without any tax liability, on condition
that the refund application must be lodged within a period of "three years
from the due date of the filing of the tax return".
In reality, a situation requiring a taxpayer to claim a
refund could arise after the statutory deadline. This phenomenon raises a
critical issue as to whether the normal three-year rule should still apply. Is
the taxpayer being forced by law to give up the right to a refund?
A recent court case illustrates how this could play out. It
involved an auction of land held by the Legal Execution Department, in which
the winning bidder paid withholding tax on the purchase price when the
ownership transfer was registered in 2004. The court later revoked the auction
results, and a letter was issued in 2008 to the Land Department with an
instruction to void the registration of the land transfer. Thus, the status of
the parties to the transaction reverted and it was as if no transaction had
ever taken place. As a result, the bidder had no liability to pay withholding
tax either.
The Legal Execution Department refunded the purchase price
of the land to the bidder, but not the withholding tax, and the bidder decided
to seek a tax refund from the Revenue Department in 2009. Predictably, the
department refused to make the refund, asserting that the three-year deadline
from the due date of the withholding tax filing in 2004 must apply.
However, the Supreme Court ruled in favour of the bidder,
saying that "the three-year deadline under Section 27 ter did not apply to
this case, as it was not a claim for a refund of excessive withholding tax, or
a refund of tax being withheld without a liability to do so, as of the time the
tax was withheld". Accordingly, it ordered the department to refund the
withholding tax paid in 2004.
This decision is in line with the fundamental rule of the
Civil and Commercial Code (CCC), which requires the statute of limitations to
begin "from the moment when the claim can be enforced". This means
the moment when the taxpayer's right to claim a tax refund occurs, in this case
the auction revocation order in 2008.
That seems to be a happy ending for the bidder, but a
question remains as to what the time frame for the tax refund should be in this
case.
In the absence of a time frame stipulated by the court for
submitting the tax refund form, as the situation is not covered by any specific
provision in the Revenue Code, the only guideline appears to be the general
10-year rule of the CCC.
In a similar case, the Department of Highways withheld tax
from the price it paid to the Crown Property Bureau (CPB) for some land in
1993. Since the Bureau was not subject to corporate income tax liability, it
requested a refund of withholding tax from the Revenue Department without
submitting a proper tax refund form (Kor 10).
It was not until 2010, after the Revenue Department issued a
letter confirming that the Bureau had no liability to pay tax, that the latter
submitted Form Kor 10. The department refused to make a refund on the grounds
that the form had been submitted after the expiry of the three-year rule under
Section 27 ter.
The court recently ruled that, "since the CPB was not a
taxable unit under the Revenue Code, and it had no liability to file tax
return, Section 27 ter did not apply as the three-year deadline from the due
date of the filing of tax return could never start". Thus, the court
applied the general 10-year rule of the CCC instead.
You may be facing the situation of a tax refund claim for
which the three-year deadline in the Revenue Code has already passed. But it
could still fall under the 10-year rule of the CCC before you have to give up
your right to claim. You should take a close look at where you stand, and not
simply surrender your rights because someone in your local Revenue Department
office says you have no case.
By Rachanee Prasongprasit and Professor
Piphob Veraphong. They can be reached at admin@lawalliance.co.th