Life is about choices and sometimes, we will make decisions that we cannot take back. In times of uncertainty and indecisiveness, it’s important to think about these choices a thousand times and consider the possible consequences.

In tax, there are choices that we cannot take back.  There is the so-called irrevocability rule under Section 76 of the Tax Code.

The rule provides that in cases where there is an overpayment of tax due on corporations in a given calendar or fiscal year, the corporation must choose whether to carry over excess tax withheld to the next fiscal or calendar year or to otherwise apply for refund or a Tax Credit Certificate (TCC) representing the excess income tax withheld. Once the choice is indicated in the return, it is deemed irrevocable.

There has been some confusion on whether the irrevocability rule applies only to the choice to carry over the excess income tax withheld, or if the rule also applies to the choice to refund or request for a TCC.

In a recent Supreme Court (SC) case, the SC held that the irrevocability rule under Section 76 of the Tax Code applies exclusively to the carry over option.

In this case, the taxpayer incurred unutilized Creditable Withholding Taxes (CWT) for calendar year 2004, resulting in an overpayment of income tax for that year. According to the taxpayer, they indicated the option to apply for the refund or issuance of Tax Credit Certificate in their amended 2004 Annual Income Tax Return (ITR), and the amount was not carried over and claimed as ‘Prior Year’s Excess Credits’. Thus, they are entitled to the refund or issuance of Tax Credit Certificate for its excess Creditable Withholding Taxes for calendar year 2004.

However, the Commissioner of Internal Revenue (CIR) argued that the taxpayer had already carried over the excess CWT for the year 2004 to the next quarters of 2005, as shown in the taxpayer’s Quarterly and Annual ITRs for taxable year 2005.

In addition, the position taken by the CIR was that although the taxpayer ticked the box "to be issued a tax credit certificate" in the amended ITRs filed for calendar year 2004, the same was negated by the carrying over of the excess credit to all the Quarterly and Annual ITRs filed for the taxable year 2005. To rephrase, the taxpayer’s choice or option to be issued a tax credit certificate was negated by carrying over the excess tax credits in its 2005 Quarterly and Annual ITRs.

In siding with the CIR, the SC agreed that the taxpayer used its option to carry over, the taxpayer may no longer revert to its original choice due to the irrevocability rule.

As reminded by this case, a key consideration for taxpayers in compliance is to keep abreast of developments in rules and regulations. Taxpayers should also be mindful of the rules and regulations regarding accomplishing and filing tax returns as some choices once made, are considered irrevocable.

Hannah Midel M. Maneja
Tax Associate
KPMG in the Philippines

Hannah Midel M. Maneja is a Tax Associate under the Tax Group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Hannah Midel M. Maneja or Mary Karen E. Quizon-Sakkam through, social media or visit

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.