Melco Resorts v. CIR: Section 229's Two-Year Clock Starts From the Claimant's Own VAT Return — Not the Suppliers'

In Melco Resorts Leisure (PHP) Corporation v. Commissioner of Internal Revenue (G.R. No. 271261, April 2, 2025), the Supreme Court First Division partly granted Melco’s petition: it reversed the Court of Tax Appeals (CTA) En Banc on prescription — holding that Section 229’s two-year period for Melco’s claim ran from Melco’s own first-quarter 2016 VAT return filing, not from hundreds of suppliers’ remittance dates — but affirmed that Melco was not entitled to a refund or tax credit of ₱81,119,005.84 because the passed-on input VAT formed part of the purchase price and was not an erroneous or illegal collection. This post is part of the Day in Court series.

Case details #

What happened #

Melco is a domestic, VAT-registered corporation that develops and operates tourist facilities, including casino entertainment complexes under a Philippine Amusement and Gaming Corporation (PAGCOR) gaming license (City of Dreams Manila and related Entertainment City / Newport City sites).

Melco claimed it had paid ₱81,119,005.84 in passed-on input VAT on purchases attributable to gaming revenues for the first quarter of taxable year 2016. It filed its quarterly VAT return (BIR Form 2550-Q) for that quarter through eFPS on April 25, 2016 (later amended), and on December 19, 2017 filed an administrative claim for refund or tax credit with the BIR Large Taxpayer Services.

The BIR denied the claim by letter dated February 26, 2018, citing Revenue Memorandum Circular (RMC) No. 33-2013 — treating income from gaming-related operations as subject to 12% VAT and therefore not entitled to a refund of creditable input tax. Melco filed a Petition for Review with the CTA on April 12, 2018 (CTA Case No. 9811).

The CTA First Division (Decision dated October 28, 2021; Resolution denying reconsideration dated April 6, 2022) denied the petition: Melco’s judicial claim was timely under Section 112, but Melco was not engaged in zero-rated activities and failed to prove entitlement.

The CTA En Banc (Decision dated July 11, 2023; Resolution dated January 8, 2024) affirmed the denial under both Sections 112 and 229. On Section 112, it held Melco’s gaming sales were VAT-exempt under Section 109 (as a PAGCOR-related operator), not zero-rated or effectively zero-rated — so Melco could not claim unutilized input VAT under Section 112. On Section 229, the En Banc treated Melco as a non-statutory taxpayer that merely bore the economic burden, and — citing Philippine Airlines, Inc. v. CIR — reckoned the two-year period from the supplier-statutory taxpayers’ VAT return filings and remittances. Because Melco did not prove those supplier payment dates, the En Banc said it could not determine timeliness. (The CTA En Banc Decision footnotes also record a Separate Opinion by Presiding Justice Roman G. Del Rosario and a Concurring Opinion by Associate Justice Marian Ivy F. Reyes-Fajardo at that CTA level — documents distinct from the Supreme Court Decision.)

Melco then petitioned the Supreme Court.

The issue before the court #

Whether Melco was entitled to a refund or tax credit of the ₱81,119,005.84 passed-on input VAT for the first quarter of 2016 under Sections 112 and/or 229 of the Tax Code — and, for the Section 229 path, how the two-year prescriptive period is reckoned when the claimant is not the statutory VAT remitter.

The ruling #

The Supreme Court partly granted the Petition for Review on Certiorari. The CTA En Banc Decision dated July 11, 2023 and Resolution dated January 8, 2024 in CTA EB No. 2608 (CTA Case No. 9811) were partially reversed.

Timely under Section 229 — from Melco’s own return #

The Court held that Melco timely filed its administrative and judicial claims for refund under Section 229. It rejected the CTA En Banc’s requirement that Melco prove each supplier’s remittance date as the Section 229 starting point. The Court reiterated that “payment of taxes” under Section 229 is interpreted as (1) the actual payment of the tax or penalty sought to be refunded, and/or (2) the date of filing of the adjusted final tax return — and it did not require “actual remittance by the suppliers” as the reckoning point for Melco.

Applying substantial justice, equity, and fair play, the Court treated the filing date of Melco’s own first-quarter 2016 VAT return (April 25, 2016) as the proper reckoning point. Requiring Melco — which dealt with about 400 suppliers — to produce roughly 1,600 quarterly VAT returns of those suppliers would be “absurd, inconvenient, unfair, and unreasonable,” the Court wrote, drawing an analogy to Philippine Airlines, Inc. v. CIR on not forcing a payee to prove that payors and the government remitted correctly.

No refund on the merits — not erroneous or illegal #

Separately, the Court affirmed that Melco was not entitled to the refund or tax credit. On the Section 112 path, Melco’s gaming revenues were VAT-exempt (Section 109 / PAGCOR-related treatment), not zero-rated or effectively zero-rated sales — so Section 112’s input-VAT refund mechanism did not apply. On Section 229, the Court held that Melco’s payment of the disputed amount was not an erroneous or illegal collection; it “represented and formed part of the purchase price it paid to its suppliers” and was therefore not refundable.

The First Division concurrence line is Gesmundo, C.J. (Chairperson), Zalameda, Rosario, and Marquez. There is no dissenting or separate opinion in the Supreme Court Decision.

Our insights #

Timeliness and entitlement are two different doors #

Grant Thornton’s July 2025 Let’s Talk Tax column on G.R. No. 271261 emphasizes the same split the dispositive text makes explicit: the Court clarified Section 229’s reckoning point for a non-statutory claimant, while still denying the refund because Section 112 did not fit and Section 229’s “erroneous or illegal” standard was not met. Alburo Law’s August 2025 case brief similarly separates the two holdings — timely filing, no entitlement.

For filers, that means winning the prescription argument does not salvage a claim that fails on the character of the tax paid.

Section 112 vs Section 229 for VAT-exempt operators #

The Decision tracks a distinction this site’s VAT guides also stress in other contexts: VAT zero-rating for exporters and related refund timing cases such as CIR v. San Roque Power and CIR v. Team Sual turn on Section 112’s zero-rated / effectively zero-rated pathway and processing clocks. Melco shows the inverse problem — a PAGCOR-licensed gaming operator whose sales are exempt, not zero-rated, cannot reframe passed-on input VAT as a Section 112 unutilized-input claim merely by calling the supplier invoice “erroneous.”

RMC No. 33-2013 was the BIR’s administrative denial ground — the Court decided on Tax Code sections #

The BIR’s February 2018 denial letter relied on RMC No. 33-2013’s gaming-VAT framing. The Supreme Court Decision resolves Melco’s petition under Sections 112 and 229 of the Tax Code and the CTA record; practitioners comparing firm alerts should not treat the RMC citation in the denial letter as interchangeable with the Court’s ratio on prescription and “erroneous or illegal” collection.

What this means for taxpayers #

A buyer that is not the statutory VAT remitter and later seeks a Section 229 refund of passed-on VAT should calendar the two-year period from its own return filing (or actual payment of the tax sought to be refunded), not from an open-ended hunt for supplier remittance proofs — Melco rejects that CTA En Banc approach on these facts. At the same time, VAT-exempt gaming or similarly situated operators should not assume that “passed-on input VAT” automatically equals an erroneous collection refundable under Section 229, or an unutilized-input refund under Section 112. Document the legal character of the sales (exempt vs zero-rated), keep the administrative claim calendar tight, and treat RMC No. 33-2013-style denial letters as starting points for analysis rather than the last word on entitlement.

Frequently asked questions #

What did the Supreme Court rule in Melco Resorts v. CIR? #

In Melco Resorts Leisure (PHP) Corporation v. Commissioner of Internal Revenue (G.R. No. 271261, April 2, 2025), the Supreme Court partly granted Melco’s petition: it held that Melco timely filed its Section 229 administrative and judicial refund claims reckoned from Melco’s own first-quarter 2016 VAT return, but affirmed that Melco was not entitled to a refund or tax credit of ₱81,119,005.84 because the passed-on input VAT was not an erroneous or illegal collection.

Does Section 229’s two-year period start from when suppliers remitted VAT to the BIR? #

No. In Melco, the Supreme Court rejected the CTA En Banc’s approach of reckoning the two-year period from the supplier-statutory taxpayer’s remittance dates. For a claimant that bore the economic burden but was not the statutory remitter, the Court treated Melco’s filing of its own quarterly VAT return as the proper reckoning point.

Why couldn’t Melco refund passed-on input VAT under Section 112? #

Because Melco’s gaming revenues were VAT-exempt under Section 109 in light of its PAGCOR license relationship, not zero-rated or effectively zero-rated sales under Section 112. Section 112 refunds unutilized input VAT attributable to zero-rated or effectively zero-rated sales — a path Melco failed to establish.

Was Melco’s Section 229 claim timely even though the refund was denied on the merits? #

Yes. Melco filed its first-quarter 2016 VAT return on April 25, 2016, its administrative claim on December 19, 2017, and its CTA petition on April 12, 2018 — within two years under the Court’s Section 229 reckoning. Timeliness and entitlement are separate questions; Melco won the first and lost the second.

Summary #

Melco Resorts v. CIR is a split-outcome VAT refund Decision: Section 229’s two-year clock for this non-statutory claimant runs from Melco’s own VAT return filing, not from supplier remittances — but the ₱81.1 million claim still fails because the payment was not an erroneous or illegal collection and Section 112’s zero-rated path does not fit VAT-exempt gaming sales. The First Division Decision is unanimous. Read it beside the Section 112 timing cases in this series and the site’s VAT vs percentage tax / zero-rating guides when classifying whether a refund theory is really a Section 112 or Section 229 case.

Sources #

Primary sources

• LawPhil.net — G.R. No. 271261 Decision, April 2, 2025 (Melco Resorts Leisure (PHP) Corporation v. Commissioner of Internal Revenue)

Secondary sources

• Grant Thornton Philippines (P&A Grant Thornton) — The two-year prescriptive period in for Claims for Refund (July 15, 2025 Let’s Talk Tax column on G.R. No. 271261)
• Alburo Alburo and Associates Law Offices — Supreme Court Clarifies Two-Year Prescriptive Period for Refund of Wrong VAT Payment (August 24, 2025 case brief)