Newsletter
AMENDMENT TO ARTICLE 28 OF THE TAX COLLECTION ACT–LIFTING FIVE-YEAR TIME LIMIT ON APPLYING FOR REFUND OF OVERPAID TAX ATTRIBUTABLE TO GOVERNMENT AGENCIES
Before the recent amendment to Article 28 of the Tax Collection Act, taxpayers could apply for refund of tax overpaid owing to misapplication of laws or regulations or miscalculation of tax payable within five years of the tax payment date. On 6 December 2006, having consulted some judgments of administrative courts, the Ministry of Finance indicated in a ruling that applications for refund of overpaid tax resulting from reasons other than those stipulated in Article 28 should also be subject to the five-year time limit ("2006 Ruling"). Therefore, overpaid tax attributable to the tax-collection or other government agencies was subject to the five-year time limit. However, where tax was overpaid because of an oversight on the part of a tax-collection or other government agency, the taxpayers usually could not know and therefore had no opportunity to apply for a refund timely. The broad interpretation adopted by the 2006 Ruling has sparked many disputes between taxpayers and the tax-collection agencies over the years.
In order to solve the above issue, the Ministry of Finance proposed the recent amendment to Article 28 of the Tax Collection Act, which was announced by the President on 21 January 2009. Pursuant to the amendment, applications for refund of tax overpaid owing to misapplication of laws or regulations or miscalculation of tax payable are still subject to the five-year time limit. Nonetheless, where a taxpayer overpays tax because of a tax-collection agency's incorrect application of laws or regulations or miscalculation of the tax payable, or other error attributable to any government agency, applications for refund of the overpaid tax will not be subject to the five-year time limit. In addition, the tax-collection agency should conduct an investigation and refund the overpaid tax within two years of the date on which it becomes aware of such error. The amendment also applies to the overpaid tax attributable to a government agency and paid before the effective date of the amendment. Furthermore, interest on the overpaid tax calculated on a daily basis should be refunded along with the overpaid tax.
Dr. C.V. Chen, the in-charge partner of Lee & Li, published several articles in this regard. Please also refer to our November 2008 Bulletin.