Expediting the process of VAT refund application

The Bureau of Internal Revenue (BIR) recently issued Revenue Memorandum Circular (RMC) No. 47-2019 which provides for the uniform guidelines and revised mandatory requirements for the processing and grant of VAT refund application under Section 112 of the 1997 Tax Code, as amended. There are two instances where a taxpayer may claim for refund:

a. Sales of goods, properties or services which are zero-rated or effectively zero-rated.

b. Cancelled registration due to retirement from or cessation of business, or due to changes in or cessation of status under Sec. 106 (C) of the Tax Code.

It is worthy to note that refund applications must be filed within two years from the close of the taxable quarter when the input taxes are incurred or from date of cancellation of registration. Under Revenue Regulations No. 13-2018, the date of cancellation is the date of issuance of tax clearance by the BIR, after full settlement of all tax liabilities relative to cessation of business or change of status of the concerned taxpayer-claimant. Thus, it is necessary that the application must be filed within the prescribed period. Otherwise, the application may be considered filed out of time.

Under the new RMC, taxpayer-claimants who have zero-rated sales or canceled registration must submit their application to the Revenue District Office (RDO) or Large Taxpayer (LT) Audit Division that has jurisdiction over the said taxpayer. For direct exporters, they must file their application at the VAT Credit Audit Division (VCAD) located at the BIR National Office. Simply put, applications must be filed at the BIR office where the taxpayer is registered except for direct exporters.

The timeframe in processing and granting VAT refund application is  90 days from submission of official receipts, invoices, and other supporting documents up to the release of the payment for the approved amount of the refund. The BIR has already shortened the period for processing VAT refund applications but the taxpayer-claimant must comply fully with all the requirements specified in the RMC if it expects to have a chance at a successful claim for refund.

Due to limited time for processing of VAT refunds, the taxpayer-claimant should ensure that all supporting documentary specified in the RMC are complete and true before submitting the same. Failure to do so may result in non-acceptance of the application. Thus, the taxpayer-claimant is required to attach a notarized sworn certification in the application attesting to the completeness of the documentary requirements.

Consequently, the taxpayer-claimant must observe certain guidelines so the application can be processed within the 90 day period. First, the taxpayer-claimant must ensure that the person who must sign and file the application is duly authorized through a notarized Secretary Certificate or Special Power of Attorney (SPA). This requirement is essential for corporations or partnerships. The BIR may not accept the application if the person processing the application is not authorized. The authorized representative must present either the Secretary Certificate or SPA to the BIR together with one valid government-issued Identification Card (ID) upon filing of the application.

Further, the taxpayer-claimant must have no outstanding tax liabilities upon filing of the application. Under Section II (1) of Revenue Memorandum Order No. 11-2014, outstanding tax liabilities is the amount of tax due from the taxpayer who failed to pay the same within the prescribed time for payment. Hence, the taxpayer-claimant shall settle first the outstanding tax liabilities, if there are any.

As to documentary requirements, the taxpayer-claimant shall ensure that the required schedules are in Microsoft Excel file format and in hard and soft copies. The soft copy of said schedules must be saved either in a flash drive or memory stick to be submitted to the BIR. For certifications and affidavits, it must only be the taxpayer-claimant’s authorized representative that can sign these documents. Otherwise, the BIR may request for the revision of the same. Please note that only original copies of said documents must be submitted.

The taxpayer may also be required to submit documents obtained from government agencies, Thus, it is necessary that the issuing agency certifies the authenticity of the documents requested. On the other hand, if the documents are obtained abroad, the documents must be consularized. Otherwise, the BIR may consider the document incomplete. If the document obtained abroad is written in a foreign language other than English, the said document must be translated to English. It is worthy to note that the taxpayer-claimant should be wary that there are instances where it is difficult to secure consularized documents. Hence, additional time must be allotted in preparing such of documents.

In addition, the taxpayer-claimant or its authorized representative must present the original copies of invoices/receipts for sales and purchases with the photocopies for validation by the assigned revenue officers. (ROs). The original copy of said documents must be returned to the taxpayer-claimant after it has been stamped with “VAT Refund Claimed”. The validation and stamping may be performed at the registered address of the taxpayer-claimants in case the original copies of said invoices/receipts are voluminous. However, the taxpayer may be required to file a written request before the validation and stamping can be transferred at its business registered address.  The assigned revenue officers may request in writing for the presentation of books of accounts and accounting records relevant to the refund application. Failure to present the documents shall also be a ground for the denial of the application.

As a final note, processing VAT refund application may be a tedious process, but succeeding in the undertaking is possible provided all the requirements are complete and available upon filing of the application. Hence, it can be said that the success of the application shall depends on the compliance of the taxpayer-claimant with the requirements set by the tax laws and regulations.                 

Carlo John R. Pascual is a supervisor from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

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 the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email [email protected] or [email protected].