The BIR recently issued two new revenue issuances, Revenue Memorandum Circular No. 71-2023 and Revenue Memorandum Order 23-2023, to streamline the requirements and procedures for claiming VAT refund
How will I know if I am eligible to claim a VAT refund? Can I also claim a VAT refund for illegally assessed or collected VAT?
You are eligible to claim for a VAT refund under any of the following circumstances:
- Direct exporters regardless of export sales to total sales and whose sales are anchored under Section 112 of the Tax Code as amended except for claims with a mix of VAT zero rated sales arising from sales of power or fuel from renewable energy sources;
- VAT Zero-rated activities other than direct export and those with indirect export classified as effectively VAT zero-rated sales;
- When a taxpayer chooses to close his business with unutilized input VAT in accordance with Section 112 of the Tax Code.
Additionally, those with claims for recovery of erroneously or illegally assessed or collected VAT can also claim for a VAT refund under Sec. 204(c) and Sec. 229 of the Tax Code.
When should a VAT refund be filed? How long does the VAT refund process take?
To claim a refund for unutilized input VAT under Section 112, the administrative claim must be filed within two years from:
- The end of the taxable quarter in which the zero-rated or effectively zero-rated sales occurred;
- The date of cancellation of business registration (in cases of VAT-registered taxpayers who closed their business due to retirement or cessation of business);
After that, the BIR has 90 days from the submission of official receipts, invoices, and supporting documents. If the BIR decides that the refund is not proper, then the Commissioner must state in writing the legal and factual basis for the denial.
In case of denial of the claim for tax refund, the taxpayer may file an appeal with the Court of Tax Appeals within 30 days from the receipt of the decision.
What are the documents that are no longer required to submit under the new regulations?
One of the significant changes under the new regulations is the revised documentary checklist which contains a minimum of 9 and maximum of 17 as announced by BIR from 30 documentary requirements under the previous checklist.
Under the new regulations, taxpayers claiming VAT refunds are no longer required to submit scanned copies of Sales Invoices and Official Receipts in support of sales and purchases.
Instead they are only required to submit its original copy, as well as documents easily verifiable within the BIR records in accordance with the Ease of Doing Business Law. However, taxpayers are not precluded from submitting copies to help the officers in timely processing the claim.
Where should I file my application for a VAT refund?
If you are a direct exporter, you can submit your VAT refund claims with the VAT Credit Audit Division (VCAD) at the BIR National Office, regardless of the proportion of export sales to total sales.
If you are an indirect exporter or if you are engaged in other VAT zero-rated activities, you can submit your claims at the following offices:
- The VAT Audit Section (VATAS)
- The respective Revenue District Office (RDO) if there is no VATAS
- The Large Taxpayers VAT Audit Unit (LTVAU) under the Large Taxpayers Service (LTS)
Are there any further guidelines in the new issuances that I, as a taxpayer, should take into consideration?
Under the previous guidelines, if a VAT taxpayer filed a claim for VAT refund beyond the two-year prescriptive period, the BIR would not even receive the claim. However, under the present guidelines, if a taxpayer claims for VAT refund beyond the two-year prescriptive period, the BIR will still accept the application but will nevertheless recommend its outright denial. This allows the claimant to seek recourse through judicial means since the denial of the claim would trigger the 30-day period within which to file an appeal with the CTA.
Previously, the BIR had a policy that prohibited taxpayers with tax delinquencies from applying for VAT refunds if their Delinquency Verification Certificate (DVC) indicated any outstanding accounts other than VAT. To proceed with a refund, taxpayers had to settle their tax liabilities first and obtain a DVC without any tax obligations from the relevant office. However, the latest RMO introduces a change to this policy. It now permits taxpayers with delinquent accounts to submit VAT refund claims, regardless of the presence of outstanding tax liabilities. Nonetheless, any approved VAT refund will be used to offset the unpaid delinquent tax liability, facilitating the collection of the owed taxes, either in full or partially. This revision aligns with prevailing tax laws and guidelines pertaining to the enforcement and resolution of delinquent accounts.
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Originally published via Rappler