Trade groups may take tax credit issue to court

BIR circular on VAT refund claims stirs hornets’ nest
By: - Reporter / @bendeveraINQ
/ 12:50 AM November 03, 2014

A number of business chambers and industry groups are going over plans to go to court in a bid to stop the implementation of the recently issued government rule on investors’ value-added tax (VAT) refund claims.

Tax Management Association of the Philippines (TMAP) president Rina Lorena R. Manuel told reporters last week that the group, as well as foreign business chambers, were “studying legal options” to challenge Revenue Memorandum Circular (RMC) No. 54-2014, which was issued by the Bureau of Internal Revenue (BIR) last June.


Manuel refused to further disclose the group’s plan, saying only that they would announce specific future actions during a press conference on Nov. 5.

Sought for comment, European Chamber of Commerce of the Philippines vice president for external affairs Henry J. Schumacher confirmed that the business groups were indeed “mulling over” legal actions.


But Japanese investors are against taking legal action on RMC 54-2014, according to Masazumi Nishizawa, secretary general of the Japanese Chamber of Commerce and Industry of the Philippines Inc. (JCCIPI).

The Japanese businessmen were among the first to criticize the circular upon its release.

We have no plan for any legal action against the Philippine government. That’s TMAP’s plan, and it is not supported by JCCIPI. What we did was, we just signed the position letter of TMAP, as did 20 other associations. JCCIPI has already submitted its position letter to the Embassy of Japan last July. We have been talking on this matter with the Philippine’s Department of Finance and the Bureau of Internal Revenue directly, Nishizawa said in a text message last Friday.

In a Sept. 12 letter to Finance Secretary Cesar V. Purisima, six foreign chambers as well as 10 Filipino industry associations called on the government to withdraw RMC 54-2014, which they claimed would make it more difficult for investors to get their incentives in the form of VAT refunds.

One touchy issue with regards RMC 54-2012 was the so-called “120+30” rule. Under the circular, BIR said that “if the claim for VAT refund or credit is not acted upon by the Commissioner within the 120-day period as required by law, such ‘inaction shall be deemed a denial’ of the application for tax refund or credit.”

Business groups opposed to the rule said that the retroactive application “of the strict ‘120+30’ rule to all pending VAT refund applications is confiscatory since it will result in a large-scale automatic denial of all pending applications.”

While an RMC is supposed to explain or amplify pertinent and applicable portions of tax laws and regulations, “RMC 54-2014 effectively created new rules and interpretations, which made it even more difficult for zero-rated taxpayers and investors to recover the VAT refunds owed by government,” read the joint letter signed by officials of the American, Canadian, European, Japanese and South Korean chambers of commerce, as well as the Philippine Association of Multinational Companies Regional Headquarters.


In all, the 16 business groups opposed to the rule warned that potential investors would shun the Philippines if it could not provide the incentives it had promised.

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