Tax refund rule expected to cut red tape, prevent corruption

The Bureau of Internal Revenue. AFP FILE PHOTO

MANILA, Philippines–The Bureau of Internal Revenue (BIR) on Tuesday reiterated that the controversial circular it released in June, which governed the processing of investors’ tax credits and refunds, was a mere implementation of rules put in place 16 years ago.

Also, the BIR claimed that Revenue Memorandum Circular (RMC) No. 54-2014 would cut red tape and prevent corruption.

In a statement, the BIR pointed out that the so-called “120+30” rule in processing value-added tax (VAT) refunds and credits—which local and foreign business groups were complaining about—had been part of the National Internal Revenue Code (NIRC). The said NIRC rule has been in place since 1998.

“Section 112 (C) of the NIRC provides that the [BIR] Commissioner shall grant a refund or issue the tax credit certificate within 120 days from the date of submission of complete documents. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within 30 days from the receipt of the decision denying the claim or after the expiration of the 120-day period, appeal the decision or the unacted claim with the Court of Tax Appeals (CTA),” the agency noted.

“Therefore, the NIRC provides that in the event the BIR does not act on the claim within 120 days, the taxpayer has the remedy to elevate the case to the CTA. RMC 54-2104 merely implements the said provision of law,” the BIR said.

According to the BIR, the circular “merely seeks to address the various complaints received by the BIR with respect to the length of time the agency takes to process claims for refund/credit and complaints that the BIR keeps on asking for additional documents.”

“With the said RMC, the BIR commits itself to process all applications in 120 days and provided certainty to the resolution of the claims of taxpayers,” it added.

Also, the circular supposedly cuts red tape as it lists all of the documents needed to support the VAT credit/refund application, upon submission of which, the claim would be processed by BIR without requiring any other documents from the claimant.

The circular is also aimed at “minimizing, if not eliminating, taxpayer interaction with revenue personnel to avoid collusion between them and to prevent corruption,” according to the agency.

The BIR disclosed that since RMC 54-2014 was implemented last June up until end-September, the agency had received 134 VAT refund and credit applications.

During the said period, the BIR processed for approval 68 applications for tax credits as well as three applications for VAT refunds, while denying 31 applications.

Last week, a number of business chambers and industry groups disclosed that they were “mulling over legal options” to stop the implementation of RMC 54-2014, which they claimed would make it more difficult for investors to get their incentives in the form of tax credits and refunds.–Ben O. De Vera