Repeal of BIR rule on VAT refunds sought

Claiming of value-added tax (VAT) refunds should no longer be dragged to the tax court, tax managers said.

Tax Management Association of the Philippines (TMAP) president Benedict R. Tugonon said it was high time the Bureau of Internal Revenue (BIR) repealed Revenue Memorandum Circular (RMC) 54-2014, which he said effectively forced taxpayers to elevate their claims to the Court of Tax Appeals (CTA). He said the circular was “oppressive, anti-business, and could potentially clog the dockets of the CTA.”

He said firms should be able to exhaust all remedies for claiming their refunds at the administrative level.

As early as 2014, 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 thorny issue in the circular is the “120+30” rule. The rule states: “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.”

“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,” the business groups had claimed.

The BIR insisted, however, that the circular was anchored on the Tax Code’s provisions and was meant to prevent corruption and cut red tape in the bureaucracy.

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,” the BIR said.