Value-added tax (VAT) refunds now have a steady source of funds as the government has allotted 5 percent of all VAT collections by the country’s two biggest revenue agencies for that purpose.
Joint Circular No. 1-2018 issued by the Department of Finance (DOF), Department of Budget and Management, Bureau of the Treasury, Bureau of Internal Revenue (BIR), Bureau of Customs (BOC) and Commission on Audit (COA) implemented the provisions of Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act on VAT refunds.
Under the TRAIN law, 5 percent of the combined VAT collections of the BIR and the BOC will be treated as trust receipts to cover VAT refund claim payments.
The payments covered included VAT refunds issued by the BIR, import VAT refunds issued by the BOC and the VAT drawback on importation jointly issued by the BOC and the One-Stop Shop Interagency Tax Credit and Duty Drawback Center.
Under the rules, the BOC and the BIR must notify the Treasury not later than Jan. 15 every year the initial amount to be transferred from the general account to the trust receipt account to cover VAT refund payments.
With VAT refund claims to be sufficiently covered, the BOC and the BIR were expected to ensure payments of all claims.
“The BIR and BOC shall ensure and facilitate processing of claims and issuance of checks due to the concerned taxpayer-claimants to the amount of their claim for tax refund, net of any outstanding VAT delinquencies,” the circular read.
The DOF, meanwhile, must deduct the amount equivalent to 5 percent of the previous year’s total VAT collection from the BOC and the BIR’s respective tax collection targets.
The joint circular was signed by Finance Secretary Carlos Dominguez III, Budget Secretary Benjamin Diokno, Internal Revenue Commissioner Caesar Dulay, Customs Commissioner Rey Leonardo Guerrero, National Treasurer Rosalia de Leon and COA Chair Michael Aguinaldo.