Input VAT refund developments under CREATE MORE
The CREATE MORE Act ushered in changes to certain documentary requirements for VAT refund claims. Beyond compliance lies a jungle of possibilities and challenges — where does your business stand? Dive into this article to uncover recent updates and explore the intricacies of securing VAT refunds amidst a sea of change.
CREATE MORE has generally adopted the same standards from the old VAT refund laws, including the following: 1. the grant or decision should be made within 90 days from the date of the submission of the application, and 2. the application will be subject to a risk assessment. However, it also introduced a new recourse for denied VAT refund claims — request for reconsideration prior to proceeding to judicial appeal, i.e., filing with the Court of Tax Appeals.
With respect to supporting documents, CREATE MORE also codified that certified true copies (CTC) of invoices, receipts, and other documents required under the rules can now be submitted to support the taxpayer’s claim — a welcome development as this gives claimants more flexibility, as opposed to the previous rules which required the submission of original documents. Moreover, VAT zero-rating will apply to the sale of goods and services to an export-oriented enterprise (EOE) whose export sales are at least 70% of the total annual production of the preceding year.
As such, Revenue Memorandum Circular (RMC) 37-2025 was issued to clarify the amendments. It includes new checklists for claiming a VAT refund pursuant to Section 112(a) of the Tax Code for: (1) claims covering the period prior to April 1, 2025; and (2) those covering taxable period starting April 1, 2025.
For claims covering the period prior to April 1, 2025, the requirements generally remain the same save for some minor changes and added requirements: adjustments to the new Annexes numbers, flexibility to submit CTCs of the invoices or receipts; GIS of the claimant must again be submitted but the Articles of Incorporation and By-laws/DTI registration are no longer required; and if applicable, the Certificate of Accreditation issued by the Department of Energy (DoE) for manufacturers, fabricators, and suppliers of renewable energy.
For claims covering taxable periods starting April 1, 2025, the following new requirements are included:
(1) If the sales from the preceding year do not meet the 70% threshold, a copy of the notification from the Export Marketing Bureau (EMB) and a certified copy of the schedule or evaluation sheet from the EMB containing the result of the validation of export sales and inward remittances for the taxable year covered by the claim;
(2) Proof of delivery, service contract or any acceptable document to prove that the goods or services are delivered or rendered to a resident local EOE for the manufacturing, processing, packing in the Philippines, which goods are subsequently exported, and photocopies of proof of remittances;
(3) Proof of delivery to bonded manufacturing warehouses of EOEs and photocopy of the permit or license to operate as a bonded manufacturing warehouse for goods subsequently for export; and
(4) Copies of Registered Business Enterprise-supplier’s sales invoice together with the filed 1600VT or BIR form 0605.
Considering that only CTCs of the invoices or receipts are now required, the rules specify that these should be signed by the taxpayer-claimant’s president, proprietor, or head of finance or accounting. These officials may assign other signatory/ies who are knowledgeable in the accounting and/or custodianship of the documents. In that case, a notarized Secretary’s Certificate, Partnership Resolution, or Special Powers of Attorney designating the representative together with a copy of their valid company ID must also be submitted.
In the context of VAT refunds, compliance with these requirements should be carefully sought. As emphasized in a Court of Tax Appeals (CTA) case, entitlement to VAT refund is one matter, while compliance with the documentary and evidentiary requirements is another.
From my experience, one of the reasons certain refund items are denied is because of alterations to the invoices or receipts. If the alterations are not properly supported, they are considered tampered with and not qualified as documentary proof.
In practice, to support the alterations, a certification confirming the authority of the person countersigning the alteration should likewise be submitted. However, examiners often differ in how they treat computer-generated receipts and invoices. In some cases, claims have been denied due to manual alterations on computer-generated invoices even if they are accompanied by a certification of the authorized signatory because the examiner prefers that the invoices or receipts be reprinted entirely. In contrast, other applications were not required to reprint invoices but were still denied because the certification lacked a copy of the signatory’s ID.
In CTA cases, the validity of countersignatures on altered receipts and invoices depends on whether the signatory is authorized, whether the signature matches the signature of the authorized representative, and whether there is sufficient proof of such authority. These cases did not distinguish between computer-generated and manually issued invoices or receipts, nor did they clearly define what constitutes valid proof of authority or sufficient certification.
As may be noted, the rules are unclear regarding the required treatment of alterations in invoices or receipts. This lack of clarity poses challenges, especially for first-time applicants who may be unfamiliar with the unspoken preferences or varying interpretations of examiners. It is possible that an application may not be successful at one instance and the taxpayer claimant may need to file another application at the risk of another denial to determine the preference of the examiner, which is revealed only after the claim has been denied.
While the imposition of such requirements by the government is understandable to ensure that only eligible claims are granted, a greater degree of clarity and uniformity would benefit all stakeholders. Clear and consistent rules not only encourage voluntary compliance among taxpayers but also reduce the risk of legal disputes, ultimately building greater confidence in the system. Furthermore, such transparency fosters a more investment-friendly environment, particularly for investors who rely on VAT zero-rating and refunds as part of their financial strategy. As we look to the future, enhanced guidance will be essential in supporting compliance and ensuring the efficient processing of claims. Together, let’s advocate for clarity that empowers both businesses and the government, paving the way for a more robust and fair tax landscape.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Rowelle Sheena Juarez-Ayson is a manager at the Tax Services department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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