VAT refunds during the pandemic

The COVID-19 pandemic has forced businesses to explore new ways to improve their cash flow. One of the ways is to tap the government for VAT refunds. This recourse is available to taxpayers with unutilized input VAT attributable to zero-rated transactions and is governed by a process which was recently streamlined by the Bureau of Internal Revenue (BIR).

In the past, we have heard about taxpayers who expressed reluctance to file VAT refund claims in view of the numerous documentary requirements and costs associated with the filing. Those who have actually filed faced difficulties in retrieving documents, whether internally or from outside sources, such as required certifications from various government agencies and foreign jurisdictions.

To reduce the burden of the VAT refund process, the BIR issued Revenue Memorandum Order (RMO) No. 47-2020, which took effect on Jan. 19, 2021, in response to the appeal of taxpayer-claimants who, due to the COVID-19 pandemic, faced difficulty complying with the documentary requirements under the old rules, and in compliance with Republic Act (RA) No. 11032, otherwise known as the “Ease of Doing Business and Efficient Government Service Delivery Act of 2018.”

The changes introduced by the RMO, coupled with the legal mandate to adopt simplified requirements, are meant to encourage reluctant taxpayers to file VAT refund claims and recover the tax they are rightfully due. If granted a refund, taxpayers can tap into a new cash flow stream that would help them sustain day-to-day operations.

NON-SUBMISSION OF PHOTOCOPIES OF SALES INVOICES/RECEIPTS
Among the notable amendments under this RMO is the removal of the requirement to submit photocopies of sales invoices or receipts for both purchases and sales of goods or services, which used to be the bulk of the documents needed upon filing. Instead, the submission of the photocopies was replaced by the submission of the originals for verification, together with corresponding scanned copies stored in a memory device. This change is believed by some to be cost and environment-friendly, and it eliminates the need for the BIR officers to conduct fieldwork at the taxpayer’s place of business, just to stamp each original document with the phrase “VAT Refund Claimed.” With all the geographical considerations and localized lockdowns, the change in the rule effectively considers the health and safety of both the BIR officers and the claimants-in-charge.

NON-SUBMISSION OF CONSULARIZED DOCUMENTS
The requirement to submit consularized or apostilled certificates of foreign registration, incorporation or association of non-resident foreign corporations (NRFCs) was likewise removed. This amendment hopes to address the dilemma of taxpayer-claimants whose VAT refund applications are hampered due to the delay in processing and delivery of foreign documents to the Philippines. The revised checklist only requires the submission of an original copy of a certification from the Securities and Exchange Commission (SEC) stating that the NRFC is not registered to do business in the Philippines.

In any case, it would still be advisable for taxpayers to secure a consularized or apostilled document in anticipation of a possible appeal in court. Until such time that jurisprudence eliminates such requirements, taxpayer-claimants are not yet fully off the hook in securing consularized or apostilled documents abroad.

OTHER RELAXED REQUIREMENTS
The RMO likewise removed other documents from the revised checklist, particularly those which are already accessible to the BIR from its own records (i.e., Annual Registration Fee, Authority to Print, Permit to Use Computerized Accounting System, and schedule of big-ticket purchases classified per supplier). Nevertheless, for big-ticket items, BIR officers are still required to check for authenticity and correctness by accessing the BIR’s Information System.

The RMO also compressed four separate sworn statements/declarations (i.e., amount of sales declared; affidavit of non-forum shopping; completeness and authenticity of documents submitted; and Taxpayer’s Profile) into one Taxpayer Attestation.

The RMO also removed the documents which were previously required to be certified as true copies by the issuing government agencies. The RMO recognized that certain government-issued documents contain embedded “quick-response” (QR) codes which can be verified electronically or online.

FIXED 90-DAY PROCESSING PERIOD
While previous BIR issuances provided that the 90-day period commences from the date of submission of the official receipts or invoices and other documents in support of the application, RMO 47-2020 emphasized that the start of the 90-day period is from the actual filing of the application with complete documents duly received by the processing office.

The RMO intends to eliminate the possibility of having the reckoning date moved or adjusted by a BIR handling officer by simply requesting for additional documents outside of the checklist.

CLARIFYING THE EXCLUSIVE VENUE FOR DIRECT EXPORTERS
With respect to venue, RMO No. 47-2020 expressly states that only the VAT Credit Audit Division (VCAD) may receive claims of direct exporters, to the exclusion of the Revenue District Office (RDO) or the Large Taxpayers Audit Division (LTAD). This clarifies previous BIR issuances (RMC No. 17-2018 and RMO 47-2019), which may be interpreted by some direct exporters to mean that they have the option of filing the VAT refund application at the RDO or LTAD.

Though the pandemic has somehow disrupted the “should be” order of VAT refund filings, it has also given the tax authorities an opportunity to rethink and streamline the VAT refund process. The RMO seeks to address the challenges faced by both BIR officers and taxpayers who find themselves standing as players in a pandemic where claims must still be filed and processed accordingly.

This RMO is a welcome development, and its implementation will ultimately redound to the benefit of all involved. As we continue to respond to challenges in this new world of uncertainty, taxpayers must continue to be on the lookout for further enhancements in government processes — including the VAT refunds — and take advantage of the benefits from such changes.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Joanne P. Lansangan is a Tax Associate Director of SGV & Co.