New VAT refund guidelines: Rerun or revamp?

It is no secret that taxpayers go through the eye of a needle when applying for value-added tax (VAT) refunds. From gathering the necessary documents for submission to the Bureau of Internal Revenue (BIR), making sure that the documents are compliant with the invoicing requirements, and securing certificates from various government agencies, the list of tasks goes on and on. When the application is received, the pace picks up with a 90-day VAT audit.

To ease these tiresome tasks, the BIR issued Revenue Memorandum Order (RMO) No. 23-2023 to streamline the documentary requirements and procedures in processing and granting VAT credit/refund claims.

At the outset, the updated guidelines would appear to merely reiterate the previous VAT refund guidelines in RMO No. 47-2020. However, a close reading of the new RMO reveals several additions, not to mention the major modifications of the checklist of required documents.

In compliance with The Ease of Doing Business Law (RA No. 11032), the requirements for filing VAT refund applications were by about half. Below are the noteworthy revisions:

• Documents or data that can be gathered from the records of the BIR, such as the annual income tax return and the VAT returns are no longer required for submission. However, for purposes of faster processing, taxpayers are not precluded from submitting copies of the same.
• Similarly, proof that the claimant’s clients are registered with the Philippine Economic Zone Authority (PEZA) or the Board of Investments (BoI) is no longer required.
• The number of Delinquency Verification Certificates (DVC) has been reduced. Previously, applicants were required to submit two DVCs, issued by the Revenue Region for non-Large Taxpayers / Large Taxpayers (LT) Collections Enforcement Division for (LT) and the Accounts Receivable Monitoring Division (ARMD). With the current RMO, the DVC issued by ARMD should now suffice. While the presentation of a DVC does not automatically absolve a claimant from outstanding tax delinquencies, should there be tax delinquency with a pending request for abatement, compromise settlement or other legal remedies under the Tax Code, the processing of the VAT refund/credit may still continue.
• With regard to proving zero-rated sales, the original copies of the sales invoices (SIs) and official receipts (ORs) must still be submitted, except for claimants transmitting their sales data to the BIR’s Electronic Invoice System (EIS) in accordance with Revenue Regulations (RR) No. 9-2022.

The submission of a scanned copy of the SIs and ORs was also dropped from the checklist. Hence, the previous requirement of a memory device with the sales and purchase documents saved therein is likewise no longer needed. Note, however, that if a refund claim is approved, the original copies of the SIs and ORs for sales and purchases must be forwarded to the Commission on Audit (CoA) for verification. Thus, it may be prudent for the claimant to keep a scanned copy for future reference. At any rate, should the claimant need a copy, a certified true copy may be requested from the CoA.

For claims that have been denied in full, the processing officer must return the original copies of supporting SI or ORs for sales and purchases to the claimant after stamping them as “VAT Credit/Refund Processed.”

• An additional requirement was included in proving that the sale of services is to a non-resident foreign corporation (NRFC)-buyer that is not doing business in the Philippines pursuant to Section 108(B)(2) of the Tax Code. The current RMO brought back the requirement under Revenue Memorandum Circular (RMC) No. 47-2019 of providing Articles or Certificates of Foreign Incorporation; but this time, with a little leeway by requiring just a photocopy (instead of an original) or printed screenshots from the website of the corporate regulatory body in the country where the NRFC is domiciled.
• Not much has been revised with regard to proving the input VAT, just a minor tweak of removing the submission of the Statement of Settlement of Duties and Taxes (SSDT) for imports. Such a revision is logical, since the payments indicated per SSDT will also be verified in the VAT payment Certificate issued by the Bureau of Customs, which remains in the checklist.

Upon completing the documentary requirements, direct exporter applicants, should file their claims with the VAT Credit and Audit Division (VCAD). All other remaining applicants, such as those engaged in other VAT zero-rated activities (other than direct exports), or those whose VAT registrations have been cancelled, and those with claims for recovery of erroneously collected VAT, should file at the VAT Audit Section (VATAS) of the Regional Assessment Division, or with their respective Revenue District Office (RDO) if without VATAS, or the Large Taxpayers VAT Audit Unit (LTVAU) of the Large Taxpayers Service (LTS).

With the constant effort of the BIR to update (and now streamline) the refund guidelines, claimants may wonder whether this revamp will actually help them in securing a grant or if their submissions will be deemed insufficient despite this simplified checklist. I guess claimants can only try, compile and file in the hope that this is not just a rerun.