BIR clarifies tax refund application issues

THE BUREAU of Internal Revenue (BIR) has clarified issues on applications for tax refunds in light of rulings issued by the Supreme Court on related petitions, outlining the timetable and requirements for the filing of tax refund or credit claims.

“Clarification on the issues concerning the application for VAT (value-added) refund/tax credit has been made by the Supreme Court in Commissioner of Internal Revenue vs. San Roque Power Corp. and in Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue,” read Revenue Memorandum Circular (RMC) 54-2014, dated June 11 and published in a newspaper on Monday.

“As such, this Circular is issued to summarize the rules on filing and processing of applications for VAT refund/tax credit.”

Under the Tax Code, VAT-registered taxpayers can claim a refund of their creditable input tax due or apply for a tax credit certificate for their zero-rated sales within two years from the close of the taxable year when the sales were made.

“As such, the taxpayer can file his administrative claim for VAT refund or credit at anytime within two-year prescriptive period,” the circular read.

The BIR commissioner, under the law, has 120 days to decide on refund or credit applications, counting from the date the applicant-taxpayer submits complete documents on his claim.

The RMC, however, clarified that “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 issuance likewise noted that claims must be accompanied by supporting documents, with an attached affidavit attesting to these documents’ completeness.

These include the refund or credit application form, a copy of the taxpayer’s annual or quarterly income tax returns, sworn statements certifying eligibility to file for a VAT refund or tax credit, and a detailed list of zero-rated sales, among others.

“Upon submission of the administrative claim and its supporting documents, the claim shall be processed and no other documents shall be accepted/required from the taxpayer in the course of its evaluation. A decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer,” it said.

“The application for tax refund/tax credit shall be denied where the taxpayer/claimant failed to submit the complete supporting documents. For this purpose, the concerned processing/investigating office shall prepare and issue the corresponding Denial Letter to the taxpayer/claimant.”

The RMC also reiterated that the mandatory 120+30-day period under which claims may be filed and brought to the Court of Tax Appeals for review, and clarified how this will work given the automatic denial of applications that are not decided on by the BIR within the 120-day prescriptive period.

“In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within 30 days from the receipt of the decision denying the claim or after the expiration of the 120-day period, appeal the decision or the unacted claim with the CTA,” it said.

“Verily, a judicial claim must be filed with the CTA within 30 days from receipt of the commissioner’s decision denying the administrative claim or from the expiration of the 120-day period without any action from the Commissioner, as the case may be. In this regard, the taxpayer/claimant is required to observe the 120+30-day rule before lodging a petition for review with the CTA.”

This means a taxpayer can file an appeal on his VAT refund or tax credit application in one of two ways: file the petition with the court within 30 days after the BIR denies the claim within the 120-day prescriptive period, or file the judicial claim within 30 days from the expiration of the 120-day period if the BIR Commissioner does not act on the application in the course of those 120 days.

The BIR noted that in cases where the taxpayer has filed a “petition for review” of his claim with the CTA, the BIR Commissioner loses authority over the application.

“Indubitably, failure to file a judicial claim with the CTA within 30 days from the expiration of the 120-day period rendered the Commissioner’s decision, or inaction “deemed a denial”, final and unappealable,” the circular said.

“This applies to all currently pending administrative claims for refund/tax credit.”

While the BIR cannot decide anymore on a refund or credit claim once a CTA petition is filed, it “shall still evaluate internally the administrative claim for purposes of intelligently opposing the taxpayer’s judicial claim,” the issuance noted. -- Bettina Faye V. Roc

source: Businessworld