The Filipino taxpayer carries a heavy burden in terms of tax obligations and compliance. We are encouraged to support the tax collection efforts of the Bureau of Internal Revenue (BIR) through its Register File and Pay campaign. However, given the prevailing poverty of the vast majority of the population, inadequate access to public health care, questionable deals and disbursements within and by the government, and delays in much-needed infrastructure projects, it would appear that taxpayers -- Filipino and foreign alike -- are not too keen on supporting the BIR.
Taxes are the lifeblood of the government. It is a harsh but necessary reality that taxpayers must pay, under threat of penalty or imprisonment. However, there are instances when the law clearly allows the taxpayer relief from payment of taxes, via refund or tax credit. But while it is very easy for the BIR to exact compliance, many believe that it is very difficult to secure BIR approval for refunds or credits.
Under our tax laws, an administrative claim may be filed with the BIR for tax refund or for issuance of a tax credit certificate (TCC) within a period of two years from the close of the taxable quarter when the sales were made, in case of refund of input tax attributable to zero-rated or effectively zero-rated sales, or two years from the date of erroneous payment in the case of taxes erroneously or illegally collected. The applicant must submit the Application for Tax Credit/Refund together with all the supporting documents. After the application is filed, the BIR will conduct an examination of the applicant’s books of account and other records in the taxable year concerned to determine the validity of the claim. The taxpayer may be required to submit numerous documents.
Particularly for value-added tax (VAT) refunds, an applicant was allowed to submit all the documentary requirements before and after the filing of the administrative claim, before Revenue Memorandum Circular (RMC) No. 54-2014 (Clarifying Issues Relative to the Application of Value-Added Tax Under Section 112 of the Tax Code) became effective last year. If the taxpayer fails to submit the required documents as provided in the BIR’s checklist, the VAT claim can be denied for lack of factual basis due to failure to submit the required documents. A party aggrieved by the BIR’s denial must, within a period of thirty (30) days from lapse of one hundred twenty (120) days from the submission of the complete documents, file an appeal with the Court of Tax Appeals. In case of inaction of the BIR, the judicial claim must also elevate his claim within 30 days from the lapse of the 120-day period when all the documents were submitted.
After the effectivity of RMC 54-2014, a taxpayer applying for a VAT refund should submit the complete set of documents at the time of the filing of the administrative claim. The application should be accompanied by a sworn certification which states that the documents submitted are complete for purposes of processing the VAT claim, and that the same are the only documents that will be presented to support the same. In fact, the BIR officer and the taxpayer’s representative go through the checklist to determine the completeness of the supporting documents, before the same is accepted.
What happens if the taxpayer fails to submit all the documents that will support his claim? While this can spell a denial of the claim on the administrative level, is the taxpayer forever barred from submitting documents when he elevates his claim to the Court of Tax Appeals?
It could be argued that the answer should be “No”. The Supreme Court held in Commissioner of Internal Revenue vs. Team Sual Corp. (formerly Mirant Sual Corp. (GR No. 205055, July 18, 2014) that there is nothing the Section 112 of the Tax Code or Revenue Regulation No. 3-88 or Revenue Memorandum Order (RMO) No. 53-98 that requires the complete submission of the documents enumerated in the RMO for a grant of refund or credit of input VAT.
The above pronouncement was adopted by the Court of Tax Appeals in the very recent case of Filminera Resources Corp. vs. Commissioner of Internal Revenue (CTA Case No. 8666, Aug. 3, 2015). The Court explained that in claims for VAT refund, the non-submission of complete supporting documents at the administrative level is not fatal to a petitioner’s claim. The court is not prevented from receiving, evaluating and appreciating evidence submitted before it. The question of whether or not the evidence by a party is sufficient to warrant the granting of a refund lies in the sound discretion of the court.
Although the above decision was based on the facts before the effectivity of RMC 54-2014, the Court’s explanations in the said decision is in accord with justice and fairness, and would offer relief for the current taxpayers who, due to difficulties in retrieving documents from voluminous accounting/tax records, are unable to submit all the required documents at the time of the filing of the administrative claim, as required by RMC No. 54-2014. Hence, for as long as the taxpayer properly and timely filed an appeal with the Court of Tax Appeals, he is given an opportunity to substantiate his claim. It is also important to note that the counting of the period to file the judicial claim should be reckoned from date of the filing of the administrative claim, as also mentioned in the Filminera case.
Due to the volume of new and pending refund applications with the BIR, almost all of the cases end up being appealed before the Court of Tax Appeals. It is comforting to know, at least, that the taxpayer has a fair opportunity to pursue his VAT refund claim at the court level, as he is still given a chance to submit additional evidence to prove his claim, which would then be subjected to the Rules of the Court.
Jean Ross Abenasa-Miso is a tax manager with the Tax Advisory and Compliance division of Punongbayan & Araullo.
source: Businessworld
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