Business groups ready legal action vs BIR

Some business groups are now working on a legal action against Bureau of Internal Revenue (BIR) for refusing to withdraw Revenue Memorandum Circular (RMC) 54-2014.

Tax Management Association of the Philippines, Inc. president Rina Lorena Manuel said in an interview with reporters that the business groups are now exploring legal options against Henares’ decision and the RMC itself.

“There’s a team studying it right now [about the legal options we can pursue against RMC]. The group would still have to meet to explore that. [This week], we will make an announcement,” Manuel said.

Manuel explained that the existence of RMC 54-2014 could involve billions worth of money that businessmen from different sectors have long been waiting but might not be able to receive anymore.

“The difficult part for the business group is that it is an end-must denial of all the pending claims. They have long been waiting for it. They have long been processing it. They didn’t sleep [in getting these refunds]. It’s just that it’s taking the BIR a lot of time to process it and now with the RMC, it would all be automatically deemed denied,” she added.

Now, TMAP together with business groups such as chambers of commerce in the Philippines, Philippine Exporters Confederation, Philippine Chamber of Commerce and Industry and United Coconut Associations of the Philippines Chairman, is planning to pursue legal action against BIR’s decision to keep RMC.

The cluster is joined by other business groups such as the Association of Certified Public Accountants in Public Practice, Employers’ Confederation of the Philippines, IT and Business Process Association of the Philippines, and the Management Association of the Philippines, among others.

The groups have been requesting the BIR to ease the RMC.

Under RMC, BIR has 120 days from the date of submission whether to grant or deny a company’s refund claim on its value-added taxes (VAT), which is a tax on the consumption charged on the sale, barter, exchange or lease of goods, properties, and services in the Philippines, as well as on the importation of goods.

If the BIR chief, for instance, failed to make a decision within the given period, the claim of the taxpayer will be “deemed denied” and the latter would only have 30 days to bring its refund request before the Court of Tax Appeals (CTA).

source:  Manila Bulletin

Businessmen want new VAT refund rule junked

Sixteen local and foreign business and industry groups have asked the government to withdraw a new tax rule which, they claimed, would make it more difficult for investors to get their value-added tax (VAT) refund.

In a Sept. 12 letter to Finance Secretary Cesar V. Purisima, six foreign chambers as well as 10 Filipino industry associations called on the government to void Revenue Memorandum Circular (RMC) No. 54-2014 issued by the Bureau of Internal Revenue (BIR) last June and “uphold the taxpayer’s right to an administrative appeals process.”

“While an RMC is supposed to only publish and amplify pertinent and applicable portions of tax laws and regulations, RMC 54-2014 effectively created new rules and interpretations, which made it even more difficult for zero-rated taxpayers and investors to recover the VAT refunds owed by government,” according to the joint letter signed by officials of the American, Canadian, European, Japanese and South Korean chambers of commerce as well as the Philippine Association of Multinational Companies Regional Headquarters.

Also signatories to the letter were executives belonging to the Association of Certified Public Accountants in Public Practice, Employers’ Confederation of the Philippines, Information Technology and Business Process Association of the Philippines, Management Association of the Philippines, Philippine Banana Growers and Exporters Association, Philippine Chamber of Commerce and Industry, Philippine Coconut Oil Producers Association, Philippine Exporters Confederation, Tax Management Association of the Philippines, and United Coconut Associations of the Philippines.

According to these groups, RMC 54-2014 “removes the fundamental right of a taxpayer to an administrative appeals process.”

The rules state that the BIR said “if the claim for VAT refund or credit is not acted upon by the Commissioner within 120-days as required by law, such inaction shall be deemed a denial of the claim.”

“This effectively encourages the BIR to abdicate its administrative duty to process refund claims by compelling taxpayers to pursue judicial claims with the CTA [Court of Tax Appeals],” they said.

Such an interpretation is “prejudicial to the taxpayer who has the option to appeal immediately the inaction to the courts after the lapse of the 120-day period.” The groups said that, adding such “will be very costly to the taxpayer who has to incur needless expenses in the form of docket fees—which is about 1 percent of the amount of the claim—and legal costs.”

The business groups also claimed that the circular “runs contrary to the Supreme Court’s ruling in San Roque Power Corp. v. Commissioner of Internal Revenue, 690 SCRA 336 (2013), which it purports to circularize.”

The ruling said that, “the BIR does not lose jurisdiction to process the administrative claim for refund simply because the taxpayer elected to appeal the inaction to the CTA. In fact, the Supreme Court said ‘the Commissioner should still evaluate internally the administrative claim for purposes of opposing the taxpayer’s judicial claim, or even for purposes of determining if the BIR should actually concede to the taxpayer’s judicial claim,’” they noted.

Also, “the retroactive application of the strict ‘120+30’ rule to all pending VAT refund applications is confiscatory since it will result in a large scale automatic denial of all pending applications. This is in violation of the non-retroactivity rule, which undermines the fairness of the tax system,” according to the groups.

The business groups noted that investors were allowed to appeal with the Court of Tax Appeals denials of their tax refund or tax credit claims within 30 days upon receipt of the BIR decision.

However, the groups also pointed out that “the BIR usually takes an average of four to six years to process and approve valid input VAT refund claims, much to the frustration of zero-rated sellers and investors.”

“A far greater number of input VAT refund claims, which already run into billions of pesos, remain unacted upon by the BIR or are pending with the Court of Tax Appeals with no definite timeframe on when these claims will be resolved,” they added.

“Instead of streamlining the VAT refund application process, RMC 54-2014 makes compliance more burdensome to taxpayers by imposing impractical and unrealistic requirements that are very difficult to comply with, or by prescribing additional requirements not found under the law,” they said.

According to the 16 business groups, they deem that “RMC 54-2014, coupled with the questionable stand of the BIR that input VAT claims could not be claimed as cost or expense for income tax purposes, effectively nullifies the incentives granted by law to zero-rated taxpayers and/or transactions.”

“The sudden change in the VAT refund process rules under the said RMC shows the lack of transparency, predictability and consistency on the part of government, which greatly affects investor trust and confidence,” they said, adding that “any unrefunded VAT arising from these very restrictive rules, on top of the existing bureaucratic inefficiencies, will result in higher costs of doing business in the Philippines.”

source:  Inquirer

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