THE Bureau of Internal Revenue (BIR) has issued Revenue Regulation (RR) 26-2018, which implements the 90-day processing of claims for value-added tax (VAT) refunds, expediting the processing of claims to three months—far from the previous experience where it could take as long as years.
The BIR on December 27, 2018, issued RR 26-2018, which implements the 90-day claims processing for VAT refunds in line with the enhanced VAT refund system provision under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
The RR amends sections 4.106-5 on zero-rated sales of goods or properties, 4.08-5 on zero-rated sales of services, and 4.112-1 or claims for refund/credit of input tax, which removes the provision of VAT refund and tax credit certificate claims filed prior to January 1, 2018, to still be governed by the 120-day processing period.
“The 90-day period to process and decide shall start from the filing of the application/claim for refund up to the release of the payment of the VAT refund. Provided, that the claim/application is considered to have been filed only upon submission of the official receipts or invoices and other documents in support of the application as prescribed under pertinent revenue issuance,” the RR said.
Furthermore, Section 4.112-1 reiterates the accountability of the BIR official, agent or employee in terms of the timely processing of claims, providing that persons from the bureau who have caused a delay will face penalties.
In case of full or partial denial of the claim for tax refund, the taxpayer may appeal to the Court of Tax Appeals within 30 days from the receipt of the decision denying the claim.
“Provided further, that, in the event that the 90-day period has lapsed without having the refund released to the taxpayer-claimant, the VAT refund claim may still continue to be processed administratively. Provided however, that the BIR official, agent or employee who was found to have deliberately caused the delay in the processing of the VAT refund claim may be subjected to penalties…,” the RR added.
A week before the issuance of RR 26-2018, the Department of Finance reported that reforms in the country’s VAT refund system have been provided for under the TRAIN, expediting the processing of VAT refund for exporters and qualified entrepreneurs.
Finance Undersecretary Karl Kendrick T. Chua pointed out that an Enhanced VAT Refund System is established by the government in line with the TRAIN law, which entails the creation of a special trust account in the general fund, which will take 5 percent of the total VAT collections of the BIR and the Bureau of Customs.
The enhanced VAT refund system also implements a risk-based post-audit, as well as an electronic invoicing and receipts system.
The TRAIN law or Republic Act 10963 was signed into law by President Duterte on December 2017, and took effect on January 1, 2018. It slashes personal income-tax rates but implements offsetting measures like increasing excise taxes on fuel and tobacco,
among others.