On 23 June 2023, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 71-2023 and Revenue Memorandum Order (RMO) No. 23-2023 to provide streamlined guidelines and the prescribed documentary requirements for the processing of value added tax (VAT) refund applications. The following significant amendments were introduced to the existing regulations outlined in this article.

Change in venue for filing claims

The claims of direct exporters, regardless of the percentage of export sales to total sales, will still be submitted to the VAT Credit Audit Division. However, the claims of other taxpayer-claimants, such as those engaged in VAT zero-rated activities, other than direct exporters and indirect exporters shall now be filed with the following offices with jurisdiction over the taxpayer-claimant:

• VAT Audit Section (VATAS) in the Regional Assessment Division;
• the respective revenue district office (RDO) if without VATAS; or
• the Large Taxpayers VAT Audit Unit of the Large Taxpayers Service.

Reduction in required documentation

Based on the new checklist of documentary requirements, the required documents to be submitted in support of claims for VAT refund have been reduced. The documents or data that can be found in the records of the BIR are no longer required to be submitted pursuant to Republic Act No. 11032 or the Ease of Doing Business Law. Nevertheless, taxpayer-claimants may still submit copies of such documents to aid in the timely processing of the claim. Moreover, only the original copies of the sales invoices or official receipts for sales and purchases of goods or services need to be submitted. The taxpayer is no longer required to submit soft copies of the sales invoices or official receipts. The amendment in the regulations resulted in the reduction of documentary requirements from the 30 documents to around 15 to 17 documents.

Applications filed beyond two-year prescriptive will be recommended for denialIf the taxpayer filed the claim for VAT credit or refund beyond the two-year prescriptive period as provided under section 112 of the Tax Code, the application may be accepted but the processing office will recommend the outright denial of the claim.

Outstanding delinquent tax liability of taxpayer-claimant may be offsetIf the delinquency verification certificate issued by the BIR shows that the taxpayer-claimant has outstanding tax liabilities that are final and executory, the approved VAT refund will be referred for garnishment to the Collection Section of the RDO and Collection Division of the Revenue Region having jurisdiction over the taxpayer-claimant. This is so that the approved VAT refund may be used to collect either fully or partially the outstanding delinquent tax liabilities subject to existing tax laws and revenue issuances on the enforcement and settlement of delinquent accounts.

Processing approved VAT refund or creditIf the taxpayer has a tax delinquency that is pending a request for abatement, compromise settlement or other legal remedies under the Tax Code, the processing of the approved VAT refund or credit may continue.

Tax docket of claimThe entire tax docket of the claim, which will include the original copies of the sales invoices or receipts, will be forwarded to the COA if the claim is approved for refund with notice to the claimant of such transmittal.

Original copies of sales invoices or receipts will be returned if claim is deniedIf the taxpayer's claim for VAT refund or credit is denied in full, the original copies of supporting sales invoices or receipts for sales and purchases will be returned by the processing office to the taxpayer-claimants after stamping "VAT Credit/Refund Processed" to the supporting sales invoices or receipts.

Originally published by Lexology. Continue reading on theLexology siteor email [email protected] for an on-demand copy.