Secretary Carlos Dominguez III of the Department of Finance (DOF) has signed a new set of revenue regulations providing relief to taxpayer-claimants whose value-added tax (VAT) credit or refund claims were deemed denied as a result of the retroactive effectivity in 2014 of an earlier rule requiring them to provide complete supporting documents upon the submission of their applications.

Revenue Regulations (RR) No. RR1-2017 clarifies certain questionable provisions in an earlier Circular issued by the Bureau of Internal Revenue (BIR) under the previous administration, and which has triggered complaints from taxpayer-claimants, particularly foreign investors seeking VAT refunds.

Under this new VAT-related RR dated Jan. 3, a taxpayer has “two years after the close of the taxable quarter when the sales were made, to apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.”

“In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two-year period under Section 112 (A) of the Tax Code, as amended, and the Commissioner or his duly authorized representative, should have decided on the claim for tax credit or refund within 120 days from the date of submission of complete documents, or from the date of the filing of the application, if the claimant-taxpayer did not submit additional documents,” the RR further stated.

Thus, under the new rule, it is only upon the complete submission of all supporting documents that a claimant’s application can be considered “officially received” and the 120-day period given to BIR to decide on the claim would start to run, said Antonette Tionko, who is finance undersecretary for the DOF revenue operations group (ROG).

This new set of revenue regulations addresses the concerns of foreign investors, particularly the issues raised by the Japanese Chamber of Commerce and Industry of the Philippines (JCCIPI) regarding their VAT claims under a previous BIR rule—Revenue Memorandum Circular (RMC) 54-2014, according to BIR Commissioner Caesar Dulay.

In his first few months at the DOF, Dominguez already began the process of addressing the long-standing complaints by foreign investors against RMC 54-2014, which was issued on June 11, 2014, but was retroactively implemented, thus effectively denying pending VAT refund claims that went beyond the 120-day period before that date.

In his letter to Dominguez recommending approval of the new RR, Dulay said its release will ensure that pending administrative claims for VAT refunds are “consistent with the decision of the Supreme Court in the case of Pilipinas Total Gas Inc. vs. the Commissioner of Internal Revenue.

Revenue Regulations are signed by the DOF secretary upon the recommendation of the BIR commissioner.

In the Pilipinas Total Gas case, the Supreme Court ruled that taxpayers “have every right to pursue their claims in the manner provided by existing regulations at the time it was filed.”

“Hence, RMC No. 54-2014 cannot be given retroactive application, without prejudicing the taxpayer whose VAT credit/refund applications were filed and pending prior to the RMC’s issuance,” said Undersecretary Tionko in her memorandum to Dominguez also recommending approval of the new RR.

Tionko said in her memo that before RMC 54-2014 was issued, a previous circular–RMC 49-2003–provided that the 120-day period would only start to run upon the taxpayer’s complete submission of the required documents for VAT refunds.

RMC 54-2014 issued by then-BIR Commissioner Kim Henares overturned RMC 49-2003, and barred claimants from submitting additional documents after filing their claims, which, in effect, took away from these applicants the reckoning point of the 120-day period.

Under the RR signed by Dominguez, “VAT credit/refund applications filed before and pending upon the effectivity of RMC 54-2014 shall be decided upon by the BIR based on available documents submitted by the taxpayer-claimant within the statutory two-year period,” Tionko said.

“VAT credit/refund applications must also be accompanied by a complete set of supporting documents before such administrative claim is barred by the two-year prescription,” she added.

Tionko said, however, that under the new RR, the following claims, even if filed before and pending upon the effectivity of RMC 54-2014, shall not be covered:

those filed beyond the two-year prescriptive period;
those denied in writing by the BIR;
those approved or granted fully or partially by the BIR; and
those already appealed to and pending with the Court of Tax Appeals (CTA), unless there is proof of withdrawal of the case filed before it.