“Kaizen” is a Japanese term for continuous improvement. We often hear this phrase in business philosophies, and some, including me personally, consider this phrase a concept we live by. It is based on the belief that everything can be improved and nothing is the status quo. By embracing the Kaizen culture, we commit to a mindset of continuous improvement, where small, incremental progress culminates in significant positive change over time.
This mindset of continuous improvement is also being embodied by our tax authorities in their efforts to adhere to the Ease of Doing Business Act, which aims to streamline the delivery of government services and prescribe the processing time of transactions therein. Now that we are in its fifth year of implementation, taxpayers and government officials are all puzzled at how far its implementation has meliorated government services since its effectivity. This stirs up the question of whether there have been any substantial improvements or realignments made as far as the period of its effectiveness is concerned.
The good thing is, the BIR has indeed released relative issuances that brought substantial changes in relation to the Ease of Doing Business Act this year.
Transitory provisions on the Quarterly filing of VAT Returns
The year started off with the issuance of Revenue Memorandum Circular (RMC) No. 5-2023 by the BIR on January 13, 2023, on the transitory provisions for the implementation of the quarterly filing of VAT returns, wherein starting January 1, 2023, VAT registered taxpayers are no longer required to file the monthly VAT returns (BIR Form 2550M) pursuant to Section 114(A) of the Tax Code of 1997, as amended by RA No. 10963 (Train Law).
After the first quarter following the issuance of the said provision, most of the taxpayers found solace in the simplified filing and payment of the VAT returns, but then again, not everyone was on the same page. Some of the taxpayers found themselves in distress on the heave of the preparations, especially for those companies that deal with numerous monthly transactions. Hence, some taxpayers are pleading to be allowed to file and pay their VAT returns monthly. In response thereof, the BIR issued RMC No. 52-2023, wherein, in line with Republic Act (RA) No. 11032, or the "Ease of Doing Business and Efficient Government Service Delivery Act of 2018", the BIR is continuously improving its policies and processes to streamline and reduce the financial burden for the convenience of the taxpayers.
Considering that the Tax Code follows the pay-as-you-file system of taxation under which taxpayers compute their own tax liability, prepare the return, and pay the tax as they file the return, VAT-registered persons may still choose to file and pay their VAT returns monthly if it is convenient on their end, and no penalties shall be imposed thereof.
VAT Refund made easy!
One of the focal points of all the issuances released by the BIR this year is the discussion on the simplified requirements and procedures for VAT refund applications. In June 2023, the BIR issued Revenue Memorandum Circular (RMC) No. 71-2023 and Revenue Memorandum Order (RMO) No. 23-2023, which provided streamlined guidelines, policies, and mandatory requirements for VAT refund claims that are applicable for VAT refund applications that will be filed starting July 1, 2023.
The said issuances cover the changes to the venue for filing VAT refund claims of other taxpayers, like indirect exporters or those engaged in other VAT zero-rated activities other than direct exports, and the most talked-about revision, the significant reduction of the number of documentary requirements needed to be submitted by taxpayers in applying for VAT refund. Wherein the revised checklist contains a maximum of twenty-two (22) documentary requirements, in contrast with the thirty (30) documentary requirements from the previous checklist. It also added that the BIR now only requires original copies of the sales invoices or official receipts issued for sales and purchase transactions. However, this raises a concern on the taxpayer’s end since there’s a probability that the BIR may lose track of these original documents considering that they are also handling ample documents from other taxpayers who are applying for the same. Apart from that, said original documents will be highly needed by the taxpayer in case they are audited by the BIR or in case of denial of the VAT refund claim by the BIR. Accordingly, they will also have to present the same documents to the courts if the claim is elevated to the judicial level.
It also highlighted other policies in the acceptance of VAT refund applications, including the discussion on VAT refund applications filed beyond the two-year prescriptive period, wherein in this case, the said application will be accepted but the processing office shall recommend outright denial for the claimant to avail of judicial remedy.
Further, the BIR will now accept VAT refund applications from taxpayer-claimants with existing tax delinquencies reflected in the Delinquency Verification Certificate (DVC). However, the amount of tax liabilities will be offset against any approved amount of VAT refund to collect, either fully or partially, the outstanding delinquent tax liability of the taxpayer-claimant, subject to existing tax laws and issuances on the enforcement and settlement of delinquent accounts.
BIR’s enhanced registration forms
In light of the implementation of Ease of Doing Business and Efficient Government Service Delivery Act of 2018, the BIR issued RMC No. 60-2023 on the availability of the enhanced BIR registration forms (July 2021 version).
The revisions therein are part of the BIR’s effort to improve the existing registration forms and to streamline the current registration process in compliance with the provisions of the Ease of Doing Business Act.
In drawing things to a close, we can say that the BIR strives forward to align their recent issuances with the Ease of Doing Business Act. Their incremental actions are indeed noteworthy, and the taxpayers have felt their substantial improvement. On our end, we should go to bat for the tax authorities on making our tax system plain sailing, as we are all aware that they are at the onset of “Kaizen.”
Let's Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
As published in BusinessWorld, dated 22 August 2023