It is usual in the Philippines that the same tax law provision has been interpreted and implemented differently by different Commissioners of Internal Revenue (CIR). This is the case of the value-added tax (VAT) claim processing.
Section 112 of the Tax Code provides that a taxpayer claiming excess input VAT for refund or tax credit must file the claim with the Bureau of Internal Revenue (BIR) within two years of the close of the taxable quarter during which the sales were made. In case of full or partial denial of the claim or failure of the BIR to act on it within a period of 120 days from receipt of the claim, a taxpayer may elevate its claim to the Court of Tax Appeals (CTA) within 30 days from receipt of the decision or upon expiration of the 120-day period.
The BIR issued several circulars the past years to implement the above provision. In 2003, the BIR issued Revenue Memorandum Circular (RMC) No. 49-2003 to allow taxpayers to file the complete documents to enable the CIR to properly process the administrative claims for tax credit or refund. The claim shall be considered as officially received only upon submission of complete documents. It is only upon such submission that the 120-day period would begin to run.
After almost 11 years, the BIR made a new interpretation with regard to the reckoning of the 120-day period and issued RMC No. 54-2014. The said RMC provides that the CIR shall have 120 days from the date of submission of complete documents to decide whether or not to grant the claim for tax credit or refund. It further requires that the application or claim must be accompanied by complete supporting documents and the taxpayer is barred from submitting additional documents after he has filed his administrative claim. This takes away from the taxpayer-claimant the reckoning of the 120-day period.
However, under the previous CIR Kim Henares, RMC No. 54-2014 was implemented retroactively because pending claims were deemed denied upon expiration of the 120-day period from the date the claims were filed even though the taxpayer-claimants are still in the process of submitting the complete documents which was allowed under RMC No. 49-2003. Hence, many taxpayers have complained of the denial of the VAT claims due to the retroactive application of RMC No. 54-2014.
Fortunately, the Supreme Court (SC), in the case of Pilipinas Total Gas, Inc. vs. The Commissioner of Internal Revenue, ruled on Dec. 8, 2016 that taxpayers “have every right to pursue their claims in the manner provided by existing regulations at the time it was filed.” On this basis, RMC No. 54-2014 cannot be applied retroactively as this would prejudice taxpayers whose VAT claims for tax credit or refund were filed and pending before June 11, 2014, the date the said RMC took effect.
Due to and in accordance with the recent SC decision, the BIR issued Revenue Regulations (RR) No. 1-2017 on Jan. 18 to clarify the tax treatment and processing of applications for VAT tax credit or refund filed and pending prior to RMC No. 54-2014.
RR No. 1-2017 provides that the VAT claims filed and pending prior to the effectivity of RMC No. 54-2014 shall be processed and approved in accordance with the following rules:
- The claimant-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. Thus, before the administrative claim is barred by prescription, the taxpayer must have submitted his complete documents in support of the application filed. It is upon the complete submission of documents in support of the application that it can be said that the application was “officially received” as clarified under RMC No. 49-2003.
- 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 CIR, 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 filing the application, if the claimant-taxpayer did not submit additional documents.
Hence, pending administrative claims prior to the effectivity of RMC No. 54-2014 shall be processed by the concerned offices based on available documents submitted by the claimant-taxpayer within the aforesaid statutory two-year period.
RR No. 1-2017 also enumerates claims filed and pending before the effectivity of RMC No. 54-2014 which are not covered as follows:
- Those claims filed beyond the two-year statutory prescriptive period under Section 112(A) of the Tax Code;
- Those denied in writing by the approving authority;
- Those approved or granted fully or partially by the approving authority; and,
- Those already appealed to and pending with the CTA unless there is proof of withdrawal of the case filed with the CTA.
Please take note that these new guidelines are applicable to VAT claims which were filed before June 11, 2014, the effectivity date of RMC No. 54-2014, and such claims are still pending with BIR. “Pending claims” mean that no written denial or decision by the approving authority. Hence, there is still hope for those pending VAT claims.
Those claims that were approved and granted fully or partially are no longer covered by these regulations. Likewise, VAT claims that were elevated to the CTA and still pending are also not covered by these regulations unless there is proof of withdrawal of the case filed with the CTA. For VAT claims already denied by the previous BIR administration due solely to the retroactive application of RMC No. 54-2014, we hope that the current CIR will give a chance and provide hope by evaluating the said applications based on its merits instead of the mere application of the said controversial RMC.
Wendell D. Ganhinhin is a Tax Partner & Head of the Cebu and Davao Branches of Punongbayan & Araullo.
As published in Business World, dated 24 January 2016