Businessmen weigh legal options on VAT refund

MANILA, Philippines - Local and foreign businessmen are weighing their legal options over what they claim as overly bureaucratic process of securing value-added tax (VAT) refunds or tax credit claims.

Rina Manuel, president of the Tax Management Association of the Philippines (TMAP), said several foreign chambers and Filipino industry groups are mulling taking their issue to the courts to protect their fundamental right to an administrative appeals process.

Investors are up in arms over a Bureau of Internal Revenue ruling that makes it difficult for taxpayers to exercise their right to refund excess input VAT credits.

The retroactive implementation of Revenue Memorandum Circular (RMC) 54-2014 has prejudiced the rights of taxpayers with pending VAT claims, local and foreign businessmen said.

In  case of full or partial denial of the claim for tax refund, the RMC stated that the affected taxpayer could either file a petition with the Court of Tax Appeals within 30 days from the receipt of BIR decision or file the claim within 30 days from the expiration of the 120-day period, if no action is taken by the BIR.

Taxpayers who filed an administrative claim but did not file a judicial claim with the Court of Tax Appeals after the lapse of the 120-day period on the basis that the BIR would continue processing and evaluating the claim, now face the spectacle of having no further recourse or remedy to pursue the claim, because RMC 54-2014 says  these claims are deemed to have been denied by the BIR.

The RMC also states that the BIR will evaluate the claim for refund based only on the documents submitted. Thus, failure on the part of the taxpayer to submit all the required documents at the time of filing the claim may result in the denial of its request.

The VAT refunds are among the key concerns of foreign investors doing business in the country. As an incentive to investors, firms could claim refunds from the government for the advanced VAT payments made for imports of items used for goods they export. Foreign and local business groups claimed that the RMC shows the lack of transparency, predictability and consistency on the part of government, which greatly affects investor trust and confidence,”

They said “any unrefunded VAT arising from these very restrictive rules, on top of the existing bureaucratic inefficiencies, would  result in higher costs of doing business in the Philippines.”