Tax refund: The 75-day challenge of Revenue Memorandum (RMO) No. 38-2014

Concerns on how undisbursed claims for tax refunds can work against the competitiveness of the Philippines as possible avenue for investment were expressed last year by several business groups.  As a seeming response to these concerns, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum (RMO) No. 38-2014 on 09 December 2014.  RMO No. 38- 2014 aims to facilitate the processing and issuance of checks pertaining to claims for tax refund due to taxpayers. “Each and every claim for tax refund that were approved by the concerned revenue offices, after the conduct of necessary audit and/or verification, as the case may be, shall be processed, approved and the corresponding check released within seventy five (75) days”,  the RMO reads.

Basically, RMO 38-2014 sets down uniform policies and guidelines on the implementation of cash disbursements for tax refunds. Pursuant to the RMO, all covered tax refunds shall now be sourced from the Trust Receipt Account of the BIR specifically created for this purpose. Claims for tax refund covered by the RMO include refunds of excess or erroneous collection of Value Added Tax (VAT) and other internal revenue taxes; payments of cash conversion of valid and unexpired Tax Credit Certificates (TCC); refunds of input taxes attributable to zero-rated or effectively zero- rated transaction; and payments for the monetization of VAT TCCs as part of the TCC Monetization Programs.

It bears emphasis that prior to the approval of tax refunds, the RMO requires that all outstanding delinquent tax liabilities of the taxpayer must be fully settled.  In the event that a taxpayer-claimant has an outstanding delinquent tax liability pending before the concerned revenue offices responsible for the processing of the tax refund of the taxpayer, including the regional finance division, the tax liability shall first be determined and thereafter deducted from the claim of the taxpayer before the processing of the claim for refund shall proceed. Furthermore, RMO 38-2014 mandates that pertinent provisions of RMO No. 29-2014 and Revenue Memorandum Circular 70- 2014 with respect to the issuance of certifications on the existence of outstanding tax liabilities must be strictly complied with.

With the implementation of the RMO, payments on claims for tax refund shall be now be deducted from the revenue collection of all concerned revenue offices having jurisdiction over the taxpayer for the current year according to the specific tax type. On the other hand, the outstanding tax liabilities that are deducted from the claims of tax refund of a taxpayer shall be recognized as revenue collection in favor of the revenue offices having jurisdiction over the taxpayer. This system will enable the BIR to ascertain the flow of tax collections and refunds of every revenue office with more accuracy and thus pave the way for accountability and transparency within each revenue office. However, this system may not receive a warm welcome to wary taxpayer-claimants. Bearing in mind that the outstanding tax liabilities are now recognized as collection for the revenue office, revenue officers would now have the incentive to deduct pending tax liabilities of the taxpayer-claimant regardless if the finality of these tax liabilities is yet to be determined. Revenue offices may also deter in recognizing claims for tax refunds because in doing so their revenue collection will be reduced proportionately.

The 75-day period provided for by RMO 38- 2014 may seem long-drawn-out for some considering that the period comes into the picture only after the claim for tax refund has been approved. Nonetheless from the view point of taxpayer-claimants whose claim for tax refunds have already been approved, they could now have some level of assurance that their approved claims would be released to them in 75 days at the very least. The challenge now is with the BIR to accordingly release the payments for approved claims for tax refunds within 75 days and to take more steps forward in making the institution more efficient in addressing claims for tax refunds. Indeed much have been said regarding taxes being the lifeblood of the government but may the government not forget that the claim for tax refund by a diligent taxpayer-claimant may very well be his lifeblood and that of his family.

Marjorie H. Mari is a Supervisor from the Tax Group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email [email protected] or [email protected].

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