Tax Alert No. 45 [Revenue Memorandum Order No. 25 dated 15 May 2019]

27 May 2019

Policies and procedures to implement the ninety (90)-day period to process and grant claims for value-added tax (VAT) refund/credit pursuant to Section 112 of the National Internal Revenue Code of 1997 (Tax Code), as amended

The Commissioner of Internal Revenue has issued Revenue Memorandum Order (RMO) No. 25-2019 dated 15 May 2019 to prescribe the policies and procedures to implement the 90 – day period to process and grant claims for VAT refund/credit pursuant to Section 112 of the Tax Code, as amended by Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

The salient provisions of the RMO are summarized below:

A. Receipt of claims for VAT refund/Credit

The following processing offices of the Bureau of Internal Revenue (BIR) shall receive claims for VAT refund/credit:

Receiving offices	Type of VAT Refund/Credit Claims
VAT Credit Audit Division (VCAD)	For claims of direct exporters under Section 112(A) of the Tax Code, regardless of the percentage of export sales to total sales
Revenue District Offices (RDOs)	For claims by other VAT zero-rated within their jurisdictions For claims of taxpayer-claimant whose VAT registration has been cancelled under Section 112(B) of the Tax Code
Large Taxpayers Audit Division	For claims by other VAT zero-rated taxpayers within its jurisdiction For claims of taxpayer-claimants within its jurisdiction whose VAT registration has been cancelled under Section 112(B) of the Tax Code

The assigned receiving revenue officer (RO) shall pre-check the application form and all the supporting documents listed in Annex A.1 of Revenue Memorandum Circular No. 47-2019.
The RO shall not accept applications if the taxpayer-claimant has outstanding delinquent tax liabilities. However, if the tax liability pertains solely to VAT, the claim may be accepted subject to performance of certain procedures.
If there is a VAT liability with the BIR and the claim includes or solely pertains to refund of input VAT on importations which requires endorsement to the Bureau of Customs (BOC) for processing of the payment, the RO shall inform the claimant that the VAT liability must be settled prior to filing the application for VAT refund/credit with the BIR.

B. Processing and verification of claims

A tax verification notice (TVN) shall be issued by the head of the processing office. The TVNs shall be manually issued until such time that the TVN Monitoring System and the Case Management System are fully operational.
The verification by the RO of the application and its supporting documents shall not be construed as an audit/investigation. Hence, the concerned investigating office having jurisdiction over the taxpayer-claimant in the Regional or National Office may issue subsequently an electronic Letter of Authority (eLA) against the taxpayer-claimant.
For claims filed under Section 112(B) of the Tax Code, the verification of the processing office shall be limited to the supporting documents, particularly the proofs of input VAT accumulated as of the change in or cessation of status of VAT registration under Sec. 106(C) of the Tax Code. Any output VAT that may be determined shall be automatically deducted from the claim. The assigned RO/s shall validate the photocopies of the invoices/receipts for sales and purchases from the original copies presented by the claimant, which shall be returned after stamping “VAT Refund/Credit Claimed” thereto. If it is not logistically possible to bring the original documents to the processing office, the assigned RO/s may perform the stamping at the registered address of the taxpayer-claimant after securing a permit duly approved by the chief/head of the processing office.
The processing, reviewing, and approval of the VAT refund claims shall be strictly completed by the respective offices within a total of seventy-five (75) days from receipt of the application.
The claims recommendation for approval/disapproval of the claims shall be approved by the following revenue officials
For claims filed with VCAD under Section 112(A) of the Tax Code, the following are the authorized approving revenue officials:

Amount of claim	Amount of claimApproving Revenue Official
A. For claims filed with VCAD under Section 112(A) of the Tax Code
Not more than PHP50m	Assistant Commissioner (ACIR) - Assessment Service
More than PHP50m up to PHP150m	Deputy Commissioner - Operations Group
More than PHP150m	Commissioner of Internal Revenue (CIR)
B. For claims filed with the LTS under Sections 112(A) or 112(B) of the Tax Code	ACIR – LTS
C. For claims filed in the RDOs under Sections 112(A) and 112(B) of the Tax Code	Regional Director

The result of the evaluation of the VAT refund/credit claim, approved or otherwise, shall be communicated in writing to the taxpayer immediately after the approval of the report by the designated approving revenue officials.
The processing and release of payment for the approved VAT refund shall be completed by the respective offices within fifteen (15) days from receipt of the Disbursement Voucher, Budget Utilization Request and Status, and VAT refund docket, and within the 90-day period required by the law.
If the processing of the VAT claim exceeded the 90-day period without the payment released to the taxpayer-claimant, the processing office may still continue the administrative processing of the claim.
Any official, agent or employee of the BIR who fails to act on the application within the timeline allotted for his/her office as prescribed by the RMO, he/she shall be punishable under Section 269 of the Tax Code.

This Order shall take effect immediately.

You may access the full version of the Order through the BIR website.