Revised Policies and Procedures on the Refund of Excess Taxes Withheld on Individual Income

April 28, 1989 REVENUE MEMORANDUM ORDER NO. 28-89 SUBJECT : Revised Policies and Procedures on the Refund of Excess Taxes Withheld on Individual Income TO : All Internal Revenue Officers and Others Concerned In view of recent developments resulting from the conferences with Land Bank of the Philippines (LBP) officials to further improve the service on the payment of tax refund particularly those arising from the excess of withholding taxes on individual income, in keeping with the desire of the government to render the highest quality of service to the taxpaying public, the following are the new policies and procedures for the guidance and compliance of all concerned. I. Policies : A. The processing of refundable income tax returns (ITRs) shall be given priority over other returns by all offices involved. acd B. Refundable ITRs with purely compensation income (1701A) shall be refunded after pre-audit. C. Refundable ITRs with Mixed or Purely Business Income (1701) shall be investigated before issuance of tax refund. D. The servicing and encashment of all processed tax refunds shall be done by the Land Bank of the Philippines after the necessary funds shall have been deposited therein by the Department of Budget and Management in accordance with the New Disbursement System. E. All refunds above P10.00 shall be paid in cash thru LBP while those amounting to P10.00 and below shall no longer be refunded. F. Tax Refund Notice (TRN) issued to the individual taxpayer to whom the refund is due may be encashed anytime within a period of two (2) years from the date of issue at the particular LBP Branch, LBP accredited bank and/or conduit. If after the lapse of such period, but within five (5) years from date of issue, and the refund is still unclaimed, the refundee may request the Commissioner of Internal Revenue, Attention: Tax Credit/Refund Division for its reissuance. Another TRN shall be issued upon written request and surrender of the expired TRN. G. A refundee with TRN for encashment in a particular LBP Branch, LBP accredited bank and/or conduit outside of Metro Manila may for practical reasons such as change of address, etc. request from the Tax Credit/Refund Division (TC/RD) for authority to encash in LBP Q.C. Branch (see prescribed form marked Annex A). H. Refunds may be claimed through an authorized representative of the refundee upon compliance with the prescribed requirements of LBP. I. In cases of non-receipt or lost TRN, upon request by the refundee a replacement for TRN using the same form and serial number specifically marked "replacement" shall be issued by the TC/RD after verification from the records of the bureau. The LBP shall likewise ascertain from its particular LBP Branch, LBP accredited banks and/or conduit that the refund has not yet been claimed before issuing the cash refund. The replacement shall take the place of the lost TRN for payment and audit purposes. cd J. All outstanding Tax Credit Certificates (TCCs) may still be encashed in the prescribed manner under RMO 12-86 provided the 5-year period from date of issuance has not lapsed. Corollary to this, the Trust Fund for TCCs (now as cash advance chargeable against Fund Code 105) shall be maintained until the last batch of TCCs released shall have expired. II. Procedures : The following procedures are prescribed for compliance by all concerned: A. OFFICE OF THE COLLECTION OFFICER 1. Receive two (2) copies of ITRs from taxpayers; 2. Bundle and transmit the returns to the Revenue District Office (RDO) within five (5) days from receipt; acd B. REVENUE DISTRICT OFFICE (RDO) 1. Receive ITRs from Collection Officers; 2. Separate out-of-district returns (including 1701C returns) from those properly belonging to the district; 3. Segregate refundable ITRs from other returns; 4. Classify refundable ITRs into those with purely compensation income (1701A) and those with mixed or purely business income (1701); 5. Batch ITRs by 100s according to the above classifications; 6. Forward batches of ITRs including the out-of-district returns to the Assessment Branch within five (5) days from receipt; 7. Conduct investigation on refundable 1701 returns transmitted by Assessment Branch for field audit; 8. Prepare Enforcement Officer's Audit Report and attach the same to the return; 9. Forward investigated refundable tax dockets to Tax Credit/Refund Division. C. ASSESSMENT BRANCH 1. Receive batches of ITRs from RDOs; transmit out-of-district returns to proper RDO and International Tax Affairs Division (ITAD), if any; For refundable ITRs with compensation income (1701A) - 2. Pre-audit the returns; 3. Re-batch ITRs by 100s; 4. Assign assessment number in accordance with RMO Nos. 9-76 and 2-77; 5. Prepare Block Control Sheet (BCS), in 3 copies; attach the original BCS to the corresponding batch of refundable ITRs; cd i original Revenue Computer Center (RCC) duplicate Tax Credit/Refund Division (TC/RD) triplicate office copy 6. Forward batches of original and duplicate copies of refundable 1701A returns with the attached BCS to RCC weekly or sooner if number of returns reached 5,000; forward the duplicate of the BCS to TC/RD for reference purposes; file office copy. For refundable ITRs with mixed or purely business income (1701) - 2. Assign assessment number in accordance with RMO Nos. 9-76 and 2-77; 3. Classify refundable 1701 returns into field audit and office audit returns; casia 4. Forward refundable 1701 returns classified for field audit to the Revenue District Office concerned; 5. Conduct investigation on refundable 1701 returns classified for office audit; 6. Prepare Enforcement Officer's Audit Report and attach the same to the return; 7. Forward audited refundable tax dockets to TC/RD immediately. D. INTERNATIONAL TAX AFFAIRS DIVISION (ITAD) 1. Receive two (2) copies of 1701C returns directly from taxpayers and regional offices for returns filed in the Philippines; receive 1701C, 1701 and 1701A from revenue post, embassies and consulate offices abroad, for returns filed outside the Philippines; casia 2. Classify returns into 1701A, 1701 and 1701C; 3. Segregate refundable ITRs from other returns maintaining the above classification; 4. Audit 1701A returns/conduct office audit on 1701C and 1701 returns; 5. Prepare and attach to the return the audit sheet for review and approval of the Division Chief; 6. Batch refundable ITRs by 100s; 7. Assign assessment number to the refundable ITRs in accordance with RMO Nos. 9-76 and 2-77; 8. Prepare BCS in 3 copies; attach the original BCS to the corresponding batch of refundable ITRs; original RCC duplicate TC/RD triplicate office copy 9. Forward the original and duplicate copies of audited refundable 1701C, 1701 and 1701A returns with the attached BCS to RCC immediately; forward the duplicate of the BCS to TC/RD for reference purposes; file office copy. casia E. REVENUE COMPUTER CENTER (RCC) Initial Issuance of TRN 1. Receive batches of original and duplicate refundable 1701A returns from the Assessment Branches, approved tax dockets on refundable 1701 returns from the TC/RD and original and duplicate refundable 1701C, 1701 and 1701A returns from the International Tax Affairs Division (ITAD) with their corresponding covering BCS; 2. Match the ITR against the Annual Return of Income Tax Withheld on Compensation (W-3) and the Annual Return of Creditable Income Tax Withheld (Expanded Withholding Tax System), 1743-B; 3. Conduct computer audit preparatory to the preparation of the tax refund; 4. Pull-out from the batches defective refundable returns (those which became either collectible, even or will still need resolution) after computer audit. These shall be the basis for the preparation of the Report of Defective Refundable Returns; 5. Conduct duplication run to preclude the possibility of a taxpayer claiming tax refund more than once on the same income; 6. Generate the following: a) Tax Refund Payroll (TRP) - not more than 2,000 refundees in a payroll 2 copies: Original - Auditor Duplicate - Land Bank of the Philippines (LBP) Condensed - Disbursement Payroll Accounting Division (DAD) The original and duplicate of the TRP are to be signed by the refundee upon claiming his refund. b) TRP Summary per LBP Branch 4 copies: Original - LBP Duplicate - DAD Triplicate - Budget Division (BD) Quadruplicate - RCC c) Tax Refund Notice (TRN) (to be signed by the refundee upon claiming his refund) 1 copy: - Tax Refundee d) TRN Transmittal List 3 copies: Original - General Services Div. (GSD) Duplicate - TC/RD Triplicate - RCC e) List of Refundable ITRs (for attachment to corresponding batch of ITRs) 1 copy: Original - Regional Office concerned (Administrative Branch) f) Report of Defective Refundable Returns 2 copies: Original - TC/RD Duplicate - RCC g) Tax Refund Alpha List (overall and by region) acd Overall : 1 copy : Original - TC/RD By region : 1 copy : Original - Regional Office concerned (Administrative Branch) 7. Forward to TC/RD the TRP with the condensed payroll, TRP Summary per LBP Branch, TRN, TRN Transmittal List, and List of Refundable ITRs with the corresponding ITRs and Report of Defective Refundable Returns with corresponding defective returns within 30 days from receipt of the refundable ITRs; 8. Forward to TC/RD the Tax Refund Alpha List (overall and by region) at the end of the semester. Reissuance of TRN 1. Generate new TRNs bearing the same serial numbers as the surrendered TRNs, specifically marked "reissuance", TRP exclusively for the reissued TRNs and other pertinent reports upon receipt from DAD of the documents, in case of refunds which have remained unclaimed after 2 years; 2. Forward refund documents to TC/RD. F. TAX CREDIT/REFUND DIVISION Initial Issuance of TRN 1. Review tax dockets on refundable 1701 returns received from the Revenue District Offices and Assessment Branches; 2. Prepare BCS in 2 copies; attach the original BCS to the corresponding batch of approved tax dockets; original RCC duplicate office copy 3. Forward the batch of approved tax dockets with the attached BCS to RCC immediately; file office copy of the BCS; aisa dc 4. Receive and check/match ITRs, TRN, List of Refundable ITRs, TRN Transmittal List, etc. from RCC; 5. Certify to the correctness of the TRP by signing on the space provided thereon; 6. Forward to Disbursement Accounting Division the two (2) copies of the TRP with the condensed payroll and the three (3) copies of the TRP Summary per LBP Branch; 7. Insert TRNs individually in window envelopes provided for the purpose and forward the same with both copies of the TRN Transmittal List to GSD; 8. Forward the List of Refundable ITRs with the corresponding returns to the Administrative Branch of the Regional Office concerned; 9. Receive from RCC at the end of the semester, the Tax Refund Alpha List (overall and by region); 10. Forward to the Administrative Branch of the Regional Office concerned thru GSD the Tax Refund Alpha List for the region's information and reference; retain overall list for its reference; 11. Undertake appropriate action on the returns of taxpayers indicated in the Report of Defective Refundable Returns as needing further investigation/verification and/or collection; cd i 12. Receive TRNs marked "return-to-sender" from GSD, reflect necessary notations on the corresponding TRN Transmittal List retained by the office and file the TRNs for future reference. Reissuance of TRN 1. Ascertain from its records the authenticity of the surrendered TRNs upon receipt of the requirements for reissuance, in case of refunds which have remained unclaimed after 2 years; 2. Forward documents to DAD; 3. Review refund documents from RCC; 4. Follow steps 5 to 7 under initial issuance. G. BUDGET DIVISION (BD) Initial Issuance/Reissuance of TRN 1. Prepare in 7 copies and sign Request for Obligation of Allotment (ROA) based on TRP Summary; cdt original DAD duplicate BD (suspense file) triplicate DAD quadruplicate BD (with obligation no.) quintuplicate to be attached to voucher sextuplicate DAD sextuplicate COA 2. Retain office copy of ROA and TRP Summary; forward ROA with TRP Summary to DAD. H. DISBURSEMENT ACCOUNTING DIVISION (DAD) Initial Issuance of TRN 1. Receive and re-check the mathematical accuracy of the totals reflected on the TRP with the condensed payroll and TRP Summary from TC/RD; 2. Retain TRP; forward TRP Summary to Budget Division; 3. Receive ROA with TRP Summary from the Budget Division; 4. Certify to the availability of funds by signing on the appropriate space in the ROA and TRP; 5. Retain office copy of the documents; forward TRP and attachments to Internal Control Unit (ICU); 6. Prepare Request to Debit Current Account addressed to Land Bank of the Philippines (LBP), Quezon City; 7. Forward Request to Financial Service (FS) for the signature of the Asst. Commissioner or his authorized representative; 8. Receive signed Request from FS; retain office copy of the same; await approved TRP from Administrative Service (AS); 9. Receive approved TRP from the AS; 10. Forward to LBP the original and duplicate copies of the TRP, the original copy of the TRP Summary, and the original and duplicate copies of signed Request to Debit Current Account as basis for the payment of tax refunds. Furnish the GSD and TC/RD a copy of each of the said request to serve as notice for the mailing of the TRNs; aisa dc 11. Undertake appropriate action on the returns of taxpayers indicated in the Report of Defective Refundable returns as needing further investigation/verification and/or collection; 12. Receive TRNs marked "return-to-sender" from GSD, reflect necessary notations on the corresponding TRN Transmittal List retained by the office and file the TRNs for future reference. 13. receive the original copy of the TRP from LBP within 2 years; 14. Forward the TRP to COA for audit purposes. Reissuance of TRN 1. Verify from its records that the refunds have remained unpaid upon receipt from TC/RD of the requirements for reissuance, in case of refunds which have remained unclaimed after 2 years; 2. Forward documents to RCC; 3. Follow steps 1 to 10 under initial issuance; 4. receive from LBP all encashed TRNs marked "reissuance" and "replacement", if any, monthly; 5. Reflect in the condensed payroll as paid all surrendered TRNs marked "reissuance" and "replacement", if any. Forward the TRNs to COA immediately after reconciliation; 6. Follow steps 13 and 14 under initial issuance. I. INTERNAL CONTROL UNIT (ICU) Initial Issuance/Reissuance of TRN 1. Receive TRP and attachments from DAD; 2. Pre-audit TRP and forward to the Administrative Service (AS). cdt J. GENERAL SERVICES DIVISION (GSD) Initial Issuance/Reissuance of TRN 1. Receive TRNs with both copies of the TRN Transmittal List from TC/RD and check enclosed TRNs against transmittal; 2. Mail TRNs to refundees after 2 weeks from date of receipt of refund documents by LBP, reflect date when mailed on the space provided for the purpose on both copies of the TRN Transmittal List, return duplicate copy of TRN Transmittal List to TC/RD for its reference and file office copy; 3. Receive and forward all TRNs marked "return-to-sender" to TC/RD. K. ADMINISTRATIVE SERVICE (AS) Initial Issuance/Reissuance of TRN 1. Receive TRP and attachments from the ICU; 2. Approve for payment the TRP and forward the documents to DAD. casia IV. Repealing Clause : This Order supersedes RMO No. 46-88 dated September 28, 1988 and all other existing issuances or portions thereof inconsistent with this Order. V. Effectivity: This Order shall take effect immediately upon approval. JOSE U. ONG Commissioner of Internal Revenue TAN: 05220-C1831-A-9 ANNEX A Republic of the Philippines Ministry of Finance QUEZON CITY _____________, 19____ The Manager Land Bank of the Philippines PBG Bldg., Quezon Blvd. Quezon City Sir/Madam: This is to request that the tax refund of Mr./Mrs. ________________________ for the taxable year ____________ under TRN No. _________________ dated __________________________ payable at _________________________________ be encashed at LBP, Quezon City Branch. Very truly yours, _______________________________ Chief, Tax Credit/Refund Division