Prescribing Procedures on the Processing of Claims for Value Added Tax Credit/Refund by Exempt/Non-VAT Registered Taxpayers in the Computerized RDOs

August 13, 1998 REVENUE MEMORANDUM ORDER NO. 73-98 SUBJECT : Prescribing Procedures on the Processing of Claims for Value Added Tax Credit/Refund by Exempt/Non-VAT Registered Taxpayers in the Computerized RDOs TO : All Internal Revenue Officers and Others Concerned I. Background In general, VAT is imposed on goods and properties brought into the Philippines, whether for use in business or not. VAT on importation is paid by the importer prior to the release of such goods from the custody of Bureau of Customs (BOC). Existing policy requires only VAT registered taxpayer may apply for issuance of a tax credit certificate or refund of input taxes paid on capital goods imported into the Philippines. However, BIR had issued a ruling (dated April 14, 1997 for Visayan Electric Company, a non-VAT registered Corporation) that importation of equipment and other facilities necessary in the conduct of its business is exempt from the 10% value added tax. In effect, revenue data centers and computerized revenue district offices are receiving requests from exempt and non-VAT registered taxpayers for value added tax credit/refund, hence the need to develop standard procedures to be followed by concerned BIR offices. II. Objectives This Order is issued to: 1. Prescribe standard guidelines and procedures in processing claim for value added tax credit/refund by exempt/non-VAT registered taxpayers under a computerized RDO; and 2. Facilitate and expedite the processing of VAT credit/refund claim to further improve taxpayer service. III. Guidelines 1. The Non-VAT/Exempt taxpayer must file a written claim for VAT credit or refund with the Commissioner of Internal Revenue within two (2) years from date of payment of value added tax. Only VAT paid on equipment and facilities imported by non-VAT persons for its business use are subject for tax credit/refund. 2. Claims for VAT credit/refund from non-VAT registered taxpayer shall be accepted and evaluated by the Revenue District Office having jurisdiction over the taxpayer. 3. The claim for VAT credit/refund must specify whether it is in the form of tax credit certificate or cash. 4. All necessary supporting documents shall have been submitted before any request or claim for VAT credit/refund can be entered into the system. Applications for claims/refund are considered duly received only on the day of submission of the last documents specified in the checklist of requirements. 5. Tax Credit Certificate (TCC) shall be issued by the Bureau of Customs upon recommendation for favorable grant of claim for VAT credit/refund from BIR. llcd 6. Approved tax credits/refunds can only be applied to tax liabilities which have become final, executory and demandable. Tax credit certificates can be applied to any tax liabilities except withholding tax and deficiency taxes. IV. Procedures A. The computerized RDO shall: 1. Verify existence of the taxpayer on the ITS database. 2. Receive from taxpayer the following documents. Ascertain the completeness of the supporting documents. a. three (3) copies of request/application for VAT credit/refund b. photo copies of invoices, import declaration, import entry document, official receipt or confirmation receipts issued by BOC evidencing payment of VAT on equipment and facilities imported. c. summary of importations of equipment and facilities made during the period with the following details: Date of invoice Supplier Item AWB/BL No. Date of arrival Total value Date of payment OR No. VAT paid 3. Stamp the word "RECEIVED" on all copies of application. Indicate the date of receipt and initial of receiving officer. Original - Revenue District Office (w/ the docket) Duplicate - Taxpayer Triplicate - Revenue District Office (File) 4. Provide the document locator number (DLN) and encode the necessary data about the taxpayer. 5. Create a case on-line, apply appropriate template and assign case to group supervisor/case officer using the Case Monitoring System (CMS). 6. Maintain a register exclusively for VAT credit/refund claim from non-VAT registered taxpayers containing the following information: Name, TIN & address of taxpayer Contact person and telephone number Control number Case number Period covered Name of examiner Amount claimed Amount approved for refund/credit Date Recommendation to Issue TCC was sent to BOC Date VAT Refund was processed/issued 7. Conduct audit/investigation of claims following the guidelines and procedures as prescribed under RAMO 1-91. Maintain case on-line. Make sure that the input tax paid on importation did not form part of the capital cost subjected to depreciation, in case of imported machineries and equipments. 8. Prepare audit report supported by all the prescribed documentary requirements together with a recommendation for the favorable grant or denial of the claim for VAT refund/credit for approval by concerned officials. 9. Forward the entire docket to the Chief, Assessment Division for review evaluation and approval of claim. 10. Receive the approved Tax Credit Refund Statement (TCRS) from Regional Office. Record pertinent information in the register/logbook and forward TCRS to Administrative Division, RDC for mailing. The TCRS informs the taxpayer that his/her claim for credit/refund has been approved. It also contains information on the amount applied to outstanding liability, if any. The TCRS is presented by the taxpayer to claim the corresponding Tax Credit Certificate. 11. Prepare recommendation to issue Tax Credit Certificate (Annex "A") and send to BOC together with copies of the following documents: Revenue Officer's Verification/Audit Report Examiner's Audit Memorandum Report Checklist of Audit Procedures Undertaken Request/application for VAT credit/refund Invoices, import declarations, import entry documents, official receipts/confirmation receipts evidencing payment of VAT Summary of importations made during the period B. The Assessment Division, RO shall: 1. Receive and review the docket containing results of audit/evaluation of claims for VAT credit/refund by non-VAT registered taxpayer. Maintain case created on-line. 2. Return the docket to the RDO whenever there are still items which need to be thoroughly verified, explained or clarified. dctai 3. Approve report, close case created on-line and forward the reviewed/approved docket to RDC for encoding and issuance of TCRS C. The Revenue Data Center shall: 1. Receive approved request/application for VAT credit/refund with docket from Assessment Division, RO. 2. Encode information contained in the docket. 3. Ascertain the existence of outstanding liabilities of taxpayers with claims for VAT refund by making an inquiry of the status of the claim on-line. Utilize the Inquire on a Tax Claim conversation screen. 4. Check whether the approve VAT refund type qualifies for offsetting against liabilities. Proceed with application process in the event that the tax type qualifies for offsetting. 5. Prepare and print Tax Credit and Refund Statement (TCRS). Forward TCRS, together with the docket, to the Regional Director for signature. 6. Print three (3) copies of Tax Refund Payroll Recap (TRP Recap) .and three (3) copies of Tax Refund Payroll (TRP). 7. Forward three (3) copies of TRP Recap to Accounting Division, NO. 8. Download TRP information to a diskette. Forward TRP data diskette and three (3) copies of TRP to Finance Division, RO. 9. Five days after the details of the funding debit advice has been encoded, print Tax Refund Notice (TRN). 10. Send TCRS to taxpayer through the Administrative Unit, RDC. The fund approved tax refund procedures (Annex "B") shall be applied by all concerned offices in the National and Regional Offices in the preparation and processing of necessary documents prior to the release of Tax Refund Notice to the taxpayer. D. The Regional Office shall: 1. Receive TCRS, together with the docket, from RDC. 2. Review the TCRS and signify approval to the claim. 3. Forward signed/approved TCRS and entire docket to RDO. V. Effectivity This order shall take effect immediately. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue ANNEX A Revenue Region No. _______ _______________________ Date: THE HONORABLE COMMISSIONER Bureau of Customs Port Area, Manila Sir: Please be informed that the claim of ________________________________ for tax credit in the amount of __________________________________________ (P__________________) representing input tax on importation for the period _____________________ up to _________________ has been approved by this Office. Pursuant to the agreement executed by and between the Bureau of Customs and the Bureau of Internal Revenue dated April 08, 1988, authority is hereby granted to your Office for the issuance of Tax Credit Certificate for value-added tax payments covered by Official Receipts as shown in the attached summary list of importations, subject to verification by that Bureau to the actual receipts of payment by the government, in compliance with the Commission on Audit requirements, and which your Office is more in a position to make. Very truly yours, ___________________ Revenue District Officer Section 2 Fund Approved Tax Refund Claims Responsible Person/ Task Procedures Office Accounting Division 1. Receive three (3) copies of the TRP Recap by Region NO- from RDC. 2. Forward duplicate and triplicate copies of TRP Recap by Region to the Chief, BD as a basis for the preparation of the SAA. Budget Division 3. Receive duplicate and triplicate copies of TRP Recap NO- by Region from AD. 4. Prepare SAA by Region. 5. Forward to FAS for approval. Financial and 6. Receive SAA from BD. Administrative Service NO- 7. Check TRP Recap accuracy and compare data on hard copy with data on screen. For the step-by-step procedure to print TRP Recap and TRP, please refer to Title 16 (Generation of Reports), Chapter 5 (Generate Tax Credit and Refund Reports), Section 2 (View and Print Reports) of this manual. 8. Approve SAA and return it to the BD. Budget Division 9. Receive approved SAA from the FAS. NO- 10. Forward three (3) copies of approved SAA with triplicate copy of TRP Recap by Region to AD. Retain duplicate copy of SAA for file. Disbursement Accounting 11. Receive three (3) copies of the approved SAA with Division triplicate copy of the Recap by Region from BD. NO- 12. Prepare following required documents per RMO 39-94 for transmittal to concerned offices: 12.1. Notice of Fund Transfer (NFT) 12.2. Request of Fund Transfer (RFT) addressed to the LBP based on the SAA. 13. Forward NFT and RFT to FAS for approval. Financial and 14. Receive NFT and RFT from AD. Administrative Service NO- 15. Review and approve aforementioned documents. 16. Return signed NFT and RFT transfer to AD. Accounting Division 17. Receive approved NFT and RFT from FAS. NO- 18. Forward original copy of NFT to BD for mailing to RO concerned. Retain duplicate copy of NFT for file. 19. Forward original copy of RFT to LBP and retain duplicate copy of RFT and quintuplicate copy of the SAA for file. Budget Division 20. Receive original copy of NFT from AD. NO- 21. Forward to GSD original copies of NFT and SAA for mailing to the concerned RO. General Services 22. Receive original copies of SAA and NFT from BD. Division NO- 23. Mail original copy of SAA and NFT to AdmD of RO concerned. LBP 24. Receive RFT from AD. 25. Credit corresponding regional account as contained in the RFT. Administrative Division 26. Receive original copies of NFT and SAA from BD. RO- 27. Forward original copies of NFT and SAA to RO-FD. Finance Division 28. Receive original copies of NFT and SAA from AdmD RO- and three (3) copies of TRP and TRP data diskette from Computer Operator. 29. Draw Journal Voucher (JV) to record the receipt of NFT and SAA. 30. Forward to AD copies of the TRP for certification that the expenses are necessary and lawful. AD RO- 31. Receive TRP from FD. 32. Review TRP detail. 33. Sign on the spaces provided to certify that expenses are necessary and lawful. 34. Return certified TRP to FD. Finance Division 33. Receive certified TRP from AD. RO- 36. Prepare Request for Obligation of Allotment (ROA) to cover tax refund and assign obligation number thereto. 37. Post ROA to Journal and Analysis of Obligation. 38. Certify on space provided in the TRP Summary the following: 38.1. Availability of funds. 38.2. Expenditure is proper. 38.3. Accounts Code proper. 38.4. Duly supported by documents appearing legal and proper. 39. Prepare DA for signature of ARD. 53. Encode details of the funding Debit Advice. For the step-by-step procedure on how to add details of a funding debit advice, please refer to Title 5 (Processing of Claims for Tax Credit and Refund), Chapter 6 (Issue Tax Refunds), Section 3 (Add Details of a Funding Debit Advice) of this chapter. Note: Five (5) days after the details of the funding debit advice has been encoded, the system will print Tax Refund Notices (TRNs) at the Regional Data Center (RDC) to inform the taxpayer that their refund can now be claimed. The refund amount may be encashed through an authorized bank. 54. Forward the duplicate copy of the DA and transmittal letter duly acknowledged by the LBP to the Central Filing Area for document tracking and storage. For the step-by-step procedure for the mechanics of the Document Tracking System, please refer to Title 4 (Case Monitoring and Related Procedures), Chapter 5 (Processing of a Document) of this manual. Document Processing 55. Forward automatically printed TRNs to RDC- RDC- Administrative Services for mailing. Mailing Section 56. Mail TRNs to refundees. RDC- Taxpayer 57. Receive TRN 58. Claim refund from the authorized bank indicated in the TRN by presenting the same. Upon presentation of the TRN together with the required documents, the validity of the TRN is verified against the TRP by the AAB. In the event that the TRN is found in order and the taxpayer passes the bank's identification process, the amount of refund indicated in the TRP will be released to the taxpayer by the AAB. The taxpayer will be required to sign on the appropriate space in the TRN as proof of receipt of the tax refund. PROCESSING OF VAT CREDIT/REFUND CLAIMS BY NON-VAT/EXEMPT TAXPAYERS