On 1 January 2017, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 1-2017. RR No. 1-2017 states that the rule under RMC No. 54-2014, which considers pending administrative claims for refund deemed denied after the expiration of the 120-days from date of filing (the 120-day period), cannot be given retroactive effect. Thus, claims filed and pending prior to the effectivity of RMC No. 54-2014 should not be automatically denied by the BIR solely on the basis of the lapse of the 120-day period.
Implications for taxpayers with pending administrative claims for refund
RMC No. 54-2014, issued on 11 June 2014 and which took effect immediately, stated that a claim for refund of excess input VAT which was not acted upon by the Commissioner of Internal Revenue within 120 days from date of submission of complete documents, shall be deemed denied.
There have been cases where pending administrative claims for VAT refund were denied by the BIR merely because of the lapse of the 120-day period. Taxpayers who chose not to appeal the claim to the Court of Tax Appeals were left with no other remedy.
Now that RR No. 1-2017 made it clear that RMC No. 54-2014 should not be applied retroactively, taxpayers with administrative claims filed prior to 11 June 2014 may continue to pursue their administrative claims with the BIR.
Revenue Regulations No. 1-2017
RR No. 1-2017 addresses the issues created by RMC No 54-2014.
Under Section 112 of the Tax Code, a VAT-registered person, whose sales are zero rated or effectively zero rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid, attributable to such sales. The Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within 120 days from the date of submission of complete documents in support of the application.
Prior to the issuance of RMC No. 54-2014, taxpayers had 30 days within which to submit the complete documentary requirements from the date of filing of the claim for refund with the BIR (RMC No. 49-2013). It is only upon submission of the complete documents that the 120-day period would begin to run. However, under RMC No. 54-2014, the requirements have become more burdensome. Aside from the additional documentary requirements, taxpayers were required to complete the supporting documents at the time of the filing of the administrative claim. The new requirements, among others, are as follows:
- The application for VAT refund/tax credit must be accompanied by complete supporting documents;
- The taxpayer shall attach a statement under oath attesting to the completeness of the submitted documents. The affidavit shall further state that the said documents are the only documents which the taxpayer will present to support the claim;
- The Commissioner shall have 120 days from the date of submission of complete documents to decide whether or not to grant the claim for refund or issuance of the tax credit certificate;
- If the claim for VAT refund or credit is not acted upon by the Commissioner within 120-day period as required by law, such “inaction shall be deemed a denial” of the application for tax refund or credit.
Thus, when RMC No. 54-2014 took effect, some pending claims were deemed denied upon the expiration of the 120-day period from the date of the filing of the application, even if the taxpayers were still in the process of completing the supporting documents, which was previously allowed under RMC No. 49-2013. Some taxpayers who chose not to appeal the claim to the Court of Tax Appeals ("CTA") were left with no other remedy because the judicial claim for refund should have been filed within 30 days from the lapse of the 120-day period.
The issuance of RR No. 1-2017 clarified that the rules laid down by RMC No. 54-2014 should not be applied to claims filed and pending prior to the effectivity of RMC No. 54-2014, save for certain cases.
The issuance of RR No. 1-2017 clarified that the rules laid down by RMC No. 54-2014 should not be applied retroactively. Thus, pending claims that were filed prior to 11 June 2014 are not considered automatically denied after the lapse of the 120-day period from the date of filing of the application. This new issuance by the BIR is relevant to taxpayers whose claims have been denied solely because of the lapse of the 120-day period. Affected taxpayers whose claims were deemed denied by the BIR, and who,did not appeal to the CTA, may revive their administrative claims for VAT refund by invoking RR No. 1-2017.