Over the last months, the requests for refunds of Value Added Tax (VAT) from the Tax Administration Service (SAT) have become a complicated process for taxpayers, since, in addition to being lengthy and involving the tax authorities' exercise of auditing powers, this process, in many cases, ended up, in the best scenario, in the abandonment of such refund requests by the taxpayers.

In connection with the foregoing, on October 08, 2014, the Office for the Defense of Taxpayers (the "PRODECON"), together with the SAT, issued Newsletter 050/2014, which contains the internal strategies to be followed by the SAT to make more expeditious the audits it conducts in order to determine the appropriateness of the VAT refund requests.

Below is a list of the most relevant aspects of such strategies:

  • Any audits conducted by the SAT as a result of a VAT refund request must be completed within a term not to exceed 90 – 180 days.
  • The final report should be prepared within the above mentioned terms, in order to allow the taxpayer to disprove any observations made.
  • Audits will be conducted preferably through an in situ inspection, and only those transactions giving rise to the refund request will be reviewed.
  • Audited taxpayers will be notified of any request for information sent to third parties (compulsas).
  • When a taxpayer files several refund requests, only one request for information and documentation will be made and, as appropriate, one single audit will be conducted.

The Newsletter indicates that the above-mentioned strategies will be effective for audits conducted by the SAT as of October 01, 2014.

We consider that the foregoing is a step forward in protecting the taxpayers' rights, as it defines with clarity and precision how the authority should act with respect to VAT refunds.