90 days to process claims for VAT refunds

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THE secretary of Finance has issued Revenue Regulations 26-2018, which amends certain portions of RR 13-2018, or the “2018 Value-added Tax (VAT) Regulations.” RR 13-2018 implements the VAT and percentage tax provisions of Republic Act 10963, or the Tax Reform for Acceleration and Inclusion (Train) Act. Like Train, RR 13-2018 took effect on Jan. 1, 2018.

Before we dive into the amendments introduced by RR 26-2018, it would be worthwhile to review some of the salient provisions of RR 13-2018:

The following export sales of goods and services continue to be subject to zero-percent VAT:

– The sale of raw or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise that will be used in manufacturing, processing, packing or repacking that buyer’s goods in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).

– The sale of raw or packaging materials to an export-oriented enterprise whose export sales exceed 70 percent of total annual production.

– Transactions considered “export sales” under the Omnibus Investments Code of 1987 and other special laws.

– Processing, manufacturing or repacking goods for other persons doing business outside the Philippines, which are subsequently exported and where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.


– Services rendered by contractors in processing, converting or manufacturing goods for an enterprise whose export sales exceeds 70 percent of total annual production.

The abovementioned export sales shall be subject to 12-percent VAT once these conditions occur:

– The establishment and implementation of an enhanced VAT refund system that grants and pays refunds of creditable input tax within 90 days from the filing of the VAT refund application with the Bureau of Internal Revenue (BIR).

– All pending VAT refund claims as of Dec. 31, 2017 shall be fully paid in cash by Dec. 31, 2019.

For this purpose, the Department of Finance shall establish a VAT Refund Center in the BIR and in the Bureau of Customs to process and grant cash refunds of creditable input tax.

For this purpose, RR 26-2018 clarified that the 90-day period provided to the BIR to process the claims for refund for creditable input tax shall start from the filing of the claim up to the release of the payment of the refund.

In addition, the claim is considered to have been filed only after the taxpayer submits the official receipts/invoices and other documents to support his or her application.

If the 90 days lapse without the refund released to the taxpayer, the claim may still be processed administratively. Any BIR employee who fails to act on the claim within 90 days shall, upon conviction, be fined and imprisoned, and also be permanently disqualified from holding public office, voting and participating in any election.

The amendments introduced by RR 26-2018 shall apply to claims for refund filed upon the effectivity of RR 13-2018.


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