“Kaizen,” the Japanese management concept of “continuous improvement,” is a philosophy many live by, myself included. It is based on the belief that any process can be improved, and nothing should remain status quo. Embracing kaizen is a commitment to a mindset of making small, incremental progress, culminating in significant positive change over time.
Our tax authorities also seem to be adopting continuous improvement, as seen in their efforts to implement the Ease of Doing Business Act, which requires agencies to streamline the delivery of government services and forces them to complete transactions within a prescribed timetable. Now that we are in its fifth year of implementation, taxpayers and government officials may wonder how much progress this reform has made.
The good news is, the BIR has indeed released issuances that rang in substantial changes to comply with the Ease of Doing Business Act this year.
QUARTERLY FILING OF VAT RETURNS
The year started off with Revenue Memorandum Circular (RMC) No. 5-2023 on Jan. 13. The RMC covers transitory provisions on the quarterly filing of VAT returns. Starting Jan. 1, 2023, VAT-registered taxpayers are no longer required to file monthly VAT returns (BIR Form 2550M) pursuant to Section 114(A) of the Tax Code of 1997, as amended by RA No. 10963 (the TRAIN Law).
After the first quarter, most taxpayers found solace in the simplified filing and payment of VAT returns, but then again, not everyone was on the same page. Some taxpayers found themselves in distress regarding the burden of the preparations, especially companies that deal with numerous monthly transactions. Hence, some taxpayers are pleading to be allowed to file and pay their VAT returns monthly. In response, the BIR issued RMC No. 52-2023, which cited Republic Act (RA) No. 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, and approved the request to continue with monthly filing.
Considering that the Tax Code follows the pay-as-you-file system of taxation under which taxpayers compute their own tax liability, prepare the return, and pay the tax as they file the return, VAT-registered persons may thus still choose to file and pay their VAT returns monthly if it is convenient on their end, with no penalty.
VAT REFUND MADE EASY
One of the highlights of the BIR’s issuances this year is simplified requirements and procedures for VAT refund applications. In June, the BIR issued Revenue Memorandum Circular (RMC) No. 71-2023 and Revenue Memorandum Order (RMO) No. 23-2023, which streamlined the process and requirements for making VAT refund. The new rules apply to all claims filed starting July 1, 2023.
The issuances cover the change in venue for filing VAT refund claims of indirect exporters or those engaged in other VAT zero-rated activities other than direct exports. The most talked-about revision significantly reduces the number of documentary requirements needed to be submitted by taxpayers applying for a VAT refund. The revised checklist contains a maximum of 22 required documents, in contrast with 30 in the previous checklist. The BIR also now only requires original copies of the sales invoices or official receipts issued for sale and purchase transactions.
However, this raises a concern on the taxpayer’s end since there is a probability the BIR may lose track of these original documents considering that they are also handling large volumes of documents from other taxpayers. The taxpayers will also need their original documents in case they are audited by the BIR or in case of denial of the VAT refund claim by the BIR. Accordingly, they will also have to present the same documents to the courts if the claim is elevated to the judiciary.
Other highlights involve the acceptance of VAT refund applications, including VAT refund applications filed beyond the two-year prescriptive period. In such cases, applications will be accepted, but the processing office will recommend outright denial to make the claimant avail of judicial remedy.
Further, the BIR will now accept VAT refund applications from taxpayer-claimants with existing tax delinquencies reflected in the Delinquency Verification Certificate (DVC). However, tax liabilities will be offset against any approved amount of VAT refund for collection, either fully or partially.
ENHANCED REGISTRATION FORMS
In light of the Ease of Doing Business Act, the BIR issued RMC No. 60-2023 to launch the enhanced BIR registration forms (July 2021 version).
In conclusion, we can say that the BIR is striving to align its recent issuances with the Ease of Doing Business Act. Such incremental actions are indeed noteworthy, and taxpayers have felt a substantial improvement. The tax authorities’ efforts to make our tax system easier to navigate promise more improvements to come, if they are indeed on the path of kaizen.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Neymhel Marie I. Obedencio is a semi-senior from the Tax Advisory & Compliance Practice Area of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 29 Partners and more than 1000 staff members.
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