Court asked to review VAT refund ruling

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THE business community on Tuesday joined the clamor for clear and transparent rules from the judiciary on value-added tax (VAT) refunds.

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The call came after the Supreme Court in a resolution dated October 8, 2013, turned down the claim of San Roque Power Corp. to recover P483-million excess input VAT from the BIR.

They said this leaves the business community (and the lower courts) with unclear dates of effectivity and hurts a string of other refund seekers.

Local and foreign business groups said there should be equal protection under the law.

Henry Schumacher, external affairs vice president for the European Chamber of Commerce of the Philippines, earlier expressed alarm by the “retroactive” rulings of the Court and the BIR.

In a statement, Schumacher said the San Roque case could turn off investors out to do business in the Philippines, adding that “the High Court and the BIR were ganging up on foreign investors, making it difficult for them to receive fiscal incentives such as duty and tax-free imports for capital equipment of priority sectors.”

Burdensome process
He said the long process of claiming such refunds is also burdensome to investors, since they have to go through the BIR only to be forced to go to the CTA and then to the High Court, where long delays cause businesses to claim their refunds only years after.

“San Roque Power Corp. is just the tip of the iceberg. There are a lot of companies out there with pending VAT refund claims,” he pointed out.

Although it is accepted that the 120+30-day rule in applying for VAT refund is valid, it is obvious that—by design or otherwise—the BIR was/is inconsistent regarding the question from when the 120+30-day rule counts.

The VAT refund case of San Roque Power Corp. (SRPC) compared to many others decided by the BIR, CTA and the Supreme Court, point to sufficient evidence that all three decided on the basis of different criteria, confusing the private sector and depriving some investors of the promised VAT refund, he added.

The business groups (foreign chambers, Makati Business Club, Management Association of the Philippines), including the European Chamber of Commerce in the Philippines have made efforts for the government to understand the predicament companies are currently facing, reiterating then and again today that there is an urgent need for a definite statement to the issue of the date of effectiveness.

According to the ruling written by Justice Antonio Carpio, the effectivity of the new interpretation should be from the date of effectivity of Republic Act 8424 (Tax Reform Act of 1997) on January 1, 1998, until December 10, 2003, date of issuance of BIR Ruling DA-489-03. From December 11, 2003, up to October 5, 2010, the 120+30-day period requirement will be deemed discretionary. Then from October 6, 2010, (date of promulgation of Aichi) onwards, the 120+30-day requirement is again deemed mandatory and jurisdictional.

Dissenting view
Justice Presbitero Velasco’s dissent opined that “judicial claims filed from January 1, 1996, (effectivity of Revenue Regulation 7-95) up to October 31, 2005, (prior to effectivity of Revenue Regulation 16-2005), should be exempt from strict enforcement of the 120+30-day requirement, provided that both administrative and judicial claims are filed with two years from close of the relevant taxable quarter.”

And for judicial claims filed from November 1, 2005, (date of effectivity of RR 16-2005, which clarified and correctly interpreted the meaning of Section 112(C) of the National Internal Revenue Code (NIRC), and effectively repealed RR 7-95. In other words, the 120+30-day period requirement is non-mandatory from Januaru 1, 1996,s until October 31, 2005, given that the prevailing rule at that time was RR 7-95 which allowed simultaneous filing of administrative and judicial claims.

Jomar Canlas

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