Bill proposes DoF take charge of processing VAT refund claims

A SENATE bill is proposing to transfer the responsibility of processing value-added tax (VAT) refund claims to the Department of Finance (DoF) from the Bureau of Internal Revenue (BIR).

Senator Sherwin T. Gatchalian, who heads the Senate Ways and Means Committee, said in Senate Bill No. 2654’s explanatory note: “Even after (claimants) submit the proper paperwork, the BIR continues to deny rebates by citing rules not clearly written in the tax laws or other laws and regulations.”

“Many companies are giving up on the VAT rebate due to the time, labor, and costs of dealing with the BIR.”

Under the measure, which Mr. Gatchalian filed on May 6, the DoF’s Revenue Operations Group will be tasked with processing VAT refund claims, instead of the BIR.

The Secretary of Finance will also be tasked with approving refund claims for creditable input taxes, taking the responsibility away from the internal revenue commissioner.

The American Chamber of Commerce of the Philippines, Inc. has said VAT refunds for jet fuel purchases take as long as five years to resolve.

The bill also seeks to impose a 2% tax on registered business enterprises (RBEs) operating in economic zones, based on their gross sales, while granting RBEs a 100% additional deduction on power expenses incurred in a taxable year, up from the 50% currently authorized by Tax Code, to address high power costs.

The bill also seeks to amend the applicability of an RBE’s net operating loss carryover to five years after the end of the income tax holiday period.

Registered export enterprises will also be given duty exemptions on imports of raw materials and spare parts for capital equipment.

Businesses will also be entitled to VAT zero-rating on local purchases, provided they operate at 70% capacity.

The CREATE MORE (CREATE to Maximize Opportunities for Reinvigorating the Economy) measure,  which seeks to cut the corporate income tax to 20% from 25%, was passed by the House of Representatives on final reading in March, and has been transmitted to the Senate, Senate President Juan Miguel F. Zubiri said last month. — John Victor D. Ordoñez