Re: Tax Refund of Creditable Input Vat

I. Facts:

Summary of Revenue Memorandum Circular No. 54-2014 1

The administrative claim for VAT refund or TCC must be filed within two
years from the close of the taxable quarter when the zero-rated sales and/or
effectively zero-rated sales were made.

The application for VAT refund must be accompanied by complete

supporting documents as specifically enumerated in Annex A of the RMC. In
addition, the taxpayer should attach a sworn statement/affidavit (i) attesting
to the completeness of the submitted documents; (ii) stating that the
attached supporting documents are the only documents which the taxpayer
will present to support the claim; and, additionally, (iii) in the case of
corporations or other juridical persons, there should be a sworn statement
that the officer signing the affidavit (which should at the very least be the
Chief Finance Officer) has been authorized by the companys Board of
Directors.

Upon submission of the administrative claim and its supporting

documents, the BIR shall process the claim, and no other documents
shall be accepted or required from the taxpayer in the course of its
evaluation. A decision shall be rendered by the Commissioner based only on
the documents submitted by the taxpayer. The application shall be denied if
the taxpayer fails to submit the complete supporting documents.

II. Issue:
Whether the Bureau of Internal Revenue (BIR) may accept an
administrative claim for tax refund of Creditable Input Value-Added Tax
even if the taxpayer has not submitted the complete documents as
required under Annex A specifically the Certified True Copy of Audited
Financial Statements of Revenue Memorandum Circular No. 54-2014?

III. Arguments
1. Pursuant to the due process guaranteed under the 1987 Constitution 2,
the taxpayer-applicant should be allowed reasonable freedom as to
when and how to present his claim within the allowable period
provided by law.

2. There is nothing in Section 112 of the NIRC or RMC No. 54-2014 that
requires that the submission of complete documents enumerated in
Annex A of RMC No. 54-2014 must be made upon the application of
tax refund.

3. The list of documents to be submitted upon the application of tax

refund as documents enumerated in Annex A of RMC No. 54-2014 is
not mandatory in granting claims for refund.

4. Administrative issuances must remain consistent and in harmony with

the law they seek to apply and implement.

IV. Discussion
1. In a claim for tax credit or refund, it is the taxpayer who has the
burden to prove his cause of action. As such, he enjoys relative

1 June 11, 2014

2 No person shall be deprived of life, liberty, or property without due process
of law, nor shall any person be denied the equal protection of the laws. ( Sec. 1, Art.
III, 1987 Constitution)
 freedom to submit such evidence to prove his claim. Furthermore, it is
the taxpayer has a greater interest in ensuring that the complete set of
documentary evidence is provided for proper evaluation of the State. 3

In the present Revenue Memorandum issued by the BIR, it restricts the

right of the taxpayer to exercise his discretion on how to present his
administrative claim when it provides that upon submission of the
application, the claim shall be processed and no other documents shall
be accepted or required from the taxpayer in the course of its
evaluation.

2. Under Section 112 (C) of the NIRC, it provides that In proper cases,
the Commissioner shall grant a refund or issue the tax credit certificate
for creditable input taxes within one hundred twenty (120) days
from the date of submission of complete documents in support
of the application filed in accordance with Subsections (A) hereof. 4

The law is clear and unequivocal that the 120-day period granted to
the CIR to decide the administrative claim is primarily intended to
benefit the taxpayer, to ensure that his claim is decided judiciously and
expeditiously.

Here, the RMC 54-2014 allows the CIR to determine the completeness
of the documents submitted which is upon the application of a tax
refund and thus dictates the running period of the 120-day period.

Moreover, what the law only requires is that the taxpayer has two (2)
years, after the close of the taxable quarter when the sales were
made, to apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales. Hence,
before the administrative claim is barred by the 2 year period, the
taxpayer should be allowed to submit his complete documents in
support of the application filed.

On the contrary, the RMC 54-2014 provides that it is upon the

application of the administrative claim that the supporting documents
must be submitted therefore this is the time when the reckoning period
of the 120-day starts to run.

3. As can be gleaned from RMC 54-2014, the circular is addressed to

internal revenue officers and employees for the purpose of
summarizing the rules on filing and processing of applications for VAT
refund/ tax credit. There is nothing stated in the RMC that would show
that it was intended to be a standard in determining whether the
documents submitted by the taxpayer are actually complete to support
a claim for tax credit or refund of unutilized excess VAT.

Moreover, under the Tax Code specifically Section 112 of the NIRC,
there was no express requirement that the submission of the complete
documents enumerated under Annex A of RMC 54-2014 is necessary
for a grant of a refund.5

3 Pilipinas Total Gas, Inc., vs. Commissioner of Internal Revenue, (December

8, 2015, G.R. No. 207112)
4 National Internal Revenue Code of 1997 ( Republic Act No. 8424)
5 Commissioner of Internal Revenue vs. Team Sual Corporation ( July 18,
2014, G.R. No. 205055)
 4. Administrative issuances must remain consistent and in harmony with
the law they seek to apply and implement. 6

Revenue Memorandum-Circulars are considered administrative rulings

which are issued from time to time by the Commissioner of Internal
Revenue. It is widely accepted that the interpretation placed upon a
statute by the executive officers, whose duty is to enforce it, is entitled
to great respect by the courts. Nevertheless, such interpretation is not
conclusive and will be ignored if judicially found to be erroneous. 7

Here, RMC 54-2014 runs contrary to the law and jurisprudence when it
provides that the application for VAT refund/tax credit must be
accompanied by complete supporting documents and in addition the
taxpayer shall attach a statement under oath attesting to the
completeness of the submitted documents. Furthermore, the affidavit
shall further state that the said documents are the only documents
which the taxpayer will present to support the claim.

The RMC 54-2014 provides stricter conditions which are not found
under the NIRC or applicable jurisprudence. In so doing, the BIR did not
simply interpret the law; rather it legislated guidelines contrary to the
statute passed by Congress.

It is well-settled that rules and regulations issued by administrative

officials to implement a law cannot go beyond the terms and provisions
of the latter.

6 Commissioner of Internal Revenue vs. Fortune Tabacco Corporation ( July

21, 2008, G.R. Nos. 167274-75)
7 Philippine Bank Communications vs. Commissioner of Internal Revenue, et
al. ( January 28, 1999, G.R. No. 112024)