TRAIN hastens VAT refund claims

Says DOF

The first tax reform law has hastened the processing of all value-added tax (VAT) refund claims after the measure introduced four reforms in the system of consumption levy, the Department of Finance (DOF) said yesterday.

According to the DOF, the tax reform for acceleration and inclusion (TRAIN) allowed exporters and other qualified entrepreneurs to claim their VAT refunds within three months after submitting applications for refunds.

The faster processing of VAT claims is due to enhanced VAT refund system provided under the TRAIN law.

These reforms include the setting up of a special trust account in the General Fund sourced from five percent of the total VAT collections of the Bureau of Internal Revenue (BIR) and the Bureau of Customs.

The tax reform also introduced basing revenue targets set for the next fiscal year on net of VAT refunds; a plan to conduct a risk-based post audit to do away with the tedious process of auditing claims before giving a refund; and implementation of an electronic invoicing and receipts system.

“So all of these together will allow the refund process to be better. We changed the incentives so that the refund system can be better given,” the DOF said.

Such reforms would be welcome news for enterprises applying for VAT refunds, which used to take as long as nine years to claim, according to businessman Peter Wallace, the man behind the Wallace Business Forum.

Under the National Internal Revenue Code, qualified businesses are allowed to recover excess input VAT for certain transactions, mostly those involving exports, either through a VAT refund or tax credit certificate.

The pre-TRAIN process of claiming VAT refunds involve the submission of a voluminous set of documents and often take years to resolve.

“For 30 years since we started the VAT in 1988, we’ve done the refund so badly because the incentive to give refund is not there. So we reformed it (under TRAIN),” DOF said.