RMO No. 23-2024 — Prescribes the guidelines, policies and procedures in the implementation of the risk-based approach in the verification and processing of Value-Added Tax (VAT) refund claims, as introduced in Republic Act No. 11976 (Ease of Paying Taxes Act). Digest | Full Text | Annex A

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE Quezon City JU

REVENUE MEMORANDUM ORDER NO.23 - 2024

SUBJECT Guidelines, Policies and Procedures in the Implementation of the Risk-

(VAT) Refund Claims, as Introduced in Repubtic Act (RA) No. 11976. Based Approach in the Verification and Processing of Value-Added Tax

Otherwise Known as the "Ease of Paying Taxes Act"

TO Ail Internal Revenue Officials, Employees and Others Concerned

Section I 12(A) of the National Internal Revenue Code of 1997, as amended (Tax Code) by RA Regulations (RR) No. 5-2024. No. 11976 or the Ease of Paying Taxes (EOPT) Act, and as implemented by Revenue implementation of the risk-based approach in the verification of VAT refund claims under This Order is issued to provide guidelines, policies and procedures in the

T GENERAL POLICIES

1. The policies on risk-based verification of VAT refund claims pursuant to Section strictly followed. 1 12(A) of the Tax Code, as implemented under Section 3 of RR No. 5-2024, shall be

2. The assigned Revenue Officer/s (RO) of the VAT refund claim shall evaluate and ascertain from the necessary data available (i.e., documents submitted by the taxpayer- claimant and including those available in the records/database of the BIR) for purposes of classifying the risk level of VAT refund claims.

3. The concerned BIR office/s that possess/es the necessary data or information related to the risk factor identified in the matrix shall respond to the processing office/s within BIR office/s and processing office/s. five (5) days upon receipt of the request for data from the latter. Requests and responses may be sent electronically via the dedicated email address of the concerned

4. The assigned ROs of the VAT refund claim shall include in their respective working providing justifications and supporting documentations, if any. refund claim. papers the matrix on how the risk level of the VAT refund claim was determined. Inasmuch as there is a 90-day period mandated by law to process VAT refund claims. BIR office/s that failed to provide the data within the prescribed 5-day period shall be administratively dealt with pursuant to Section 269(J) of the Tax Code, if such failure or inaction has become the cause-of the delay in the processing of the VAT O

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5. The assigned ROs shall follow the scope of the verification of sales and purchases of the VAT refund claims depending on the risk-level identified under Section II (2) of this Order.

6. The processing offices shall verify the record of VAT refund claims processed for the immediately preceding six (6) years with details of the taxpayer-claimant, amount of claim, period of claim, date of application, amount granted/denied and percentage of disallowance over the amount of claim, among others, which will be used by the assigned ROs in determining the risk-classification of the VAT refund claims.

7. For taxpayer-claimant filing other than the annual basis fi.e., quarterly, semestral, covering 3 quarters), the risk classification shall be made for every filing.

8. The processing offices shall furmish the Department of Finance, the BIR Management. and the Commission on Audit (COA), a monthly report on the VAT refund claims processed to include the risk level identified for each taxpayer-claimant.

JI. IDENTIFICATION OF THE RISK CLASSIFICATION OF THE CLAIM

1. The following VAT refund claims shall be automatically considered as high-risk or shall require full verification:

b.Filed by first-time claimant which will remain as such for the succeeding three (3) a. Claims filed on April 27, 2024 to June 30, 2024: C. The fourth (4th) claim following the three (3) consecutive (ow-risk classification VAT refund claims;

d.Filed pursuant to Section l I2(B) of the Tax Code; f. Filed by taxpayer-claimants with complaints duly filed at the Department of e.Filed by taxpayer-claimant tagged as Cannot Be Located (CBL): of processed VAT refund claims;

h. Applications for VAT refund claim covering more than one taxable quarter, where g. Filed by taxpayer-claimant who has fully denied claim from its immediately preceding VAT refund claim; and at least one taxable quarter is already prescribed. Justice (DOJ) and/or those facing criminal cases before the Courts under the Rur After Tax Evaders (RATE) and Run After Fake Transactions (RAFT) programs;

claim for VAT refund for the last five (5) years prior to the application of claim as For purposes of this Order, first-time claimant shall refer to those with no history of VAT refund application since registration with the BIR or no previous administrative certified by BIR Assessment Programs Division (APD).

in the risk matrix under item 2 of this Section). These shall be covered by a separate The enumeration under (a) to (h) shall not be considered exclusive. Other cases may be considered as high-risk claims as determined by the Commissioner of Internal revenue issuance. Revenue based on reasonable criteria (e.g. relevant risk factors not otherwise captured

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2. The risk classification shall be determined using a point system which considers the

following main risk factors:

a Amount of VAT refund claim; h Frequency of filing VAT refund claims;

d. Other risk factors (e.g., level of disallowance from previous claims) c. Tax compliance history; and

3. The risk matrix attached hereto as Annex "A" shall be used as guide by the processing offices in determining a particular VAT refund claim's risk ievel.

4. Failure to secure data from the concerned office or the unavailability of data related to a specific risk factor (e.g., data on COA disallowance, etc.) shall automatically be excluded from the matrix and the corresponding weight assigned thereto shall be

reallocated to the risk factor that has corresponding data/information within the same category under the main risk factors mentioned in no. 2 above.

become futile must be properly documented such as, but not limited, to email/letter requests, follow-ups and other similar communications. Proof that efforts have been made to sccure data from the concerned office which have

5. The resulting weighted average following the prescribed pointing system shall be

interpreted as follows:

Low-risk: Medium-risk: High-risk: above 35.00% but not exceeding 60.00% 35.00% and below above 60.00%

6. The risk matrix and risk factors shall be revisited and adjusted accordingly, if deemed

necessary.

I. REFUND CLAIMS PROCEDURES BASED ON RISK CLASSIFICATION

follows: The scope of verification may be reduced in accordance with the identified risks as

Note. Medium Level Risk Low High - Based on initial checking of the documents submitted during check-tisting procedures only. This Submission of Complete Prescribed by the BIR* Requirements Documentary Yes Y es Yes At least 50% ofthe amoun Scope of Verification of sales and 50% of the issued including inward remittance and proof of total invoices/receipts No verification VAT zero-rating of Sales 100% input VAT claimed and 50% of suppliers with priority on amount of purchases with At least 50% of the total Scope of Verification "Big-Ticket" Purchases No verification of Purchases 100%

does not include thorough verification of the supporting documents for sales and purchases.

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1. Before officially receiving the application, the assigned RO in the processing office shall perform the checklisting and pre-verification procedures to ensure the Only applications with complete documentary requirements shall be received and completeness of the submitted documentary requirements by the taxpayer-claimant.

processed by the authorized processing office.

2. Processing of VAT refund claims classified as low-risk shall be limited only to the longer be performed. checking of the authenticity and completeness of documentary requirements under the Checklist of Mandatory Requirements in RMO No. 71-2023 (Annex A.1). Verification procedures for sales of goods and services as well as purchases and input tax shall no

3. For medium-risk claims, the default 50% verification rate shall be determined as follows:

a. For sales transactions:

i. Total or all invoices/receipts issued supporting the declared total sales for the

which shall be sorted from lowest to highest. The first 50% of the total invoices/receipts starting from the lowest randomly assigned number shall comprise the documents subject for verification. period of claim (including other documents supporting zero-rating treatment such as bill of lading, inward remittance, etc.) shall be assigned random numbers.

ii. The sales documents to be examined shall account for at least 50% each of the total sales reported as zero-rated and exempt. If the total documents determined of zero-rated and exempt sales, additional documents to be examined shall be taken from the succeeding invoices/receipts randomly sorted as mentioned under item (a.i), until the minimum 50% of the total amount of zero-rated and exempt sales are covered. under item (a.i) is not sufficient to cover the minimum 50% of the total amount

iii. Sales adjustments as supported by credit/debit memo, journal vouchers and other relevant documents shall be fully verified in addition to the minimum 50% of Sales to be verified. iv. For sales transactions supporied by provisional and final invoices/receipts (e.g.. mining industry), such provisional and final invoices shall be selected and counted as one transaction for purposes of identifying the minimum 50% sales that will be verified.

b. For local purchases with input VAT claimed:

i. The selection of the documents for verification shall consider 50% of the total suppliers of local purchases with: input VAT claimed, where suppliers for "big. ticket purchases" shall be prioritized.

ii. The non-big-ticket suppliers of local purchases with input VAT claimed shall be assigned random numbers, which shall be sorted from lowest to highest. The rest of the 50% of the minimum required suppliers (i.e., after considering the

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suppliers for big-ticket purchases) subject for verification shall then be taken from the list of suppliers sorted starting from the lowest randomly assigned number.

iii. If the total documents determined under item (b.i) is not sufficient to cover the

minimum 50% of the total local purchases with input VAT claimed, additional documents shall be examined which shall be taken from the transactions with the succeeding suppliers randornly sorted as mentioned under item (b.ii), until the minimum 50% of the total local purchases with input VAT claimed are covered.

iv. Big-ticket purchases will be subject to 100% verification of the supporting purchase invoices/receipts, including the related proof of payment.

c. For importations with input VAT claimed:

i. The selection of documents for verification shall consider 50% of the total suppliers of imported purchases of goods for which input VAT was claimed. ii. The suppliers of imported purch.ases of goods with input VAT claimed shall be assigned random numbers, whic'h shall be sorted from lowest to highest. The first

assigned number shall comprise the source for documents subject for 50% of the total suppliers of im ported goods starting from the lowest randomly

Verification.

ii. If the total documents determined under item (c.i) is not sufficient to cover the minimum 50% of the total importations with input VAT claimed, additional the succeeding suppliers of imported goods randomly sorted as mentioned under item (c.ii), until the minimum 50% of the total importations with input VAT documents shall be examined vhich shall be taken from the transactions with claimed are covered.

iv. Verification of claims for refund of unutilized input VAT on importations shall include the VAT Payment Ce:tification issued by the Revenue Accounting Division of the Bureau of Customs and copies of Import Entry and Internal Revenue Declarations or Inforim:al Import Declaration or Single Administrative Document submitted by the taxpayer-claimant as part of the mandatory

requirements.

4. For medium-risk claims, in the event that the assigned ROs found at least 30% thereby mandating the performance of 100% verification on both sales and purchases. disallowance of the total amount of VAT refund claim upon examination of the default 50% verification rate, the risk classification shall be modified to high-risk claim,

5. For high-risk claims, 100% verification of sales and purchases, including general applicable to the year of application of the VAT refund. verification procedures, shall be performed pursuant to the policies and procedures

6. The RO-reviewer shall conduct a review of the endorsed docket of the claim, which will then be recommended either for approval/disapproval based on the evaluation of

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the same documents that were verified by the processing office and following the same risk-based assessment made by the latter.

Checking of the related Supporting clocuments (e.g., sales invoices/official receipts for purchases and sales including export documents and import documents) for medium- for review and shall be limited only to the scope of verification performed by the and high-risk claims shall be done on a sampling basis only due to limited time allotted

processing office.

IN. REPEALING CLAUSE

inconsistent herewith are hereby renealed, amended or modified accordingly. All provisions of revenue issuances/memoranda or portions thereof that are

V. EFFECTIVITY

To provide ample time for the taxpayers and the BiR to adjust with the new requirements and procedures that will be imposed, this Qrder'shall cover claims filed starting July I, 2024 onwards.

UMAGUI JR. Cf ssioner of Internal Revenue

BUREAU OF INTERNAL REVENUE

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