Author MRTC

Introduction

REVENUE MEMORANDUM ORDER NO. 23 – 2024

Issued on June 19, 2024, provides the guidelines, policies, and procedures in the implementation of the risk-based approach for verifying and processing Value-Added Tax refund claims, as per Republic Act No. 11976 (Ease of Paying Taxes Act).

  1. GENERAL POLICIES
    1. Section 112(A) of the Tax Code, as amended and Section 3 of RR No. 5-2024 mandate strict risk-based verification of VAT refund claims.
    2. The assigned Revenue Officers (RO) evaluate and classify the risk level of VAT refund claims using available data, including taxpayer claimant documents and BIR records.
    3. BIR offices must respond within five days to requests for data or information related to the risk factor identified. Inasmuch as there is a 90-day period mandated by law to process VAT refund claims, failure to provide data within a 5-day period shall lead to administrative action.
    4. The assigned ROs of VAT refund claims must provide a matrix detailing the risk level determination, justifications, and supporting documentations.
    5. The assigned ROs must verify sales and purchases of VAT refund claims based on the identified risk-level under Section II (2) of the order.
    6. Processing offices must verify VAT refund claims for the past six years, including taxpayer-claimant details, amount, period, date of application, granted/denied amount, and percentage of disallowance. The assigned ROs will use this information to determine risk-classification.
    7. Filings by taxpayer-claimants that are not made annually need to be risk classified for every filing.
    8. Processing offices are required to submit monthly reports on completed VAT refund claims to the Commission on Audit, BIR Management, and the Department of Finance.
  2. IDENTIFICATION OF THE RISKS CLASSIFICATION OF THE CLAIM
    1. Outlines the criteria for categorizing VAT refund claims as high-risk, which require full verification. The claims that are automatically considered high-risk include:
      1. Claims filed between April 27, 2024, and June 30, 2024.
      2. Claims filed by a first-time claimant, which will also apply to their next three claims.
      3. The fourth claim following three consecutive low-risk classifications.
      4. Claims filed pursuant to Section 112(B) of the Tax Code.
      5. Claims filed by taxpayers tagged as Cannot Be Located (CBL).
      6. Claims filed by taxpayers with complaints filed at the Department of Justice (DOJ) or facing criminal cases under the Run After Tax Evaders (RATE) and Run After Fake Transactions (RAFT) programs.
      7. Claims filed by taxpayers who fully denied the immediate preceding VAT refund claim.
      8. Applications covering more than one taxable quarter, with at least one quarter already prescribed.

        First-time claimants are defined as those with no previous VAT refund applications or administrative claims since registration or within the last five years, as certified by the BIR Assessment Programs Division (APD). Other cases may also be considered high-risk based on reasonable criteria, even if not explicitly listed. These additional cases will be reviewed separately.
    2. Describes the method for determining the risk classification of VAT refund claims:
      1. Amount of VAT refund claim.
      2. Frequency of filing VAT refund claims.
      3. Tax compliance history.
      4. Other risk factors (e.g., level of disallowance from previous claims).
    3. Risk Matrix:

      A risk matrix (Annex “A”) will guide processing offices in determining a claim’s risk level.
      1. Data Unavailability:

        If data is unavailable, the corresponding weight will be reallocated to a similar risk factor with available data. Documentation of efforts to secure data must be provided.
      2. Risk Level Determination:

        The weighted average will classify claims as:
        1. Low-risk: 35.00% and below.
        2. Medium-risk: above 35.00% but not exceeding 60.00%.
        3. High-risk: above 60.00%.
      3.  Review and Adjustment:

        The risk matrix and factors will be revisited and adjusted if necessary.
  3. REFUND CLAIMS PROCEDURES BASED ON RISK CLASSIFICATIONS

    For the scope of verification of sales and purchases for VAT refund claims, kindly refer to RR 5- 2024 issued on April 11, 2024.