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BIR sets verification rules for low-risk VAT claims

THE Bureau of Internal Revenue (BIR) said in new guidelines that it will require only minimal verification of value-added tax (VAT) refund claims classified as low risk.

In a memorandum order, the BIR said: “Processing of VAT refund claims classified as low risk shall be limited only to the checking of the authenticity and completeness of documentary requirements,” it said.

“Verification procedures for sales of goods and services as well as purchases and input tax shall no longer be performed,” the BIR added.

In the order, the BIR said revenue officers (ROs) handling VAT refund claims will be made to document their risk classification decisions.

“The assigned ROs of the VAT refund claim shall include in their respective working papers the matrix on how the risk level of the VAT refund claim was determined, providing justification and supporting documentation, if any,” it added.

The risk classification process employs a points system that considers the amount involved in the claim; the frequency of claims filed; the claimant’s tax compliance history; as well as other factors deemed to constitute risk.

The Ease of Paying Taxes Act, signed into law in January, introduced the risk-based approach to evaluating VAT refund claims, with claimants classified as low, medium, or high risk.

Medium-risk claims require the verification of at least 50% of the sales amounts and 50% of total invoices/receipts issued including inward remittances and proof of VAT zero-rating.

Claims in this category must also undergo verification of at least 50% of the total amount of purchases on which input VAT was claimed, and of 50% of suppliers with priority on “big-ticket” purchases.

Meanwhile, high-risk claims require 100% verification for both sales and purchases.

VAT refund claims that are automatically considered high risk include those claims filed between April 27, 2024 and June 30, 2024; those filed by first-time claimants, who will be treated as such for the succeeding three claims; and claims in which the claimant cannot be located, among others.

“Other cases may be considered high-risk claims as determined by the Commissioner of Internal Revenue based on reasonable criteria,” it added. — Luisa Maria Jacinta C. Jocson