BIR: Incomplete VAT refund claims automatically deemed ‘high risk’

THE Bureau of Internal Revenue (BIR) will now automatically classify value-added tax (VAT) refund claims with incomplete information as “high risk,” subject to full verification.

In a memorandum order, the BIR said incomplete claims include those with no reference details and incomplete or no transaction details on the schedules of sales and purchases.

A VAT refund claim classified as “high risk” would need 100% verification of sales and purchases, according to an earlier memorandum issued by the BIR.

“With the implementation of the risk-based approach in the verification of VAT refund claims, the completeness of the information supplied in the schedules of sales and purchases is very crucial, as the scope of verification varies depending on the claim’s risk classification,” the BIR said.

“Hence, to address the issue of applications with incomplete/missing information on the schedules of sales and purchases, such applications shall automatically be classified as high risk and shall require 100% verification in accordance with the risk-based approach on the verification of VAT refund claims.”

Republic Act No. 11976 or the Ease of Paying Taxes Act applies a risk-based approach in evaluating VAT refund claims. This classifies claimants as low, medium, or high risk.

The risk classification process is determined through a points system that considers the size of the claim; the frequency of claims filed; the claimant’s tax compliance history; and other risk factors.

The BIR also classifies “high risk” claims if they were filed between April 27, 2024 and June 30, 2024; if they were filed by first-time claimants; claims in which the claimant cannot be located; and claimants with complaints before the Justice department or with pending criminal cases, among others.

The BIR identifies a VAT refund claim as low risk depending on the completeness of submitted documents.

A refund claim classified as medium risk is subject to 50% verification of both the sales amounts and total invoices/receipts issued including inward remittances and proof of VAT zero-rating.

The Commissioner of Internal Revenue may determine whether other cases may be deemed high risk, the bureau said. — Beatriz Marie D. Cruz