Philippines: Requirements for refund or credit of input VAT for zero-rated sales and services
Court of Tax Appeals (CTA) decision setting out the requirements for a valid claim
Court of Tax Appeals (CTA) decision setting out the requirements for a valid claim
The Court of Tax Appeals (CTA) recently issued an en banc decision setting out the requirements for a valid claim for refund or credit of input value added tax (VAT) attributable to zero-rated sales and the essential elements of valid VAT zero-rated sales of services:
- The claim for refund must be filed with the Bureau of Internal Revenue (BIR) within two years after the close of the tax quarter when the sales were made.
- A judicial claim with the CTA must be filed within 30 days from receipt of the BIR’s decision fully or partially denying the claim, or after the expiration of the 120-day period (now 90-day period) within which the BIR must act on the application.
- The claimant must be a VAT-registered taxpayer.
- The taxpayer must be engaged in zero-rated or effectively zero-rated sales for which the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules and regulations. In particular, to establish that sales of services are zero-rated, the taxpayer must show that:
- The recipient of the services is a foreign corporation, and such corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed, including presentation of both the Securities and Exchange Commission (SEC) Certificate of Non-registration of Corporation/Partnership and proof of registration/incorporation in a foreign country (i.e., Articles of Foreign Incorporation)
- The services rendered are not “processing, manufacturing or repacking goods”
- The services are performed in the Philippines by a VAT-registered person
- The input taxes being refunded must not be transitional, must be due or paid, must be attributable to zero-rated or effectively zero-rated sales, and must not have been applied against output taxes during and in the succeeding quarters.
- The taxpayer must comply with the applicable substantiation and invoicing requirements.
Read a November 2023 report prepared by the KPMG member firm in the Philippines
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.