Cash Refund Procedure for VAT on Importations

Section 608 of the Tariff and Customs Code of the Philippines, as amended is cited as the authority for prescribing the cash refund procedure.
Executive Order No. 68, as amended is cited for the implementation framework.
The General Appropriations Act FY 2014 is cited as the appropriation basis for the cash refund program.
Joint Circular No. 5-2012 dated October 31, 2012 (among DOF, DBM, BIR, and BOC) is cited as the basis for the operational arrangement on the refund program.
Joint Circular No. 1-97 dated January 2, 1997 is cited as part of the linked implementation arrangement for the cash refund mechanism.

The order is issued to implement the cash refund program for input VAT on importations attributable to zero-rated transactions under Section 112 of Republic Act No. 8424 (NIRC), as amended.
The order provides the procedure to facilitate cash refund of input VAT on importations covered by the zero-rating rule in Section 112 of the NIRC, as amended, where an appropriation has been set aside.
The order prescribes internal BOC steps to support the payment execution through the appropriate government budgeting and treasury processes.

The order applies to all claims for refund of input VAT on importations attributable to zero-rated transactions under Section 112 of the NIRC, as amended.
The order covers the processing of claims for cash refund of input VAT on importations within the BOC’s refund execution responsibilities.

The Tax Credit Secretariat (TCS) must check that required documents are attached to the docket forwarded by the BIR after receipt of the docket.
If the supporting documents are complete, the entire docket is endorsed by the Secretariat to the Chief, Revenue Accounting Division (RAD) for verification of payments of duties and taxes using Tax Credit, or if cash payments were made, for verification that such payments were remitted to the Bureau of Treasury (BTr).
After receiving the entire docket from RAD, and after RAD issues certifications attesting to collection and remittance to the BTr, the Secretariat must endorse the docket to the Chief Accountant, Accounting Division, Financial Management Office (FMO) for validation and computation of the amount to be refunded, and issue an Evaluation Report.
After receipt from FMO with the corresponding Evaluation Report, the Secretariat determines whether the claimant will receive cash refund or Tax Credit Certificate (TCC).
The Secretariat prepares the endorsement for signature of the Commissioner or his duly designated Tax Credit Approving Authority authorizing payment of cash refund or issuance of TCC based on the amount computed or recommended by FMO; the signed endorsement is then forwarded to Accounting Division, FMO for preparation of cash refund or issuance of TCC.

The claimant must have an attached copy of the claimant’s application for VAT refund pursuant to Section 112 of the NIRC, as amended.
The docket must include a BIR endorsement to the BOC containing the BIR’s determination of the validity of the claim for VAT refund on importation pursuant to Section 112 of the NIRC, as amended, with the corresponding Authority for the BOC to issue the VAT credit/refund.
The docket must include original or Certified True Copies of:
- Import Entry and Internal Revenue Declarations (IEIRDs),
- BOC Official Receipts (BCORs) or the Statement of Settlement of Duties and Taxes, and
- Single Administrative Documents and List of Importations for the period of the claim.

Cash release for VAT refund on importations is subject to availability of funds appropriated for the purpose.
The budget execution process is subject to existing budgeting laws, rules, and regulations in consultation with the DBM.
COA-DBM-DOF Joint Circular No. 1-97 (Guidelines for the Transfer by National Government Agencies of all Cash Balances to the National Treasury, dated 2 January 1997) is adopted to guide the treatment of trust receipts, including release of funds to cover tax refund.
FMO must open and maintain an MDS-Sub account for trust receipts with an MDS Government Servicing Bank.
RAD must issue a Journal Entry Voucher (JEV) to cause transfer of funds from General Fund to Trust Fund and endorse it to FMO.
FMO must request the BTr for certification and for the BTr’s JEV to adjust the books on the transfer of funds, ensuring the amount to be refunded is set aside and available under BOC’s trust liabilities account.

Within five (5) days from receipt of the endorsement authorizing the cash refund, FMO must prepare the request for issuance of a Notice of Allocation (NCA) from the DBM, supported by BTr certification that the corresponding amount is available under BOC’s trust liabilities account.
The NCA request must be supported with:
- An endorsement signed by the Commissioner or his duly designated Tax Credit Approving Authority authorizing payment of the cash refund;
- A copy of the claimant’s application for VAT refund pursuant to Section 112 of the NIRC, as amended;
- The BIR endorsement to the BOC with the BIR’s determination of validity for VAT refunds on importation pursuant to Section 112 of the NIRC, as amended, with the corresponding authority for the BOC to issue the refund;
- RAD’s certification of payments; and
- The computation of the final amount of cash refund as computed by Accounting Division, FMO.
Upon receipt of the NCA, the Accounting Division, FMO must prepare the Disbursement Voucher and forward it to the BOC Cashier.
The Cashier must prepare a check based on the Disbursement Voucher.
Release of the check is made only to:
- the claimant himself, or
- the claimant’s authorized representative,
- upon presentation of a Special Power of Attorney executed in favor of the representative, or (for corporations) a Secretary’s Certificate and Board Resolution.

Claimants must secure a Clearance from the Collection Service attesting that the importer-claimant has no outstanding liability with the BOC.
The Clearance must be submitted to the Secretariat before the Secretariat prepares the endorsement authorizing payment.
Where a claimant determines liabilities based on the Collection Service records, the claimant must settle those liabilities first before the claim for VAT refund is processed for payment.

Applicants with claims pending processing with the BOC, or whose tax credit certificates have yet to be issued, may apply for cash refund.
The option to apply for cash refund requires submission of a formal letter to the Secretariat manifesting preference for cash refund in lieu of issuance of Tax Credit Certificates.

The Accounting Division, FMO must prepare and submit monthly reports to the Commissioner and the Tax Credit Approving Authority on utilization of amounts appropriated for payment of cash refund.
The Accounting Division, FMO must also prepare quarterly reports on utilization of appropriated amounts for cash refund.
Quarterly reports must be submitted by the Commissioner of Customs to:
- the DBM,
- the House Committee on the Appropriations, and
- the Senate Committee on Finance,
- for evaluation and consideration in preparation of the next year’s budget for the BOC.