GRT reimposed on financial deals

The Bureau of Internal Revenue (BIR) has issued two separate memorandum circulars re-imposing the gross receipts tax (GRT) on financial transactions, allowing banks and other financial institutions to refund the value added tax (VAT) they paid in January.

The circulars were issued after the passage of Republic Act 9238 which restored the application of the GRT on financial transactions when the VAT proved to be too difficult to administer.

Under the new BIR regulations, banks were allowed to claim the refund of VAT payments they made in January before the new law came into effect.

According to the BIR, however, banks and other covered financial institutions are required to report and pay the GRT on transactions entered into for the month of January 2004.

For transactions entered into in January that were covered by issued VAT receipts, the BIR said bank clients were also allowed to request for a refund from banks provided the VAT receipts were surrendered to the bank.

The bank, on the other hand, would be required to cancel the VAT receipts and issue a non-VAT invoice in its place.

The BIR also said banks would be allowed to claim VAT adjustments for their January transactions until April 2004 to allow clients to sort out their own receipts that would be surrendered to the bank when they claim their refund.

On the other hand, the BIR also issued another circular on the treatment of transactions with government agencies such as the Bureau of Treasury and the Bangko Sentral ng Pilipinas (BSP).

Under the VAT, the BTr and the BSP are required to deduct and withhold the VAT at the rate of six percent on the gross receipts for services rendered that were creditable against the VAT liability of the person for whom the amount was withheld.

The BIR said that banks and non-bank financial intermediaries were not allowed to deduct the VAT they collected from government agencies from their VAT liability or their GRT.

The BIR said it would refund the VAT charged by the banks and non-bank financial intermediaries to the government agencies when the agency has applied for the refund.

However, the BIR said the bank was allowed to claim adjustment of the VAT actually refunded against its GRT liability only up to April this year for transactions entered into last January.

The re-imposition of the GRT came into effect this year and also exempted lawyers from the VAT that was applicable to all professionals, except medical practitioners.