Foreign chambers urge gov’t to issue prospective ruling on VAT refund

MANILA, Philippines - Foreign business chambers are urging the government to come up with a prospective ruling on value-added tax (VAT) refunds to allow investors to get what they have been promised as well as encourage new firms to invest in the country for the long-term.

In a press conference yesterday, European Chamber of Commerce of the Philippines (ECCP) executive vice president for external affairs Henry Schumacher said business groups believe there is a need for government to provide guidance on rules to get VAT refunds offered as an investment incentive.

“The business groups are looking for a prospective ruling so that all pending investors will be treated fairly in being refunded as promised by the government in the first place,” he said.

He noted that an estimated P6-billion to P7-billion worth of VAT refunds have yet to be given each by the government to foreign investors.

As an incentive to investors, capital equipment could be imported to the country at zero duty. The firms are claiming refunds for the advanced VAT payments made for the imports.

San Roque Power Corp. (SRPC), which is jointly owned by Marubeni Corp and Kansai Power International Corp., is among the firms which have yet to claim their VAT refunds. SRPC’s tax refund amount to more than P480 million.

In February, the Supreme Court (SC) ruled that SRPC is not eligible to claim VAT refund based on technicalities.

The SC noted that the firm lost its right for refund as it filed the claims with the Court of Tax Appeals (CTA) before the Bureau of Internal Revenue (BIR) gave its decision on the tax refund.

Under Section 112 of the 1997 National Internal Revenue Code, the BIR commissioner is given 120 days from the date of submission of documents by the claimant to decide if it would grant a refund or issue the tax credit certificate for creditable input taxes.

The claimant could file an appeal with the CTA within 30 days upon receipt of unfavorable ruling from the BIR.

“The business or investor community is watching the pending VAT refund case of SRPC before the SC with anxiety as it will set new rules for investors seeking the refund of advanced VAT,” Schumacher said.

He noted that when comparing the case of SRPC with many decided by the BIR, CTA and the SC, there is evidence to suggest that all three decided on the basis of different criteria thereby confusing the private sector.

“The business community supports SRPC in filing a Motion for Leave to be allowed to file a second Motion for Reconsideration after the recent 6-6-2 SC decision on its case to clarify once and for all with a majority vote of Justices on the effectivity date and providing the lower courts and investors with clear guidance,” he said.

Schumacher stresses the necessity for the government to address the issue especially as it seeks to attract foreign direct investments in the country.

“Old investors should be treated as new investors because old investors serve as ambassadors for new investors,” he said.

In the same event, Japanese Chamber of Commerce and Industry of the Philippines Inc. president Takashi Ishigami said that while many Japanese companies are interested to invest in the country because of the economic growth performance and good quality of labor force, it is difficult for them to decide because of confusion in rules.

In particular, he said there is confusion over rules on VAT refund as well as in water concession agreements.

The government ordered a reduction in tariff being charged even as the water concession agreement provides for a mechanism to determine the tariff and the appropriate market-based return on the concessionaire’s investments.

Even as the government wants firms to participate in the Public-Private Partnership projects, Ishigami said Japanese companies are on a wait-and-see because of such issues.

“We think that rules need to be clear and it should be effective for long time,” he said.