IN line with the bid to simplify tax processes with the issuances of Republic Act (RA) 10963 or the Tax Reform for Acceleration and Inclusion Law and the RA 11976 or the Ease of Paying Taxes Act, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Order (RMO) 16-2024 to streamline the process for claiming tax credits or refund of excise taxes paid on petroleum products.
The RMO aims to provide a more simplified approach to what has long been a major issue for businesses in the petroleum sector. However, it raises a critical question: will this streamline or prolong the process?
The amended guidelines are designed to expedite the refund process while ensuring transparency and promoting efficiency. One of the changes introduced is the updated and more comprehensive list of documents that must be submitted. The list includes a summary of excise tax payments and a breakdown of the pending excise tax claim with the BIR and/or the Bureau of Customs. While more detailed and transparent, the companies involved have been saddled with a more extensive list of requirements to fulfill.
This is also on par with the guidelines released by the BIR under Revenue Regulations 2-2018, which prescribes petroleum manufacturers and/or importers who are subject to excise taxes to create a real-time inventory of petroleum products found in storage depots of manufacturers and/or importers to be able to determine the possible volume, quantity or articles produced to provide the BIR with a better way of accurately accounting for excise taxes.
The BIR provided the regulations as a way to get a clearer picture of what can be deemed acceptable in terms of the tax refund process. It guides taxpayers on how to provide the proper documentation and lessen unnecessary delays. While the guidelines provide a positive and productive approach, they also impose new challenges with regard to the increased documentation and compliance requirements. The changes, including the need for a real-time tracking system, are potentially a hurdle for smaller businesses. Although it may be easier for large companies to adapt to these changes, the cost and the administrative burden of maintaining the additional detailed and precise records will pose some difficulties.
As the Department of Energy once said, "The stability of the oil supply is of paramount importance to any economy." Likewise, the ability of petroleum companies to claim tax refunds faster and more efficiently is vital for maintaining operational stability and enhancing their cash flow. Avoiding delays in these processes is crucial to preventing disruptions in their day-to-day operations. Moreover, the success of implementing these changes will depend on how effectively these are integrated into the companies' practices.
The new guidelines represent a shift in the tax refund process, emphasizing strict compliance with the detailed documentation checklist and transparent policy implementation by the BIR. Whether the adjustments will result in more cumbersome compliance or lead to a more streamlined review process remains a critical concern.
The BIR must ensure that the reforms genuinely streamline procedures rather than make it harder for companies to comply with the already lengthy tax refund process. Ultimately, the aim is to achieve a more efficient and productive interaction with the BIR, which would foster growth and stability in the petroleum sector.
The author is a senior at the Tax & Corporate Services practice of Deloitte Philippines, a member of the Deloitte Asia Pacific Network. For comments or questions, email phcm@deloitte.com.