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New guidelines on customs duty, tax refund effective Oct 9

Image by Lucia Grzeskiewicz from Pixabay

The Bureau of Customs (BOC) has released Customs Memorandum Order (CMO) No. 25-2020, which provides guidelines on refund of duties and taxes and tax credit.

CMO 25-2020 applies to the refund of overpayment or erroneous payment and other refund of duties and taxes to claimants as implemented under Customs Administrative Order (CAO) No. 04-2019 (guidelines on handling applications for duty drawback and refund for overpayment, abatement of duties and taxes).

READ: PH Customs issues streamlined rules on processing duty drawback, refunds

It also applies to payment and refund arising from final decisions in protest cases, judicial decisions, special laws, and executive or presidential issuances, as well as to payment of refund claims approved and endorsed by BOC and the Bureau of Internal Revenue (BIR).

The order takes effect on October 9.

According to the book Understanding International Trade, Tariff & Customs by former BOC deputy commissioner and PortCalls columnist Atty. Agaton Teodoro Uvero, the Customs Modernization and Tariff Act’s (CMTA) Section 903 provides the rules on refund and is a new provision pursuant to the Revised Kyoto Convention.

Stakeholders may file claims for refund of duties and taxes on any of the following grounds:

  • When there is an error in the assessment or goods declaration
  • When BOC permits a change in customs procedure, in the instances of consumption to warehousing from one where duties and taxes are paid to another where no or less duties and taxes are required to be paid
  • Clerical errors on an invoice or entry, and errors in return of weight, measure and gauge
  • Errors in the distribution of charges on invoices not involving any question of law, which means only question of facts

No application for refund will be accepted for claims is less than P5,000. The finance secretary, in consultation with the customs commissioner, may adjust the minimum amount of refund, taking into consideration the consumer price index as published by the Philippine Statistics Authority.

Applications for refund must be filed within 12 months or 360 days from the date of payment of duties and taxes, and submitted to the Office of the District Collector (ODC) of the port where these were paid. Payment of processing fees will also be made at the same port.

Under CMO 25-2020, processing fees can range from P700 to P5,000 depending on the amount of claim. Other fees include documentary stamp, internal revenue stamp, and Tax Credit Certificate (TCC) fee.

Eligible claims for refund will be processed, paid or granted within 60 days, starting upon submission of all mandatory documents required under CMO 25-2020.

If the claim is for the refund of purely internal revenue taxes only, such as value-added tax (VAT) and excise tax, it must be filed with BIR. If it is erroneously filed with the BOC, the ODC should immediately inform the claimant to submit the application to BIR and should decline to process the application due to improper venue.

Refund of duties and taxes will be paid in cash, as long as they are included in BOC’s budget for the fiscal year, and subject to compliance with existing laws, rules, and regulations.

BOC earlier said only VAT refunds approved by BIR were previously allowed to be paid in cash. With the advent of the CMTA, claimants may now get their refunds in cash, which eliminates having to process the issuance of TCCs and subsequently having to process the utilization of TCCs in the payment of duties and taxes.

A TCC is a certification issued to the grantee-importer who is legally entitled to a tax credit. Its money value may be used to pay or satisfy any of the grantee’s customs duty or tax obligations or be converted as a cash refund.

Further, CAO 04-2019 has adopted a new policy that TCCs are non-transferable, which BOC noted “ensures that all TCCs to be issued arise only from valid claims of importers” and “eliminates the transfers of fraudulent TCCs to third parties,” a practice which has plagued BOC in the past.

Under CMO 25-2020, if the claimant elects to be paid in TCC instead of cash, or if cash payment is not authorized under the law, the TCC to be issued in the name of the claimant can’t be assigned or transferred to any other person or entity.

Payment of refund arising from final decisions in protest cases, judicial decisions, special laws, and executive or presidential issuances should follow the procedure under CMO 25-2020. – Roumina Pablo


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