Annex A  

NATIONAL GOVERNMENT AUDIT SECTOR

Cluster 2 - Oversight and Public Debt Management Agencies
Commonwealth Avenue, Quezon City

Compliance Audit Program

(Value-Added Tax) VAT Credit and Refund

Identified Significant Risks Audit Objectives

1. The taxpayer claiming the VAT
credit/refund may not be a valid claimant,
meaning it lacks the necessary registration
requirements and have not complied with
the relevant laws and regulations governing
its operations which has an effect of
nullifying its capacity to claim tax
credit/refund.
2. The claim for VAT credit/refund may not be
valid, meaning the claim has been rendered
invalid by prescription or other factors, or
there is no legally valid claim from the
beginning.
3. The claim may not be properly
substantiated, meaning the taxpayer has not
complied with the legally required
documentation for the claim.
4. The original copies of the invoice and
official receipt used to substantiate VAT
credit/refund pertaining to input VAT may
not have complied with the invoicing
requirements under Section 113, National
Internal Revenue Code (NIRC) of 1997, as
amended, and/or may not have been
cancelled, hence, can be reused.
5. The claim for VAT credit/refund may not be
processed/granted within the prescribed
period.
6. Non-compliance with the prescribe policies
and procedures under Revenue
Memorandum Order (RMO) No. 20-2018
dated March 19, 2018
7. The refund may not have been received by
the taxpayer and have been illegitimately
disbursed by the BIR.
1. To determine the eligibility of the claimants
of tax credit / refunds.
2. To determine the validity of the claims for tax
credit / refunds.
3. To ascertain that the claims are properly
substantiated.
4. To determine the propriety of the claimed
transactions, compliance with invoicing
requirements under Section 113, NIRC of
1997, as amended, and to ensure that there are
no duplicate/multiple claims arising from re-
use of supporting documents.
5. To determine that the VAT credit/refund is
processed/granted within the prescribed
period.
6. To determine that the Tax Credit Certificates
(TCC) Cash Conversion process complied
with the prescribe policies and procedures
under RMO No. 20-2018.
7. To determine that the refund have been
received by the taxpayer and have been
legitimately disbursed by the BIR.

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 Audit Procedures WP Staff Mandays
Ref. Resposible
1. Extract the Subsidiary Ledger of Tax Refunds Payable account
in Fund Cluster No. 07, as of September 2022 and tag those
VAT refund payments made by the BIR National Office (NO).

1.1 List the payment transactions made by the BIR NO and

input the listing in the Randomizer
(https://www.random.org) for sampling of the tax refund
dockets, or
1.2 Perform data analysis using pivot tool to determine the
taxpayer/claimant with the most frequent tax refund
claims, using the gathered data thru the following:
a. Extract the Subsidiary Ledger Accounts of the
taxpayers/claimants under Tax Refunds Payable
Account from Calendar Year (CY) 2018 to CY 2022.
b. Perform data cleansing by extracting the following
necessary data:
 Taxpayer/claimant
 Check/JEV No.
 Particulars
 Amount Refunded
 Date/Year Refunded

Identified Risk #1   The taxpayer claiming the tax credit/refund may not be a valid claimant.
Audit Objective To determine the eligibility of the claimants of VAT credit/refunds.
2. Confirm the authenticity of the following documents with the
issuing agency, including the date when the taxpayer filed with
and were issued with:
 SEC Registration/Articles of Incorporation and By Laws
(for Partnership/Corporation)
 DTI Registration, if applicable (for Single Proprietor)
 BIR Certificate of Registration
 BOI/PEZA/TIEZA Registration
 Certificate of Registration issued with other Government
agencies
 Certificate with the BIR Office where the taxpayer is
registered or from the VCAD, where applicable, that
claimant/taxpayer has no similar claim filed in that office
 Certification from DOF-OSS that taxpayer/claimant has
not filed a similar claims(s) covering the same period

Identified Risk #2   The claim for VAT credit/refund may not be valid
Audit Objective To determine the validity of the claims for VAT credit/refunds
3. Evaluate if the legal basis of the claim is valid and appropriate.
4. Evaluate if the claim was filed within two (2) years from the end
of the taxable quarter when the sales were made (if based on
Sec. 112 of the NIRC of 1997) or within the prescriptive period
under the relevant legal basis.

Identified Risk #3   The claim may not be properly substantiated.

Audit Objective To ascertain that the claims are properly substantiated.

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 Audit Procedures WP Staff Mandays
Ref. Resposible
5. Examine the VAT Refund Dockets if the complete supporting
documents for the Evaluation Reports are attached to the
Disbursement Vouchers (DV) and list the following
information:
 JEV No./ Date
 DV No./ Date
 Check No. /Date
 TCC No./ Date Issued & Expiry/ Approving Official
(Assessment Service/ LTS)
 Processing Office (VCAD or LTS)
 Name of the taxpayer-claimant
 Taxpayer Identification No.
 Type of tax claimed
 Legal basis of the claim
 Taxable period (quarters) claimed by the taxpayer

6. Depending on the period when the claim was filed, examine the
attached Checklist of Mandatory Requirements to confirm if the
taxpayer-claimant submitted complete supporting documents.
Pay particular attention to the dates of the documents if there are
indications that it was not submitted on or before the date of
filing of BIR Form No. 1914.

Period of Filing Checklist Reference

Annex A, Revenue Audit
Memorandum Order
Prior to September 5, 1998
(RAMO) No. 1-91 or Annex
B, RAMO No. 2-93
September 5, 1998 to June 11, V-6, VAT Audit Manual,
2014 RAMO No. 1-99
June 11, 2014 to March 8,
Annex A, RMC No. 54-2014
2018
Annex A.1, and A.2, RMC
March 8, 2018 onwards
No. 17-2018
Annex A.1, and A.2, RMC
June 1, 2019 onwards
No. 47-2019
Per RMC No. 14-2021 a. Filed prior to January 19,
-Clarifying effectivity date of 2021:
revenue issuances which Revenue Memorandum
imposed new documentary Circular (RMC) No. 47-
requirements for the 2019 & RMO No. 25-2019
processing of VAT Refund
Claims b. Filed on or after January
19, 2021: RMO No. 47-
2020
Identified Risk #4   Non-compliance with the invoicing requirements under Section 113, NIRC of
1997, amended, and non-cancellation/stamping of supporting invoices/receipts
Audit Objective To determine compliance with invoicing requirements and to ensure that there
are
no duplicate/multiple claims arising from re-use of supporting documents.
7. Local Purchases of Goods and Services

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 Audit Procedures WP Staff Mandays
Ref. Resposible
7.1 Vouch the taxpayer/claimant's purchases from the
submitted Schedule to the supporting invoices/official
receipts, ensuring the accuracy of amounts, date, buyer,
and the propriety of the transactions.

7.2 Examine compliance of Invoices and Official Receipts

with the Invoicing Requirements in Section 113 of the
NIRC of 1997 and the implementing rules and
regulations.

7.3 Examine all documents supporting the VAT Credit

Claim, ensuring that all are stamped the words “VAT
Refund Claimed” and “PAID”.

7.4 Examine the series of Invoices/Official Receipts for any

duplication or breaks in the serial numbers.

7.5 Re-compute the corresponding input VAT for each

transaction.

8. Sales of Goods or Services

8.1 Vouch the taxpayer/claimant's sales from the submitted

Schedule to the supporting invoices/official receipts,
ensuring the accuracy of amounts, date, seller, nature of
transaction, and other relevant information.

8.2 Examine compliance of Invoices and Official Receipts

with the Invoicing Requirements in Section 113 of the
NIRC and the implementing rules and regulations.

8.3 Examine all documents supporting the VAT Credit

Claim, ensuring that all are stamped the words “VAT
Refund Claimed” and “PAID”.

8.4 Evaluate if the Invoice and Official Receipts are covered

with Authority to Print. Ensure completeness of
invoice/official receipt by accounting for any breaks in
the serial numbers.

Identified Risk #5   The claim for VAT credit/refund may not be processed/granted within the
prescribed period.
Audit Objective To determine that the VAT credit/refund is processed/granted within the
prescribed period.
9. Evaluate if the refund was processed/granted within the
prescribed period:
 120 days if filed prior to the effectivity of TRAIN Law
(RMC No. 54-2014 dated June 11, 2014 & RMC No. 89-
2017 dated October 20, 2017)
 90 days if filed after the implementation of TRAIN Law
(Section 112, NIRC, as amended, & Annex F, RMO No.
47-2020 dated October 10, 2020)

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 Audit Procedures WP Staff Mandays
Ref. Resposible

Identified Risk #6   Non-compliance with the prescribe policies and procedures under RMO No.
20
2018 dated March 20, 2018
Audit Objective To determine that the TCC Cash Conversion process complied with the
prescribe
policies and procedures under RMO No. 20-2018.
10. Check whether the TCC subject for cash conversion is still
valid and not expired, unless revalidated before 5 years from
date of issue.

11. Check whether the taxpayer/claimant has no outstanding

liability (If it was found to have an outstanding liability, the
TCC may be used for payment through Tax Debit Memo

12. Check whether all the required documents for the processing
and approval of request for conversion of TCC into Cash
Refund are submitted.

Identified Risk #7  The refund may not have been received by the taxpayer and have been
illegitimately disbursed by the BIR.
Audit Objective To ensure that all refunds have been duly and actually received by the
taxpayer-
claimant.
13. Confirm with taxpayer-claimants if the refund was duly
received.

A. Prepare necessary audit working papers and document the noted

deficiencies/ discrepancies, if any.
B. Make conclusion, prepare the Audit Observation Memorandum
(AOM) for the deficiencies/ discrepancies, if any, and issue the
same to Management, otherwise prepare an Audit
Memorandum (AM).
C. Consider Management/Auditee’s reply/ comments on the
AOM, if any.
D. Prepare rejoinder to the said reply, if warranted.
E. Organize working papers with proper indexing and cross-
referencing.

Prepared by: Reviewed by:

Atty. APPLE JOY M. DOCTOLERO Atty. ARNEL P. BACARRA

Audit Team Leader Supervising Auditor
Date: August 17, 2022 Date: August 22, 2022

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