DOF withdraws regulations imposing 12% VAT on exporters’ inputs


MANILA – The Ministry of Finance (DOF) and the Bureau of Internal Revenue (BIR) agreed to suspend the implementation of Tax Regulation (RR) 9-2021, which imposed a value added tax (VAT) of 12% on some transactions from exporters that were previously taxed at 0 percent, a House leader said.

The suspension of the BIR regulation comes after a briefing facilitated by the House Ways and Means Committee on Wednesday with government agencies and relevant stakeholders.

Albay representative Joey Salceda, chairman of the committee, expressed gratitude to Finance Secretary Carlos Dominguez III for the move, as it will help the country’s export industry “get the breath it needs” to recover.

“The DOF and the BIR spoke with me this weekend. We were supposed to have a hearing on Monday, but we postponed the briefing until Wednesday out of deference to the secretary, whose decision was to suspend the settlement first pending corrective legislation, ”Salceda said.

The RR No.9-2021 was issued in accordance with the provisions of the Law of the Republic (RA) No.10963 or the Law on Tax Reform and Acceleration and Inclusion (TRAIN), which provides that certain transactions previously considered zero-rated will be subject to a rate of 12%. VAT

This is subject to the satisfaction of two conditions: the successful establishment and implementation of an improved VAT refund system, and that all pending VAT refund claims as of December 31, 2017 are fully paid in cash. by December 31, 2019.

With the suspension decision, the following transactions will revert to their zero-rated status:

Sale of raw materials or packaging materials to a non-resident buyer for delivery to a local export-oriented business;

Sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed 70 percent of the total annual production;

Those considered as export sales under Executive Decree (EO) No. 226 or the General Investment Code of 1987 and other special laws (Article 106 (A) (2) (a) (5) of Tax Code, as amended);

Processing, manufacturing or repackaging of goods for others doing business outside the Philippines, which goods are then exported; and

Services provided by subcontractors and / or contractors in the processing, processing or manufacturing of goods for a business whose export sales exceed 70 percent of total annual production.

Salceda said the DOF will implement the provision of the Business Recovery and Tax Incentives for Businesses Act (CREATE), which allows exporters to benefit from a zero VAT rate on local purchases of goods and services directly and exclusively used in its registered project or activity.

“CREATE hopes to facilitate the operations of exporters, improve the country’s competitiveness and encourage the sourcing of materials from local suppliers. It is the spirit of the law. This is why he insists on the zero-rating of local inputs, in addition to the improved deductions for them, ”he said.

Salceda also said he would continue to work with BIR and DOF to draft “corrective legislation” to address concerns of small exporters on the reimbursement system and on audits.

“The DOF says that one problem with the audit system, which requires them to audit everyone who requests reimbursement, is that the Audit Commission is also very strict with the reimbursement system. So my proposal is to relax the rules for small claims de minimis a bit, because it’s really not worth the tax administration’s time, ”he added.

Salceda said the practice of risk-based auditing is already the norm in more advanced tax jurisdictions.

“You go to Japan or Singapore to buy goods as a tourist, and at the airport you can get your VAT refund at the counter. Ideally, that’s a system you want here too,” Salceda said. . “The DOF appears intent on modernizing our tax administration and closing loopholes.”

He said Congress was ready to work with the executive to draft the legislation needed to improve the system. (ANP)

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