Regulation on 0% VAT for exporters’ local purchases signed

The new Revenue Regulation (RR) that will allow exporters to continue to avail of zero value-added tax (VAT) rating on their local purchases of goods and services will be issued soon, according to a Bureau of Internal Revenue (BIR) official.

Larry Barcelo, Officer-in-Charge and Assistant Commissioner for BIR Legal Service, informed the House Committee on Ways and Means in an online public hearing on December 6 that the amendatory RR has been signed and will be published soon in a newspaper of general circulation.

“There is yet no number on that RR and [we will still] publish it, but it was signed by both the Commissioner [of the BIR] and the Secretary [of Finance]. It implements the VAT zero-rating of local purchases of goods and services under Sections 294 E and 295 D of Title XIII of the CREATE Act as well as Section 5, Rule 2 and Section 5, Rule 18 of the CREATE IRR. So next week siguro (maybe) this will be published,” Barcelo said.

The new RR amends certain provisions of the controversial RR 9-2021, which took effect in June and implemented the 12 percent VAT on indirect exports and sale of services previously taxed zero percent VAT.

Implementation of RR 9-2021 was suspended by the BIR in July through RR No. 15-2021 to make way for amendments following vehement objections from exporters, domestic suppliers, and other stakeholders, who said imposing the 12 percent VAT would kill the pandemic-hit industry.

However, RR 15-2021 states that the postponement is solely due to the Covid-19 pandemic and new amendatory regulations would be published.

REFUND SYSTEM

Thus, the Export Development Council -Networking Committee on Legislative Advocacy and Monitoring (EDC – NCLAM) wrote to Trade Secretary Ramon Lopez to express support for the eventual implementation of the VAT policy “provided that the preconditions for the removal of VAT exemption are satisfied and an enhanced VAT refund system is in place”.

Rami Amer Hourani, EDC-NCLAM vice chair, in his letter to Lopez who is also the EDC chair, noted that the BIR has not yet established a new VAT refund system and continues to use the old system, which does little to assure stakeholders that the VAT refund could be completed within the required 90 days.

“It would be considerably easier for all involved if the process could be automated. This would be possible under the proposed electronic invoicing system, which the BIR intends to implement in 2023,” Hourani said.

The refund of VAT backlog to several companies should also be fulfilled to avoid a situation where new VAT applications are reimbursed ahead of preceding claimants.

The committee also proposed that VAT refund centers be established in the BIR and Bureau of Customs to devolve the processing of applications, which is currently being done only in the National Capital Region.

“This power should be devolved to the various Revenue District Offices in order to ensure that everyone is able to avail of the option to claim a VAT Refund,” the letter to Lopez read.

INCLUDE MSME

It further urged the Board of Investments to “abbreviate its process of registration to accommodate MSME (micro, small and medium enterprises) exporters in order for their participation in the tax system to remain simple.”

Hourani further stated that the ability to register should not be limited to new and/or expanding enterprises as this will shut off MSMEs from availing of new tax incentives.

“Any reasonable implementation of this policy would make the opportunities available to large corporations also available to small business. Otherwise, we run the risk of inadvertently taxing the least profitable and most vulnerable in the business sector,” he explained.

The committee likewise sought legislative reforms that will exempt local purchases of goods and services from VAT imposition.

The EDC – NCLAM called for the signing of an agreement with relevant government agencies on the continued deferment of RR 9-2021 “until such time the Philippine export sector has fully recovered from the economic impact of the pandemic and enhanced, effective and efficient VAT refund system has been established.”