Philexport Cebu | export services, market reports, training for Philippine exporters

Zero-VAT Rating is one of the incentives approved by the government to assist the export industry.Accredited exporters for zero rating may avoid payment of value added tax thus improving their chances of managing their cash flow efficiently. A seminar of Philexport Cebu, the only non-government body deputized by the Bureau of Export Trade and Promotion (BETP) to assist companies in the accreditation process,will inform the export industry about the rationale and effects of VAT and how to apply for accreditation under the Export Development Act (EDA) through a seminar on “The Impact of Value Added Tax (VAT) on Export Transactions”.

In challenging times, such as in an economic crisis where we are right now, every single peso that can be saved on expenses counts and it becomes even more important to manage the cash flow of a business as efficiently as possible. The entering of Zero-VAT Rating in the Tax Reform Act of 1997of the Philippines was one measure to support the export industry and it has a positive impact on the cash flows of the manufacturers. But how does it actually work and how to avail of the Zero-Rated VAT incentives?

According to Sec. 106 of the Republic Act No. 8424 or the Tax Reform Act of 1997, export sales are subject to zero percent VAT. Moreover, it is stated that “Services performed by subcontractors and/or contractors in processing, converting, of manufacturing goods for an enterprise whose export sales exceed seventy percent (70 percent) of total annual production” are included in the Zero-VAT Rating. As per the National International Revenue Code (NIRC), exporters accredited under the Export Development Act (RA 7844) are VAT-Zero Rated.

Members of Philexport Cebu, the business support organization for exporters in Central Visayas, may avail of the accreditation under RA7844 and thus, may become zero VAT rated. The Bureau of Export Trade and Promotion (BETP) of the DTI will endorse all recommendations of Philexport Cebu to the Bureau of Internal Revenue. Exporters who have this certificate will be able to avoid payment of value added tax not only for their products but also for the services provided by their suppliers and sub-contractors.

These benefits may not be known to all exporters, therefore, Philexport Cebu decided to cooperate with the Bureau of Internal Revenue’s, National office, to organize a seminar that will give insights on Zero-VAT Rating and the procedures that accreditation entails. The seminar shall also provide a forum for questions which will be answered by Philexport Cebu staff and Mrs. Grace Evelyn Lacerna, OIC - Chief Audit Information of the Tax Exemption &Incentives Division of BIR. The seminar will be held on Friday, July 31, 2009at the Cebu Grand Hotel. Details can be found in the Philexport Cebu’s website www.philexportcebu.org.

But the exporters are not the only ones who can benefit from this incentive. Also subcontractors or direct suppliers of raw materials or packaging materials to export-oriented enterprises, whose export sales exceed seventy percent of total annual production, may avail of the Zero-Rated VAT benefits. Under the current set-up,it means that even if exporters’ products and services are not subject to VAT,they may still avail of tax credits from the VAT they pay on various VAT-covered transactions whether these are manufactured goods or rendered services. - Sabine Schacknat