Regulation on 0% VAT for exporters’ local purchases signed, set for release

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

Larry M. Barcelo, OIC-assistant commissioner for legal service of the BIR, informed the House Committee on Ways and Means in an online public hearing last 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 this will be published,” Barcelo said.

The new RR amends certain provisions of the controversial RR 9-2021, which took effect last June and implemented the 12% VAT on indirect exports and sale of services previously taxed 0% VAT.

Implementation of RR 9-2021 was suspended by BIR in July 2021 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% VAT would kill the pandemic-hit industry.

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

Thus, the Export Development Council -Networking Committee on Legislative Advocacy and Monitoring (EDC-NCLAM) has written 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.

In addition, the refund of VAT backlog to several companies should 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 (BOC) 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 (RDOs) in order to ensure that everyone is able to avail of the option to claim a VAT Refund,” suggested the letter.

It further urged the Board of Investments to “abbreviate its process of registration to accommodate MSME 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 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 also sought legislative reforms that will exempt local purchases of goods and services from VAT imposition.

Finally, 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.”

Close Menu