BIR starts enforcing 12% VAT on exporters, citing TRAIN law

THE BUREAU of Internal Revenue (BIR) issued rules over the weekend setting a 12% value-added tax (VAT) on export sales of companies that had previously been exempt, a move it said was authorized by the Tax Reform for Acceleration and Inclusion (TRAIN) law.

The BIR issued Revenue Regulations (RR) No. 9-2021 on Friday, a copy of which was published over the weekend, implementing the VAT on zero-rated goods and services of exporters.

“RR 9-2021 is meant to announce that… those transactions are no longer zero-rated but now subject to 12% VAT as required under the TRAIN Law,” Marissa O. Cabreros, deputy commissioner at the BIR said in a Viber message on Sunday.

Transactions covered under the new rules are export sales of raw materials and packaging items to a foreign buyer that will be delivered to a resident export enterprise for manufacturing in the Philippines.

Raw materials and packaging items sold to export-oriented companies which derive 70% of total sales from exports will also pay 12% VAT, along with export sales covered by Executive Order No. 226 or the Omnibus Investments Code of 1987.

VAT will also be imposed on outsourced services such as processing, manufacturing or repacking of goods to be exported. Services by contractors and subcontractors working for a company that exports most of its products are also covered by the new rule.

Republic Act No. 10963 or TRAIN took effect in 2018, cutting personal income tax while increasing the rates on some goods and services.

Under the law, the BIR can only implement the 12% VAT on export-oriented companies once it improves the VAT refund system which will meet a standard refund within 90 days from filing. Other conditions are to pay out all pending VAT refund claims as of the end of 2017; and to set up a refund center that will handle the claims.

The BIR also issued RR 8-2021 on Saturday easing procedures on coronavirus disease 2019 (COVID-19)-related imports such as protective equipment and vaccines, by removing the requirement of obtaining an authority to release import goods before such items are released.

The regulation also affirmed that the threshold for VAT-exempt homes will remain at P3.199 million. It likewise allowed companies to apply for tax refunds on their excess payments of percentage tax, after the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act lowered the rate to one percent from three percent starting July 2020.

Those who shifted to VAT-registered taxpayer from being a non-VAT enterprise previously, and those that opted to avail the eight percent income tax rate starting 2021 can file percentage tax refunds.

Otherwise, taxpayers can opt to carry-over the excess payments in the next quarters.

“This carry-over portion is intended for percentage taxpayers who are regularly filing the returns and are expected to have overpaid taxes as a result of the retroactive application of the CREATE,” it said. — Beatrice M. Laforga