BIR clarifies taxability of raw sugar

Posted on March 17, 2015

THE BUREAU of Internal Revenue (BIR) has clarified the tax treatment of sugar while standing behind a previous ruling that only “muscovado” is tax-exempt of all the sugar products.

In Revenue Regulations 4-2015, the BIR said “refined sugar and raw sugar... shall be subject to advance payment of VAT (value-added taxes) by the owner/seller before the sugar is withdrawn from any sugar refinery/mill”.

BIR defined raw sugar as products “whose content of sucrose by weight in dry state, corresponds to a polarimeter reading of less than 99.5 degrees. Sugar, on the other hand, refers to all sugar types other than raw cane sugar.

Raw cane sugar remains tax-free. These are sugar “produced by simple process of conversion of sugar cane without need of any mechanical or similar device”. Thus, BIR said the product called “muscovado” is the only sugar exempt from taxes under the National Internal Revenue Code.

“Centrifugal process of producing sugar is not in itself a simple process. Therefore, any type of sugar produced therefrom are not exempt from VAT such as raw sugar and refined sugar,” the BIR issuance said.

BIR Commissioner Kim S. Jacinto-Henares yesterday said in a telephone interview the new issuance clarifies that raw sugar is taxable.

“I’m just complying with the tax code,” Ms. Henares said.

Sought for comment, Philippine Sugar Millers Association, Inc. President Francisco D. Varua yesterday said in a telephone interview the industry will comply with the BIR rule.

“What can we do if the BIR will insist, then we’ll have to follow the BIR,” Mr. Varua said.

Small-time farmers who are agrarian reform beneficiaries will bear the brunt of the BIR’s latest rule.

“Definitely it’s not going to affect much of the industry,” Mr. Varua said, noting that the bulk of domestic consumption involves refined sugar.

“That will affect the sugar planter who will have to bear the brunt of the VAT,” he added.

Mr. Varua said the tax due is equivalent to about P150 per bag. -- Mikhail Franz E. Flores