THE PROPOSED tax reform program will retain fiscal incentives for firms registered with the Board of Investments (BoI) as well as economic zone locators stated under the Special Economic Zone (SEZ) Act, the Finance department clarified.
Finance Undersecretary Karl Kendrick T. Chua said the removal of value-added tax (VAT) exemptions under the Tax Reform for Acceleration and Inclusion Act or House Bill 5636 is limited to indirect exporters, as direct exporters that send their goods out of the country will continue to enjoy tax perks.
“Receipts from foreign services within the SEZs of the Philippine Economic Zone Authority (PEZA) will remain VAT-exempt, as is the case now, because they are outside customs territory by legal fiction, or zero-rated if the exporters are outside the special economic zone, including those that are BoI-registered,” Mr. Chua said in a statement.
“As for exporters outside SEZs, they are zero-rated on VAT payments and are entitled to get back their VAT payments once they apply for such refunds under the proposed 90-day refund system, while all other taxpayers, including suppliers to exporters will have to pay the VAT,” he said.
However, Mr. Chua also clarified that the zero-rated VAT privilege of indirect exporters will be removed only “if and when a credible and enhanced system is put in place” that will allow affected companies to get cash refunds of their VAT payments within 90 days after their filing of VAT refund applications with the Bureau of Internal Revenue.
“The fear that the Philippine BPO (business process outsourcing) industry will lose its competitiveness because of the proposed tax reform has no basis. Certain industry stakeholders are likely misinterpreting the provisions of the bill, said Mr. Chua.
The clarification was made following calls from PEZA and the BPO industry to retain their tax perks to keep them competitive against neighboring BPO hubs.
The removal of VAT exemptions is part of the Finance department’s bid to broaden the tax base and plug up leakages to increase revenue collections.
The Finance department first package of the tax reform program is expected to yield a P1.163 trillion net revenue from 2018 to 2022, which will be earmarked for infrastructure and social spending. — E.J.C. Tubayan
