BIR backtracks on ODA VAT

MANILA, Philippines - Japanese development programs in the country are now expected to proceed smoother after the Bureau of Internal Revenue (BIR) reversed an earlier order burdening them with value-added tax (VAT).

Under Revenue Memorandum Circular (RMC) 8-2017, the government decided to shoulder the 12-percent VAT charged to Japanese companies financing projects under the Overseas Economic Cooperation Fund (OECF).

“The VAT-registered suppliers and sub-contractors shall bill and pass on the 12 percent VAT to the Japanese companies and contractors,” the circular stated.

“In turn, the Japanese contractors shall include in their billing and pass on the 12-percent VAT to the concerned executing agencies of the Republic of the Philippines,” it added.

In October last year, Finance Secretary Carlos Dominguez promised during his Japan visit to revise RMC 45-2015, which charged the VAT to Japan official development assistance (ODA) projects.

Only five percent was shouldered by the government under the previous order. The revisions came in time for the visit of Japanese Prime Minister Shinzo Abe to the Philippines.

Japan is the country’s biggest ODA provider, accounting for 23.2 percent of total amount disbursed in 2014, according to government data.

All ODA projects pursued are based on bilateral agreements between the Philippines and Japan.

“This would encourage smooth implementation of OECF funded projects since the VAT issue has been clarified,” BIR spokesperson Marissa Cabreros said in a text message.

The new order would apply even to “ongoing” projects, she said.

Under the Duterte administration, the BIR had embarked on a review of previous issuances and tax rulings seen to burden taxpayers in a bid to encourage them to pay more revenues.