Philexport raises concerns on VAT on indirect exports

MANILA, Philippines — The Philippine Exporters Confederation Inc. (Philexport) has urged government to ensure that the implementation of the 12 percent VAT on indirect exports do not become another burden for exporters and micro, small and medium enterprises (MSMEs).

In a June 22 letter to BIR Commissioner Cesar Dulay, Philexport president Sergio Ortiz-Luis Jr. said exporters and MSMEs have “very serious concerns” about the impact of Revenue Regulation 9-2021 that need to be quickly addressed.

RR 9-2021 imposes a 12 percent VAT on exports and sale of services previously at zero percent VAT as contained in Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law set to take effect today.

One of these major concerns is the requirement to physically file for VAT refunds at the BIR’s VAT Credit Audit Division (VCAD) in Quezon City.

“This is the exporter/taxpayers’ money that they are refunding. Imposing difficult processes is not fair, considering that there is cost of money and the negative impacts on their cash flows, particularly of MSMEs,” Ortiz-Luis pointed out.

He suggested that until an electronic system for filing is developed, the BIR should decentralize the processing of VAT refunds by setting up VCAD branch offices that can decide and act on VAT refund applications and even release the funds.

Another issue raised is the need to keep and duplicate voluminous documents, which companies regard as yet another unnecessary and additional process that transfers the burden of proof on their shoulders.

Ortiz-Luis suggested that the BIR instead issue rules on the automatic assessment of VAT refunds where input VAT exceeds output VAT in the case of MSME exporters without further need for separate forms and supplementary evidence.

“Exports account for some 30 percent of the country’s GDP and failure in this refund system will be a disincentive to exporters,” he said.

Also being questioned is the linking of incentives to the Strategic Investments Priorities Plan (SIPP), as the trade leader said the priority investment sectors may change depending on leadership.

Exporters/exports should be a permanent beneficiary under the SIPP, Ortiz-Luis said.

Furthermore, enterprises are pushing to have a provision included in RR 9-2021 on the full VAT refund in cash—not in the problematic tax credit certificates—within the 90-day timeframe for BIR to process and grant claims for VAT refunds.

The policy was one of the major topics in the recent Philexport general membership meeting where member-exporters expressed frustration, anger and confusion on this new directive, noting that it seems to facilitate convenience for regulators in plugging issues such as smuggling, while leaving exporters and MSMEs to address the negative impacts on them.

Philexport has opposed the imposition of VAT on exports during consultations on the TRAIN Act, which took effect in 2018.  It pointed out that taking away the zero VAT rating for indirect exports would hurt the entire export community and the local industries the Department of Trade and Industry is trying to develop and strengthen.