BIR defers 12% VAT on exporters’ purchases

Elijah Felice Rosales - The Philippine Star

MANILA, Philippines — The Bureau of Internal Revenue (BIR) has deferred the implementation of Revenue Regulation 9-2021 which imposed a 12 percent value-added tax (VAT) on raw material purchases of export firms from domestic suppliers.

“In view of the continuing COVID-19 pandemic and its impact to the export industry, the implementation of RR 9-2021 is hereby deferred until the issuance of an amendatory revenue regulations,” the BIR said in issuing RR 15-2021, signed on July 27 by Finance Secretary Carlos Dominguez.

The BIR issued RR 9-2021 to comply with the provisions of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which states that certain transactions that used to gain the VAT exemptions will be taxed 12 percent as soon as the government puts up an enhanced refund system.

In response, export manufacturers had called on the government to revoke RR 9-2021, arguing the issuance will injure their operations, labor force and sales. Likewise, they said the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act allows them to enjoy zero-rate VAT on local purchases for their registered projects and activities.

The Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) had warned some of its members plan to source P28 billion worth of supplies from abroad due to the lifting of the VAT exemption.

Around 50,000 workers may lose their jobs in the process if manufacturers choose to buy raw materials overseas, SEIPI said.

The Department of Finance reported that the government lost P481.7 billion in 2019 from the grant of fiscal incentives to exporters and cooperatives.

Exemptions from the payment of VAT to exporters and cooperatives accounted for roughly 59 percent at P283.45 billion. On the other hand, income tax incentives made up about 31 percent, or P149.25 billion, followed by exemptions from import duties, P47.59 billion, and returns from percentage tax, P1.38 billion.

The government is trying to minimize its losses from the awarding of tax perks, especially in a time when it is raising revenue for its COVID-19 measures. One of the steps it took was to pass the CREATE Act that brought down corporate tax to 25 percent on one end, and lifted incentives of investors on the other.

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