THE Bureau of Internal Revenue (BIR) said it will be slapping a 12-percent value-added tax on certain sales of goods and services previously subjected to zero-percent VAT.
The BIR said in its Revenue Regulation (RR) 9-2021 that certain transactions that were previously taxed at zero rate are now subjected to 12 percent VAT after the conditions under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (Train) law “have been fully satisfied.”
BIR Commissioner Caesar R. Dulay and Finance Secretary Carlos G. Dominguez III signed RR 9-2021, which was released on June 11, 2021. The new RR is set to take effect 15 days following publication in leading newspapers of general circulation.
The following transactions considered as export sale that would be slapped with a 12 percent VAT would now include sales of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing, or repacking in the Philippines of the said buyer’s goods and paid for in acceptable foreign currency and accounted for in accordance with Bangko Sentral ng Pilipinas’ (BSP) rules and regulations.
Likewise, the sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed 70 percent of the total annual production would also be slapped with a 12-percent VAT.
Also, those considered export sales under Executive Order 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws, would no longer enjoy a zero-percent VAT.
The processing, manufacturing, or repacking goods for other persons doing business outside the Philippines, which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with BSP’s rules and regulations, would also be subjected to a 12-percent VAT after the BIR order takes effect.
No longer zero-rated would be services performed by subcontractors and/or contractors in processing, converting or manufacturing goods for an enterprise whose export sales exceed 70 percent of the total annual production.
Under the TRAIN law, the imposition of 12-percent VAT on specific transactions previously taxed under zero rate is only allowed upon satisfaction of two main conditions. One condition is the successful establishment of an enhanced VAT refund system that grants refunds of creditable input tax within 90 days from the filing of VAT refund application with BIR. The second condition is that all pending VAT-refund claims as of December 31, 2017 were fully paid in cash by December 31, 2019.
According to RR 16-2005 and RR 13-2018, a zero-rated sale of goods or properties or services by a VAT-registered person is a taxable transaction for VAT purposes but this shall not result in any output tax. However, the input tax on purchases of goods, properties, or services related to such zero-rated sale, shall be available as tax credit or refund.
On the other hand, VAT-exempt transactions refer to the sale of goods and/or services and the use of lease of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on purchases.
1 comment
Hi. Is sale to PEZA registered entities now subject to 12% VAT?