BIR ends VAT exemption for exporters, ecozone firms

by Elijah Felice Rosales (The Philippine Star), 26 Jun 2021

MANILA, Philippines — The Bureau of Internal Revenue (BIR) will no longer accept applications for VAT exemption from exporters for the purchase of goods and services as part of the lifting of fiscal incentives under the new tax law.

In a tax advisory, the BIR announced it will no longer process filings for a VAT zero rate starting June 28 on the sales of goods and services to registered locators in economic zones.

Exporters operating in economic zones used to enjoy VAT-free purchase of goods and services made in the Philippines.

However, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, signed in March by President Duterte, restructured privileges awarded to economic zone locators. It lifted, among others, the VAT exemption that exporters maximized to source their raw materials from domestic suppliers.

Likewise, the CREATE Act removed the five percent tax on gross income paid in lieu of local and national taxes that exporters had insisted on retaining in the measure. In exchange, the law cut the corporate income tax rate to 25 percent, from 30 percent, the highest in Southeast Asia.

“Applications for VAT zero-rate… shall no longer be accepted and processed by the concerned offices under the Large Taxpayers Service and Assessment Service starting June 28, 2021,” the tax advisory read.

However, the BIR said applications submitted prior to the release of Revenue Regulations (RR) 9-2021 would be facilitated and upheld effective until June 27.

RR 9-2021 amended certain provisions of previous RRs to introduce the changes made by the CREATE Act, particularly the lifting of VAT exemption for the local purchases of exporters.

Likewise, the BIR said approved applications will remain effective until June 27, or the effective date in the filing, whichever is earlier. The agency indicated no provision in the tax advisory for any possible extension of the VAT exemption.