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VAT on exporters’ local inputs formally deferred

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THE Bureau of Internal Revenue has suspended its recent order that imposed a 12% value-added tax on previously exempt raw materials sold by local manufacturers to exporters. — REUTERS

THE BUREAU of Internal Revenue (BIR) suspended its recent order that imposed a 12% value-added tax (VAT) on previously exempt raw materials sold by local manufacturers to exporters, after outcry from the export industry.

BIR Commissioner Caesar R. Dulay issued Revenue Regulation (RR) No. 15-2021 on Wednesday deferring the effectivity of RR 9-2021 until the issuance of a new amendatory regulation, as a form of relief for exporters struggling amid the pandemic.

“We thank Sec. Sonny (Finance Secretary Carlos G. Dominguez III) for his intercession. It’s a ton off the shoulders of both direct and indirect exporters plus the MSMEs (micro, small and medium enterprises) supply chain,” George T. Barcelon, chairman of the Philippine Exporters Confederation, Inc. (Philexport) said in a Viber message on Thursday.

Mr. Dominguez said earlier this month that the regulation was being reviewed to align the conflicting provisions under Corporate Recovery and Tax Incentives for Enterprises (CREATE) law and Tax Reform for Acceleration and Inclusion (TRAIN) law.

CREATE, which was enacted in April retained the zero-tax rate for exporters while the Tax Reform for Acceleration and Inclusion (TRAIN) law in 2018 mandates the BIR to impose the VAT on these previously zero-rated transactions once the 90-day refund system is in place.

The BIR issued the RR, which took effect on June 27, to comply with the TRAIN law’s provision.

Various exporters’ groups and foreign chambers had asked the BIR to repeal the RR, saying this could cripple the industry and hamper investments.

Mr. Barcelon had said imposing a 12% VAT on locally sourced inputs could force companies to source their raw materials offshore instead where they can enjoy lower taxes. — B.M.Laforga

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