DOF formally defers VAT on exporters’ local inputs

Published July 28, 2021, 9:06 PM

by Chino S. Leyco

The Department of Finance (DOF) has formally deferred Revenue Regulation No. 9-2021 that imposed the value-added tax (VAT) on exporters’ purchases from local suppliers and other indirect exports in view of the continuing COVID-19 pandemic and its impact to the export industry.

Finance Secretary Carlos G. Dominguez III

Based on RR No. 15-2021 obtained by reporters late Wednesday, Finance Secretary Carlos G. Dominguez III approved the deferral of Revenue Regulations No. 9-2021 “until the issuance of an amendatory revenue regulations.”

“This Regulation [RR 15-2021] shall take effect immediately,” the document dated last July 21, but was signed by Dominguez on July 27, 2021.

Export-oriented companies earlier decried the issuance of RR 9-2021 that imposed VAT on certain transactions previously taxed at zero percent. The previous BIR regulation had took effect last June 27, or 15 days after its issuance on June 12.

Under RR 9-2021, raw materials, packaging supplies and services rendered or sold to export companies engaged in manufacturing, processing, packing or repacking are subject to VAT. Sale of services and lease of properties to exporters are also covered.

According to exporters, the imposition of VAT on their local inputs could “cripple industry.”

Last July 21, Dominguez admitted that there were conflicting provisions regarding VAT on exports under the tax reform and acceleration and inclusion act (TRAIN) and the newly-enacted corporate recovery and tax incentives for enterprises (CREATE) law.

TRAIN law has mandated the removal of VAT zero-rating of goods sold to exporters, while CREATE law provided that the VAT zero-rating may still apply.

“We will implement it accordingly to the law,” Dominguez had said. “Now the law unfortunately is not very fair. There is one law in TRAIN and there is another provision in CREATE. We will implement it strictly as we are sworn to do.”

The finance chief also said the imposition of VAT on exporters’ local inputs was “technically deferred.”

“Registrations were issued end of June. VAT returns are quarterly. So if we start implementing CREATE this quarter July, it’s technically deferred to this quarter and returns are due 25th day after the end of the third quarter,” Dominguez explained.