BIR returns exporters’ VAT perks
MANILA, Philippines—Exporters can continue dealing in local transactions exempt from 12-percent value-added tax (VAT) after the Bureau of Internal Revenue (BIR) on Friday (Dec. 10) published new rules in line with the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
Finance Secretary Carlos Dominguez III and Internal Revenue Commissioner Caesar Dulay signed Revenue Regulations (RR) No. 21-2021 to correct RR 9-2021 issued in June, which slapped VAT on local purchases of goods and properties as well as on services for exporters operating within economic zones.
Export-oriented firms had sought the repeal of RR 9-2021, which the BIR, in turn, deferred implementation in July.
The BIR had explained that RR 9-2021 was based on the earlier Tax Reform for Acceleration and Inclusion (TRAIN) Act implemented in 2018.
But the CREATE law signed by President Rodrigo Duterte in March already exempted exporters from the TRAIN law’s levy.
“The VAT-exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly and exclusively used in the registered project or activity of a registered export enterprise, for a maximum period of 17 years from the date of registration, unless otherwise extended under the SIPP [Strategic Investment Priorities Plan],” RR 21-2021 read, echoing CREATE’s implementing rules and regulations (IRR).
The BIR said exporters’ equipment, goods, inventories, packaging and raw materials, supplies, as well as services (such as provision of basic infrastructure, utilities, and maintenance, repair and overhaul of equipment), among other important expenditures will continue to be zero VAT-rated.
These transactions must nonetheless be first endorsed by the investment promotion agency (IPA) which granted the exporter its tax perks. They must also adhere to the BIR’s documentary requirements.
In a related development, the BIR in partnership with the United States Agency for International Development (USAID) also on Friday launched the “Taxpayer First (Fast, Innovative, Reliable, Secure, and Technology-driven electronic services)” initiative in line with the BIR’s shift to full digital operations by 2030.
Dulay said electronic payment channels like GCash and PayMaya would accommodate 24-hour tax payments. The same goes with online banking channels of Development Bank of the Philippines and Land Bank of the Philippines. This also goes for UnionBank and other government partners belonging to the InstaPay and PayGate or PesoNet networks.
Deputy Commissioner Arnel Guballa said 84 percent—or P1.43 trillion out of P1.71 trillion—in taxes collected by the BIR from January to October were through e-payment facilities.
But as a share of transactions, e-payments accounted for only 33 percent, or 4.6 million out of the total 13.8 million, of tax payments to the BIR, as the bigger 9.2 million was still done manually, Guballa said.
Through Taxpayer First, the BIR targets to hike e-payment transactions by half in 2022.
During the launch, Dominguez also noted that in 2015, only 1.9 million tax payments were done electronically.
“About 90 percent of the total number of annual income tax returns (ITRs) were filed electronically in 2020,” said Dominguez.
“This grew to almost 100 percent in 2021. This is a major breakthrough given the fact that only 10 percent of the country’s taxpayers made use of digital tools to file their income taxes in 2015 before our administration took over,” Dominguez said.
“I am happy that the BIR is determined to expand its digital payment facilities,” added Dominguez, who also oversees BIR.
“We must not stop innovating to align our processes and standards with the best tax collection services in the world,” he said.
“With the support of the private sector and our development partners such as the USAID, this comprehensive digitalization initiative will make revenue collection more efficient and reliable, thereby helping build more solid foundations for our economic recovery,” said Dominguez.
In a separate economic bulletin, Finance Undersecretary Gil Beltran, DOF chief economist, said the national government’s tax effort or share of collections to the economy rose by 0.3 percentage point to 14.8 percent as of the end of the third quarter from 14.5 percent in 2020.
Beltran attributed the higher tax effort to “the digitalization of revenue collection operations which enabled the BIR and the BOC [Bureau of Customs] to improve their efficiency.”
While the BIR’s end-September tax effort “dropped marginally from 11.3 percent to 11.2 percent, due to the shift to imported petroleum products with the closure of a domestic refinery,” Beltran commended the BOC.
The Customs bureau’s tax effort increased to 3.4 percent from 3.1 percent in 2020. The BOC’s take of import duties and other taxes has been benefiting from recovering imports alongside the reopening of more economic sectors.
