PH exporters urged gov’t to address VAT exemption issue 

MANILA, Philippines  – Three of the largest export trade associations in the country are urging the government to make good on its promise to resolve the issues concerning their zero value-added tax (VAT) rating incentive, saying they are still awaiting resolution less than two weeks before the given time.

A joint statement released by the IT and Business Process Association of the Philippines (IBPAP), Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI), and the Confederation Wearables Exporters of the Philippines (CONWEP) said that a solution has been promised by the end of the month, which also coincides with the end of the first taxable quarter.

“The understanding of the sectors is that most of the government agencies involved in resolving the issue believe that there is clear basis for all purchases of exporters to be without the 12 percent VAT, given that this is not only allowed by the rules but is more importantly critical in ensuring that the prices at which the services and goods offered are able to remain competitive in the international market,” the joint statement read.

“The same issue has also given rise to confusion on the part of the various industries engaged as suppliers of goods and services to the export sectors, such as the providers of healthcare, power, raw materials, and other integral services,” it read further.

The three trade associations said they believed that failing to address the matter might have a crippling consequence on the parts localization initiatives of exporters.

“The inability to address this serious and pressing matter by the end of March will have detrimental effects to these sectors particularly in sustaining their growth potential,” the statement also read.

To recall, the private sector had noted that the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act -which took effect in 2021- limited the application of the tax perk given to registered firms, restricting it to local purchases of goods that are exclusively and directly used in the registered project or activity of the registered firm.

Last year, Philippine Chamber of Commerce and Industry (PCCI) president George Barcelon told the Inquirer in an interview that the zero VAT rating incentive used to be simpler and more straightforward before the 2021 tax reform law.

The qualifier from the CREATE Act meant that registered firms which plan to avail themselves of the VAT zero rating perk must be able to provide paperwork to prove that they satisfy the conditions, adding uncertainty as well as an added level of bureaucracy and compliance.

In a bid to highlight their contribution to the economy, the three business groups said the sectors they belong to contributed a total of $83 billion in 2022, accounting for 69 percent of the country’s total goods and services exports.

They also noted that the export sector employ 2.5 million people directly and 6.75 million indirectly.

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