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Daily Tax Newsletter

Philippines

30 July 2021

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BIR Regulations Issued Suspending 12% VAT Rate for Certain Supplies to Exporters and Certain Conditions for Proprietary Educational Institution Benefits

The Philippines Bureau of Internal Revenue (BIR) has issued Revenue Regulations No. 15-2021, which suspends the implementation of Revenue Regulations No. 9-2021 in relation to the imposition of 12% VAT on certain supplies to exporters that were previously zero-rated. As previously reported, the Department of Finance and the BIR agreed to suspend the implementation of Revenue Regulation 9-2021 in relation to imposing 12% VAT on certain supplies to exporters, including:

  • Sale of raw materials or packaging materials to a non-resident buyer for delivery to a local export-oriented enterprise;
  • Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed 70% of total annual production;
  • Those considered export sales under Executive Order (EO) No. 226, or the Omnibus Investment Code of 1987, and other special laws (Section 106 (A) (2) (a) (5) of the Tax Code, as amended);
  • Processing, manufacturing, or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported; and
  • Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed 70% of total annual production.

According to Revenue Regulations No. 15-2021, the deferral is provided in view of the continuing COVID-19 pandemic and its impact on the export industry. The deferral will remain in force until the issuance of amendatory revenue regulations.

In addition to the suspension of the 12% VAT rate, the BIR also issued Revenue Regulations No. 14-2021, which suspends the implementation of certain provisions of Revenue Regulations No. 5-2021 in relation to the taxation of proprietary educational institutions. Under the CREATE Act, further beneficial measures were provided for the taxation of proprietary educational institutions that were implemented by Revenue Regulations No. 5-2021. However, the benefits were limited to "non-profit" proprietary educational institutions. To ease the burden of taxation of proprietary education institutions, especially during the COVID-19 pandemic, Revenue Regulations No. 14-2021 suspends different references to "non-profit" in Revenue Regulations No. 5-2021 until the passage of appropriate legislation. In other words, it is provided that proprietary educational institutions may be eligible for the beneficial measures even if they are not "non-profit".

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