BIR Releases VAT Zero-Rating Regulations of Goods and Services in the Philippines
The Bureau of Internal Revenue (BIR) released the rules of value-added tax (VAT) zero-rating of goods and services, which covers the information technology (IT) and business process management (IT-BPM) industries.
Companies under the IT and Business Process Association of the Philippines (IBPAP) stated that IT-BPM registered export enterprises (REEs) and their local suppliers “finally have much-needed clarity on this important matter” after months of concern on VAT zero-rating of goods and services.
The IBPAP cited two regulations from the BIR’s Revenue Regulation (RR) 3-2023. The first rule involves health maintenance organization (HMO) premiums having VAT zero-rated. Meanwhile, the other protocol covers investment promotion agencies (IPAs) having jurisdiction over issues related to VAT zero-rated purchases of their respective REEs.
The IBPAP claimed, “We are grateful that we now have this RR as [a] basis in handling the issues that we have been grappling with for some time,” on Monday.
Moreover, the IBPAP noted that it looks forward to “further streamlining of the regulation to the effect that those exporting within the minimum threshold of 70% be allowed full-VAT exemption or zero-rating on their purchases given their compliance to the export condition of their registration.”
The IBPAP also cited that businesses remain “hopeful that no obstacles will be encountered henceforth given the new direction to allow IPAs to exercise full supervision and monitoring on this matter.”
In April 2023, Semiconductor and Electronic Industries in the Philippines Foundation Inc. (SEIPI) President Danilo C. Lachica discussed that the regulation set by the BIR is an improvement to ease the concern of constructive exporters.
Lachica stated, “What could be better is to have zero VAT for companies that export at least 70 percent of their products,” noting that he discussed the matter with the Department of Trade and Industry (DTI).
BIR’s RR 3-2023 was released on April 2023. It states that “in all instances in issuing the VAT zero-rating certification, the concerned IPA shall be guided by the rule that such local purchases of services are directly attributable to the registered project or activity without which such registered project or activity cannot be carried out.”