Press Releases

House tax panel to resolve VAT issue among indirect exporters through resolution, amendments to Tax Code

February 7th, 2023

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) directed the committee secretariat of the House tax panel to prepare “a committee report on this resolution, and by filing a bill to amend Section 311 on Investments Prior to the Effectivity of this Act, and other relevant sections of the National Internal Revenue Code, as amended” to resolve issues regarding the VAT treatment of indirect exporters and local suppliers of direct exporters.

The implementing rules and regulations of the CREATE Law restricted VAT zero-rating to items directly and exclusively used for exports, and to registered exporters, although, as Salceda pointed out “the law did not make the latter distinction.”

“The BIR reports that there are 4,136 registered export enterprises, however, this is a small portion of the universe of those affected by the change in VAT treatment. The entire downward linkages of the export sector, especially small businesses with few resources for VAT refund applications, are bearing the costs,” Salceda said.

“And of course, if they are unable to refund their costs, our export prices go up, costing us our competitiveness. This is why for two years now the Committee has sought relief from the FIRB on this matter.”

Salceda says that the Committee will file a resolution expressing the legislative intent of the CREATE law, as well as a bill clarifying ambiguities in both CREATE and TRAIN laws for indirect exporters and local suppliers.

Salceda earlier said that the veto of the TRAIN law’s portions on VAT perks for some local suppliers and enterprises does not amend the law, or supersede the more recent CREATE law.

“The President’s veto cannot amend the law. And in this case, the law did not make a distinction about who is VAT zero-rated and who is not. Neither should the implementing rules, or the implementor.”

“A more logical fix is for the FIRB not to tie its own hands, since that benefit may be useful in attracting a desirable investment in the future. Instead, as is intended, the FIRB can grant the VAT zero-rating incentive on an applicant-to-applicant basis, rather than close down the entire incentive for local suppliers.”

“My constituents in Albay are suppliers of exporters, or exporters themselves. We have a big footprint in the handicrafts export business. And their size of businesses are the ones being hurt by this interpretation.”

“In the interest of export competitiveness, let’s settle or correct this issue once and for all.”

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