Following the coming into force of the Tax Reform for Acceleration and Inclusion (“TRAIN”) Act on 1 January 2018, the Bureau of Internal Revenue (“BIR”) has been issuing revenue regulations to implement the TRAIN Act. On 15 March 2018, the Commissioner of Internal Revenue issued Revenue Regulations (“RR”) No. 13-2018 to implement the provisions of the TRAIN on value-added tax (“VAT”) and percentage tax to further amend RR No. 16-2005.
For the key highlights of RR No. 13-2018, please see below.
RR No. 13-2018 now clarifies that persons engaged in international shipping or international air transport operations, including leases of property for use thereof may enjoy VAT zero rated treatment provided the sale of goods, supplies, equipment, fuel or services are used exclusively for international shipping or air transport operations.
Upon the establishment and implementation of an enhanced VAT refund system, the VAT zero-rating privilege for indirect exports of goods or services will be eliminated.
VAT refund applications filed with the BIR beyond 1 January 2018 should be settled within 90 days from the filing of such administrative application together with the official receipts or invoices and other supporting documents, instead of the previous 120-day period. This also means that such applications filed prior to 1 January 2018 shall be governed by the 120-day processing period. However, RR No. 13-2018 does not clarify when the supporting documents accompanying the application will be deemed complete by the BIR.
The following items have been added to the list of VAT-exempt transactions:
From 31 December 2021, RR No. 13-2018 will also change the rules with respect to claims for input VAT on depreciable goods. Currently, input VAT attributable to purchases of capital goods at a price above PHP1,000,000 is required to be evenly spread out for a 60-month period. After 31 December 2021, the input VAT has to be claimed outright as a credit from output VAT on the month of purchase, but taxpayers with unutilized input VAT on capital goods shall be allowed to apply the same as scheduled until fully utilized, in accordance with RR No. 13-2018.
With respect to the filing of VAT returns and payments, beginning 1 January 2023, the filing and payment shall be done within 25 days following the close of each taxable quarter.
Rules on withholding of VAT by the government also underwent some changes, wherein beginning 1 January 2021, such VAT withholding system shall shift from a final to a creditable system.
RR No. 13-2018 does not impose additional requirements for the zero-rating of sales to PEZA-registered enterprises by VAT-registered suppliers. Therefore, sales of goods and services to PEZA-registered entities shall continue to be subject to 0% VAT. In other words, until a contrary law or regulation is issued, the “status quo” on PEZA-registered enterprises remains and the latter may conduct business as usual. However, in a conference organized by the Tax Management Association of the Philippines (“TMAP”), BIR Deputy Commissioner-Legal Marissa Cabreros, mentioned that availment of the 0% VAT rate for sale of goods and services to PEZA-registered entities may require suppliers of said goods and services to comply with requirements of the BIR Audit Information, Tax Exemption & Incentives Division (“AITEID”). In recent years, the BIR AITEID has required the filing by suppliers to PEZA entities of an “Application Form for VAT Zero Rate”, pursuant to RR No. 16-2005 and Sections 106 and 108 of the 1997 Tax Code, as amended. In practice, during the course of audit, BIR examiners can impose 12% VAT on an otherwise VAT zero-rated transaction by a supplier to a PEZA entity if said supplier is unable to present proof of compliance with the AITEID requirement.
This alert is for general information only and is not a substitute for legal advice.