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DOF: Revenue rule on VAT will be replaced

The Department of Finance (DOF) building is seen in this BusinessMirror file photo.


The Department of Finance (DOF) clarified on Thursday that the controversial Revenue Regulations (RR) 9-2021 will be repealed and replaced with a new one that will allow exporters to keep enjoying zero-percent value-added tax (VAT) on their local purchases of goods and services “directly and exclusively used” in a registered project or activity.

Finance Undersecretary Antonette C. Tionko, who heads the DOF’s Revenue Operations Group, said on Thursday the new RR that is targeted to be issued this month will now be in line with the provisions of Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.

“So in effect RR 9-2021 will be repealed by the regulations that are gonna be coming out to implement CREATE,” Tionko said in a webinar hosted by the Tax Management Association of the Philippines, Inc. (TMAP).

The announcement of the intended repeal of RR 9-2021 came after exporters expressed concern that the regulation could cripple the industry. The old RR was issued in line with the provisions of Republic Act (RA) 10963 or the Tax Reform and Acceleration and Inclusion Act (TRAIN) that certain transactions previously considered zero-rated shall be subject to 12-percent VAT upon satisfaction of two specific conditions.

Since RR 9-2021 took effect on June 27, which meant that only three days was left covered for the second quarter, Tionko said they decided not to implement the said regulation for that period.

“For those three days, I doubt if anyone paid VAT on that or anyone passed on VAT and if ever, there is still time to refund because the deadline is still July 25, [right], so the impact isn’t very great,” she said.

But Tionko said the whole month of July will be covered by the new RR that they will issue soon.

“By this quarter, we can already implement CREATE since it’s only the start [of the quarter] and the regs [regulations] are likely to come out soon,” she said.

Asked what happens if vendors have already issued VAT invoices for the sale of goods and services this month to exporters prior to the repeal of the old RR, Tionko said: “That’s being addressed; it’s either by the issuance soon of the new regs [regulations] or if it will take more time than they think, then probably an interim issuance [whichever comes first].” She explained it might be “useless to issue a suspension” that overlaps with the release of a new rule. “So we will see how it works out,” she said.

According to RR 16-2005 and RR 13-2018, a zero-rated sale of goods or properties or services by a VAT-registered person is a taxable transaction for VAT purposes, but this shall not result in any output tax. However, the input tax on purchases of goods, properties, or services related to such zero-rated sale, shall be available as tax credit or refund.