The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular (RMC) No. 152-2022 to provide clarifications and guidelines on the implementation of certain provisions in Revenue Regulations (RR) No. 21-2021 and RMC Nos. 24-2022 and 49-2022 regarding the revised value-added tax (VAT) rules for Registered Export Enterprises (REEs) under the CREATE Law.
What is the VAT treatment of local purchases of goods and services during the transitory period (effectivity of RR No. 21-2021 on Dec. 10, 2021, and the issuance of Q&A No. 26 of RMC No. 24-2022 on March 9, 2022)?
As a general rule, REEs whose incentives have already prescribed are no longer qualified for VAT zero-rating on their local purchases; thus, they are subject to 12% VAT. Exemption to the general rule are the local purchases from December 10, 2021, to March 8, 2022, to protect taxpayers from being prejudiced on the change in interpretation. As such, local purchases made during the transitory period are still VAT zero-rated.
What are the remedies of the buyer and seller if the local purchase is erroneously subjected to VAT during the transitory period?
Option 1: Retain the transaction as subject to 12% VAT
a. Seller will report the transaction in its VAT return as VATable.
b. Buyer will utilize the passed-on VAT as input VAT and deducted against any output VAT. If the buyer is not VAT-registered, the input VAT will form part of the cost/expense of the buyer.
Option 2: Revert the transaction from 12% VAT to VAT zero-rated
a. Seller will amend the affected VAT return and reimburse the buyer of the corresponding VAT. Seller will replace the issued VAT sales invoice and/or official receipt with a zero-rated sales invoice and/or official receipt. Seller will prepare a list of cancelled VAT sales invoice and/or official receipt, together with the replacement zero-rated sales invoice or official receipt.
b. Buyer will amend the affected VAT return and secure from the seller the reimbursement thereof and the corresponding VAT-zero rated sales invoice and/or official receipt.
What is the tax impact on the sales and local purchases of REEs after complying with the mandatory shift from VAT to Non-VAT?
The change of registration from VAT to Non-VAT will not render the sales of REEs as subject to percentage tax, considering that the REEs are entitled only to gross income tax or special corporate income tax in lieu of all other internal revenue taxes. On the other hand, REEs will continue to enjoy VAT zero-rate incentives on their local purchases until the expiration of the incentive period. For those whose incentive periods have already expired, the general rule of local purchases subject to 12% VAT will apply.
Please be guided accordingly.
Source:
P&A Grant Thornton
Certified Public Accountants
P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.
As published in SunStar Cebu, dated 11 January 2023
