Exporters and other affected stakeholders will be happy to note that the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act addresses their concerns regarding the implementation of the value-added tax (VAT) zero rating on local purchases and the tedious VAT refund process.
Lawyer Jomel Manaig, a partner at tax law firm Du-Baladad and Associates, in a recent virtual presentation on some of the most important tax developments this year, said the newly signed law brings back “directly attributable” as a standard of measure for VAT-related concerns.”
Earlier under the CREATE law, the “directly and exclusively used” standard governed the applicability of VAT exemption on importation and VAT zero rating on local purchases. However, inconsistencies arose when the related revenue regulations were issued. This resulted in difficulties and, eventually, frustrations for registered business enterprises or RBEs, which bore the brunt of the ill effects of these issues and inconsistencies, Manaig noted.
“The ‘directly and exclusively used’ standard under CREATE was removed due to the problems that came during CREATE’s implementation, which rendered the said incentives unpredictable and at times unreliable,” said Manaig in his November 28 talk.
To recall, under CREATE, duty exemption on importations could only be enjoyed if these importations were directly and exclusively used in the registered project or activity of the RBEs.
Now under CREATE MORE, this incentive may be availed of if the importation is “directly attributable” to the registered activity of the RBE, including goods for administrative purposes, Manaig said.
Similarly, CREATE ruled that VAT exemption on importation and VAT zero rating on local purchases could only be applied if the purchases were directly and exclusively used in the registered project or activity of the RBEs.
CREATE MORE amends this by stating that these incentives may be enjoyed if the purchases are directly attributable to the registered activity of the registered export enterprise (REE) or high-value domestic market enterprises including incidental expenses.
Earlier this year, exporters had sought clarity over the uncertainties in the implementation of the CREATE Act, particularly its provisions on the VAT zero rating. The Philippine Exporters Confederation, Inc. came out with an official position paper seeking a resolution to the problems this policy had created for exporters and their local suppliers.
At the same time, CREATE MORE has revised the VAT refund process, another major issue for companies, by introducing another layer of remedy for taxpayers seeking refunds, namely, the Request for Reconsideration to the Commissioner of Internal Revenue (CIR).
“It applies in case there is an adverse decision to the VAT refund claim of the taxpayer,” said Manaig. “Claimants may now file the request for reconsideration within 15 days from the receipt of the decision and the CIR in turn would have 15 days to process this request.”
He added: “We are eager to see if this new layer of remedy would actually be effective considering the limited time to process the request for reconsideration.”
Fortunately, the new law also requires the BIR to publish relevant statistics on the processing of VAT refund claims. With this, the efficiency of the request for reconsideration and the entire VAT refund process may be evaluated using measurable factors, Manaig said.
VAT refund applicants have complained about the long process for claiming their refunds, with some saying they’ve been waiting for months, even years, to no avail.
