VAT on importing from within

 Economy
Jun 212017
 

If a buyer in the Philippines purchases goods from a Philippine Economic Zone Authority (PEZA) registered enterprise, is the purchase subject to value-added tax (VAT)?
Under Section 107 of the Tax Code in relation to Section 26 of Republic Act No. 7916 (PEZA Law), sale of goods by a PEZA-registered enterprise to a buyer in the Philippines (i.e., domestic sales) is considered a “technical importation,” i.e. the buyer is treated as the importer and the sale shall be charged the corresponding VAT. The rationale for this tax treatment is that an ecozone is considered a separate customs territory which creates a legal fiction that it is a foreign territory, even though located within the Philippines. In essence, purchases from an ecozone are likened to purchases made from abroad. Thus, the sale is treated as a technical importation.

Hope in pending VAT claims

 Economy
Jan 232017
 

It is usual in the Philippines that the same tax law provision has been interpreted and implemented differently by different Commissioners of Internal Revenue (CIR). This is the case of the value-added tax (VAT) claim processing. Section 112 of the Tax Code provides that a taxpayer claiming excess input VAT for refund or tax credit must file the claim with the Bureau of Internal Revenue (BIR) within two years of the close of the taxable quarter during which the sales were made. In case of full or partial denial of the claim or failure of the BIR to act on it within a period of 120 days from receipt of the claim, a taxpayer may elevate its claim to the Court of Tax Appeals (CTA) within 30 days from receipt of the decision or upon expiration of the 120-day period.

Understanding VAT refunds

 Economy
Jan 222017
 

(Third of three parts) In the second part of this series, we discussed some pointers that companies may wish to consider before filing an application for value-added tax (VAT) refund. In particular, we discussed the need to prepare for a BIR audit, to secure in advance the required certifications from government agencies and to ensure that non-resident corporations who are service recipients are not doing business in the Philippines.

Proposed tax reforms: for better or for worse?

 Economy
Oct 032016
 

The Department of Finance submitted to Congress last week the first package of proposed tax reforms. The proposals include the restructuring of the personal income tax (PIT) system; expanding the value-added tax (VAT) base by reducing the coverage of its exemptions; adjusting excise taxes imposed on petroleum products; and, restructuring the excise tax on automobiles except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles. These proposed tax reforms, however, received varying reactions from stakeholders.

Documenting offsetting arrangements in a tax credit or refund

 Economy
May 302016
 

We often hear the phrase: “Taxes are the lifeblood of the Government,” as the main reason why collecting them is essential. However, there are instances when this should give way to the taxpayer’s right to claim a tax refund or credit. One such instance is a claim for tax refund or tax credit on input Value-Added Tax (VAT) arising from VAT zero-rated export sales. A taxpayer claiming this type of tax credit or refund must present at least three types of documents, as follows:

Beware of the new BIR audit program

 Economy
Dec 022015
 

More than a decade ago, a taxpayer could expect only one tax investigation by the Bureau of Internal Revenue (BIR) in a given year, and seldom for two successive years. But now, a taxpayer can be investigated up to three times in the same year: first, under a normal tax audit (i.e., covering all taxes); second, under a value-added tax (VAT) audit; and third, under a Letter Notice audit (which is based on discrepancies arising from the computerized matching of data between the taxpayer’s records and its customers and suppliers).

Setting things straight: The treatment of denied VAT refund claims

 Economy
Jun 152015
 

The need for clear and definitive rules on the proper treatment of input value-added tax (VAT) from zero-rated/export sales in case of denial has never been as important as today. As more VAT refunds are denied by the Bureau of Internal Revenue (BIR), the taxpayers’ clamor to address the issue on the recovery of VAT for zero-rated/export sales becomes inevitable.

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