Export-oriented enterprises
In view of the continuing Covid-19 pandemic and its impact to the export industry, Revenue Regulations (RR) 15-2021 deferred the implementation of RR 9-2021 until an amendatory revenue regulation is issued. RR 9-2021 imposed 12 percent VAT on transactions which used to be zero-rated under Section 106 (A) (2) (a) (3), (4), and (5) and Section 108 (B) (1) and (5) of the Tax Code, as amended.
The following transactions will revert to VAT zero-rating:
Sale of goods or properties:
The sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods, paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed seventy percent (70 percent) of total annual production.
Transactions considered export sales under Executive Order 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws.
Sale of services and use or lease of properties:
Processing, manufacturing or repacking goods for other persons doing business outside the Philippines, which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.
Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70 percent) of the total annual production.
Proprietary educational institutions
To ease the burden of taxation among proprietary educational institutions, RR 14-2021 suspended the following provisions of RR 5-2021 on the income taxation of proprietary educational institutions:
Section 2 (C) - definition of proprietary educational institutions, insofar as it includes therein the phrase, “which are non-profit”;
Section 2 (E) - definition of non-profit, insofar as it applies to “Proprietary Educational Institutions”; and
Section 3 (B) - which provides illustration on the tax treatment of proprietary educational institutions that are non-profit.
Section 3 of RR 5-2021 provides that proprietary educational institutions are subject to one percent income tax from July 1, 2020, until June 30, 2023, and 10 percent income tax thereafter.
Please be guided accordingly.
Source:
P&A Grant Thornton
Certified Public Accountants