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22 January 2018

Philippine Tax Authority releases draft regulations on recent VAT amendments

The Philippine Bureau of Internal Revenue recently released draft regulations implementing the recent amendments to the Tax Code on Value Added Tax (VAT) under the Tax Reform for Acceleration and Inclusion (TRAIN) Law. The draft regulations amend Revenue Regulations No. 16-2005 and provides implementing rules on transactions subject to "VAT 0%" and those that are exempt from VAT.

The draft regulations include but are not limited to the following key points:

VAT 0% on the sale of goods

  • The sale of goods, supplies, equipment, and fuel to persons engaged in international shipping or air transport operations must be exclusively used for international shipping or air transport operations in order to qualify for VAT 0%.
  • The sale of goods to registered enterprises within a separate customs territory under special laws and within tourism enterprise zones are classified as VAT 0% in the TRAIN Law but were vetoed by the President, resulting in the exclusion of this specific classification in the regulations.
  • Certain deemed export sale of goods currently subject to VAT 0% will be subject to 12% VAT upon successful establishment and implementation of an enhanced VAT refund system and full payment in cash by 31 December 2019 of all pending VAT refund claims as of 31 December 2017.

VAT 0% on the sale of services

  • Services rendered to persons engaged in international shipping or air transport operations must be exclusively for international shipping or air transport operations to qualify for VAT 0%.
  • Sale of services to registered enterprises within a separate customs territory under special laws and within tourism enterprise zones are classified as VAT 0% in the TRAIN Law but were vetoed by the President, resulting in the exclusion of this specific classification in the regulations.
  • Certain deemed export sale of services currently subject to VAT 0% shall be subject to 12% VAT upon successful establishment and implementation of an enhanced VAT refund system and full payment in cash of pending VAT refund claims, similar to the deemed export sale of goods as mentioned above.

VAT-exempt transactions

  • Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations, provided that these shall be used exclusively for international shipping or air transport.
  • Transfer of property pursuant to qualified tax-free exchange.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Philippines (SGV & Co.), Makati City

  • Luis Jose P. Ferrer
    luis.jose.p.ferrer@ph.ey.com
  • Fidela T. Isip-Reyes
    fidela.t.isip-reyes@ph.ey.com

Ernst & Young LLP, Philippine Desk, New York

  • Betheena Dizon
    betheena.c.dizon1@ey.net

Ernst & Young LLP, Asia Pacific Business Group, New York

  • Chris Finnerty
    chris.finnerty@ey.com
  • Kaz Parsch
    kazuyo.parsch@ey.com
  • Bee-Khun Yap
    bee-khun.yap@ey.com

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ATTACHMENT

PDF version of this Tax Alert

Document ID: 2018-5170

 
 

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