Special InTAX: June 2021 Issue 1 | Volume 1

 

Department of Finance

 

The Department of Finance (DOF) issued the following:

Revenue Regulations (“RR”) No. 8-2021, 11 June 2021, to amend certain provisions of RR No. 4-2021 which implemented the Value Added Tax (VAT) and Percentage Tax provisions under Republic Act  (RA) No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises Law (CREATE Law).

Salient points of RR No. 8-2021 are as follows:

•  Fairness and equity dictate that the VAT-exempt threshold under RA No. 10963 (TRAIN Law) of Php 2,000,000.00 for sale of house and lot and other residential dwellings should also be adjusted to Php 3,199,200.00 beginning 1 January 2021. Hence, Section 2, sub-section 4.109-1 (B)(p)(4), of RR No. 4-2021 is amended to read as follows:

“Provided, that beginning 1 January 2021, the VAT exemption shall only apply to sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business; sale of real property utilized for socialized housing as defined by Republic Act (RA) No. 7279, as amended, and, sale of house and lot, and other residential dwellings with selling price of not more than Two Million Pesos (Php 2,000,000.00), as adjusted to Php 3,199,200.00 in 2011 using the 2010 Consumer Price Index values: Provided, further, That every three (3) years thereafter, the amount stated herein shall be adjusted to its present value using the Consumer Price Index as published by the Philippine Statistics Authority (PSA).”

• To facilitate the early release of the imported items to achieve herd immunity and to require the use of medical grade Personal Protective Equipment (PPE) components as a protection against COVID-19, Section 2, sub-section 4.109-l(B)(p)(bb), therefore, of RR No. 4-2021 is amended to read as follows:

“The importation of items under (i), (ii) and (iii) hereof shall not be subject to the issuance of the Authority to Release Imported Goods (ATRIG) under Revenue Memorandum Order (RMO) No. 35-2002, as amended, and maybe released by the Bureau of Customs (BOC) without the need of an ATRIG.

The exemption claimed under this subsection shall be subject to post audit by the Bureau of Internal Revenue (BIR) or the BOC, as may be applicable.”

• For excess percentage tax payments as a result of the decrease of tax rate from 3% to 1%, tax refund, is still allowed in the event that the taxpayer shifted from non-VAT to VAT-registered status, or the taxpayer has opted to avail of the eight percent (8%) income tax rate at the beginning of TY 2021. Hence, Section 3(2)(b) of RR No. 4-2021 is amended to read as follows:

“Percentage taxpayers who have overpaid taxes as a result of the decrease of tax rate from 3% to 1 % starting 1 July 2020 until the effectivity of RR No. 4-2021 are allowed for a tax refund in the event that:

a.  The taxpayer shifted from non-VAT to VAT-registered status; or

b.  The taxpayer has opted to avail the eight percent (8%) income tax rate at the beginning of TY 2021.”

• Effective 15 days following publication in the Official Gazette or in a leading newspaper of general circulation, whichever comes first.

(RGM & Co. Note:  The RR was published in Philippine Star on 12 June 2021)

RR No. 9-2021, 9 June 2021, to amend certain provisions of RR No. 16-2005, as amended by RR No. 13-2018 and as further amended by RR No. 26-2018 to implement the imposition of 12% VAT on transactions covered under Section 106 (A)(2)(a) subparagraphs (3), (4), and (5), and Section 108 (B) subparagraphs (1) and (5) of the Tax Code of 1997, as amended by TRAIN LAW.

Salient points of RR No. 9-2021 are as follows:

• Section 2 of the RR provides transactions which are now subject to 12% VAT as conditions required under the proviso of Sections 106(A)(2)(a) and 108(B) of the Tax Code of 1997, as amended, have been fully satisfied. The following are the transactions that are now subject to 12% VAT which were previously taxed at 0% VAT:

 

Transaction	Particular Items
Transactions considered as export sale under subparagraphs (3), (4), and (5) of Section 106(A)(2) of the Tax Code	1.  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 and paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP [Sec. 106(A)(2)(a)(3 )]; 2.   Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production [Sec. 106(A)(2)(a)(4)]; and 3.  Those considered export sales under E.O. No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws [Sec. 106(A)(2)(a)(5)].
Sale of services and use or lease of properties under subparagraphs (1) and (5)  of Section 108(B) of the Tax Code	1.   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 [Sec. 108(B)(l )]; and 2.   Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of the total annual production [Sec. 108(8)(5)].

 

• Section 3 of the RR renumbered subparagraphs of Sections 4.106-5 and 4.108-5 of RR No. 16-2005, as amended.

• Effective 15 days following publication in a leading newspaper of general circulation.

(RGM & Co. Note:  The RR was published in Philippine Star on 12 June 2021)

 

Attached are the full texts of the issuances. 

Revenue Regulations No. 8-2021 _AmendsRRNo04-2021

Revenue Regulations No. 9- 2021 TransactionsSUbjecttoVATunderTRAINLaw