Special InTAX: December 2021 Issue 1 | Volume 3

Coverage

Amendments introduced by RR No. 21-2021

Zero-rated Sale of Goods or Properties (Section 4.106-5 of RR No. 16-05, as amended)

The following sales by VAT-registered persons shall be subject to 0% rate:

a.   Export sales;

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b.  Sales to persons or entities whose exemption from direct and indirect taxes under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate;

c.  Sale of raw materials, inventories, supplies, equipment, packaging materials, and goods, to a registered export enterprise**, to be used directly and exclusively in its registered project or activity for a maximum period of 17 years from the date of registration, unless otherwise extended under the SIPP. Provided, that the above-described sales to existing registered export enterprises located inside ecozones and freeport zones shall also be qualified for VAT zero-rating under this sub-item until the expiration of the transitory period.

Zero-rated Sale of Services [Section 4.108-5(b) of RR No. 16-05, as amended]

The following services performed in the Philippines by VAT-registered persons shall be subject to 0% VAT rate:

1.  Services other than processing, manufacturing or repacking of goods rendered to a person engaged in business conducted outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP;

2.  Sales rendered to persons or entities whose exemption from direct and indirect taxes under special laws or international agreements to which the Philippines is a signatory, effectively subjects the supply of such services to zero percent (0%) rate;

3.  Sale of services, including provision of basic infrastructure, utilities, and maintenance, repair and overhaul of equipment, to a registered export enterprise**, to be used directly and exclusively in its registered project or activity for a maximum period of 17 years from the date of registration, unless otherwise extended by the SIPP. Provided, that the above-described sales to existing registered export enterprises located inside ecozones and freeport zones shall also be qualified for VAT zero-rating under this sub-item until the expiration of the transitory period;

4.  Services rendered to persons engaged in international shipping or air transport operations, including leases or property for the use thereof: Provided, that these services shall be exclusively for international shipping or air transport operations;

5.  Transport of passengers and cargos by domestic air or sea vessels from the Philippines to a foreign country. Gross receipts of international air or shipping carriers doing business in the Philippines derived from transport of passengers and cargo from the Philippines to another country shall be exempt from VAT; however, they are still liable to a percentage tax of three percent (3%) as provided for in Sec. 118 of the Tax Code; and

6.  Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other emerging sources using technologies such as fuel cells and hydrogen fuels: Provided, however that zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to sale of services related to the maintenance or operation of plants generating said power.