Special InTAX: February 2024 Issue 1 | Volume 2

Bureau of Internal Revenue

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 21-2024 dated 07 February 2024 to clarify the answer to Q&A No. 31 of RMC No. 49-2022.

The revision mandates Registered Export Enterprises (REEs) whose sales are generated only from the registered activity and have shifted from Income Tax Holiday (ITH) to 5% Gross Income Tax (GIT) or Special Corporate Income Tax (SCIT), and those enjoying 5% GIT regime but are still VAT-registered upon the effectivity of the CREATE Act, to change their registration status from value-added tax (VAT) registered entity to non-VAT, within two (2) months from the expiration of their ITH, and within two (2) months from the effectivity of RMC No. 49-2022, respectively.

However, a disparity of treatment arose between petroleum importers inside freeport zones or special economic zones (SEZ) and those within the customs territory due to the application of these guidelines in conjunction with the intention of Section 295(F) of the Tax Code, as amended.

Consequently, REE petroleum importers, including those inside freeport zones or SEZ, are required to pay applicable duties and taxes, including VAT, on their import transactions but may be refunded for export of petroleum related products and/or tax-exempt sales.

Under Section 112(A) of the Tax Code, only VAT-registered entities can claim VAT refunds. Thus, the BIR clarifies that REEs within freeport zones or SEZ enjoying 5% GIT or SCIT, which directly import petroleum products and have no other activities subject to VAT, shall be permitted to register as VAT taxpayers to claim input VAT refunds from zero-rated sales.

This Circular applies prospectively, not covering previous transactions of petroleum importers which changed their status from VAT to non-VAT under RMC No. 49-2022. All other issuances inconsistent herewith are hereby repealed and modified accordingly.

Here is the link to the full text of the issuance: RMC No. 21-2024.