BIR frees OECF-funded projects from VAT

PH gov’t to shoul­der tax

Manila Bulletin - - Front Page - By CHINO S. LEYCO

In time for the visit of Ja­pan Prime Min­is­ter Shinzo Abe to the Philip­pines, the Bureau of In­ter­nal Rev­enue (BIR) re­versed its ear­lier rul­ing that im­poses a con­sump­tion tax on all govern­ment projects funded by Ja­panese com­pa­nies.

Un­der Rev­enue Mem­o­ran­dum Cir­cu­lar (RMC) 8-2017, the BIR de­cided to ex­empt Ja­pan-funded projects un­der the Over­seas Eco­nomic Co­op­er­a­tion Fund (OECF) from pay­ing the 12 per­cent value-added tax (VAT).

In­stead, the BIR ruled that “all taxes as­so­ci­ated with the project shall be as­sumed by the ex­e­cut­ing govern­ment agen­cies.”

Ac­cord­ing to the BIR, it is the obli­ga­tion of the Philip­pine govern­ment to shoul­der the VAT based on the OECF rules.

“The VAT-reg­is­tered sup­pli­ers and sub-con­trac­tors of the Ja­panese com­pa­nies shall bill and pass on the 12 per­cent VAT to the Ja­panese com­pa­nies/con­trac­tors,” the BIR cir­cu­lar read.

“In turn, the Ja­panese con­trac­tors shall in­clude in their billing and pass on the 12 per­cent VAT to the con­cerned ex­e­cut­ing agen­cies of the Republic of the Philip­pines,” the doc­u­ment fur­ther stated.

Last Septem­ber, Ja­panese busi­ness­men sought help from Fi­nance Sec­re­tary Car­los G. Dominguez III re­gard­ing BIR reg­u­la­tions on the with­hold­ing sys­tem for VAT on projects funded by Ja­pan’s OECF.

Fol­low­ing Dominguez’s meet­ing with the busi­ness­men, he in­structed BIR Com­mis­sioner Cae­sar R. Du­lay to pri­or­i­tize the res­o­lu­tion of the is­sues in­volv­ing Rev­enue Mem­o­ran­dum Cir­cu­lar 45-2015.

In Au­gust 2015, then BIR Com­mis­sioner Kim S. Jac­into-Henares is­sued RMC No. 45-2015, which up­held the ap­pli­ca­tion and va­lid­ity of Republic Act No. 9337 for govern­ment pay­ments un­der OECF-funded projects.

Cit­ing an ear­lier ex­change of notes be­tween the govern­ments of the Philip­pines and Ja­pan, Jac­into-Henares had said the Philip­pine govern­ment would as­sume the fi­nal with­hold­ing VAT worth 5.0 per­cent of the gross pay­ment.

This is to be paid out of govern­ment cof­fers or by per­ti­nent agen­cies as a fi­nal set­tle­ment of the tax due on the in­come re­ceived by Ja­panese con­trac­tors.

As such, Ja­panese con­trac­tors of OECF-funded projects were not al­lowed to in­clude in their billings the en­tire 12 per­cent VAT to be as­sumed by the Philip­pine govern­ment.

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