TRAIN Law may affect zero VAT privilege of freeports

MARIVELES, Bataan: A provision in the Tax Reform for Acceleration and Inclusion (TRAIN) Law may affect the Zero Value Added Tax (VAT) privilege of registered locators in the country’s freeports and economic zones, the chairman of the Freeport Area of Bataan (FAB) said on Wednesday.

“The effect of the TRAIN Law on locators depends on the second package which covers investments. how to increase the take home pay of employees and higher collections for the Bureau of Internal Revenue,” FAB chairman Emmanuel Pineda said.

He said investment promotions in Clark (Pampanga), Subic (Zambales), Bataan and the Philippine Economic Zone Authority as one has convinced Congress not to remove the Zero Vat incentive enjoyed by investors in freeports and economic zones.

Pineda said congress passed the law retaining the Zero VAT rate but the Department of Finance wanted it to be taxed.

“And President Rodrigo Duterte vetoed it,” the FAB chairman said.

He added that registered investors in freeports and economic zones do not pay VAT when they purchase materials for their companies in domestic territory or local markets.

“Our advocacy is for locators to make use of local components in their factories but if the privilege will be removed, they will resort to importing materials where the tax is duty-free. Our intention is good because we want the investors to source more from the local market,” Pineda said.

He said that in the meantime, BIR has issued an advisory saying that the Zero Vat rate is still in effect until the implementing rules of the TRAIN Law is released.

“We are still lobbying and are hopeful that congress will still consider it and the President will take back his veto and no longer remove the Zero VAT rate so more investments will continue coming in,” the chairman said.

Pineda said, however, that the President has his last say on the matter and they will respect his decision.

FAB has informed locators they are “We told them that it may possibly be removed so they will be prepared,” he said.

The Freeport in Mariveles, Bataan which became operational in 2010 has 128 multinational companies and 37,455 workers as of December 31, 2017.

Investments rose from P5 million in 2010 to P6 billion in July 2017.