May 1 sugar inventories VAT-free, says BIR
Inventories of raw sugar and refined sugar covered by a warehouse receipt dated before May 1 are not subject to value-added tax or percentage tax, the Bureau of Internal Revenue clarified yesterday.
The BIR issued Revenue Memorandum circular 252015 to clarify the imposition of advance business tax ( value- added or percentage tax) on raw cane sugar and refined sugar.
Internal Revenue commissioner Kim Henares said the advance business tax (VAT or percentage tax) would be imposed on raw sugar produced in the milling operations if it is sold to another person or entity.
If the raw sugar is just to be transferred to the refinery operation of the taxpayer for purposes of refining and converting the same into refined sugar, only the advance business tax on the refined sugar shall be imposed, Henares said.
“There is no separate imposition of business tax on raw sugar and refined sugar considering that no sales transaction has transpired since both products are owned by one and the same taxpayer,” she said.
Henares said the advance payments of percentage taxes by non- VAT taxpayers are not allowable as input tax credits in the computation of the VAT liabilities of their clients-customers.
Average retail prices of sugar in Metro Manila have gone up since last month ahead of the implementation of a regulation that requires owners and sellers of refined and raw sugar to pay VAT in advance before the sugar is withdrawn from any sugar refinery mill.
Only raw cane sugar or muscovado will be exempt from VAT under the Tax Code since it is produced naturally.
Raw cane sugar is defined by the BIR as sugar produced by simple process of conversion of sugar cane without need of any mechanical or similar device.