Philippines: Exporters released from VAT liability on their local purchases under certain conditions

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On the 3rd of December 2021, the Bureau of Internal Regulation issued RR 21-2021,a regulation which discusses the amendments of previous regulations and for the further implementation of the Sec 294 (E) and Sec 295 (D) of the CREATE law which majorly impacts the VAT implications for export businesses.  


Under the new regulation:


  • Exporters are now free from VAT liability on the local purchases they make, provided that these are for direct and exclusive use for their export business.   
  • Sales to registered exporter enterprises of raw materials, inventories, supplies, equipment, packaging materials, and other related goods, directly and exclusively used in registered projects, are to be free from VAT charges.
  • Services for the direct and exclusive use of the exporters such as provision of basic infrastructure, utilities, and repairs and maintenance of equipment, which are also subject to the same VAT exemption.   


It should be noted that in order to qualify for the abovementioned exemption, the exporter must be a registered export enterprise in accordance with the certain provision provided by the law. The exemption will last up to 17 years from the date of registration (unless otherwise extended by the governing bodies). The regulation is to take effect immediately and be applied on transactions occurring in the start of the third quarter of 2021 onwards.   



Source:  bir.gov.ph 


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