THE Department of Finance (DoF) is expected to submit in a matter of days its proposed amendments to the Corporate Recovery and Tax Incentives (CREATE) law, which will clarify the eligibility of exporters seeking to avail of value-added tax (VAT) zero-rating, a senior legislator said.
The expected amendments will take the form of modifications to the law’s implementing rules and regulations (IRR), according to Albay Rep. Jose Ma. Clemente S. Salceda, who chairs the House ways and means committee.
“In the coming days, (the DoF) will issue amendments to the CREATE Law IRR so that registered export enterprises can continue to avail of VAT zero-rating throughout the transition period, while domestic market enterprises inside economic zones will be allowed to register as VAT taxpayers so they can avail of the refund system,” Mr. Salceda said.
“Representatives from the business sector have brought these VAT issues to the President’s attention and have cited them as affecting our competitiveness as an investment destination,” Mr. Salceda said.
Last month, President Ferdinand R. Marcos, Jr. cited the need to amend CREATE to address concerns raised by businesses and investors.
At the Tuesday plenary session, legislators adopted Committee Report No. 638, which “found glaring inconsistencies between the letter and intent of the CREATE law and the rules and regulations issued to implement its provisions.”
Inconsistencies noted in the report are the “disrespect for the transition period prescribed under Section 311 of the Tax Code about VAT privileges attached to the preferential five percent (5%) tax on gross income earned,” as well as the distinction between registered domestic and export enterprises in applying for VAT privileges, when the law did not make distinctions.
The panel also recommended that the Board of Investments “integrate incentive promotion in its regional offices,” and that the Bureau of Internal Revenue improve its processing of VAT refunds.
Signed in 2021, the Republic Act (RA) No. 11534 or CREATE reduced tax rates and overhauled the incentive system to support businesses recovering from the pandemic.
Under the law, the corporate income tax rate for micro, small and medium enterprises was decreased to 20% from 35%. Large corporations with taxable income above P5 million also saw their rates reduced to 25% from 30%.
RA 11534 also grants incentives to registered companies and projects, including income tax holidays, special corporate income tax rates, enhanced deductions, duty exemptions on imports of selected materials, and VAT zero-rating on local purchases.
However, some incentives like those involving VAT zero-rating have been singled out by exporters.
“We hope to put all questions about CREATE’s IRR to rest before the year ends,” Mr. Salceda said.
BULK CASH SMUGGLING BILL
During the Wednesday plenary, the proposed Anti-Bulk Foreign Currency Smuggling Act drew 266 votes for and zero against, with zero abstentions.
House Bill No. 8200 requires a written or electronic declaration for the cross-border transfer of foreign currency and monetary instruments worth more than $10,000.
During the bill’s second reading last week, Nueva Ecija Rep. Rosanna V. Vergara said the measure aims to expedite the removal of the Philippines from the Financial Action Task Force’s (FATF) “gray list.”
It will also help ease the process of sending home money for overseas Filipino workers (OFWs), she said.
The proposed law defines bulk foreign currency smuggling as physically transporting or transferring foreign currencies and monetary instruments worth more than $200,000.
Bulk foreign currency smuggling will be considered a violation of the Anti-Money Laundering Act, according to the bill.
An individual is considered to have evaded the declaration requirement if found to have concealed foreign currency and monetary instruments worth more than $10,000 in and out of the country; in the event of failure to declare unaccompanied foreign currency or foreign currency-denominated bearer monetary instruments to be transported or already received; making a false declaration, or breaking down the amount being transferred into smaller sums to avoid declaration.
A similar bill was passed in the 18th Congress. — Beatriz Marie D. Cruz