RR No. 9-2021: Amends certain provisions of RR No. 16-2005, as amended by RR No. 13-2018 and as further amended by RR No. 26-2018, to implement the imposition of 12% VAT on transactions covered under Section 106 (A)(2)(a) subparagraphs (3), (4), and (5), and Section 108(B) subparagraphs (1) and (5) of the NIRC of 1997, as amended by RA No. 10963 (TRAIN Law)

Summary

RR No. 9-2021 amends RR No. 16-2005, as amended by RR Nos. 13-2018 and 26-2018, to subject certain formerly zero-rated transactions to 12% VAT under the NIRC as amended by RA No. 10963 (TRAIN Law).

Key points

1. Sales of goods now at 12%. Three export sales under Section 106(A)(2)(a) subparagraphs (3), (4) and (5) move from 0% to 12%. They are sales of raw or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise, sales of such materials to an export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production, and sales considered export sales under Executive Order No. 226 and other special laws.
2. Services now at 12%. Two services under Section 108(B) subparagraphs (1) and (5) also move to 12%. They are processing, manufacturing or repacking goods for persons doing business outside the Philippines, where the goods are later exported, and services by subcontractors or contractors for an enterprise whose export sales exceed seventy percent (70%) of total annual production.
3. Renumbered Section 4.106-5. Zero-rated sales of goods are export sales (actual shipment abroad, and sales of goods, supplies, equipment and fuel used exclusively for international shipping or air transport) and sales to persons whose exemption under special laws or international agreements effectively zero-rates the sale. Any portion of such fuel, goods, supplies or equipment used for other purposes is subject to 12% VAT.
4. Renumbered Section 4.108-5. Zero-rated services include services to persons doing business outside the Philippines paid in acceptable foreign currency, services to persons exempt under special laws or international agreements, services to international shipping or air transport, and transport of passengers and cargo from the Philippines to a foreign country. Sale of power or fuel from renewable energy sources is also zero-rated, but not services related to maintaining or operating the plants. International carriers’ receipts from such transport are VAT-exempt but liable to a three percent (3%) percentage tax under Sec. 118 on cargo.

Who is affected

• VAT-registered sellers of raw or packaging materials to export-oriented enterprises
• Subcontractors and contractors processing goods for export-oriented enterprises

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.