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In order to address concerns regarding the value-added tax (VAT) exemption on importation and VAT zero-rating on local purchases in freeport zones, the House Ways and Means Committee is considering introducing amendments to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law and other pertinent sections of the Tax Code.

The panel would correct any discrepancies between the CREATE law and its corresponding administrative issuances regarding the classification of freeport zones as a separate customs territory and the utilization of associated tax incentives, according to Albay Representative Joey Salceda, panel chair, during the committee hearing on Monday.

He claimed that the CREATE Law’s implementing rules and regulations restricted the applicability of the VAT exemption on imports and the VAT zero-rating on purchases made locally by an export firm that is registered.

He continued, using the term “Registered Business Enterprises,” that the CREATE Law does not distinguish between an export firm and a domestic market enterprise.

Salceda stated that there are 4,136 registered export firms, which he observed is a “tiny percentage of the universe” of those affected by the change in VAT treatment, citing figures from the Bureau of Internal Revenue (BIR).

“”The expenses are being borne by the entire downward connections of the export sector, particularly small enterprises with little resources for VAT refund claims,” Salceda said. Of course, our export prices increase and we lose our competitiveness if they are unable to reimburse their costs.”

In contrast to the CREATE Law, which recognizes ecozones and freeport zones as distinct customs territories, House Resolution 490 claims that the cross-border doctrine for these zones has been rendered ineffective and inoperative.

According to him, the panel will submit a resolution outlining the CREATE law’s legislative aim as well as a bill that clarifies any ambiguity between indirect exporters and domestic suppliers in both the CREATE law and the Tax Reform for Acceleration and Inclusion (TRAIN) law.

He claimed that the elements of the TRAIN bill that were vetoed related to tax breaks for specific local vendors and businesses did not change the law or supersede the more current CREATE statute.

“The law cannot be changed by the President’s veto. In this instance, the law did not distinguish between those who are VAT zero-rated and those who are not. Additionally, neither the implementing regulations nor the implementer, “added he.

He claimed that the Fiscal Incentives Review Board’s (FIRB) “not tying its own hands” would be a more sensible solution because the benefit would be useful in luring a desirable investment in the future.

He also suggested that rather than eliminating the VAT zero-rating incentive entirely for local suppliers, the FIRB may provide it on an applicant-by-applicant basis.

“My constituents in Albay are either exporters themselves or suppliers to exporters. We have a considerable presence in the export of handicrafts. And it is their smaller enterprises that are suffering as a result of this interpretation. Let’s resolve or address this matter definitively in the sake of export competitiveness “added he.

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