VAT Refunds: Who, what, where, when and how

“Show me the money!” -- Rod Tidwell, Jerry Maguire.

The catchphrase made famous by actor Cuba Gooding Jr. seems to perfectly capture the constant pressure received by consultants like me who assist taxpayers in the recovery of their excess or unused input taxes remitted to the Philippine tax authority.

To put things in context, let us revisit the basic principles surrounding the Philippine value-added tax (VAT) system. Briefly, except for certain specific transactions or taxpayers that are exempt, any person who sells, leases or exchanges goods or services in the Philippines is subject to VAT at the rate of either 0% or 12%. However, being an indirect tax, the amount of VAT due from the seller is shifted or passed on to the buyer of the goods and/or services sold. The buyer then becomes entitled to claim the VAT paid as input tax credit against his output tax liabilities. As such, a taxpayer shall only pay the difference between the VAT on his own sales (output tax) and the VAT from his purchases (input tax). 

In most cases, the amount of output tax will be more than the input tax, resulting in a VAT remittance to the government. However, there are instances when the opposite is true, particularly if the buyer’s own sales transactions are subject to 0% VAT (such as in the case of export sales). In such cases where the input VAT credits of a taxpayer exceed his output VAT liabilities, the Philippine Tax Code allows the taxpayer to carry over such excess to the succeeding quarters, or apply for a refund or issuance of a tax credit certificate (TCC). 

For this article, let’s discuss the “who, what, where, when and how” with regard to the refund of excess or unused input taxes attributable to a taxpayer’s sales which are subject to 0% VAT.

Who? Any VAT-registered taxpayer claiming a refund of excess or unutilized input tax credits. 

What? An application for the refund or issuance of a TCC representing excess or unutilized input tax credits attributable to zero-rated or effectively zero-rated sales. Export sales are considered zero-rated sales while sales to entities registered with the Philippine Economic Zone Authority (or other free trade zones) or entities registered with the Board of Investments whose sales are 100% exported are effectively zero-rated sales. 

Where? Claims/Applications for refund or issuance of a TCC representing excess input taxes attributable to export sales may be filed either with the Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) having jurisdiction over the taxpayer-applicant or with the Bureau of Internal Revenue’s (BIR) VAT Credit Audit Division (VCAD). 

On the other hand, claims/applications representing excess input taxes attributable to export-oriented sales (i.e., effectively zero-rated sales) may only be filed with the RDO/LTDO having jurisdiction over the taxpayer-applicant.

When? Refund claims/applications must be filed within two years from the close of the taxable quarter when the sales were made.

Once the claim/application is filed by the taxpayer, the BIR office where the claim was filed is required to act on the refund claim within a mandated 120-day period. Based on a 2014 Supreme Court decision, inaction by the BIR within this period shall be deemed a denial of the claim. For taxpayers who generate their revenues from export sales, experience would show that it is more advisable to file the claim with the VCAD. This is because, unlike the RDO/LTDO which has numerous functions, the sole function of the VCAD is to cater to refund claims filed by direct exporters.

How? Aside from being able to substantiate the claim with compliant supporting documents, it is also important for applicants to know how to calculate the amount to be applied for refund. 

For taxpayers whose sales are all considered export or export-oriented, the refundable amount shall be the covered period’s current purchases.

For taxpayers with mixed transactions (i.e., with sales subject to 12% VAT and with sales subject to 0% VAT), only the input taxes attributable to the export or export-oriented sales (zero-rated sales) shall be eligible for refund. Where specific identification is not possible, the input tax is allocated based on sales volume. 

After allocating the input tax, please do note that in cases where the current period’s input taxes attributable to domestic sales is greater than current period’s output VAT liabilities, such excess input taxes would be included in the VAT credit balances to be carried forward. As mentioned, only the current period’s input taxes attributable to zero-rated sales would be eligible for refund. On the other hand, in case the current period’s input taxes attributable to domestic sales is less than current period’s output VAT liabilities, the output tax still due for the current period of the claim shall be deducted from the current period’s input taxes attributable to zero-rated sales. Only the balance of current period’s input tax attributable to zero-rated sales, after deducting the “output tax still due,” will be eligible for refund.

Undoubtedly, processing a tax refund is considered a tedious process; nonetheless, succeeding in this endeavor (without Court intervention) is not an impossible feat. In fact, this author believes that by at least knowing the above basics of VAT refunds, taxpayers do have a fighting chance during the 120-day ordeal with the BIR. Knowing the basics also applies to taxpayers who prefer to seek external assistance from consultants as this will make the refund application process go smoothly and increase the chances of full recovery. In turn, this will help relieve the pressure to “show me the money” as it gives life to the other oft-quoted catchphrase -- “help me, help you.”

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article

Jocelyn T. Tsang is a Senior Manager belonging to the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network. 

2012: The new rule on taxation of nonresident citizens

SUITS THE C-SUITE By Iryn S. Yap-Balmores
Business World (06/11/2012)

Companies in today’s business environment compete on a global level, making it more commonplace for employees to work across borders.

Businesses are looking increasingly at work arrangements such as seconding employees which allows them opportunities for training, specialization, and exposure to other countries and cultures. Being seconded overseas can further develop an individual’s career and also acts an incentive to help companies retain their good people. It also allows an entity within a global organization to share resources and emphasize to their employees its worldwide reach.

Secondment is not a new phenomenon. Filipinos working in multinational or global companies stand a chance of being sent to foreign offices. These arrangements usually last from a few months to a couple of years. Given this, how then do Filipinos account for their taxes when they are assigned abroad?
Prior to the passage of Republic Act (RA) 8424 or the Tax Reform Act of 1998, income tax was imposed on foreign-sourced income of nonresident Filipino citizens. The top marginal rate was 3% for foreign-sourced income over US$20,000.

With the passage of RA 8424, however, nonresident citizens became subject to tax only on their income from Philippine sources. Only resident citizens are taxed on their worldwide income. Clearly, for Philippine income tax purposes, it is vital to determine whether a Filipino is a resident or a nonresident citizen.

Taxation of Nonresident Citizens under the Tax Code and Previous Tax Rulings

Section 22 of the Tax Code defines a nonresident citizen as “a citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year.” In Section 2 of Revenue Regulations (RR) No. 1-79, the term “most of the time” means presence outside the Philippines for not less than 183 days during the taxable year.

The provisions above have been the bases for BIR rulings which held that income of employees who were assigned overseas is not taxable in the Philippines under either of the following premises:

• Employees who are registered with the Philippine Overseas Employment Administration (POEA) are considered as overseas contract workers (OCWs), regardless of the number of days spent outside the Philippines during the taxable year; or

• Employees who may not be registered with the POEA, but who are physically present abroad for at least 183 days during the taxable year, are considered as nonresident citizens.

In these rulings, nonresidency of a Filipino and eligibility to qualify for tax exemption were determined on the basis of physical presence. The place where the salary was paid was deemed immaterial in determining residency – perhaps based on the underlying principle that the situs of taxation in the case of personal services is determined by the place where the services are rendered.

Thus, based on the Tax Code provision as interpreted in past BIR rulings, companies and employees often remember and use the 183-day threshold.

However, based on a recent BIR ruling, it appears that looking only at the 183-day rule is not enough.

BIR Ruling No. 517-2011

In this ruling dated December 22, 2011, the Bureau of Internal Revenue (BIR) held that a local company’s employees (they are engineers) assigned to render services abroad do not qualify as “nonresident citizens” and will thus be treated as resident citizens. Accordingly, compensation income from their assignment abroad, where such engineers are present in the foreign country most of the time during the taxable year (more than 183 days), are subject to Philippine income tax and consequently to creditable withholding tax on wages.

The local employer is a domestic corporation that sends its engineers to various countries for a maximum period of 214 days per calendar year. While working overseas, these engineers remain on the Philippine payroll. The BIR held that the engineers cannot qualify because the phrase “employment thereat” [as used in paragraph (3) of Section 22(E)] means that the individual must be employed in such country. For this purpose, it cited the definition of an “employee” under Section 2.78.3 of RR 2-98, that is, an individual performing services under an employer-employee relationship.

The BIR noted that the personnel are employed as full-time staff in the local company and the foreign assignment is considered part of their duties. As their salaries were paid by the local company whether they were in the Philippines or on foreign assignment, their temporary assignment does not make them employees of the foreign companies for which they rendered that service. The BIR further explained that as the employees of the local company, though working abroad, they are still under an employer-employee relationship with the Philippine entity and not with the foreign entity, and so they do not qualify them as non-residents under paragraph (3).

The basic principle in BIR Ruling No. 517-2011 – that an employer who claims compensation paid to an employee as an expense should withhold the requisite withholding tax on compensation – is sound. Some companies may argue that perhaps the BIR should also consider diverse arrangements between companies in the host and home countries, and the assignees. In construing who is the employer in these secondment arrangements, perhaps the BIR may clarify situations where the home country entity remains the legal employer in form, but the substance of the transaction is that the host country entity is the real employer of the individual, as it has the right to control and direct the individual on the means by which the services will be performed, the results to be accomplished, and ultimately, is the entity that receives the benefit of the services.

BIR Ruling No. 517-2011 abandons previous BIR pronouncements on the same issue. Previously, emphasis was given on the number of days an individual spends within or without the Philippines and the location where the services are rendered in order to determine the situs of taxation. This time, it is the entity who holds the employment contract and pays the payroll costs that were considered material.
This is, of course, something that taxpayers with mobile employees should consider, particularly if the company had previously been issued a ruling on secondment arrangements upon which they have adopted tax practices and policies. While secondment is a welcome career opportunity for most, an employee must also be responsible for remitting the appropriate tax on his or her income earned from work performed overseas.

Iryn S. Yap-Balmores is Senior Tax Director of SGV & Co.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Absent but present

With a month to go before 2016 ends, companies are now processing their payroll annualization, estimating the final amount of tax for individual employees. For a citizen working abroad during the taxable year, one very important matter to consider is his residential status, because it will determine how much of his income, if any, is taxable.

As provided in the Philippine Tax Code, a resident citizen is taxable on all income derived from sources within and without the Philippines, while a non-resident citizen is taxable only on income derived from sources within the Philippines.

Section 22 (E) of the Tax Code defines a non-resident citizen as any of the following:

(1) A Philippine citizen who establishes to the satisfaction of the Bureau of Internal Revenue (BIR) Commissioner the fact of his physical presence abroad with a definite intention to reside therein.

(2) A Philippine citizen who leaves the country during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis. 

(3) A Philippine citizen who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. 

A person previously considered a non-resident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the country shall likewise be treated as a non-resident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines. 

The forgoing Tax Code provision mirrors the definitions under Section 2 of Revenue Regulations (RR) No. 1-79 dated Jan. 8, 1979. Under the RR, a non-resident citizen is one who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with the definite intention to reside therein, and shall include any Filipino who leaves the country during the taxable year as an immigrant, a permanent employee abroad, or a contract worker. 

The same RR also defined the term “most of the time” under Section 22(E)(3) above by establishing the 183-day physical presence rule that continues to be applied today.

However, the application of this rule is not as simple as it appears as exemplified in BIR Ruling No. 305-2016 where a government employee who was on assignment abroad for three years was held to be a resident citizen for tax purposes and as such, subject to tax on her worldwide income.

In the ruling, the critical points raised by the BIR are the temporary nature of the transfer (secondment) and the continuing employee-employer relationship with the Philippine employer.

Based on the Memorandum of Agreement between the government agency and the international organization, the individual remained an employee of the government agency during the period of secondment but was considered on leave without pay. The government agency continued to pay for the mandatory government contributions during the duration of her secondment. As such, the employee does not qualify as a non-resident citizen under Section 22(E)(3).

Further, the individual did not have any intention to reside in the foreign country either as an immigrant or on a permanent basis to make her a non-resident citizen under Section 22(E).

In 2011, the BIR issued BIR Ruling No. 517-2011 stating that employees who rendered services for more than 183 days in foreign countries were not considered non-residents on the basis that: (1) the employee-employer relationship continued to exist between the local company and employees; and (2) the salaries of the employees were paid by the local company. Section 2.78.3 of RR 2-98 states that an employee-employer relationship exists when the person for whom the services were performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished, but also as to the manner and means by which such results are accomplished. 

It can be inferred from both rulings that whichever party shoulders the compensation payment and whichever party has the right to control and direct the individual do not matter. The substance of the employee arrangements with foreign companies appears inconsequential to the issue. What seems to be the determining factor is whether the individual remains employed by the local employer, regardless of where the employee gets directions or compensation.

As the year is about to end, entities that second or transfer employees abroad for more than 183 days during the taxable year may need to revisit the provisions of their employees’ contracts of employment and arrangements with foreign companies to properly assess the residency status of their employees. 

Most taxpayers want to comply with tax rules and regulations. However, some of our existing ones are vague and can be interpreted differently. Hence, as part of the government tax reform plan to restructure individual tax rates, the BIR may need to revisit Section 22(E)(3), issue implementing guidelines, and provide clear-cut illustrations on when an individual qualifies as a non-resident. 

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.

Jane R. Alcause-Fabro is a Director at the Client Accounting Services group of Isla Lipana & Co.,

(02) 845-27 28

jane.r.alcause@ph.pwc.com

An ‘out with the old’ VAT exemption

In September, the Department of Finance (DoF) submitted the first of six tax reform packages to Congress. The first package proposes to adjust the income tax brackets and to lower individual income tax rates, except for high earners who will be taxed at 35%. But while this proposal will generally result in less income tax paid by individuals, it will also mean reduced revenue collection for the government.

To mitigate this anticipated effect, the DoF also proposes certain offsetting measures. These include adjustments in the excise tax rates for petroleum products and automobiles, and the expansion of the value-added tax (VAT) base by removing current exemptions under existing tax laws.

Last month, the Senate Committee on Ways and Means held its first public hearing on the DoF-sponsored bill covering the first tax reform package. Various government agencies and affected sectors and organizations, including the Tax Management Association of the Philippines and our firm, were invited to express their sentiments and comments.

As may be expected, most representatives opposed the proposed increase in excise taxes, the 35% personal income tax rate, and the removal of the VAT exemptions if such measures would affect their particular sector, organization, or special group of people. But one particular organization -- the Coalition of Services of the Elderly (COSE) -- surprised me in its support of the DoF proposal to remove the VAT exemption of senior citizens. 

Although their statement was qualified as not being the official and collective position of the entire group, the COSE representative mentioned that they are amenable to the removal of the VAT exemption of senior citizens provided that pensions and other direct incentives and subsidies are given and/or increased, and made available to replace the lost exemption. 

Other senior citizen groups may have other sentiments on the matter. As the removal of this VAT exemption is a sensitive issue, perhaps these other elderly groups can also voice out their concerns. As one senator put it during the hearing, this matter is an emotionally charged issue since the elderly believe that the exemption currently granted is something they have earned having paid their dues for so long.

While I understand that the objective of the proposed tax reform is to adhere to the principle of equity and simplification, there is also the principle of compassion (which was also mentioned by one senator) that needs to be considered. 

Compared to other member countries of the Association of Southeast Asian Nations (ASEAN), we are the only country that gives VAT exemptions to senior citizens. While others may consider conforming to the other ASEAN countries on this matter (and remove the VAT exemption enjoyed by senior citizens), I am proud that the Philippines is unique enough to give this privilege as a sign of our respect to the elderly.

The VAT exemption is granted by Republic Act No. 9994, otherwise known as the “Expanded Senior Citizens Act,” with the following declared policies and objectives:

• To recognize the rights of senior citizens to take their proper place in society and make it a concern of the family, community, and government;

• To give full support to the improvement of the total well-being of the elderly and their full participation in society, considering that senior citizens are an integral part of Philippine society;

• To motivate and encourage senior citizens to contribute to nation building;

• To encourage their families and the communities they live with to reaffirm the valued Filipino tradition of caring for senior citizens;

• To provide a comprehensive health care and rehabilitation system for disabled senior citizens to foster their capacity to attain a more meaningful and productive ageing; and

• To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to actively seek their partnership.

No less than the Constitution requires the State to prioritize the needs of the elderly, particularly in terms of health development, as well as social justice in all phases of national development. The State likewise values the dignity of every human person and guarantees full respect for human rights.

If we would take a look at the intention of the Expanded Senior Citizens Act, Congress gave the VAT privilege as a sign of our Filipino value of caring for senior citizens, regardless of social status. 

While I understand that COSE might have as its primary objective the creation of, if not better, pensions and subsidies, why can’t we just provide these pensions and subsidies without sacrificing the VAT exemption of senior citizens? In fact, there are other alternatives where the government can get its revenue collections. 

One of the things that I admire in the new administration is how it aims to address the long overdue reform of the tax laws. I can see why the people elected President Rodrigo R. Duterte. A lot of Filipinos feel his sincerity in bringing change to the Philippines by eradicating crime, primarily those relating to illegal drugs, fighting corruption in the government, strengthening foreign relations particularly with China and Japan, and protecting the underprivileged. Filipinos generally see President Duterte for his heart. 

I genuinely support the tax reform initiatives of the government. I believe that the DoF listens to each stakeholder that will be affected by the proposed tax reforms. But more than just listening, I do hope that it will also have the heart to reconsider repealing the VAT exemption given to the elderly. 

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.

Benedict C. Villalon is an assistant manager belonging to the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network. 

(02) 845-2728 

benedict.villalon@ph.pwc.com

Don’t die rich or you’ll get taxed!

One week from now, we commemorate All Souls Day. Many of us will visit the cemetery to remember departed loved ones. For some, this occasion is a reminder that, after all the toils and struggles in life, our physical bodies will be laid to rest in the same place. Then, what happens?

Aside from the spiritual and religious aspects of death, there is another aspect which we might not be able to avoid -- tax. In particular, upon death, our estate could be subject to estate tax. Others call it the death tax. Is this applicable only to rich people?

Actually, the estate tax is imposable on the right to transfer the estate of the deceased person to his heirs or beneficiaries. There is estate tax if the net estate at the time of death (after deducting the allowable deductions, including the standard deduction at P1 million and the family home also at P1 million) is valued at more than P200,000. The excess of P200,000 net estate is subject to estate tax. In computing the estate tax due, there is a tabular estate tax rate which ranges from 5% to 20%. These are based on the basic tax rules that we currently have, while we are still waiting for the outcome of the on-going proposals to amend our estate tax laws. 

To give an example, if someone dies with a “net” estate of P7 million, the amount of estate tax due, based on the tax table, would be P765,000. The remittance of the P765,000 estate tax will be attended to by the heirs (if there is no executor/administrator). This tax remittance should be made within six months of the decedent’s death, unless extended by the Commissioner of the Bureau of Internal Revenue (BIR) in meritorious cases, which extension does not exceed 30 more days.

So, when we die, we will leave to our heirs/loved ones -- (1) our net properties, (2) the obligation to remit estate tax, and (3) the obligation to beat the deadline within six months from the time of death. The last two items are, undeniably, the other gloomy consequences of death. But can we somehow lessen the impact of future estate tax when we intend to transfer our properties to our loved ones?

You might consider the following modes:

1. Donate while alive;

2. Sell the asset; or

3. Create a trust fund or obtain life insurance coverage.

The ensuing discussions will give a glimpse of the above.

DONATING WHILE ALIVE
When you donate your properties to your intended loved ones while you’re alive, your future estate that could be subjected to estate tax will be reduced. Here, the donor’s tax applicable ranges from the tax rate of 2% to 15%. This range is relatively lower than the 5% to 20% of the estate tax. However, note that the 2% to 15% rate applies only if the donee is classifiable as your brother, sister, spouse, ancestor, lineal descendant, or relative by consanguinity in the collateral line within the fourth degree of relationship. Otherwise, if the donation is made to a stranger, the donor’s tax rate applicable is even higher at 30%.

In addition, the donation should also qualify as a valid donation, and not just a mere transfer of properties but still in contemplation of death.

SELLING THE ASSET
Selling the asset to the intended heirs/beneficiaries will also reduce your future estate that could be subjected to estate tax. This can also be considered if you have the objective of transferring an identified property to a particular heir. 

From your perspective as the seller, the resultant tax consequence in a sale would be lower, particularly when what is being sold is a real property that is considered a capital asset. Here, the applicable taxes on the value of the asset are capital gains tax at 6%, documentary stamp tax at 1.5%, and less than 1% of local transfer tax. The total of these taxes, even when combined, could still be lower than the amount of estate tax which has a maximum rate of 20%.

As a reminder, the sale should be a valid sale.

CREATING A TRUST FUND OR OBTAINING LIFE INSURANCE COVERAGE
In this option, although you will not be reducing your future estate, you will, instead create a fund to cover the future estate tax. While alive, you may want to invest in trust funds or you may want to get life insurance coverage, with the objective of raising the amount that would approximate the amount of possible estate tax in the future. You may approach several financial institutions or insurance companies that can give you the package that would suit your interest.

Here, you will be able to ease the burden of your heirs/beneficiaries to raise the money for estate tax remittance to the BIR within a period of 6 months.

The above discussions are but previews only, and there are a lot more details to consider in an estate planning. There are also other modes or combinations thereof which could be applicable depending on the objectives of the taxpayer.

Certainly, you would want your loved ones to succeed to the fruits of your hard work when you pass away. But how about reducing your net estate by giving some to charity? You can do this while alive or you may set aside a portion of your future net estate for this; especially so, when you have already reserved enough for your family and loved ones. You may want to know that there are donations to accredited institutions/organizations that are exempt from tax under the rules. After all, giving to charity -- a more valuable investment in life -- is not a bad idea. 

Next week, we will visit our departed loved ones. While doing so, we might remember that we cannot bring our properties with us after we die, and for the properties that we will leave behind -- these can be taxed!

Olivier D. Aznar is a partner of the Tax Advisory and Compliance Division of Punongbayan & Araullo.

Excise tax on sweetened drinks may create more harm than good–BIAP

AS the House Committee on Ways and Means started its hearing on a measure imposing excise tax on sugar sweetened beverages (SSBs), the Beverage Industry Association of the Philippines (BIAP) on Wednesday called for “nondiscriminatory” tax proposals on its beverage products.

This, after the Department of Finance (DOF) and government health agencies backed the proposal to impose tax on sweetened beverages.

During the lower chamber’s hearing, Joan Sumpio of the BIAP urged lawmakers to further study the impact of the proposal to the Filipino people.

“The BIAP supports the Duterte administration’s tax-reform efforts through fair and nondiscriminatory tax measures that would have broad-based positive impact for the country. However, some tax proposals have to be studied further to ensure that these would create more good than harm, particularly the current plans to levy a tax on sugar-sweetened beverages, such as House Bills 292, 3720 and 4005, all filed [in] the 17th Congress,” Sumpio told lawmakers.

Casualties

While the bills on taxing sweetened beverages purportedly seek to curb the risk of developing obesity and other health-related problems, Sumpio, however, said the proposed taxes would only serve to unduly burden “those who can least afford such an increase, while achieving nothing of real significance to address the health angle it purports to target.”

“It is important to note that the beverages that will be affected by the proposed tax are those consumed by the majority of Filipinos, particularly those in the lower socioeconomic classes,” she said.

Sumpio, citing the latest Family Income and Expenditure Survey of the Philippine Statistics Authority, said close to 40 percent of the income of an average family is spent on food and nonalcoholic beverages.

“Items like coffee, juice and soft drinks will become more expensive for ordinary Filipino consumers, and any upward adjustment in prices of these beverages would impact their purchasing power,” Sumpio added.

Any tax proposals on sweetened beverages, he said, will not generate the additional revenue promised.

“BIAP member-firms employ over 30,000 workers, and for each direct job in a BIAP member-firm, an additional six to 10 other people are employed in secondary, support or allied services. It would lead to job losses within the beverage industry and, in turn, among small- and medium-sized retailers who sell sweetened beverages,” she said.

“Worse, it would likely fall short in terms of revenues raised due to industry job losses and foregone retail sales. Most important, these house bills would not solve the Philippine obesity and diabetes challenge,” Sumpio added.

Culprit

Also, the BIAP official said obesity and diabetes are multifactorial, as these are triggered by personal choices and is, therefore, not directly caused by a single factor, much less a single type of food or drink.

“A typical Filipino meal, based on the 2013 National Nutrition Survey of the Food and Nutrition Research Institute, consists mainly of the staple rice and food that are high in fat. This constitutes the lion’s share of calorie intake,” Sumpio said.

“Sweetened beverages are not a regular fixture in many Filipinos’ daily meals. In fact, sugar and syrup represent less than 2 percent of the daily caloric intake in a typical Filipino diet. Singling out sweetened beverages as the sole cause, and taxing these beverages then will not be an effective deterrent to fight the obesity and diabetes challenge in the country,” she added.

Moreover, the BIAP official said discrimination against sweetened beverages without regard to the other food and beverage components of a people’s diet will negatively affect the future of the beverage industry and allied industries, such as sugar, packaging, marketing and advertising sectors.

“Consequently, a stagnant growth in any of these industries would lead to economic slowdown and imperil the jobs and livelihoods of millions of stakeholders,” she said.

The players

The Beverage Industry Association of the Philippines is the umbrella organization of firms engaged in the manufacture, distribution, marketing and selling of beverages in the country. BIAP counts as members some of the country’s top corporations, such as Pepsi Cola Products Philippines Inc., Coca-Coca Philippines, Coca-Cola Femsa Philippines, San Miguel Corp., Mondelez Philippines, Universal Robina Corp., Asia Brewery, Nestlé Philippines, Liwayway Corp., Kopiko, Del Monte Philippines, Asiawide Refreshment Corp. and Zest-O Corp.

For his part, Finance Undersecretary Karl Kendrick Chua said the finance department is fully supporting the proposal, as it is eyeing the bill as one of the offsetting measures to make up the foregone revenues from the comprehensive tax-reform package. “We fully support the bill to increase excise tax on sugar-sweetened beverages,” Chua said.

In House Bill (HB) 292, Partido Demokratiko Pilipino-Laban Reps. Horacio Suansing Jr. of Sultan Kudarat and Estrellita Suansing of Nueva Ecija said their bills seeks to impose an excise tax of P10 on sugar-sweetened beverage per liter of volume capacity to generate additional revenues for the government and promote public health and wellness.

HB 292 seeks to impose an excise tax on sugar-sweetened beverages by inserting a new Section 150-A in the National Internal Revenue Code of 1997, as amended. The new Section 150-A, titled Sugar Sweetened Beverages, provides, “There shall be levied, assessed and collected on sugar-sweetened beverages per liter of volume capacity an excise tax of P10. The rate of tax imposed under this section shall be increased by 4 percent every year thereafter effective on January 1, 2017, through Revenue Regulations issued by the secretary of finance.”

Categories

The bill defines sugar-sweetened beverage as “a nonalcoholic beverage that contains caloric sweeteners/added sugar or artificial/noncaloric sweetener. It may be in liquid or solid mixture, syrup or concentrates that are added to water or other liquids to make a drink.”

Sugar-sweetened beverages include a) soft drinks, soda, pop and soda pop, which are nonalcoholic, flavored, carbonated or noncarbonated beverages; b) fruit drinks, punches or ades, which are sweetened beverages consisting of diluted fruit juice; c) sports drinks, which are beverages designed to help athletes rehydrate, as well as replenish electrolytes, sugar and other nutrients; d) sweetened tea and coffee drinks, which are teas and coffees to which caloric and noncaloric sweeteners have been added; e) energy drinks, which are carbonated drinks that contain  large amounts of caffeine, sugar and other ingredients, such as vitamins, amino acids and herbal stimulants; and f) all nonalcoholic beverages that are ready-to-drink and in powder form with added natural or artificial sugar. The bill excludes the following from the scope of the Act: 100-percent natural-fruit juices; 100-percent natural-vegetable juices; yogurt and fruit-flavored yogurt beverages with pure fruit and vegetable juice or concentrate; meal-replacement beverages (medical food), as well as weight-loss product; and all milk products, infant formula and milk alternatives, such as soy milk or almond milk, including flavored milk, such as chocolate milk.

source:  Business Mirror

DTI, BIR sign agreement on e-registration

The Bureau of Internal Revenue (BIR) and the Department of Trade and Industry (DTI) signed on Monday a memorandum of agreement requiring mandatory registration for a taxpayer identification number (TIN) from sole proprietorships and partnerships seeking to register under the Philippine Business Registry (PBR).

The agreement mandates the BIR to facilitate the issuance of a TIN for all sole proprietorships and partnerships applying to be registered under the PBR of the DTI.

Under the agreement, the BIR agreed to issue a TIN through the e-registration, or eReg, System linked to the PBR.

The BIR will process the registration of the new business and issue the corresponding Certificate of Registration and other permits relative to the secondary registration after the businesses shall have completed the documentary requirements.

The BIR will also provide the DTI with material information regarding the applicant for registration.

The DTI, on the other hand, will generate and provide the BIR with a monthly list of DTI-registered businesses with newly issued TINs.

The DTI will also inform the applicants to proceed to the BIR to complete their registration requirements before the issuance of the Certificate of Registration.

The two agencies also agreed to coordinate their policies and procedures in registering new businesses to broaden the tax base, which is one of the solutions which the Department of Finance is looking into to generate more revenues amidst the measures aimed at lowering the tax rates.

The agreement was signed at the BIR’s main office in Quezon City by Internal Revenue Commissioner Caesar R. Dulay and Trade and Industry Secretary Ramon M. Lopez.

source:  Business Mirror