REVENUE MEMORANDUM CIRCULAR NO. 21 – 2024
This addresses the clarification of Q&A No. 31 in RMC No. 49-2022, concerning RR No. 4-2022 and Section 295(F) of the Tax Code of 1997, as amended by the CREATE Act.
The revised answer in Q & A No. 31 pursuant to RMC No. 49-2022 required the following types of Registered Export Enterprises (REE) to change their registration status from Value-Added Tax (VAT)-registered entity to non-VAT:
a. Within two months after the expiration of their Income Tax Holiday (ITH): Those whose sales are generated only from the registered activity and have shifted from ITH to 5% Gross Income Tax (GIT) or Special Corporate Income Tax (SCIT) regime, and
b. Within two months from the effectivity of RMC No. 49-2022: Those enjoying the 5% GIT regime but are still VAT-registered at the time the CREATE Act took effect.
The said RMC likewise provides that if the taxpayer has other activities other than those registered with the Investment Promotion Agency (IPA) that are subject to VAT (i.e., VAT at 12% and 0%), it shall remain as a VAT taxpayer and shall report the sales in the VAT returns as VATable, zero-rated and/or VAT-exempt, as the case may be.
The circular notes a disparity in the treatment of petroleum importers located inside the freeport zones or special economic zones and those located within the customs territory citing Section 295(F) of the Tax Code, as amended.
It stipulates that importers of petroleum products are subject to duties and taxes upon importation, with provisions for refund claims for exports or tax-exempt sales. While some REE petroleum importers changed their status to non-VAT to avail themselves of the 5% GIT or SCIT regime, the circular clarifies that these entities, including those in freeport zones, are required to pay applicable duties, taxes, and VAT. It clarifies that only VAT-registered entities can file for VAT refunds under Section 112(A) of the Tax Code.
Therefore, the BIR clarifies that REEs enjoying the 5% GIT or SCIT, located within freeport zones or special economic zones, exclusively importing petroleum products without other VAT activities, shall be permitted to register as VAT taxpayer to allow them to file for input VAT refund incurred from importation of petroleum attributable to zero-rated sales under RR No. 4-2022.