Tax Alert No. 39 [Revenue Regulations (RR) No. 9-2021 dated 9 June 2021]

21 Jun 2021

Implementing the Imposition of Twelve Percent (12%) Value-Added Tax (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 National Internal Revenue Code (Tax Code) of 1997, as amended 

The Secretary of Finance has issued RR No. 9-2021 to implement the imposition of the 12% percent VAT on certain sales transactions previously considered as zero-rated sales.

The following export sales are now subject to 12% VAT:

  1. Sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
  2. Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; and
  3. Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws.
Similarly, the following sale of services and use or lease of properties are now subject to 12% VAT:
  1. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); and
  2. Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent 70%) of the total annual production.

These Regulations shall take effect 15 days following its publication on 12 June 2021.

You may access the full version of the regulations through the BIR website.

Contact us

Lyn Golez-Geronan

Tax Librarian, PwC Philippines

Tel: +63 (2) 8845 2728 Ext. 2054

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