HONTIVEROS WARNS: 'INCONSISTENT' RULES ON VAT EXEMPTION AND ZERO-RATING UNDER CREATE LAW THREATEN LOCAL ENTERPRISES

Hontiveros calls on the Senate to address the "apparent inconsistency" between the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, and its Implementing Rules & Regulations (IRR), on VAT Exemption and Zero-Rating, which poses a threat to many domestic enterprises.

The deviations, according to her, "have directly and adversely affected the cost of doing business for 212 domestic industries, while potentially discouraging other domestic firms from registering with investment promotion agencies (IPAs)".

"It is the height of irony that while the President and other officials are trying to woo foreign investors, our tax laws are being interpreted in a way that will surely drive away investors in local businesses. We can't claim to be foreign-investor friendly while at the same disincentivizing foreign investments," Hontiveros said.

Through Proposed Senate Resolution (PSR) No. 219, Hontiveros asked the Senate to convene the Congressional Oversight Committee on the Comprehensive Tax Reform Program to review Section 5 of the IRR and Revenue Regulations No. 21-2021.

"The interpretation contained in the aforementioned IRR as well as Revenue Regulations No. 21-2021 appears to be inconsistent with the language and spirit of NIRC Section 295 (D), as amended, which is to make VAT exemption on importation and zero-rating on domestic purchases available to both export and domestic enterprises," the resolution states.

The said IRR and issuance limit the scope and coverage of VAT exemption and zero-rating of purchases, contrary to CREATE's goal of granting VAT exemptions on importations and zero-rating on domestic purchases.

Hontiveros stressed that this "interpretation of the CREATE Law has, in effect, cancelled the eligibility of all domestic enterprises registered with the country's IPAs to avail of the VAT exemption on importation, as well as VAT zero-rating on local purchases."

"This disparity has to be examined promptly, so that the intended effects of the law may be fulfilled and our already overwhelmed local economy can be prevented from collapsing," Hontiveros concluded. ###

*Note: Please see attached PSR No. 219