Zubiri: Japan firms threatened to leave PH due to VAT refund issues

Japanese companies have threatened to leave the Philippines due to the government’s value added tax (VAT) refund issues under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, Senate President Juan Miguel Zubiri said Wednesday.

The Senate chief disclosed this at the first day of plenary deliberations of the General Appropriations Bill (GAB) which contains the proposed P5.768 trillion national budget for next year.

Zubiri shared that he discussed the VAT refund issue with the executive secretary of Japanese Prime Minister Fumio Kishida during the latter’s visit to the Philippines last week.

“Ang tagal naming pinag-usapan itong issue ng VAT refund where in the previous administration… when the Japanese companies that are manufacturing here buy from local producers, the certain goods and these goods are exported anyways together with products, the last administration maybe clear na magbabayad muna sila ng VAT then ire-refund pag-export. Ang problema hindi nagva-VAT refund ang gobyerno natin,” he said.

(We discussed the issue of VAT refund lengthily where in the previous administration… the Japanese companies that are manufacturing here buy from local producers, the certain goods and these goods are exported anyways together with products, the last administration maybe clear that they will pay VAT then they will get a refund after they export it. The problem is our government does not refund the VAT.)

“We owe them billions of pesos already and… there are threats they might move shop to other countries. These are already locators here... Now, prospectively, ayusin natin (we will fix it),” the Senate chief added.

Zubiri said he committed to the Japanese Prime Minister that they will tackle the amendments to the CREATE Law as soon as possible.

Senate finance committee chairman Sonny Angara, who is answering on behalf of the economic managers as the sponsor of the 2024 GAB, explained that the VAT refund will be paid within 90 days, but there are cases that are still pending before the courts.

“I was told, they have 90 days to pay and the secretary said they will pay it, but according to the Commissioner of the [Bureau of Internal Revenue], there are some instances where it’s already in the court. In that case, they have to wait for the final decision. For those that are due and demandable, they have 90 days, they promised to pay by the end of the year,” Angara said.

Zubiri then asked if the government’s policy is to ask the investors to bring their VAT refunds before judicial courts before paying it. 

“That’s a policy issue again. I believe that the BIR, I’m not sure if it was this administration or the last administration, their policy was ‘Take us to court!’ Imagine telling a billion-dollar investor, ‘Take us to court,’” Zubiri said.

“These poor Japanese companies, who are hiring thousands of people in our country, are suffering because they have court cases and they would rather settle out of court. But anyway, and’yan na ‘yan, we can only look prospectively,” he added.

Pending the enactment of the law that will amend the CREATE Law, Angara said the government will pay the VAT refund as long as the documents are complete.

The Senate chief then asked the Court of Tax Appeals to act on the cases quickly as well as the BIR to work on the VAT refunds as the Philippines is trying to attract investors into the country.

The House of Representatives is already deliberating on the bill seeking to amend the CREATE Law.

The proposed CREATE to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) seeks to clarify the transitory provision in the law “by expressly exempting transitory registered business enterprises (RBEs) under the 5% gross income earned (GIE) regime from all national and local taxes, including VAT and duty incentives.”

The bill also seeks the establishment of a streamlined tax refund system for registered business enterprises (RBEs) and the institutionalization of a risk-based classification of claims and audit framework in a bid to improve the timeliness, efficiency, and predictability of the VAT refund process.

The Department of Finance has already expressed support for the measure, saying this will “enhance the incentives, clarify the rules and policies on the grant and administration of incentives to qualified enterprises, and address issues affecting the country’s investment climate.” —VAL, GMA Integrated News