Phillipines - Sugar VAT rules recalled

The Bureau of Internal Revenue has recalled the strict guidelines on the payment of value-added tax on the sale of refined sugar to give the government and major proponents in the industry enough time to adjust to the new scheme.

BIR Commissioner Lilian Hefti issued Revenue Regulation 11-2007 suspending the implementation of RR 6-2007 issued in May as part of efforts to update and align the policies and procedure on the advance payment of VAT on the sale of refined sugar.

Hefti said the imposition of the new guidelines was suspended to “give both the BIR and the representatives of the sugar industry ample time to thresh out unclear provisions embodied therein and to introduce a more improved version of the Regulations.”

She added that a dialogue would be conducted to properly address the problems of the sugar industry and collect the correct taxes due from them.

Under the guidelines, the VAT on the sale of refined sugar should be paid in advance by the owner or seller before the sugar is withdrawn from any refinery or miller. No refined sugar could be released from the refinery or miller unless the owner or the seller showed a certificate of advance payment of VAT from the BIR Revenue District Office or Large Taxpayer Service.

The directive also requires sugar refiners and millers to submit monthly reports on the quantity of refined sugar milled or produced as well as the amount of advance VAT paid and duly remitted to the national coffers.

If ownership of refined sugar is transferred by a cooperative to a buyer other than a cooperative, the guidelines state that the buyer should pay the VAT in advance to the BIR prior to the withdrawal of the product. The transferor, on the other hand, is required to submit monthly report of sugar sold.

The guidelines said refined sugar withdrawn from the refinery or miller by a duly accredited agricultural cooperative of good standing registered with the Cooperative Development Authority is exempted from VAT as long as it is produced by the cooperative. Otherwise, the sale would be subject to VAT.

Likewise, the transaction is not subject to VAT if the owner of the refined sugar as reflected in the quedan is an agricultural cooperative, which is a producer of sugar. If the seller-cooperative is not a producer but merely purchases the sugar cane from planter-members, the sale to another agricultural cooperative is also not subject to VAT.