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BPO Tax Benefits Remain, According to DOF

by: Mary Christine Galang

Wednesday, August 02, 2017 | Outsourcing News |

BPO sector to remain competitive in the export market

The Department of Finance (DOF) said that the first package of the Philippine government's Comprehensive Tax Reform Program (CTRP) will not impact the BPO sector and that the sector will maintain its competitiveness in the export market.

Finance Undersecretary Karl Kendrick Chua said in a statement that the Tax Reform for Acceleration and Inclusion Act (TRAIN) or House Bill 5636, which is included in the first package of CTRP, seeks to remove the tax benefits enjoyed by "indirect exporters" – or suppliers of export-oriented firms and that there is no change in tax policy for exporters.

Chua clarified that under TRAIN, BPO firms, which are referred to as "eco zones" (special economic zones), will continue to retain their VAT exemptions and zero-rated status, while the ones outside, including Board of Investments (BOI)-registered firms, will retain their zero-rated status.

"Receipts from foreign services within the SEZs of the Philippine Economic Zone Authority will remain VAT-exempt, as is the case now, because they are outside customs territory by legal fiction, or zero-rated if the exporters are outside the special economic zone, including those that are BOI-registered," Chua said.

"As for exporters outside SEZs, they are zero-rated on VAT payments and are entitled to get back their VAT payments once they apply for such refunds under the proposed 90-day refund system, while all other taxpayers, including suppliers to exporters, will have to pay the VAT," he added.

Chua assured indirect exporters that their zero-rated VAT privilege will only be removed if and when an improved VAT refund system is in place, which will allow them to claim cash funds for VAT payments within 90 days of filing their VAT refund applications to the Bureau of Internal Revenue (BIR).

He maintains that the BPO sector will remain highly competitive and that the tax policy will remain the same after TRAIN.

"Demand services are driven by the high quality of service and talent they offer," Chua said.

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