Let's Get on the TRAIN
President Duterte vetoes five provisions of Republic Act 10963 or TRAIN Law
On 22 December 2017, it was announced that President Duterte had vetoed the following line items:
Why this matters
With the presidential veto, employees of existing RHQs, ROHQs, OBUs, and Petroleum Service Contractors and Subcontractors shall be subject to the new income tax rates of 20%-35% beginning 01 January 2018 and 15%-35% beginning 01 January 2023.
Further, the sale of goods and/or services to registered enterprises within economic and tourism enterprise zones may be treated as subject to the 12% VAT. However, it is noted that the TRAIN Law still treats the following transactions, among others, as VAT zero-rated sales:
• Sale of goods treated as export sales under the Omnibus Investments Code and other special laws 1
• Sale of services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to 0%.
The veto notice of the President to the House of Representatives did not contain any exact reference when the exemption of various petroleum products from excise taxes will take effect.
Key Points to Consider
It remains uncertain whether Congress will override the veto made by the President on the five items. Congress is still in recess and session will resume only on 15 January 2018.
Notwithstanding the possibility of the override by Congress, the TRAIN law will take effect on 01 January 2018 following its complete publication in the Official Gazette on 20 December 2017. The TRAIN Law states that it shall take effect on 01 January 2018 following its complete publication in the Official Gazette or in at least one newspaper of general circulation.
The Bureau of Internal Revenue needs to clarify the implementation of the vetoed items, especially the first two items. With respect to the VAT, the BIR may have to evaluate if zero-rating is still applicable under the other provisions of the TRAIN Law.
1 This transaction will be subject to 12% VAT upon the establishment and implementation of an enhanced VAT refund system that grants refunds of creditable input VAT within ninety (90) days from the filing of the VAT application.
DISCLAIMER: The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although R.G. Manabat & Co. endeavors to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
For any queries, you may contact any member of the InTAX Editorial Board or send your questions to email@example.com.