Philippines: SRA continues its challenge on sugar VAT

May 19, 2015

The Sugar Regulatory Administration (SRA) continues to question the imposition of advance value added tax (VAT) on raw sugar even as the clarification issued by the Bureau of Internal Revenue (BIR) on sugar tax treatment would be implemented this month, according to The Philippine Star.

Considering the earlier concerns laid down by the SRA on the perceived double taxation of raw sugar and refined sugar as well as the disruption of trade in the current crop year, the BIR issued a new revenue circular clarifying the imposition of advance VAT on raw and refined sugar.

The new circular stipulates that advance VAT would be imposed on raw sugar if the producer sells it to another person or entity.

If the producer, however, would merely be transferring the raw sugar to his own refinery – such as in the case of those who have integrated milling operations – only the advance VAT on refined sugar will be collected.

“If the owner of the raw sugar is one and the same, only the VAT for the refined sugar would be collected. Our earlier concerns on double taxation was considered in this,” said SRA administrator Ma. Regina Martin.

The BIR maintained that only raw cane sugar or muscovado sugar shall be exempt from the imposition of the advance VAT.

Martin said that while the new circular would be implemented, the SRA continues to challenge BIR’s definition of raw cane sugar and the imposition of advance vat on raw sugar.

The BIR argues that any sugar produced using the centrifugal process is not exempt from the imposition of VAT. As such, it only exempts muscovado sugar from taxation as it is produced without use of any mechanical device.

The SRA argues that based on a 1989 BIR regulation, raw sugar is free from tax.

“What the industry is still hoping for is that raw sugar be not subjected to VAT. We continue to question this,” said Martin.

She said BIR is expected to issue a new revenue regulation on tax treatment on raw cane sugar.

“We are still awaiting BIR’s revenue regulation on VAT on raw cane sugar,” said Martin.

The current sugar crop year would close in August with most sugar mills completing production by June or July.