BIR to tighten VAT collection on sale of refined sugar

The Bureau of Internal Revenue (BIR) is tightening its collection of value added tax (VAT) on the sale of refined sugar by requiring both sugar producers and sugar refiners to pay their taxes in advance to make it difficult for them to skirt their tax obligations.

The BIR has issued a new revenue regulation setting the VAT parameters for all classes of refined sugar, such as washed sugar, direct consumption sugar, plantation white sugar, standard sugar, improved raw sugar, premium improved raw sugar and premium sugar.

In the new regulation, the VAT on the sale of sugar will be paid in advance by the owner or the seller and the actual stock will not be allowed to leave the refinery until the tax has been paid in advance.

Once the VAT has been paid, the BIR said the certification of VAT payment will be used by the sugar miller or refiner to release the refined sugar, unless the stock is owned by cooperatives which are exempted from VAT.

According to the BIR, however, cooperatives still have to secure an authority from the revenue district officer before they can take their refined sugar out of the refinery.

The BIR said the sugar must be cooperative-owned at the time of withdrawal from the refinery and they would not be allowed to charge advance VAT to the future buyer.

In the regulation, the BIR also detailed a provision setting the base price for various classes of refined sugar. The bureau said the application of the 10 percent VAT would be based on the applicable base price per 50-kilogram bag depending on the class of sugar.

Standard refined sugar owned by the sugar refinery would have a base price of P850 per 50-kg bag while sugar owned by others would have a base price of P760 per bag.

The base price, according to the BIR, could be adjusted periodically but only with the approval of the BIR commissioner and the chairman of the Sugar Regulatory Administration.

The BIR said input tax credits would be allowed and the amount of advance payments made by the sellers would be allowed as credit against their output tax on the actual gross selling price of refined sugar.

On the other hand, companies engaged in the production of refined sugar for their own account would be allowed to claim a presumptive input tax creditable against the output tax.

The BIR said this would be equivalent to one and one half percent of the gross value of their purchases of agricultural products used as main raw material for sugar production.