BIR exempts processed sugar from 10% VAT

The Bureau of Internal Revenue (BIR) has agreed to the sugar industry’s request for processed sugar to be exempted from the 10 percent-value added tax (VAT).

Sugar Regulatory Administrator (SRA) James C. Ledesma said the BIR appears to be amenable to the proposal of the industry to exempt processed sugar with 99.5-percent purity from VAT.

While the proposal is closely being looked into to fine tune the directive, the BIR is also receptive to the proposal standardizing the definition of "refined sugar" and to have this harmonized with the Standard International Trade Classification.

Ledesma said the amendment to the definition of refined sugar is needed to avoid confusion.

The BIR is expected to issue a new directive amending its Revised Regulation 29-2002 issued last December which defined that refined sugar covers cane sugars labeled as washed sugar, direct consumption sugar, plantation white sugar, Marco directo sugar, standard sugar and improved raw sugar.

"This is an easier method because refined sugar that has below 99.5-percent polarization will be immediately exempted from VAT," said Ledesma.

Leaders of the sugar industry also met recently with President Arroyo to discuss the concerns of the sector, particularly the prevailing low millgate prices of sugar.

Sugar prices are steadily declining since the start of the milling season because of surplus harvest which was compounded by the reduced demand for domestic sugar with the entry of cheap sugar containing products and pre-mixes.

Another factor that is slowing down sugar trading is the recent imposition by the BIR of the VAT on raw sugar and the one-percent creditable withholding tax on sugar.

Mrs. Arroyo responded by instructing BIR Commissioner Guillermo Parayno to review the recent circular issued regarding the taxes being imposed on the trading of sugar.

Agriculture Secretary Luis Lorenzo Jr. was also ordered to draft a Presidential Order giving the SRA the authority to monitor and regulate the entry of pre-mixes and sugar containing products which are being used by industrial processors in preparing soft drinks and fruit juices. The President also told Lorenzo to coordinate with the Tariff Commission to review the tariff on these products.