Currently, multinational companies operating in the Philippines are facing delays in VAT refunds, and the situation is gradually intensifying, with some foreign companies considering launching the country's market。

The Philippine government has offered to "support VAT rebates" to attract global companies to set up shop in the Philippines, but its complex tax system has added to the cost burden of corporate rebate applications.。

A source at a large multinational said: "If we don't solve the tax rebate problem, we can only consider scaling back our business or withdrawing from the market.。

The issue was raised last month when the Japanese Embassy in the Philippines received representatives of Japanese businesses and Philippine government agencies.。The issue is often mentioned at such meetings, but the Philippines has yet to give a comprehensive solution.。

Dole, an agricultural multinational that exports bananas from the Philippines, has yet to receive a refund of the 12% cost tax on wholesale.。The tax refund is expected to be as high as $67 million, according to people familiar with the matter.。

Energy giant Chevron also lodged a protest over the non-payment of VAT refunds, according to local media reports.。

Jules Riego, co-chair of the U.S. Chamber of Commerce's Financial Services, Taxation and Tariffs Committee, said: "We don't have exact figures, but this pain point implicates almost all claimants, across industries.。The group plans to urge all parties involved to amend legislation and streamline paperwork.。

Numerous Japanese companies, including manufacturers, logistics providers and trading companies, are also waiting for VAT refunds.。Electronic equipment is the main export product of the Philippines, and Japanese companies in this field are not immune to twists and turns.。An industry insider said: "Even if the appropriate documents are submitted to the Internal Revenue Service (BIR), BIR still refuses to refund the tax on the grounds that it is not clearly defined in the tax law or other laws and regulations.。"

In the past, many multinational companies have entered the Philippine market in anticipation of tax rebates.。Today, these companies have to deal with costs that have risen by 12%, which they never expected。

"After the tax reform in the Philippines, the requirements for tax rebates are more stringent," said a related person.。"Due to the time, labor and cost of dealing with BIR, many companies have abandoned VAT refunds."。However, some companies are also reluctant to ask for refunds for fear of a retaliatory audit by BIR.。

As of press time, BIR has not responded to the question of non-payment of VAT refunds。

Multinationals remain uncertain about government intentions due to non-payment of tax refunds。Industry sources said: "Taxes are getting tighter due to the new crown epidemic, so they are targeting foreign companies.。Another related source said: "The Philippine government seems to have a quota of staff to complete."。In his view, rejecting the VAT refund is equivalent to increasing tax revenue.。

The Philippine tax system is complicated.。

Exemption from VAT for export manufacturers designated by the Philippine Economic Zone Authority。But in 2021, the administration led by former President Rodrigo Duterte implemented the Corporate Recovery and Corporate Tax Incentives (CREATE) Act.。The law reduces corporate taxes, but also obscures the wording of the VAT exemption, essentially narrowing the scope of the exemption。

Specifically, the CREATE Act states that the VAT exemption "applies only to goods and services of the registered enterprise that are directly and exclusively used for the registered project or activity."。For many, the definition of "direct and specific" is vague.。

It has been revealed that manufacturers can apply for VAT exemption on the cost of parts procurement and production lines。But there are reports that fees related to toilets, warehouses, food halls and lounges inside the factory are not tax-deductible。

Vietnam, Thailand and Indonesia are emerging as manufacturing hubs for the electronics and automotive industries, while the Philippines lags behind those in Southeast Asia.。Manila has been working to attract foreign investment in the automotive, aviation and electronics industries, especially Japanese and American companies with close ties to the Philippines.。

Last year, foreign direct investment in the Philippines fell 22 percent to $9.3 billion.。Such investments are currently comparable to 2019, when the new crown epidemic had not yet dampened economic activity。Philippine President Ferdinand Marcos Jr., who came to power last year.Actively strive for domestic business leaders to invest overseas。In 2022, the Philippines amended its law to ease restrictions on foreign capital entering the industrial sector.。

However, investment growth is weakening due to the lack of implementation of fundamental reforms to the VAT refund process。

Nobuo Fujii, vice president of the Japanese Chamber of Commerce and Industry of Philippines, said: "The government is trying to build a domestic supply chain driven by manufacturers, but the complex tax system makes it very different.。"

BIR recently signed a memorandum of understanding with nine organizations, including the United States and Japan, promising to improve services for taxpayers.。The agency or the multinational company took action after the complaint。

As the time comes to amend the CREATE Act, Japan will push for further improvements through statements from embassies, chambers of commerce and businesses.。How the Philippine government faces this problem will continue to be tested in the coming months。