The Philippine Economic Zone Economic Zone Authority (PEZA) has appealed to the Department of Finance (DOF) for a status quo on the zero value added tax rating on local purchases of economic zone locators.
PEZA Director General Charito B. Plaza made this appeal to DOF Secretary Carlos G. Dominguez III following the issuance by the Bureau of Internal Revenue of Regulation (RR) No. 9-2021, imposing a 12 percent VAT from zero-VAT rating on ecozone locators’ local purchases.
RR 0-2021 was issued June 9 only this year and was supposed to take effect on the 27th this month.
PEZA argued that RR No. 9-2021 is against the provisions of RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), particularly Sections 294 (E) and 295 (D).
Section 294 (E) on incentives provides that VAT exemption on importation and VAT zero-rating on local purchases. Section 295 (D) also provides that VAT exemption on importation and VAT zero rating on local purchases only apply to goods and services directly and exclusively used in the registered project or activity by a registered business enterprises.
In addition, PEZA CITED Section 5 of the final draft of the Implementing Rules and Regulations of CREATE on zero VAT rating and exemption.
“With the above-cited provision of the IRR, we would like to seek confirmation that local purchases of PEZA export enterprises, whether from an export-oriented or domestic enterprise, shall be taxed at zero percent VAT subject to the condition required under the proviso of Section 295 of R.A. No. 11534 and Section 5 of its IRR, i.e., that the goods and services purchased are directly and exclusively used in the registered project or activity by a registered business enterprise,” said PEZA Chief Plaza.
Plaza noted that the CREATE Law did not amend or repeal Section 8 of R.A. No. 7916 or The Special Economic Zone Act of 1995 which SEC. 8 on ECOZONE provides that these zones are operated and managed as separate customs territory by the PEZA as a separate customs territory.
Pending clarification of the subject matter, PEZA requested the deferment of the implementation of RR No. 9-2021 or status quo, and while awaiting the effectivity of the IRR of the CREATE Law.
Plaza said that maintaining a status quo will “give registered enterprises the opportunity and sufficient time to study the regulations before its actual implementation.”
Also, Plaza said the deferment of RR 9-2021 will provide investment promotion agencies and concerned government agencies the opportunity to institute mechanisms and procedures to effectively implement these new regulations particularly in ensuring that the condition set forth in the availment of the VAT zero-rating incentive shall be fully complied.