PEZA wants next DTI chief to reconcile VAT exemption

The Philippine Economic Zone Authority (PEZA) has formally asked incoming Trade and Industry Secretary Alfredo Pascual, who will also serve as the agency’s chairman, to reconcile the existing value added tax (VAT) exemption for its registered enterprises as against the current position of the Bureau of Internal Revenue (BIR) lifting such VAT free status.

PEZA Director General Charito B. Plaza revealed the agency has sent a letter to Pascual requesting for a formal dialogue on hopes the incoming secretary can hear their sentiments before crafting his economic agenda.

“So before he can frame up his economic agenda or what, at least he can already hear our sentiments and our suggestions for the economic agenda of the next administration,” said Plaza, justifying their request for advance meeting with Pascual.

PEZA Deputy Director General Tereso Panga also noted the different interpretation of the Department of Finance (DOF) when the BIR issued a revenue regulation lifting the VAT exemption on PEZA firms’ purchases from the local market.

Panga said that in the last hearing in Congress, ways and means committee chairman Joey Salceda categorically stated that the Implementing Rules and Regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law went actually beyond the intent and spirit of the law in exempting PEZA firms from the 12 percent VAT on their local purchases.

“Therefore, the IRR being made as a basis for crafting the Revenue Memorandum Circular would appear that these MCs are flawed and void from the beginning,” said Panga.

With that, Panga said that PEZA would like to request the incoming administration to request them to revisit and reconsider the agency’s position that there was a big mistake in the MCs.

“We’d like to request our position on the VAT exemption,” he stressed.

The BIR issued Revenue Regulations (RR) No. 9-2021 stating that certain sales which were previously considered zero-rated for VAT are already subject to 12 percent VAT. This RR implements the provisions of Republic Act (RA) No. 10963 or the Tax Reform and Acceleration and Inclusion (TRAIN) Act.

Prior to the passage of the TRAIN Law, sales to PEZA-registered entities were zero-rated as clarified under Revenue Memorandum Circular (RMC) No. 74-99. Under RMC No. 74-99, all sales of goods, properties, and services made by a VAT-registered supplier from the customs territory to any registered enterprise operating in the ecozone are subject to VAT at zero percent, regardless of the latter’s type or class of PEZA registration (e.g., ITH or 5% GIT).

Aside from the VAT issue, PEZA is also at loggerheads with the DOF-BIR over the hybrid (onsite-offsite) work arrangement for its IT-business process outsourcing firms. After the 90 percent work-from-home or offsite privilege expired on March 30, the DOF has told PEZA-registered BPOs to return 100 percent to their approved economic zone location or lose their tax incentives.

PEZA, however, insisted that its IT-BPOs can continue to work 70 percent onsite and 30 percent offsite or WFH based on its own policies. The BIR conducted audits on PEZA firms to make sure they are working in their approved location. PEZA said that BIR has BIR has suspended their audits.