Exporters and the Philippine Economic Zone Authority (PEZA) said the revised rules on value added tax (VAT) zero rating on the local purchases of goods and services of exporters are expected to boost investor confidence in the country.
PEZA Director General Tereso O. Panga said following the release of Revenue Regulation 3-2023 by the Bureau of Internal Revenue, setting the guidelines on the availment of VAT zero rating on the local purchases of goods and services of RBEs in various investment promotion agencies (IPAs), major of them are PEZA registered companies.
PEZA Director General Tereso O. Panga
In particular, Panga welcomed the creation of the Negative List, comprising of six items which costs of goods and services cannot be granted zero VAT. But with the Negative List, RBEs are still allowed to appeal with their respective IPAs that such cost items are for the direct and exclusive use of their operations.
Once justified, the IPA will issue a certification to enable the company to avail of the zero VAT privilege.
The Negative List include janitorial services; security services; financial services; consultancy services; marketing and promotion; and goods used or services rendered for administrative operations such as human resources (HR), legal, and accounting.
“The Negative List as a key reform in the revised BIR RR,” said Panga. He said the creation of the Negative List will have positive consequence as RBEs will be encouraged to source more from the local market (instead of importing from abroad) to sustain their operations, given the wider coverage of allowable goods and services for VAT zero rating.
PEZA also welcome the post audit to be conducted by the BIR, in lieu of the pay first and refund policy before.
“PEZA and ecozone industry laud the President for prompting the concerned agencies in correcting the previous administration's issuances that limit the grant of incentives to qualified projects/activities of registered business enterprises (RBEs). The revised BIR Revenue regulations (RR) gives justice to the real intent and spirit of the CREATE law, which is to incentivize qualified investments and to streamline and clarify the guidelines on the availment of VAT zero rating/exemption incentives by RBEs,” said Panga in a statement over the weekend.
Panga added that the restoration of ecozone export-oriented locators' incentives, including VAT zero rating/exemption on goods and services that are directly and exclusively used in their registered activity, will “improve exporters’ bottom line and capacity to reinvest in the country.”
“As we manage the cost of doing business to enhance our competitiveness, this will also attract new investors to take advantage of the incentives and benefits offered by the CREATE,” he said.
As the locators are spared from the VAT refund process, Panga said it will benefit as well their local suppliers who are no longer required to apply with the BIR for the VAT zero rating of their transactions.
“The certification issued by IPAs shall be the basis for availing of the VAT zero rating incentive. This will strengthen the role of IPAs in investment facilitation and exercise of regulatory functions over RBEs,” he said.
“We will continue to collaborate with our partner agencies and industries as we try to restore the incentives for support to export activities and address the remaining industry issues on cost allocation for VATable administrative expenses, conduct of BIR audit, IPAs' approving authority for projects and policy-making powers, flexi-work scheme for ecozone locators, and protection for existing RBEs pursuant to the sunset provision of the CREATE law,” he concluded.