The Philippine Economic Zone Authority on Wednesday assured registered business enterprises in economic zones that they would continue to enjoy value-added tax exemption despite the confusion over recent issuances by the Bureau of Internal Revenue.
“The separate customs territory status vested in the ecozones by virtue of the cross-border doctrine and destination principle in taxation are still applicable despite the conflicting provisions of the CREATE [Corporate Recovery and Tax Incentives for Enterprises] law IRR [implementing rules and regulations] and Bureau of Internal Revenue Revenue Memorandum Circular 24-2022,” said PEZA director-general Tereso Panga at the sidelines of the 10th Philippine Die and Mould Machineries and Equipment Exhibition.
Panga said the Office of the Government Corporate Counsel also shared the same opinion in favor of Clark Freeport Zone RBEs.
“Thus, it is clear that the SCT accorded to the ecozones as originally contained in the PEZA law, including the Clark and Subic Freeport Zones, and retained in the CREATE law, did not render inoperative the CBD for VAT purposes. It is only in the CREATE IRR and BIR RMC provisions that made such a ruling, thus the same are inconsistent with the CREATE,” Panga said.
Based on the SCT, no VAT will apply particularly on eligible goods/services purchased by export-oriented RBEs from the local market including those imported from abroad and brought or consumed inside the ecozones.
Panga said that as the SCT provision was retained in the CREATE law, the CBD and destination principle in taxation are valid and enforceable for qualified transactions of ecozone RBEs.
He said investment promotion agencies and economic zones welcomed the President’s order to concerned agencies to revisit the tax incentives law.
Other than the SCT and CBD issues, the ecozone locators also raised concern over other conflicting provisions between CREATE IRR and the BIR RMC.
“We hope and pray for the prompt resolution of the issues/concerns through administrative proceedings and without need to go through the legislative mill for the clarifications to be issued by the FIRB and BIR,” Panga said.
PEZA is confident that with the restoration of the tax incentives for investors as promised in the CREATE law and as contained in their registration agreements with the IPAs, the Philippines could be a more attractive and competitive investment destination.
Panga said the government’s move to honor its commitments would amplify the message of the President to global investors that “the Philippines is the smart destination in the region and that the best time to invest in the country is now.”