The IT and business process management enterprises and their local suppliers welcomed the release of Revenue Regulations No. 3-2023 by the Bureau of Internal Revenue providing clarity to activities that will quality as VAT-exempt activities.
The IT Business Process Association of the Philippines said the RR articulates that health maintenance organization premiums are appropriately VAT zero-rated and investment promotion agencies are confirmed to have jurisdiction over any and all issues relating to VAT zero-rated purchases of their respective REEs.
“We are grateful that we now have this RR as basis in handling the issues that we have been grappling with for some time and we look forward to the further streamlining of the regulation to the effect that those exporting within the minimum threshold of 70 percent be allowed full VAT exemption or zero rating on their purchases given their compliance to the export condition of their registration,” IBPAP said in a statement.
The group expressed appreciation to the Department of Trade and Industry, the Board of Investments, the Fiscal Incentives Review Board and the Philippine Economic Zone Authority for listening and acting on the concerns of the IT-BPM industry.
ITBPM companies are hopeful that no obstacles will be encountered given the new direction to allow IPAs to exercise full supervision and monitoring of VAT zero activities.
The Philippine Economic Zone Authority said that with the RR providing clarity to VAT zero rating, the Philippines is in a more stable position to attract new investors to take advantage of the incentives and benefits offered by the CREATE Law.
PEZA said that as locators are spared from the VAT refund process, the regulation will also benefit local suppliers who are no longer required to apply with the BIR for the VAT zero rating of their transactions.
The certification issued by investment promotion agencies will 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.
PEZA said another key reform in the revised RR is the provision for a negative list, which limits the VATable goods and services imposed on RBEs to six cost items. These involve janitorial services, security services, financial services, consultancy services, marketing and promotion and goods used or services rendered for administrative operations such as human resources, legal and accounting.
PEZA said that with VAT exemption of certain activities, RBEs will be encouraged to source more from the local market instead of importing from abroad.