RMC No. 24-2022 clarifying issues relative to RR No. 21-2021 implementing the amendments to the Value-Added Tax (VAT) zero rating provisions under Sections 106 and 108 of the National Internal Revenue Code of 1997 (Tax Code), in relation to Sections 294(E) and 295(D), Title XIII of the Tax Code, introduced by RA No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act Implementing Rules and Regulations.

• Only those goods and services that are directly and exclusively used in the registered project or activity of Registered Business Enterprise (‘RBEs”) qualify as VAT 0% local purchases;
• CREATE sets certain parameters for the availment of VAT zero-rating on local purchases of registered export enterprises, regardless of location; and
•  The effectively zero-rated sales shall only apply to sales of goods and services rendered to persons or entities who have direct and indirect tax-exemption granted pursuant to special laws or international agreements to which the Philippines is a signatory.

• VAT exemption for RBEs enjoying the 5% gross income earned (GIE) or special corporate income tax (SCIT);
• VAT exemption on importation and VAT zero-rating on local purchases of goods and services

Enterprises registered prior to the effectivity of the CREATE Act shall continue to enjoy the foregoing until the expiration of the transitory period (10 years)

RR 9-2021

June 27 to June 30, 2021 (4 days)

RR No. 15-2021

July 1, 2021 to December 9, 2021

• Non-retroactivity may be applied as this will be prejudicial to the taxpayer;
• Transactions that have been considered by the seller as VAT zero-rated shall still remain as VAT zero-rated from July 1, 2021 to December 9, 2021

RR No. 21-2021

December 10, 2021

• Covers transaction entered into the third quarter of the taxable year 2021 (July) and onwards;
• Retroactive application is justified as it will be more beneficial to the taxpayer affected.

RR No. 15-2021 – Defers the implementation of RR 9 -2021; Possible effect: VATable sales from July 1, 2021 up to December 10, 2021

RR No. 21-2021

Key provisions –  Sales subject to zero-rated:

• Sales to entities exempted from direct and indirect taxes under special laws (goods and services)
• Sale of raw materials, inventories, supplies, equipment, packaging materials and goods to a registered export enterprise to be used directly and exclusively in its registered project or activity for a maximum of 17 years from the date of registration, unless otherwise extended under the SIPP
•  Sale of services, including provision of basic infrastructure, utilities and maintenance, repair and overhaul of equipment for a maximum period  of 17 years for the date of registration, unless otherwise extended under the SIPP

• Zero-rated
• Note: Applicable only to goods and/or services directly and exclusively used in the registered project or activity of the registered export enterprise
• Maximum period of 17 years from the date of registration unless otherwise extended under SIPP
• Date of registration = date indicated in its Certificate of Registration issued by IPA

•  Categorized as Domestic Market Enterprises (DME)
• Service enterprises engaged in the following services: 1. Customs brokerage; 2. Trucking services; 3. Forwarding services; 4. Janitorial services; 5. Security services; 6. Insurance; 7. Banking and other financial services; 8. Consumers’ cooperatives; 9. Credit unions; 10. Consultancy services; 11. Retail enterprises; 12. Restaurants; and 13. Such other similar services as may be determined by the FIRB

• The DME under the 5% Gross Income Tax (GIT) or Special Corporate Income Tax (SCIT) regime, registered as a VAT exempt entity, shall treat its revenues as VAT exempt.
• The VAT passed on to it by its VAT-registered local suppliers shall form part of its cost or expenses

–        By registered export enterprise to another registered export enterprise

Same applies to:

• Sales by DME to another registered export enterprise; and
• Non-RBE exporter to a registered export enterprise (only A)

70% – the goods/services will form part of the final export product or services of at least 70% of the total production or output

• Corresponding VAT on importation should be paid accordingly.
• For partial utilization in a non-registered project or activity, the amount corresponding to the VAT on a specific capital equipment, raw materials, spare parts, or accessories shall be paid in proportion to its utilization for the non-registered project or activity.

• From the customs territory
• To existing registered export enterprises located inside the Ecozones or Freeport zones

• Zero-rated
• Until the expiration of the transitory period or the remaining period of their incentives as specified in Rule l8 of the CREATE IRR.
• It shall only apply to goods and/or services directly and exclusively used in the registered project or activity of a registered export enterprise.

•  From the customs territory
•  To existing registered NON-export enterprises located inside the Ecozones or Freeport zones

Subject to 12% VAT

• VAT registered
• To existing registered export enterprises
• OTHER THAN PEZA or Freeport zones  registered with the BOI and IPAs)

• Zero-rated
• Until the expiration of the transitory period or the remaining period of their incentives as specified in Rule l8 of the CREATE IRR.
• It shall only apply to goods and/or services directly and exclusively used in the registered project or activity of a registered export enterprise.

• Sale by Non-RBE (not enjoying incentives)
• Sold to Non-resident foreign buyers
• Delivered or rendered to export-oriented companies in PH

• Sale  by PEZA RBEs entitled to 5% GIT or SCIT
• to persons doing business outside the Philippines
• goods are subsequently exported,
• Services are paid for in acceptable foreign currency
• The service fee shall be indicated in the Official Receipt and VAT returns as a VAT exempt sale.

• For delivery to a resident local export-oriented enterprise
•  to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods
•  Paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP
• PEZA RBE entitled to 5% GIT or SCIT

Zero-rated under ITH

• Should taxpayer revert the same as VAT-zero rated
• Except for the 4-day period (June 27 to June 30, 2021)
• Provided it shall apply to goods and/or services directly and exclusively used in the registered project or activity of a registered export enterprise

• Absence of prior approval from the BIR may result in the disallowance of the VAT zero-rated sale of the supplier.
• IPA to issue annually a zero-rated VAT certification only to registered export enterprise
• IPA is required to submit to the BIR the list of RBE

• Photocopy of the BIR – Certificate of Registration,
• Certificate of Registration and VAT certification issued by the concerned IPA
• A sworn declaration stating that the goods and/or services being purchased shall be used directly and exclusively in the registered project.

• Governed by Revenue Memorandum Order (RMO) No. 7-2006.
• Attachments:
• Certificate of Registration and VAT Certification issued by concerned IPA
• Sworn affidavit executed by the registered export enterprise-buyer,
• Other documents to corroborate entitlement to VAT zero-rating such as but not limited to duly certified copies of purchase order, job order or service agreement. sales invoices and/or official receipts, delivery receipts, or similar documents to prove existence and legitimacy of the transaction

Treatment of input VAT passed on if purchase of goods/services are not directly and exclusive used in the registered project or activity