RR No. 21-2021: Amends certain provisions of RR No. 16-2005, as amended by RR Nos. 4-2007, 13-2018, 26-2018 and 9-2021 to implement Sections 294 (E) and 295 (D), Title XIII of the NIRC of 1997, as amended by RA No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act Implementing Rules and Regulations

Key points

1. Direct and exclusive use. VAT exemption on importation and VAT zero-rating on local purchases apply only to goods and services directly and exclusively used in the registered project or activity of a registered export enterprise. The maximum period is seventeen (17) years from the date of registration, unless extended under the SIPP, and local purchases also need endorsement of the concerned IPA.
2. Zero-rated sales of goods. Section 4.106-5 now lists export sales and sales of goods, supplies, equipment and fuel for international shipping or air transport. It also covers sales to entities exempt under special laws or international agreements, and sales to a registered export enterprise for use in its registered project or activity for up to 17 years from registration.
3. Zero-rated sales of services. Section 4.108-5 now covers services to non-residents paid in acceptable foreign currency, services to registered export enterprises, and services to international shipping or air transport. It also covers passenger and cargo transport from the Philippines to a foreign country, and sale of power or fuel from renewable energy sources.
4. Limits stated. Fuel, goods, supplies or equipment used for other purposes are subject to 12% VAT. Zero-rating for renewable energy covers only the sale of power or fuel, not services related to plant maintenance or operation, and international carriers remain liable to a three percent (3%) percentage tax under Sec. 118.
5. Ecozone enterprises. Sales to existing registered export enterprises inside ecozones and freeport zones also qualify for zero-rating until the transitory period expires.

Who is affected

• Registered export enterprises
• VAT-registered sellers to registered export enterprises
• International shipping and air transport operators and their suppliers

Deadlines and effectivity

• Effective immediately after publication in a leading newspaper of general circulation
• Covers transactions from the third quarter of Taxable Year 2021 onwards
• Maximum period: seventeen (17) years from registration