RMC No. 24-2023: Further clarifies the qualifications of Ecozone Logistics Service Enterprise (ELSE) to the incentives of VAT-Zero Rate on local purchases of goods and services exclusively and directly used in the registered project or activity

Summary

RMC No. 24-2023 further clarifies when an Ecozone Logistics Service Enterprise (ELSE) qualifies for VAT zero-rating on local purchases of goods and services used exclusively and directly in its registered project or activity.

Key points

1. Who an ELSE is. An ELSE is a Registered Business Enterprise that supplies production-related raw materials and equipment and caters exclusively to export manufacturing enterprises registered with PEZA, CDC, SBMA, AFAB or other special economic zones or freeports outside PEZA administration.
2. Export enterprise coverage. ELSEs that give at least 70% of their output or services to another RBE fall within the definition of export enterprise under Section 293(E) of the NIRC, as amended by the CREATE Act and clarified in BOI MC No. 2023-001.
3. Qualifying logistics service. Under BOI MC No. 2023-001, only logistic services that both establish a warehouse storage facility and import or locally source goods for resale or for packing, cutting or altering to customer specification qualify for ELSE registration. Section 293(M) excludes service enterprises such as trucking or forwarding.
4. Zero-rate scope. Purchases from VAT-registered suppliers are zero-rated only for goods and services directly and exclusively used in the ELSE’s registered project or activity. Details are in RMC No. 24-2022 and its amendments.
5. Application documents. Processing follows RMO No. 7-2006 and its amendments, with strict compliance with Sections 294(E) and 295(D) of the NIRC and the CREATE IRR. Attachments must include the IPA registration and VAT certification, a sworn affidavit of the export enterprise buyer, and corroborating documents such as purchase orders, invoices and delivery receipts.

Who is affected

• Ecozone Logistics Service Enterprises (ELSEs)
• VAT-registered suppliers selling to ELSEs

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.