RR No. 3-2023: Amends certain provisions of RR No. 16-2005, as amended by RR No. 21-2021, to implement Sections 294 (E) and 295 (D), Title Xlll 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 IRR, as amended.

Summary

RR No. 3-2023 amends RR No. 16-2005, as amended by RR No. 21-2021, to implement Sections 294 (E) and 295 (D) of the NIRC as amended by the CREATE Act, on VAT zero-rating of local purchases by registered export enterprises.

Key points

1. Zero-rated sale of goods (Sec. 4.106-5). Sales of raw materials, inventories, supplies, equipment, packaging materials and goods to a registered export enterprise are zero-rated if used directly and exclusively in its registered project or activity. This applies for a maximum of seventeen (17) years from registration unless extended under the SIPP, and existing export enterprises in ecozones and freeport zones also qualify until the transitory period expires.
2. Zero-rated sale of services (Sec. 4.108-5). The same treatment applies to services sold to a registered export enterprise, including basic infrastructure, utilities, and maintenance, repair and overhaul of equipment. HMO plans for employees directly and exclusively involved in the registered project, as part of their compensation package, count as directly and exclusively used, under existing laws, rules and regulations.
3. Not directly and exclusively used. Purchases relating to janitorial, security, financial, consultancy, marketing and promotion services, and administrative services such as HR, legal and accounting, do not count. The enterprise may still prove to the IPA with supporting evidence that a purchase is directly and exclusively used.
4. Mixed use. The enterprise adopts a method to allocate purchases used in both the registered project and administrative operations. If proper allocation cannot be determined, the purchase is subject to twelve percent (12%) VAT.
5. Availment and BIR role. Zero-rating is availed on the basis of the IPA’s VAT zero-rating certification, subject to BIR post-audit. Local suppliers no longer need to apply for BIR approval upon effectivity. Pending applications with IPA certification get zero-rating treatment from the date of filing, subject to post-audit.
6. IPA reporting. The IPA gives the BIR, through the Assessment Service (AITEID), a list of registered export enterprises issued VAT zero-rating certification within twenty (20) days after each taxable quarter closes.

Who is affected

• Registered export enterprises
• Local suppliers of goods and services to registered export enterprises
• Investment Promotion Agencies

Deadlines and effectivity

• Zero-rating up to seventeen (17) years from registration, unless extended under the SIPP
• IPA list due within twenty (20) days after close of each taxable quarter

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