Ecozone developers conditionally eligible for VAT zero rating status

THE Bureau of Internal Revenue (BIR) said economic zone (ecozone) developers and operators are eligible for value-added tax (VAT) zero rating subject to a number of eligibility conditions.

In a memorandum circular, the BIR said that the developers and operators of economic zones and industrial parks and buildings housing export enterprises qualify for VAT zero-rating if they pass the 70% threshold for leasable or saleable area dedicated to exporters.

“For investment promotion agency (IPA) — registered business enterprises, this means exporting at least 70% of total production or services. For non-IPA registered enterprises, this means exporting at least 60% of output,” it added.

The circular also sets minimum standards for economic zones like infrastructure such as paved roads, power systems, water supply, drainage systems, sewage treatment facilities, pollution control systems, and other facilities needed for export operations.

“This also covers the development and management of new buildings located outside the National Capital Region, declared an economic zone or within export or freeport zones, with a minimum contiguous land area of 10,000 square meters,” it said.

It also added that these must have the following features high-speed telecommunication networks; uninterruptible power supply; computer security systems; and any other requirements determined by the Board of Investments or IPA.

Meanwhile, Finance Secretary Benjamin E. Diokno said no further amendments to the VAT zero-rating guidelines are likely.

“If you ask me, my preference is to let the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) law be implemented first. That is a new law. It took three decades to come up with that,” he told reporters on Friday.

The BIR recently issued Revenue Regulations No. 3-2023, which amended the VAT zero-rating guidelines.

Under the revised rules, local suppliers of goods and services to registered export enterprises are not required to seek approval from the BIR for the VAT zero-rating.

A VAT zero-rating certification may instead be provided by the concerned IPA.

Exporters had called on the government to address the “conflicting provisions” in the VAT zero-rating guidelines stemming from the CREATE Act. — Luisa Maria Jacinta C. Jocson