Gov’t clarifies rules on zero-VAT

MANILA  -The government has issued new rules clarifying its zero-rated value -added tax (VAT) policy for registered businesses, listing the types of services and the purchase of related goods that are not tax-exempt.

The Bureau of Internal Revenue (BIR) issued Revenue Regulations No 3-2023, a copy of which was shared to the press by the Board of Investments (BOI) on Friday.

Enumerated were six items which would not be considered as “directly or exclusively used” in the registered project or the registered export enterprise: janitorial services, security services, financial services, consultancy services, marketing promotion, as well as services rendered for administrative operations such as human resources, legal, and accounting.

However, the issuance said that registered export enterprises were not prohibited from proving to the investment promotion agency (IPA) that any of the local purchase of goods related to these services had been directly and exclusively used for the registered project or activity.

“In all instances, in issuing the VAT zero-rating certification, the concerned IPA shall be guided by the rule that such purchases of goods are directly attributable to the registered project or activity, without which such registered project or activity cannot be carried out,” read a part of the issuance.

To recall, three of the country’s largest export trade associations have urged the government last month to issue clear rules concerning incentives offered to registered businesses by IPAs, such as the BOI and the Philippine Economic Zone Authority (Peza).

The IT and Business Process Association of the Philippines (IBPAP), Semiconductor and Electronics Industries in the Philippines Foundation, Inc. and the Confederation Wearables Exporters of the Philippines back then issued a statement calling for a prompt resolution to the matter.

IBPAP president and CEO Jack Madrid told reporters earlier this week that clear rules on the zero VAT incentive were an important matter for foreign investors.

“Investors don’t like ambiguity especially when it comes to rules and taxes, incentives. They want it black and white. They want it in writing because these are global companies who are compliant,” Madrid said on the sidelines of the IT-BPM Summit in Makati.

IBPAP projects that the local IT-BPM industry would contribute $35.9 billion to the Philippine economy in 2023, making the sector a prime mover in the economic front.

The trade association is also looking to grow the number of full-time employees in the sector to 1.7 million this year.