Following the ruling of the Board of Investments (BOI) that logistics services in support of exports are entitled to incentives, the Philippine Economic Zone Authority (PEZA) anticipates the issuance of a similar ruling on the eligibility of the other ecozone locators that provide critical support to export locators.
These would include ecozone developers, embedded ecozone power, water, and telecommunications utilities, environmental management facilities, which the agency said, complete the ecosystem in the ecozones without which our registered business enterprises cannot operate efficiently.
The BOI in Memorandum Circular (MC) No. 2023-001 dated Jan. 31, 2023 clarified ecozone logistics services enterprises (ELSEs) in support of exporters are listed under the 2022 Strategic Investment Priorities Plan under the Corporate Recovery and Tax Incentives for Enterprises (CREATE). The MC was circularized by the Philippine Economic Zone Authority (PEZA) through MC No. 2023-010 and the Bureau of Internal Revenue (BIR) under Revenue Memorandum Circular (RMC) No. 15-2023, both dated Feb. 3, 2023.
Tereso Panga, PEZA officer in charge, said in a statement the recognition of ELSEs as an eligible activity in the new SIPP finally resolves the agency’s pending concern on the eligibility of these enterprises for registration with investment promotion agencies with incentives.
Initially, PEZA made a case to BOI for the inclusion in the SIPP of other ecozone locators other than those into export manufacturing and information technology services that provide support to export activities such as ecozone developers/operators, utilities, facilities and logistics service enterprises. These are the types of enterprises that PEZA are authorized to register under the Special Economic Zone Act of 1995 or the PEZA Charter.
Panga said while the BOI has adopted PEZA’s recommendation with the inclusion of support to export activities in the SIPP, the agency encountered a problem with the BIR RMCs that limited the grant of incentives to only those registered business enterprises whose activities are covered by their definition for export enterprise.
“This limitation has effectively barred both existing (those registered prior to CREATE) and new locator investors providing support to export activities from enjoying their incentives.
With the clarification issued by the BOI and BIR, the existing ELSEs can now enjoy their incentives,” Panga said.
The incentives include zero value-added tax rating on qualified local purchases pursuant to the sunset provision. New ELSEs may be entitled to the incentives under the CREATE Act.
To be considered as exporters, ELSEs shall render at least 70 percent of their output/services to another registered export enterprise either through direct or constructive exports.
ELSEs are traders supplying production-related raw materials and equipment that cater exclusively to requirements of ecozone locators. They provide critical support particularly to export manufacturing companies with their requirements for logistics support to facilitate their import and export shipments, sourcing of raw materials, inventory management, just in time deliveries, localization and process customization.
To date, PEZA has registered 340 ELSEs with total investments of P11.154 billion. Of these, Japanese foreign direct investment share in ELSE accounts for P3.499 Billion.
Among the leading Japanese ELSEs are Nagase Philippines International Services Corp.; Inabata Philippines Inc.; Lima Logistics Corp.; Tokai Electronics Philippines Inc.; and NX Logistics Philippines Inc. Irma Isip
