Despite conflicting laws that could strip registered business enterprises (RBEs) of their value-added tax (VAT) exemption and render useless the hundreds of information technology zones, the Philippine Economic Zone Authority (PEZA) remains confident of hitting a 7-percent increase in investments this year.
PEZA director-general Charito Plaza in a press conference yesterday said the agency reported a 54-percent increase investments in the first quarter to P25.38 billion and will attain a triple-digit project registration this year from P88 billion in 2020.
In a letter to Finance Secretary Carlos Dominguez II dated June 24, 2021, Plaza sought confirmation that local purchases of PEZA export enterprises, whether from an export-oriented or domestic enterprise, will continue to be taxed zero percent VAT as long as these used in the registered project or activity by a RBEs as provided under Corporate Recovery and Tax Incentives for Enterprises (CREATE).
The clarification is being sought following the issuance by the Bureau of Internal Revenue of Revenue Regulation (RR) No. 9-2021 dated June 9, 2021 and which was to take effect June 27, 2021. The RR identified transactions that shall now be subject to the 12 percent VAT which are previously taxed at zero percent VAT particularly those considered as export sales under the Omnibus Investments Code.
“CREATE Law did not amend or repeal the Special Economic Zone Act of 1995 which provides that ecozones shall be managed and operated by the PEZA as separate customs territory,” Plaza said.
According to Plaza, the inclusion of RR 9-2021 in the final draft of the IRR of CREATE and the amendment to the definition of “export sales” to refer to sale and actual shipment of goods from the Philippines to a foreign country, thus, removing from the coverage indirect or constructive export sales, created the impression and interpretation that sale to PEZA registered business enterprises shall be automatically subject to 12 percent VAT
Pending clarification, “we respectfully request for a deferment of the implementation of RR No. 9-2021 or status quo, and while we also wait for the effectivity of the IRR of the CREATE Law, to give registered enterprises the opportunity and sufficient time to study the regulations before its actual implementation,” she added.
In the same press conference, Plaza expressed fear making work-from-home and offsite operations for IT-business process management (IT-BPM) companies permanent would “lose the essence of (IT) ecozones where these companies are located. “
Plaza said unless the state of calamity is extended beyond September 2021, the agency will not be able to grant the request of the Information Technology Business Processing Association to allow them to continue operating outside their PEZA-accredited sites while still enjoying incentives.
She said all other support to these companies such as removal of revenue cap and deductibility of new coronavirus virus 2019 expenses from their income tax payments will expire too.
Tereso Panga, PEZA deputy director-general, said CREATE has also superseded Administrative Order 18 which declared the moratorium on the creation of new ecozones in Metro Manila.
Panga said this effectively will enable PEZA to approve more ecozones and allow IT-BPM companies operate, with incentives, in pop up sites or off-PEZA sites.
But the agency is seeking categorical confirmation from the Office of the President as well as clarification from the Fiscal Incentives Review Board.
