The Philippine Tax Whiz discusses the clarification from Revenue Memorandum Circular 80-2023 issued by the Commissioner of Internal Revenue on VAT zero-rated transactions and Revenue Regulations 3-2023
What is Revenue Regulations No. 3-2023 and when does it become effective?
Revenue Regulations No. 3-2023 provides that local supplier of goods and/or services of registered export enterprises (REEs) are no longer required to secure prior approval for VAT zero-rating with the BIR as long as the local purchase of goods of the REE is directly and exclusively used in the registered project or activity and not included in the negative list.
This rule takes effect starting April 28, 2023.
If the application is made prior to the effectivity of RR 3-2023 (April 28, 2023), and it is accompanied by a VAT zero-rating certification prescribed in RMC 36-2022, then it will be accorded VAT zero-rating treatment from the date of filing, with such application subject to post audit of the BIR.
For transactions consummated prior to the effectivity of RR 3-2023, the seller needs to secure an approved application for VAT zero-rating. Otherwise, the transaction would be subject to 12% VAT even if the REE is duly endorsed by the IPA.
Note that if the application was already previously disapproved, then it is no longer qualified to VAT zero-rating since there was already a prior determination from the BIR.
What is the negative list mentioned in RR 3-2023? What is the remedy if these are directly and exclusively used in the registered project or activity of the REE?
Under RR 3-2023, the following services are not qualified to be considered as “directly and exclusively used” in the registered project or activity:
However, Revenue Memorandum Circular No. 80-2023 clarifies that if these activities are “directly and exclusively used for the registered project or activity,” then the REE is not precluded from further proving that fact, with supporting evidence, to the concerned Investment Promotion Agency (IPA).
If the IPA determines that these services are directly and exclusively in a registered project or activity, a VAT zero-rating certificate shall be issued without prejudice to the BIR’s power to conduct a post audit.
What are the documentary requirements needed to be secured by local suppliers to REE buyers?
Local suppliers need to secure the following documents in case of post audit by the BIR:
- VAT Zero-Rate Certification issued by the concerned IPA
- COR issued by the BIR having jurisdiction over the head office/branch/freeport/ecozone location where the goods and/or services are to be delivered
- COR issued by the concerned IPA stating all registered ecozone location
- Sworn affidavit executed by the REE-buyer, stating that the goods and/or services are directly and exclusively used for the production of goods and/or completion of services to be exported or for utilities and other similar costs, the percentage of allocation be directly and exclusively used for the production of goods and/or completion of services to be exported, following the prescribed format under RMC No. 84-2022 and Annex A of RMC 80-2023
Do local suppliers of goods/services to entities granted with VAT zero-rate incentives under special laws and international agreements need to apply for VAT zero-rate?
No. Local suppliers who provide goods/services to other entities with incentives under special laws and international agreements are not required to submit applications. Alternatively, they need to secure the documents mentioned in Revenue Memorandum Circular 80-2023.
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Originally published via Rappler