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BIR firms up definition of ecozone logistics providers eligible for zero VAT 

People line up to file their income tax returns at the Bureau of Internal Revenue office in Intramuros, Manila, April 18, 2022. — PHILIPPINE STAR/ RUSSELL A. PALMA

THE Bureau of Internal Revenue (BIR) said it has more clearly defined which economic zone logistics service enterprises (ELSE) are entitled to the zero value-added tax (VAT) incentive.

In a memorandum circular, the BIR said it published a clarification of eligible logistics providers as those engaged in “activities in support of exporters.”

“Despite its issuance, there are still some questions that need to be addressed,” it added.

It said ELSEs must be registered business enterprises supplying production-related raw materials and equipment catering exclusively to the requirements of export manufacturing enterprises registered with the Philippine Economic Zone Authority (PEZA), Clark Development Corp., Subic Bay Metropolitan Authority, Authority of the Freeport Area of Bataan or other special economic zones and freeports outside PEZA administration.

The industry “provides critical support, particularly to export manufacturing companies with their requirements for logistics support to facilitate their import and export shipments, sourcing raw materials, inventory management, just-in-time deliveries, localization, and process customization,” it added.

It also clarified that ELSEs that render at least 70% of their output or services to another registered export enterprise are covered by the definition of “export enterprise.”

The circular also affirmed that purchases by registered ELSEs from VAT-registered suppliers are subject to VAT at a zero rate, but this only applies to goods and services directly and exclusively used in the registered project or activity of the ELSE.

The BIR also issued guidelines on the requirements for the availment of the VAT at zero rate. — Luisa Maria Jacinta C. Jocson

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