RR No. 3-2023

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REPUBLIC OF THE PHILIPPINES

DEWENI‘ OF FINANCE
BUREAU OF INTERNAL REVENUE
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REVENUE REGULATIONS NO. 3‘ 2 0 2 3 A

at

SUBJECT: Amending Certain Provisions of Revenue Regulations (R) No. 16-2005;


as Amended by R No. 21-2021, to Implement Sections 294 (E) and 295‘-
(D), Title XIII of the National Internal Revenue Code. of 1997, as
Amended by R.A. No. 11534 (CREATE Act), and Section 5 , Rule 2 and
Section 5 , Rule 18 of the CREATE Act Implementing Rules and
Regulations, as Amended.
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TO: All Internal Revenue Officials, Employees and Others Concerned

SECTION 1. Scope. —— Pursuant to the provisions o f Sections 244 and 245 of the National
Internal Revenue Code of 1997, as amended (Tax Code), these Regulations are hereby
promulgated to amend certain provisions of Revenue Regulations (R) No. 16-2005, as amended
by R No. 21—2021, implementing Sections 294 (E) and 295 (D) of Title XIII of the Tax Code,
as introduced in Republic Act (RA) No. 11534 or the "Corporate Recovery and Tax Incentives
for Enterprise Act" (CREATE), and Section 5, Rule 2 of its Implementing Rules and Regulations
(IRR), as amended.

SECTION 2. Zero-Rated Sale of Goods or Properties. —— Section 4.106—5 of RR No. '16-


2005, as amended by R No. 21—2021, is hereby further amended and shall now be read as
follows: ,5
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"SEC. 4.106—5. Zero-Rated Sales of Goods or- Properties. — A zero-rated ‘


sale of goods or properties by a. VAT-registered person is a taxable
transaction for VAT purposes but shall not result in any output tax. However,
the input tax on purchases of goods, properties, or services, attributable to
such zero-rated sale, shall be available as tax credit or refimd in accordance
'with these Regulations.

The following sales by VAT-registered persons shall be subject to zero-


pcrcent (0%) rate:

(a) Export s a l e s — x x x xxx xxx

xxx xxx xxx

(c) Sale of raw" materials, inventories, supplies, equipment, packaging


materials, and goods, to a registered export enterprise, to be used directly and
exclusively in its registered project or activity pursuant to Sections 294- (E)
and 295 (D) of Republic"Act No. 11534 or the "Corporate Recovery and Tax
Incentives for Enterprise Act" ("CREATE Act"), and Section 5 , Rule 2 of its
IRR for a maximum period of seventeen (17) years from the date of
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ie'gistraiidn, unless otherwise extended under the SIPP; Provided, That the
term “registered export enterprise" shall refer to an export enterprise as
defined under Section 4 (M), Rule 1 of the CREATE Act IRR, that is also a
registered business enterprise as defined in Section 4 (W) _of the same IRR:
Provided further, That the above—described sales to existing .registered export
enterprises located inside ecozones and freeport zones shall also be qualified
for VAT zero-rating under this sub-item until.the expiration of the transitory
period.
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Local purchases of goods relating to the following services shall not b e


considered as “directly and exclusively used” in the registered project or
activity of a registered export enterprise, to wit:

1. janitorial services;
2. security services;
3. financial services; -,
4. consultancy services; '
5. marketing and promotion; and
6. services rendered for administrative operations such as Human
Resources (HR), legal, and a c c o u n t i n g . ’

This notwithstanding, the registered export enterprise is not precluded


from further proving, with supporting evidence, to the concerned
Investment Promotion Agency (IPA) that any of the local purchase of
goods relating to the above-listed services are indeed directly and
exclusively used in its registered project o r activity. I n all instances, in
issuing the VAT zero-rating certification, the concerned IPA shall he
guided by the rule that such local purchases of goods are directly
attributable to .thc registered project or activity without which such
registered project or activity cannot b e carried out. These are costs that
are indispensable to the project or activity, i.e., without which the project
o r activity cannot proceed, and these include expenses that are necessary
o r required depending o n the nature of the registered project o r activity
of the export enterprise.

If the purchased goods are used in both the registered project or activity
a n d administrative operations, the registered export enterprise shall
adopt a method to best allocate the same. If a proper allocation could not
be determined, the purchase of such goods shall be subject to twelve
percent (12%) VAT.

The VAT zero-rating on local purchases of goods shall he availed of on


the basis. of the VAT zero-rating certification issued by the concerned
IPA, Without prejudice, however, to the conduct of post audit
investigation/verification by the Bureau of Internal Revenue (BIR) that
the goods are indeed directly and exclusively used by the registered
export enterprise in its registered project o r activity. 49L

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For this purpose, upon the effectivity o f these Regulations, local suppliers
of goods of registered export enterprise shall no longer be required to
apply for approval of VAT zero-rating with the BIR. All applications
with accompanying VAT zero-rating certification issued by the
concerned IPA which have been received but have not yet acted upon by
the concerned office of the BIR upon the effectivity of these Regulations
shall b e accorded VAT zero-rating treatment from the date of filing of
such application subject to the conduct of post audit by the BIR that the
goods are indeed directly and exclusively used by the registered export
enterprise in its registered project or activity.
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The confirmed IPA shall furnish-the BIR through the Assessment Service
Attentionf Audit Information, Tax Exemption and, Incentives Division
(AITEIDf'withintwenty (20) days following the close of each taxable
quarter a listiof registered export enterprise issued with VAT zero-rating
certification. In order to obtain relevant information, for audit purposes,
the Commissioner of Internal Revenue may prescribe a report template
i n a separate revenue issuance.”
1'.- . :

SECTION 3. Zeros-Rated ' Sale of Services. — Section 4.108-5 of R No. 16-2005, as


amended by RRINo. 21-2021, is hereby amended and shall now be read as follows:

"SEC. 4.108-5. Zero-Rated Sale of Services. —


I."

XXX XXX XXX

(b) Transactions Subject to Zero Percent (0%) VAT Rate. -—- The following
services performed in the Philippines by a VAT-registered person shall be
subject to zero percent (0%) VAT rate:

XXX XXX XXX

(3) Sale of services, including provision of basic infrastructure, utilities, and


maintenance, repair and overhaul of equipment, to a registered export
enterprise, to be used directly and exclusively in its registered project or
activity pursuant to Sections 294 (E) and 295 (D) of CREATE Act, and
Section 5, Rule 2 of its amended IRR for a maximum period of seventeen
(17) years from the date of registration, unless otherwise extended under the
SIPP; Provided, That the term "registered export enterprise" shall refer to an
export enterprise as defined under Section 4 (M), Rule 1 of the CREATE
IRR, that is also a registered business enterprise as defined in Section 4 (W)
of the same IRR: Provided further, That the above-described sales to existing
registered export enterprises located inside ecozones and fieeport zones shall
also be qualified for VAT zero-rating under this sub-item until the expiration
of the transitory period. 2

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Health'maintenance organization (HMO) plans acquired by registered
export enterprise for its employees who are directly and exclusively
involved in the operations of their registered projects or activities and
forming part of their compensation package shall be considered as
“directly and exclusively used” in the registered project or activity o f a
registered export enterprise subject to the conditions provided under the
existing laws, rules and regulations regarding the availm'ent thereof.

The following local services shall not he considered as “directly and


exclusively used” i n the registered project o r activity of a registered
export enterprise, ‘to wit:

1. janitorial services;
2. security services;
3. financial services;
4. consultancy services;
5. marketing and promotion; and
6. services rendered for administrative operations such as Human
Resources (HR), legal, and accounting.

This notwithstanding, the registered export enterprise is not precluded


from further proving, with supporting evidence, to the concerned IPA
that any of the above-listed local purchases of services are indeed directly
and exclusively used in its registered project o r activity. I n all instances,
in issuing the VAT zero-rating certification, the concerned IPA shall be
guided by the rule that such local purchases of services are directly
attributable to the registered project or activity without which such -
registered project or activity cannot be carried out. These are costs that
are indispensable to the project o r activity, 1212., without which the project
or activity cannot proceed, and these include expenses that are necessary
or required depending on the nature of the registered project or activity
o f the export enterprise.

If the purchased services are used in both the registered project or


activity and administrative operations, the registered export enterprise
shall adopt a method to best allocate the same. If a proper allocation
could not be determined, said services shall be subject to twelve percent
(12%) VAT.

The VAT zero-rating on local purchase of services shall be availed of on


the basis of the VAT zero-rating certification issued by the concerned
/_.—IP-A, ~without-prejudicerhoweverrtofihe‘monduer‘of—“post—audit
investigation/verification by the BIR that the services are indeed directly
and exclusively used by the registered export enterprise in its registered
project or activity. 1

fillPEfluU 0F lNTFmMI REVENUE


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RECORDa Mu I. Do-vISION
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'For this 'purpiise, upon the effectivity of these Regulations, local suppliers
o f services of registered export enterprise shall n o longer be required to
apply for approval of VAT zero-rating with the BIR. All applications
with accompanying V‘AT zero-rating certification issued by the
concerned IPA which have been received but have not yet acted upon by
the concerned office of the BER upon the effectivity of these Regulations
shall be accorded VAT zero-rating treatment from the date of filing of
such application subject to the conduct of post audit by the BIR that the
services are indeed directly.and exclusively used by the registered export
enterprise in its registered project or activity.

The concerned IPA shall furnish the BIR through the Assessment Service
Attention: Audit Information, Tax Exemption and Incentives DiVision
(AITEID) within twenty (20) days following the close of each taxable
quarter a list o f registered export enterprise issued with VAT zero-rating
certification. In order to obtain relevant information, for audit purposes,
the Commissioner of Internal Revenue may prescribe a report template
in a separate revenue issuance.”

SECTION 4. Repealing/Amendatory Clause. ~— Any rules and regulations, issuandes or parts


thereof inconsistent with the provisions of these Regulations are hereby repealed, amended. or
modified accordingly.

SECTION 5. Separability Clause. — If any of the provisions of these Regulations is


subsequently declared unconstitutional, the validity of the remaining provisions hereof shall
remain in full force and effect.
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SECTION 6. .Effectivity. — This issuance shall take effect immediately following its
publication in a newspaper of general circulation or in the Official Gazette, whicheVer comes
first.

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BENJAMIN E. DIOKNb
Secretary of Finance

APR 2!] 2013 ..


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