- The Philippines Government has published Revenue Regulations 010-2025 to clarify VAT rules for businesses in freezones.
- The changes address concerns raised by businesses in freezones following the CREATE law.
- The CREATE law restricted a VAT exemption for imported goods and a zero rate for local purchases.
- The Bureau of Internal Revenue clarified that the CREATE law removed the “cross border doctrine” which previously treated freezones as foreign territories.
- The CREATE law provides that only goods and services directly used in a registered project or activity of a Registered Business Enterprise (RBE) qualify for the zero rate of VAT.
- An RBE is an entity registered with an IPA to engage in manufacturing, assembling, processing, IT activities, or BPO, and exports at least 70 percent of its production.
- The regulations provide that local purchases of “export-oriented enterprises” will be zero-rated, while importations are VAT-exempt.
- To qualify for zero-rated treatment, an export-oriented enterprise’s export sales must have accounted for at least 70 percent of its sales volume in the preceding year.
- The goods must be “directly attributable” to the export activity of the enterprise.
- The Export Marketing Bureau of the Department of Trade and Industry must certify the eligibility of these enterprises.
Source: answerconnect.cch.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
