In 2022, the BIR issued a circular clarifying that only direct costs directly related to a registered project or activity will qualify for VAT zero-rating. RR 3-2023 further specified that certain local services and supplies of goods, such as janitorial and security services, are not entitled to VAT zero-rating for registered export enterprises. However, the enterprise can provide evidence to prove that these purchases are directly and exclusively used in their registered project or activity. If goods or services are used for both the project and administrative operations, proper allocation should be determined, or they will be subject to 12% VAT. HMO plans acquired for employees directly involved in registered projects are considered directly and exclusively used, subject to existing laws and regulations.
Source: manilatimes.net
