Ecozone Logistics Service Enterprises Can Now Qualify for VAT Zero Rating

The Board of Investments (“BOI”) in Memorandum Circular (“MC”) No. 2023-001 dated 01 February 2023 clarified that Ecozone Logistics Service Enterprises (“ELSEs”) shall be considered as “Export Enterprises” whose activities fall under “Activities in Support to Exporters” in the 2022 Strategic Investment Priorities Plan. 

This move by the BOI was done to harmonize both the provisions of Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Act relating to export enterprises and the Philippine Economic Zone Authority’s (“PEZA”) Board Resolution (“BR”) No. 97-366 dated 11 November 1997 entitled “Guidelines for Registration and Operations of Ecozone Facilities Enterprise Engaging in Warehouse Operations,” as amended by BR No. 10-506 dated 13 October 2010.

BOI MC No. 2023-001 was also circularized by the Bureau of Internal Revenue under Revenue MC No. 15-2023 dated 03 February 2023 and recognized by the PEZA through MC No. 2023-010, dated 03 February 2023.

Both the BIR and PEZA now recognize ELSEs as activities in support to exporters. As such, ELSEs are entitled to the value-added tax (“VAT”) zero rating incentive.

To be considered as “exporter” under the definition of Section 293 (E) of the CREATE Act, ELSEs shall render at least 70% of their output or services to another registered export enterprise and shall be engaged in integrated logistics as follows: 

1. Establishment of a warehouse storage facility; and
2. Importation or procurement from local sources and/or from other PEZA-registered enterprises of goods for resale, or for packing or covering (including marking and labelling), cutting or altering to customer’s specification, mounting and/or packaging into kits or marketable lots thereof for subsequent sale, transfer or disposition directly to PEZA registered export enterprises, for direct export or for consignment to PEZA-registered export enterprises. 

ELSEs registered as a combination of both (1) and (2) above are entitled to VAT zero rating incentive on their local purchases. Accordingly, all ELSEs which have already filed their application or request for VAT zero rating certification for the year 2023 and are compliant with PEZA reportorial requirements including reports required under the Tax Incentives Management and Transparency Act shall be issued the VAT Zero rating certificate. 
Registered ELSEs which have not yet filed their applications or requests for 2023 VAT Zero rating certificate may file their accomplished “Request for VAT Zero Rating Certification,” or PEZA Form ERD.2F.006 (Rev. 04, 07 November 2022). The accomplished request form should be emailed to odg@peza.gov.ph.