REVENUE Regulation 21-2021 implements the VAT provisions under Republic Act (RA) 11534 or the Corporate Recovery and Tax Incentives for Enterprises (Create) Act. It specifically covers the rules on VAT exemption and VAT zero-rating of local purchases.

Sec. 5, Rule 2 of the regulation provides that VAT exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly and exclusively used in the registered project or activity of a registered export enterprise for a maximum period of seventeen (17) years from the date of registration, unless otherwise extended under the Strategic Investment Priorities Plan (SIPP). Direct and exclusive use for the registered project or activity includes those raw materials, inventories, supplies, equipment, goods, packaging materials, services, including the provision of basic infrastructure, utilities, and maintenance, repair and overhaul of equipment, and other expenditures directly attributable to the registered project or activity without which the registered project or activity cannot be carried out.

To be considered a zero-rated sale of goods and properties, the sale of raw materials, inventories, supplies, equipment, packaging materials, and goods to a registered export enterprise must be used directly and exclusively in its registered project or activity for a maximum period of 17 years from the date of registration unless otherwise extended under the SIPP.

Sales to existing registered export enterprises located inside ecozones and freeport zones shall also be qualified for VAT zero-rating under this until the expiration of the transitory period.

To be considered zero-rated sales of service, the sale of services, including the provision of basic infrastructure, utilities and maintenance, repair and overhaul of equipment, to a registered enterprise, must be used directly and exclusively in its registered project or activity also for a maximum of 17 years from the date of registration unless otherwise extended under SIPP.

Sales to existing registered export enterprises located inside ecozones and freeport zones shall also be qualified for VAT zero-rating until the expiration of the transitionary period.

Please be guided accordingly.

Source:

P&A Grant Thornton

Certified Public Accountants