Clarification on the availment period of VAT zero-rating incentives for existing registered export enterprises

Clarification on the availment period of VAT zero-rating incentives for existing registered export enterprises

(Revenue Memorandum Circular No. 38-2022 issued on April 06, 2022)

This Tax Alert is issued to inform all concerned on the clarifications on the transitory provisions for the non-income related tax incentives, particularly the VAT zero-rating on purchases of registered export enterprises, pursuant to the CREATE Act.

Pursuant to CREATE Act and its implementing rules and regulations, registered export enterprise shall be entitled to VAT zero-rating on local purchases that are directly attributable and exclusively used in the registered project or activity.

Such VAT zero-rating on local purchases may be availed by existing registered export enterprises, until the expiration of the transitory period for their income tax incentives, as follows:

1. For those granted Income Tax Holiday (ITH) only — until the remaining period of the ITH.
2. For those granted ITH and/or five percent (5%) tax on gross income earned — until the expiration of the ten (10) year limit.

If the income tax incentive has already expired prior to CREATE, the VAT zero-rating on local purchases could no longer be availed.