Status quo on VAT zero-rating of sales to Peza entities

Philippine Economic Zone Authority (Peza) issued Memorandum Circular (MC) No. 2018-003 dated March 12, announcing that the sale of goods and services to Peza entities will continue to be subject to zero percent value-added tax (VAT).

MC No. 2018-003 was issued following a clarification from the Department of Finance (DOF) that the Tax Reform for Acceleration and Inclusion (Train) Law does not affect the current zero-rating of sales of goods and services to Peza locators.

Train neither repealed nor amended Section 8 of Republic Act No. 7916, or the Special Economic Zone Act of 1995, which provides that special economic zones are to be operated and managed as a separate customs territory. The tax treatment/privileges of Peza entities remain in full force and effect until a new law or revenue regulation is issued amending these provisions.

Suppliers to Peza entities can continue to apply zero percent VAT on their qualified sales subject to presentation of the Peza certificate of VAT zero-rating valid for the period and until a law or revenue regulation is passed/issued contrary to or incompatible with the DOF pronouncement above. Peza entities, on the other hand, should secure their VAT zero-rating certificates from Peza and furnish a copy to their suppliers.

Please be guided accordingly.