Review of VAT on goods and services of ecozone businesses urged
SENIOR Deputy Speaker Gloria Macapagal -Arroyo is urging the House of Representatives to conduct a review of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law with regards to its implementation in freeport zones and economic zones.
Arroyo filed House Resolution 490 directing the House committee on ways and means to conduct inquiry on the imposition of value added tax on importation and local purchases of goods and services by registered business enterprises in the special economic zones.
The former President said there is need to inquire on the inconsistencies among the CREATE law; administrative issuances supporting this law; and R.A. 9400 (BCDA law).
In the resolution, the Pampanga Represetatives has cited Section 293 (F) of the National Internal Revenue Code of 1997 as amended by the CREATE law which defined a freeport zone as an area “ which shall be operated and managed as a separate customs territory….. where imported goods may be unloaded…. without being subject to imported duties.”
The resolution likewise pointed out that R.A. 9400 or the Bases Conversion and Development Act of 1992 “was not repealed but merely amended insofar as there are inconsistent provisions with the CREATE law.”
Following the Department of Finance (DoF) and the Department of Trade and Industry (DTI) issuance of the CREATE law’s Implementing Rules and Regulations (IRR), the Bureau of Internal Revenue (BIR) released its Revenue Regulations (RR) for the said law and a follow-up Revenue Memorandum Circular (RMC) which limited the applicability of incentives “to importation and VAT zero-rating on local purchases by a registered export enterprise”, and, citing the IRRs of both CREATE and the earlier-passed TRAIN law, issued a clarification that “the ‘cross-border doctrine’ as applied to Ecozones or Freeport zones have been rendered ineffectual and inoperative for VAT purposes”.
However, Arroyo pointed out that the CREATE’s IRR and BIR’s RR and RMC restrictions on the applicability of the VAT exemption on importation and VAT zero-rating on local purchases are inconsistent with the intent of the CREATE law.
