Background and Definitions
- PEZA-registered enterprises within ECOZONES pay a 5% special tax on gross income, in lieu of all taxes except real property tax.
- ECOZONES are designated special areas managed by PEZA as separate customs territories.
- Customs Territory: Philippine national territory excluding ECOZONE boundaries.
- Sales from ECOZONE to Customs Territory treated as importation by buyer, subject to import duties and VAT.
- Exported goods and services are VAT-exempt under the "Cross Border Doctrine" which prohibits VAT on goods/services destined for consumption outside the Philippines.
Tax Treatment of Sales from VAT-Registered Suppliers in Customs Territory to PEZA Enterprises
- Sales of goods to PEZA enterprises under the 5% special tax regime are zero-rated for VAT (indirect export).
- Sales of services to such PEZA enterprises are also zero-rated for VAT under the cross border doctrine.
- For PEZA enterprises not under the 5% tax regime (e.g., service establishments), zero rating similarly applies for both goods and services.
- This zero-rating applies regardless of the PEZA registration class and supersedes prior approval requirements for zero-rating.
Tax Treatment of Sales from VAT-Exempt Suppliers to PEZA Enterprises
- Sales made by VAT-exempt suppliers to PEZA enterprises are exempt from VAT without regard to the buyer's tax status or the cross border doctrine.
Tax Treatment of Sales Made by PEZA Registered Enterprises
- Sales of goods by PEZA enterprises to buyers in the Customs Territory are treated as importations by the buyer, who pays import taxes including VAT.
- PEZA enterprises pay 5% special tax on gross income from such sales, with limitations and possible income tax on excess sales beyond thresholds.
- For income tax on excess sales, net income is apportioned based on sales ratio.
- Services sold by PEZA enterprises to Customs Territory buyers are subject to 10% VAT or percentage tax, plus normal income tax.
- Intra-ECOZONE sales of goods between PEZA enterprises are VAT-exempt.
- Intra-ECOZONE sales of services by PEZA enterprises under the 5% tax regime are exempt from VAT or percentage tax.
- Intra-ECOZONE sales of services by PEZA enterprises subject to NIRC taxes are zero-rated for VAT under the cross border doctrine.
Repealing Clause
- Any inconsistent BIR rulings are amended, modified, or revoked accordingly as of issuance date.