RR No. 3-2023 — Amends certain provisions of RR No. 16-2005, as amended by RR No. 21-2021, to implement Sections 294 (E) and 295 (D), Title Xlll of the NIRC of 1997, as amended by RA No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act IRR, as amended. (Published in Manila Times on April 28, 2023)

REVENUE REGULATIONS NO. 3- 2O23 BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE APR 2.0_2023 ti* : 1: 1 .

SUBJECT: Amending Certain Provisions of Revenue Regulations (RR) No. 16-2005'

as Amended by RR No. 21-2021, to Implement Sections 294 (E) and 295 (D), Title XIII of the National Internal Revenue Code. of 1997, as Amended by R.A. No. 11534 (CREATE Act), and Section 5, Rule 2 and

Regulations, as Amended. Section 5, Rule 18 of the CREATE Act Implementing Rules and

TO: All Internal Revenue Officials, Employees and Others Concerned

SECTION 1. Scope. -- Pursuant to the provisions of Sections 244 and 245 of the National Internal Revenue Code of 1997, as amended (Tax Code), these Regulations are hereby

as introduced in Republic Act (RA) No. 11534 or the "Corporate Recovery and Tax Incentives for Enterprise Act" (CREATE), and Section 5, Rule 2 of its Implementing Rules and Regulations (IRR), as amended. promuIgated to amend certain provisions of Revenue Regulations (RR) No. 16-2005, as amended by RR No. 21-2021, implementing Sections 294 (E) and 295 (D) of Title XIII of the Tax Code,

2005, as amended by RR No. 21-2021, is hereby further amended and shall now be read as follows: SECTION 2. Zero-Rated Sale of Goods or Properties. --- Section 4.106-5 of RR No. '16- :

'with these Regulations. transaction for VAT purposes but shall not result in any output tax. However, such zero-rated sale, shall be available as tax credit or refund in accordance "SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. -- A zero-rated sale of goods or properties by a VAT-registered person is a taxable the input tax on purchases of goods, properties, or services, attributable to

The following sales by VAT-registered persons shall be subiect to zero- percent (0%) rate:

(a) Export sales ---xxxxxx XXX

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IRR for a maximum period of seventeen (17) years from the date of materials, and goods, to a registered export enterprise, to be used directly and exclusively in its registered project or activity pursuant to Sections 294. (E) and 295 (D) of Republic'Act No. 11534 or the "Corporate Recovery and Tax Incentives for Enterprise Act" ("CREATE Act"), and Section 5, Rule 2 of its (c) Sale of raw" materials, inventories, supplies, equipment, packaging

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registration, unless otherwise extended under the SIPP; Provided, That the

enterprises located inside ecozones and freeport zones shall also be qualified for VAT zero-rating under this sub-item until. the expiration of the transitory period. term "registered export enterprise" shall refer to an export enterprise as defined under Section 4 (M), Rule 1 of the CREATE Act IRR, that is also a Provided further, That the above-described sales to existing.registered export registered business enterprise as defined in Section 4 (W) .of the same IRR:

Local purchases of goods relating to the following services shall not be considered as "directly and exclusively used" in the registered project or activity of a registered export enterprise, to wit:

1.janitorial services; 3 2 -security services; financial services; consultancy services; 5 6 marketing and promotion; and services rendered for administrative operations suck as Humar.

Resources (HR), legal, and accounting.

This notwithstanding, the registered export enterprise is not precluded from further proving, with supporting evidence, to the concerned Investment Promotion Agency (IPA) that any of the local purchase of goods relating to the above-listed services are indeed directly and exclusively used in its registered project or activity. In all instances, in

or activity cannot proceed, and these include expenses that are necessary guided by the rule that such Iocal purchases of goods are directly are indispensable to the project or activity, i.e., without which the project issuing the VAT zero-rating certification, the concerned IPA shall be attributable to the registered project or activity without which such registered project or activity cannot be carried out. These are costs that

of the export enterprise. or required depending on the nature of the registered project or activity

If the purchased goods are used in both the registered project or activity and administrative operations, the registered export enterprise shall adopt a method to best allocate the same. If a proper allocation could no be determined, the purchase of such goods shall be subject to twelve percent (12%) VAT.

The VAT zero-rating on local purchases of goods shall be availed of on

investigation/verification by the Bureau of Internal Revenue (BIR) that the basis of the VAT zero-rating certification issued by the concerned IPA, without prejudice, however, to the conduct of post audit

the goods are indeed directly and exclusively used by the registered export enterprise in its registered project or activity.

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with accompanying VAT zero-rating certification issued by the goods are indeed directly and exclusively used by the registered export apply for approval of VAT zero-rating with the BIR. AIl applications shall be accorded VAT zero-rating treatment from the date of filing of concerned IPA which have been received but have not yet acted upon by the concerned office of the BIR upon the effectivity of these Regulations such application subject to the conduct of post audit by the BIR that the enterprise in its registered project or activity. For this purpose, upon the effectivity of these Regulations, local suppliers of goods of registered export enterprise shall no longer be required to

The concerned IPA shall furnish the BIR through the Assessment Service

in a separate revenue issuance." (AITEID) within twenty (20) days following the cIose of each taxable quarter a list:of registered export enterprise issued with VAT zero-rating certification. In order to obtain relevant information, for audit purposes, the Commissioner of Internal Revenue may prescribe a report template Attention: Audit Information, Tax Exemption and Incentives Division * SECTION 3. Zero-Rated' Sale of Services. -- Section 4.108-5 of RR No. 16-2005, as amended by RR No. 21-2021, is hereby amended and shall now be read as follows:

"SEC. 4.108-5. Zero-Rated Sale of Services.

XXX XXX XXX

subject to zero percent (0%) VAT rate: (b) Transactions Subject to Zero Percent (0%) VAT Rate. --- The following services performed in the Philippines by a VAT-registered person shall be

XXX XXX XXX

Section 5, Rule 2 of its amended IRR for a maximum period of seventeen maintenance, repair and overhaul of equipment, to a registered export activity pursuant to Sections 294 (E) and 295 (D) of CREATE Act, and IRR, that is also a registered business enterprise as defined in Section 4 (W) of the same IRR: Provided further, That the above-described sales to existing enterprise, to be used directly and exclusively in its registered project or SIPP; Provided, That the term "registered export enterprise" shall refer to an export enterprise as defined under Section 4 (M), Rule 1 of the CREATE (17) years from the date of registration, unless otherwise extended under the (3) Sale of services, including provision of basic infrastructure, utilities, and

registered export enterprises Iocated inside ecozones and freeport zones shall also be qualified for VAT zero-rating under this sub-item until the expiration of the transitory period. O

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Health'maintenance organization (HMO) plans acquired by registered

involved in the operations of their registered projects or activities and export enterprise for its employees who are directly and exclusively

forming part of their compensation package shall be considered as "directly and exclusively used" in the registered project or activity of a registered export enterprise subject to the conditions provided under the existing laws, rules and regulations regarding the availment thereof.

exclusively used" in the registered project or activity of a registered export enterprise, to wit: The following IocaI services shall not be considered as "directly and

1. janitorial services; 2. security services; 3 financial services; 4. consultancy services;

marketing and promotion; and S

6 services rendered for administrative operations such as Human

Resources (HR), legal, and accounting.

This notwithstanding, the registered export enterprise is not precluded

and exclusively used in its registered project or activity. In all instances, in issuing the VAT zero-rating certification, the concerned IPA shall be that any of the above-listed local purchases of services are indeed directly guided by the rule that such local purchases of services are directly attributable to the registered project or activity without which such from further proving, with supporting evidence, to the concerned IPA

or required depending on the nature of the registered project or activity of thc export enterprise. or activity cannot proceed, and these include expenses that are necessary registered project or activity cannot be carried out. These are costs that are indispensable to the project or activity, ie., without which the project

If the purchased services are used in both the registered project or activity and administrative operations, the registered export enterprise shall adopt a method to best allocate the same. If a proper allocation could not be determined, said services shall be subject to twelve percent (12%) VAT.

investigation/verification by the BIR that the services are indeed directly project or activity. IPA, -without--prejudice,--however,-to-the-"conduct--of--postaudit and exclusively used by the registered export enterprise in its registered the basis of the VAT zero-rating certification issued by the concerned The VAT zero-rating on local purchase of services shall be availed of on

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'For this purpose, upon the effectivity of these Regulations, Iocal suppliers of services of registered export enterprise shall no longer be required to apply for approval of VAT zero-rating with the BIR. All applications with accompanying VAT zero-rating certification issued by the concerned IPA which have been received but have not yet acted upon by the concerned office of the BIR upon the effectivity of these Regulations shall be accorded VAT zero-rating treatment from the date of filing of such application subject to the conduct of post audit by the BIR that the services are indeed directly.and exclusively used by the registered export enterprise in its registered project or activity.

quarter a list of registered export enterprise issued with VAT zero-rating the Coramissioner of Internal Revenue may prescribe a report template in a separate revenue issuance." The concerned IPA shall furnish the BIR through the Assessment Service Attention: Audit Information, Tax Exemption and Incentives Division (AITEID) within twenty (20) days following the cIose of each taxable certification. In order to obtain relevant information, for audit purposes,

thereof inconsistent with the provisions of these Regulations are hereby repealed, amended. or modified accordingly. SECTION 4. Repealing/Amendatory Clause. -- Any rules and regulations, issuances or parts

SECTION 5. Separability Clause. --- If any of the provisions of these Regulations is subsequently declared unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 6. Effectivity. publication in a newspaper of general circulation or in the Official Gazette, whichever comes first. This issuance shall take effect immediately following its

C C.c BENJAMIN E. DIOKNO

Secretary of Finance

APR Z 0 2023 Recommending Approval:

ROMEO D. LUMAGUI, JR. ssioner of Internal Revenue

006218

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