Philippine Economic Zone Authority (PEZA) Director General Tereso Panga has underscored the impact of maintaining separate customs territory (SCT) in economic zones as it has become the ‘unique selling point of ecozones to investors’. In a Facebook post Wednesday, Panga said the SCT status vested in ecozones originally contained in the Republic Act 7916, or the Special Economic Zone Act of 1995, is still applicable despite the conflicting provisions of implementing rules and regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law and the Revenue Memorandum Circular (RMC) 24-2022 issued by the Bureau of Internal Revenue (BIR). ‘This long-standing rule on SCT placing the ecozones under the IPAs’ (investment promotion agencies) supervision and the grant of zero VAT (value-added tax)-rating and VAT exemption incentives have been the selling point of PEZA and other free port authorities in attracting investors to locate in the ecozones,’ he said. Panga said the Office of the Solicitor General has supported PEZA’s position that the SCT status of ecozones shall be sustained despite the issuance of the CREATE IRR and the BIR RMC. This means locator registered business enterprises (RBEs) within PEZA zones shall be exempted from VAT by virtue of cross-border doctrine (CBD) and destination principle in taxation. He said the Office of the Government Corporate Counsel has also given the same opinion in favor of Clark Freeport Zone locator companies. ‘By virtue of the separate customs territory vested in the ecozones, no VAT will apply particularly on eligible goods/services purchased by export-oriented RBEs from the local market including those imported from abroad and brought/consumed inside the ecozones. Since the SCT provision was retained in the CREATE, the CBD and destination principle in taxation are no doubt valid and enforceable for qualified transactions of ecozone RBEs,’ he added. It has been an international trade practice that a ‘free zone’ is managed and operated as a separate customs territory. RA 7916, which also created PEZA, likewise provided that ‘enterprises located in export processing zones are allowed to import capital equipment and raw materials free from duties, taxes, and other import restrictions’. ‘The retention in the CREATE of the original PEZA law provision recognizing the ecozones as SCTs is most crucial to PEZA’s attraction and facilitation of investments,’ he added. ‘(A)ny attempt to remove these unique incentives and features of the ecozones will surely impact on PEZA as an investment promotion agency and the country’s competitiveness as an investment destination
Source: Philippines News Agency
