A draft Department Administrative Order (DAO) has specified some conditions and rules in the accreditation of exporters wishing to avail themselves of the zero-rated value added tax (VAT) on their local purchases of goods and services, and the VAT exemption on imported goods.
Those qualified will be issued “Certificate of Accreditation for Export-Oriented Enterprises Under CREATE MORE Act”. The draft DAO was presented by Asnia Bayabao, trade and industry development specialist at the Department of Trade and Industry-Export Marketing Bureau (DTI-EMB).
Under the draft DAO, among the conditions for issuing the certificate to an export-oriented enterprise (EOE) is that both supplier and EOE must be VAT-registered.
An EOE refers to a person, natural or juridical, that is engaged in the sale and actual shipment of goods and/or sale of services from the Philippines to a foreign country or economy as contemplated under the relevant sections of the Tax Code.
Another condition is that the export sales of the EOE must be at least 70% of its total sales of the preceding taxable year.
Further, the goods or services purchased by the EOE must be directly attributable to its export activity.
“Directly attributable” refers to goods and services that are incidental to and reasonably necessary for the export activity of the EOE, including janitorial, security, financial, consultancy, marketing and promotion services, and services rendered for administrative operations such as human resources, legal, and accounting.
The other conditions are:
• The EOE-buyer shall furnish each of its suppliers with a copy of the EMB Certificate of Accreditation for the suppliers to apply for VAT zero-rating on their sales to the EOE-buyer.
• The supplier shall issue for each sale to EOE-buyer a duly registered VAT invoice stamped with “VAT zero-rated” and indicating the name and EMB accreditation number of the buyer.
• The VAT zero-rating on local purchase of goods and services and VAT-exempt importation shall be availed of by the EOE on the basis of the EMB-issued Certificate of Accreditation. However, this does not preclude a post-audit investigation or verification by the BIR as to whether the “directly attributable” requirement was met by the EOE.
Aside from meeting these six conditions, the EOE should also comply with the following documentary requirements for accreditation:
• Accomplished application form
• BIR Certificate of Registration (BIR Form No. 1556)
• Audited annual financial statement or interim FS
• Income tax return
• Summary of export remittances/export sales
• Bureau of Customs (BOC) Certificate of Registration as an exporter
• Export documents
• For services exports, proof of international contract
• Affidavit executed by the owner/president or finance officer of the EOE certifying that the export sales for the preceding taxable year is at least 70% of the total annual production
• Original copy of Notarized Secretary’s Certificate, Special Power of Attorney and similar documents allowing the authorized representatives to file and sign documents and follow up the certification of accreditation
The draft DAO also sets down the step-by-step procedure by the EMB in issuing the certification.
Bayabao said the bureau will be coming out with a checklist on how, where and when to file, adding that they will also be accepting online submissions “provided that you will be submitting the hard copy of those documents.”
The CREATE MORE law, or Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy, stipulates the provision of tax incentives to support export-oriented enterprises.
These perks include the VAT zero-rating of sales of goods to EOEs, VAT zero-rating of sales of services performed for EOEs, and VAT exemption on the importation of goods by EOEs.
The DTI-EMB is the agency tasked to determine and certify the compliance of EOEs with the 70% threshold.
The certification should be submitted by the EOE to its local supplier prior to the purchase transaction, and to the BOC in case of importation.
