BPOs welcome ‘clarity’ after VAT zero-rating ruling

A RULING by the Bureau of Internal Revenue (BIR) clarifying eligibility for the value-added tax (VAT) zero rating removes an element of uncertainty in qualifying for the incentive, the Information Technology and Business Process Management (IT-BPM) industry said.

“The release of Revenue Regulations (RR) No. 3-2023 by the BIR is a welcome development for the IT-BPM industry. After months of uncertainty on the VAT zero-rating of goods and services, IT-BPM registered export enterprises (REEs) and their local suppliers finally have much-needed clarity on this important matter,” IT and Business Process Association of the Philippines (IBPAP) President Jack Madrid said in a statement on Monday.  

According to Mr. Madrid, the BIR resolution said that health maintenance organization premiums are “appropriately” VAT zero-rated and that investment promotion agencies (IPAs) “are confirmed” to have jurisdiction over all issues related to VAT zero-rated purchases of their respective REEs.

“We are grateful that we now have this RR as basis in handling the issues that we have been grappling with for some time and we look forward to the further streamlining of the regulation to the effect that those exporting within the minimum threshold of 70% be allowed full VAT exemption or zero rating on their purchases given their compliance with the export condition of their registration,” Mr. Madrid said.  

Last month, the BIR issued RR No. 3-2023 which clarified that local purchases related to janitorial services, security services, financial services, consultancy services, and marketing and promotion are not covered by the zero-VAT rating incentive.  The RR also specified that local suppliers of goods and services for REEs are no longer required to apply for VAT zero-rating approval with the BIR. The VAT zero-rating incentive on the local purchases of goods or services could now instead be availed of on the basis of a certification issued by the IPA. 

For 2023, the IBPAP is aiming to generate $35.9 billion in revenue and employ 1.7 million full-time employees (FTEs), against the $32.5-billion revenue and 1.57 million FTEs recorded in 2022. — Revin Mikhael D. Ochave