With the recent issuance of the Corporate Recovery and Tax Incentives for Enterprises (Create) Act's Implementing Rules and Regulations (IRR), there seems to be a lot of confusion on how to treat purchases of goods and services by Registered Business Enterprises (RBEs) - whether these should be subject to value-added tax (VAT) at 12 percent or VAT at zero-rate.
The IRR states that the VAT exemption on importation and VAT zero-rating on local purchases only applies to goods and services directly and exclusively used in a registered export enterprise's registered project or activity during the period of registration of the said project or activity with the concerned investment promotion agencies. Direct and exclusive use refers to raw materials, inventories, supplies, equipment, goods, services, and other expenditures necessary for the project or activity.
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