Clarity of tax rules and regulations is key to an efficient tax system. One of the areas that tax authorities have to clarify is the zero-rating of sales to enterprises operating in and registered under existing economic zones.
The Corporate Recovery and Tax Incentives for Enterprises (Create) Act (Republic Act 11534) amended Section 294(D) of the National Internal Revenue Code (Tax Code) to provide that registered business enterprises (RBEs) are entitled to value-added tax (VAT) exemption on importation and VAT zero-rating on local purchases. Section 295(E) of the Tax Code provides that such VAT exemption and zero-rating only applies to goods and services "directly and exclusively used in the registered project or activity" by an RBE.
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