THE amendments to the National Internal Revenue Code of 1997 (Tax Code), introduced by Republic Act (RA) 11534 (Create) and by RA 10963, or the "Tax Reform for Acceleration and Inclusion" (Train), particularly on the imposition of value-added tax (VAT) on indirect exports and limiting the transactions subject to zero-rated VAT, have caused an uproar and much confusion in the business world.
The Tax Code, particularly Sections 294(E) and 295(D), as amended by Create, now provides that VAT zero rating on local purchases shall only apply to goods and services directly and exclusively used in the registered project or activity of a registered business enterprise. Applying such provision, the Bureau of Internal Revenue (BIR) clarified in Revenue Memorandum Circular (RMC) 24-2022 that the VAT zero rating of enterprises located in economic or freeport zones, pursuant to the "cross-border doctrine" no longer applies.
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