884 Japanese locators to benefit from PEZA memorandum
A total of 884 Japanese locators will benefit from a recent memorandum released by the Philippine Economic Zone Authority (PEZA) that recognizes ecozone logistics services enterprises (ELSE) as eligible activities included in the Strategic Investment Priorities Plan (SIPP).
In a Viber message to the Daily Manila Shimbun, PEZA spokesperson Jillian Dancel said: “The clarification regarding ELSEs will be beneficial for our Japanese locators given that they continue to be the biggest investors in the PEZA zones at 27.42 percent.”
PEZA has 340 registered ELSEs which have a total investment of P11.154 billion, with Japanese foreign direct investments sharing in ELSE accounts for P3.499 billion.
According to PEZA, ELSEs are traders supplying production-related raw materials and equipment that cater only to the needs of ecozone locators.
The SIPP lists the priority industries, sectors, and business projects that may qualify for investment incentives under Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
The Board of Investments (BOI) has previously released Memorandum Circular No. 2023-001, which clarifies that logistics are considered activities in support of exporters under the 2022 SIPP.3
The memorandum circular confirms that ELSEs are entitled to Vat zero rating incentives on local purchases under type 3 of the Board Resolution No. 97-366, as amended, or the Guidelines for Registration and Operations of Ecozone Facilities Enterprise Engaging in Warehouse Operations.
PEZA through MC No. 2023-010 and the Bureau of Internal Revenue (BIR) under Revenue Memorandum Circular (RMC) No. 15-2023 released similar circulars issued on February 3.
Under Section 293 of the CREATE Act, for ELSEs to be considered exporters, they should give 70 percent of their services or outputs to other export companies through direct or constructive exports.
Before, PEZA asked the BOI to include other ecozone locators aside from those involved in export manufacturing and Information Technology, that give support to export activities like ecozone developers or operators, utilities, facilities, and logistics service enterprises.
These are the kinds of industries that PEZA can register under R.A No. 7916 or the Special Economic Zone Act of 1995 or the PEZA Charter.
In a statement released Tuesday, PEZA Officer-in-charge Tereso Panga said: “While the BOI has adopted our recommendation with the inclusion of support to export activities in the SIPP, we encountered a problem with the BIR RMCs that limited the grant of incentives to only those registered business enterprises whose activities are covered by their definition for export enterprise. This ‘limitation’ has effectively barred both existing (prior to CREATE) and new locator investors (under CREATE) providing support to export activities from enjoying their incentives,” Panga said.
“With the clarification issued by the BOI and BIR, the existing ELSEs can now enjoy their incentives (i.e., Zero VAT rating on qualified local purchases) pursuant to the sunset provision. For new ELSEs, they may be entitled to the incentives under the CREATE Act,” he added. Jaspearl Tan/DMS