Guidance for Export-Oriented Enterprises on DTI certification, tax incentives

LET’S TALK TAX

- WIANCA ANTONIETTE A. LOMIBAO

“Those who fail to prepare, prepare to fail” This principle has never been more relevant than today.

Businesses that fail to adapt to new compliance requirements are not spared the consequences. With the government getting stricter on compliance, failing to prepare can result in the loss of tax incentives that businesses might otherwise be entitled to. In taxation, entitlement without compliance is no entitlement at all.

A NEW REALITY FOR EXPORT-ORIENTED ENTERPRISES

Did you know that availing of VAT zero-rating for local purchases and import VAT exemptions for Export-Oriented Enterprises (EOEs) now hinges on the formal issuance of an Export Management Bureau Certificate by the Department of Trade and Industry (DTI)?

Before the CREATE MORE Act, under Section 106(A)(2)(a)(3) of the NIRC of 1997 (as amended), the sale of goods to an export-oriented enterprise — whose export sales exceed 70% of its total annual production — qualified for VAT zero-rating only if all of the following elements were met:

1) the sale was made by a VAT-registered person;

2.) the buyer must be considered an EOE; and,

3.) the goods sold must be used as raw materials or packaging materials for the goods exported by the EOE.

With the passage of the CREATE MORE Act (RA No. 12066), the rules have been streamlined. The law introduces clearer qualification requirements, strengthens inter-agency oversight, and places the EMB Certification at the center of the incentive-granting process. This certification now serves as the definitive basis for VAT zero-rating and VAT exemption on imports, and both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) rely on it in evaluating claims.