Tax Alert No. 55 [Revenue Regulations (RR) No. 21-2021 dated 03 December 2021]

Amending Certain Provisions of Revenue Regulations (RR) No. 16-2005, as amended by RR Nos. 4-2007, 13-2018, 26-2018, and 9-2021 to Implement Sections 294 (E) and 295 (D), Title XIII of the NIRC 1997, as amended by R.A. No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act Implementing Rules and Regulations 

The Secretary of Finance has issued RR No. 21-2021 to implement Sections 294 (E) and 295 (D), Title XIII of the NIRC 1997, as introduced in R.A No. 11534 (CREATE Act), and Section 5, Rule 2 of its implementing rules and regulations (IRR).

• Addition of the qualifying phrase “from direct and indirect taxes” in Sec. 4.106-5 (b) and Sec. 4.108-5 (b)(2):
  
  Sales/Services rendered to persons or entities whose exemption from direct and indirect taxes under special laws or international agreements to which the Philippines is a signatory, effectively subjects the sale/supply of services to 0% rate.
  
• Provision of examples of goods and services that may qualify as directly and exclusively used in a registered export enterprise’s registered project or activity. As defined in Section 5, Rule 2 of the CREATE Act IRR, “direct and exclusive use for the registered project or activity” refers to raw materials, inventories, supplies, equipment, goods, packaging materials, services, including basic infrastructure, utilities, and maintenance, repair and overhaul of equipment, and other expenditures directly attributable to the registered project or activity without which the registered project or activity cannot be carried out.
• The VAT zero-rating on local purchases shall be granted upon the endorsement of the concerned IPA, in addition to the documentary requirements of the BIR.
• The VAT zero-rating on local purchases of goods and services can be enjoyed for a maximum of 17 years from the date of registration, unless otherwise extended under the Strategic Investment Priority Plan (SIPP).
• Sales to existing registered export enterprises located inside ecozones and freeport zones are also qualified for VAT zero-rating until the expiration of the transitory period.

These Regulations took effect immediately after its publication on 10 December 2021 and shall cover transactions entered into the third quarter of taxable year 2021 and onwards.

You may access the full version of the Regulations through the BIR website.