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News » BIR issues VAT zero-rating clarifications for PH IT-BPM

BIR issues VAT zero-rating clarifications for PH IT-BPM

BIR VAT zero-rating clarifications

MANILA, PHILIPPINES — The Bureau of Internal Revenue (BIR) recently clarified the eligibility of the Information Technology and Business Process Management (IT-BPM) industry for the value-added tax (VAT) zero-rating incentive.

According to Revenue Regulations (RR) No. 3-2023, health maintenance organization premiums are now “appropriately” VAT zero-rated, while investment promotion agencies (IPAs) are confirmed to have jurisdiction over all issues related to VAT zero-rated purchases of their respective registered export enterprises (REEs).

This is a significant development for the industry, which has been uncertain about VAT zero-rating for some time.

The RR also clarified that the zero-VAT rating incentive does not cover local purchases related to janitorial, security, financial, consultancy, and marketing and promotion services. 

Additionally, local suppliers of goods and services for REEs are no longer required to apply for VAT zero-rating approval with the BIR. The VAT zero-rating incentive on the local purchases of goods or services could now instead be availed based on a certification issued by the IPA.

IT and Business Process Association of the Philippines (IBPAP) President Jack Madrid called the new ruling “a welcome development” after months of uncertainty on the VAT zero-rating of goods and services in the IT-BPM sector.

BIR’s latest ruling also enables the industry to move forward with greater confidence and continue to drive economic growth in the Philippines.

IBPAP set a revenue target of $35.9 billion and plans to employ 1.7 million full-time employees (FTEs) in 2023, against the $32.5-billion revenue and 1.57 million FTEs recorded in 2022. 

The industry’s growth is expected to be fueled by the continued demand for digital transformation services and the government’s efforts to promote the Philippines as a global destination for IT-BPM services.

Read more here.

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