Gen.

Rule: 5% preferential tax rate imposed on the

GROSS income of a PEZA-REGISTERED enterprise in
LIEU of ALL NATIONAL TAXES and VAT.
Except: Real Property Taxes on LAND OWNED by
DEVELOPERS within the ECOZONEs.

They are VAT-EXEMPT ENTITIES

Since PEZA or ECOZONE are considered FOREIGN

territory, a custom territory --VAT EXEMPT
TRANSACTION

VAT EXEMPT PARTY

Automativ ZERO-rated
transactions

Effectively ZERO-rated
transactions

Transactions generally refer

to the EXPORTS Sale of
Goods and supply of
services.

Sale of goods or supply of

services to PERSONS or
entities whose exemptions
are under SPECIAL law or
international agreement.

involves goods or services

which, by their nature, are
specifically listed in and
expressly exempted from
the VAT under the Tax
Code, without regard to the
tax status VAT-exempt or
not of the party to the
transaction

is a person or entity
granted VAT exemption
under the Tax Code, a
special law or an
international agreement to
which the Philippines is a
signatory, and by virtue of
which its taxable
transactions become
exempt from VAT

APPLIED to TAX BASE ---such 0% results in --- NO

tax chargeable against the
PURCHASER.

APPLIED to TAX BASE --0% DOES NOT YIELD to

ANY tax chargeable against
the purchaser.

Seller charges NO output

vat BUT can claim a refunds
of or a tax credit certificate
for the VAT previously
charged by the supplier.

Seller charges NO 0utput

vat on such transaction can
ALSO claim refund or tax
credit FOR VAT previously
charged by suppliers

NO recovery of INPUT VAT

WITH RECOVERYT of
INPUT vat.

As a result, sales made by a supplier in the Customs

Territory to a purchaser in the ECOZONE shall be treated as
an exportation from the Customs Territory. Conversely, sales
made by a supplier from the ECOZONE to a purchaser in the
Customs Territory shall be considered as an importation into
the Customs Territory.

VAT implication of SALES made by a supplier from

the Customs Territory to an ECOZONE enterprise?
Sales of Goods

Sales of Services

Treated as INDIRECT
EXPORT 0% based on
NIRC provided the Seller is
a VAT-Registered person

Treated as performed
outside the Philippine
territory 0% based on
cross border doctrine1
under the VAT System
provided the Seller is a
VAT-Registered person

If the SELLER is NON-VAT Registered person --the transactions are subject to VAT under NIRC.

ZERO-RATED
TRANSACTION
A taxable transaction but
DOES not result in an
output tax;
Input vat on the purchases
of a VAT-registered person
with 0% may be allowed as
tax credits or refunded
VAT registration is
mandatory

EXEMPT
TRANSACTION
Is exempt from VAT, hence,
NOT subject to OUTPUT
tax
Seller in an exempt
transaction is NOT entitled
to ANY input tax on his
purchases despite the
issuance of a VAT invoice
or receipt
VAT registration is
OPTIONAL

PEZA-ENTERPRISES or in ECOZONEs
Cross Border Doctrine - no VAT shall be imposed to form part of the cost of
goods destined for consumption outside of the territorial border of the taxing
authority.
1

Actual export of goods and services from the Philippines to a foreign

country must be free of VAT; while, those destined for use or consumption within the
Philippines shall be imposed with VAT.