Peza lauds recognition of ELSE as ‘eligible activity’ in 2022 SIPP

Peza Officer in Charge Tereso O. Panga

The Philippine Economic Zone Authority (Peza) has welcomed the recognition of the ecozone logistics services enterprises (ELSE) as an “eligible activity” in the 2022 Strategic Investment Priorities Plan (SIPP).

“We thank the Department of Finance [DOF], Department of Trade and Industry [DTI], Board of Investments [BOI], and the Bureau of Internal Revenue [BIR] for finally resolving our pending concern on the recognition and eligibility of ELSEs for registration with the investment promotion agencies [IPAs] with incentives,” said Peza Officer-in-Charge Tereso Panga.

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 BOI has recently released Memorandum Circular (MC) No. 2023-001 dated January 31,2023, which clarified the coverage of logistics services as one of the activities in support of exporters under the 2022 SIPP pursuant to Section 300 of the CREATE Act and Sections 2 and 3 of its Implementing Rules and Regulations.

The same has been released by Peza through MC No. 2023-010 and the BIR under Revenue Memorandum Circular No. 15-2023, both dated February 3, 2023.

Initially, Peza said it made a case to BOI for the inclusion in the SIPP of other economic zone locators other than those into export manufacturing and IT services that provide support to export activities such as ecozone developers/operators, utilities, facilities and logistics service enterprises.

These, Peza noted, are the types of enterprises that are authorized to register under the Special Economic Zone Act of 1995 or the Peza Charter.

For his part, Panga mentioned the problem that Peza encountered with the BIR RMCs, which he said “effectively barred” both existing (prior to CREATE) and new locator investors (under CREATE) which are providing support to export activities from enjoying their incentives.

“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,” Panga said in a statement issued on Tuesday.

Now, with the clarification issued by the BOI and BIR, Panga said the existing ELSEs could enjoy their incentives such as zero value-added tax (VAT) rating on qualified local purchases pursuant to the sunset provision.

According to PEZA, ELSEs are traders supplying production-related raw materials and equipment that cater exclusively to requirements of ecozone locators.

Further, the investment promotion agency said it provides “critical” support, particularly to export manufacturing companies with their requirements for logistics support to facilitate their import and export shipments, sourcing of raw materials, inventory management, just in time deliveries, localization and process customization.

The BOI MC affirms the entitlement to VAT zero rating incentives on local purchases of ELSEs registered under type (3) of Board Resolution No. 97-366, as amended, or the Guidelines for Registration and Operations of Ecozone Facilities Enterprise Engaging in Warehouse Operations.

However, PEZA said, to be considered as exporters under the definition of Section 293 (E) of the CREATE Act, ELSEs shall render at least 70 percent of their output/services to another registered export enterprise either through direct or constructive exports.

Meanwhile, Panga underscored the role of ELSEs in supporting export enterprises.

“Together with ELSEs and other locators that provide support to export enterprises, PEZA ecozones have long been a participant in the global value chain by attracting global manufacturing and ICT industry leaders to set up their facilities in the ecozones, thus generating much-needed jobs, investments, and export revenues for the country,” the PEZA official stressed.

To date, PEZA said it has registered 340 ecozone logistics services enterprises with investments worth P11.154 billion. Of these, Japanese foreign direct investments (FDI) share in ELSE accounts for P3.499 billion.

Among the leading Japanese ELSES are Nagase Philippines International Services Corporation; Inabata Philippines, Inc.; Lima Logistics Corporation; Tokai Electronics Philippines Inc.; and NX Logistics Philippines Inc., PEZA noted.

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