-
The Board of Investments issued rules on availing exemption from customs duty and VAT on imports of capital equipment, raw materials, spare parts and accessories under the Corporate Recovery and Tax Incentives for Enterprises Act
-
The guidelines under BOI Memorandum Circular No. 2023-004 covers imports by BOI-registered business enterprises
-
MC 2023-004 is in keeping with implementing rules of the CREATE Act, which states that importation of capital equipment, raw materials, spare parts and accessories are exempt from customs duty provided they comply with certain conditions
The Board of Investments (BOI) has issued rules on customs duty and value-added tax (VAT) exemption for imports of capital equipment, raw materials, spare parts and accessories under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
The guidelines under BOI Memorandum Circular (MC) No. 2023-004, signed June 30 and posted on July 13, covers importations by BOI-registered business enterprises (RBEs).
MC 2023-004 is in keeping with the implementing rules and regulations of Republic Act No. 11534, or CREATE Act, which states that importation of capital equipment, raw materials, spare parts and accessories are exempt from customs duty provided they comply with certain conditions.
Customs duty and VAT exemption
Customs duty and VAT exemption apply to RBEs that are export enterprises (17 years from date of registration) while VAT exemption applies to domestic market enterprises (12 years from date of registration).
Under MC 2023-004, the customs duty exemption applies only to imports of capital equipment, raw materials, spare parts and accessories directly and exclusively used in the registered project or activity by RBEs.
The importations should also be “directly and reasonably needed” by the RBE and will be used exclusively in and as part of the direct cost of the registered project or activity of the RBE.
In addition, the capital equipment, raw materials, spare parts and accessories should not be produced or manufactured domestically in sufficient quantity or of comparable quality and at reasonable prices. In compliance with this condition, the RBE should secure the Certificate of Non-Local Availability (CNLA) from BOI prior to importation.
The approval of BOI for the exemption must be obtained by the RBE before goods importation. The application for importation must be accompanied by a quotation/pro forma invoice in the name of the applicant RBE as consignee to whom the shipment will be released.
VAT exemption
The VAT exemption, meanwhile, only applies to goods directly and exclusively used in the registered project or activity of a registered export enterprise during the period of registration of the registered project or activity.
Within the first five years from the date of importation, the RBE should secure BOI approval before the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, and accessories that were granted customs duty exemption. This requires the payment of duties based on the net book value of the capital equipment, raw materials, spare parts, or accessories.
Further, the sale, transfer, or disposition will be allowed only under certain circumstances under MC 2023-004.
After five years from the date of importation, the RBE should also notify BOI prior to the sale, transfer, or disposition of capital equipment, raw materials, spare parts, or accessories.
If the RBEs sell, transfers, or disposes the imported items without prior BOI approval, the RBE and the vendee, transferee, or assignee would be solidary liable to pay twice the amount of the duty exemption that should have been paid during its importation, without prejudice to any penalties or sanctions that the BOI may impose.
In the event the imported items will be used for a non-registered project or activity by the RBE at any time within the first five years from the date of importation, the RBE should secure prior approval from the BOI and pay the amount corresponding to the exempt customs duty on importation thereof.
For part-time utilization in a non-registered project or activity, the amount corresponding the customs duty exempt on a specific capital equipment, raw materials, spare parts or accessories should be paid in proportion to its utilization for the non-registered project or activity.
The Certificate of Authority to Import (CAI), which is proof of entitlement to duty exemption on importation, should be applied with the BOI. It is non-transferrable and valid for a period of one year from the date of issuance, unless earlier invalidated or revoked.
For the issuance of Tax Exemption Indorsement (TEI), the RBE should submit to the Department of Finance (DOF) the CAI and CNLA issued by BOI, including the official import documents, as may be required by DOF.
For the release of the shipment, the RBE should, upon release of the TEI, file a single administrative document with the Bureau of Customs (BOC), including supporting documents, as may be required by BOC.
A performance bond, valid for one year, from the Government Service Insurance System, equivalent to the VAT and/or duties waived on the importation, is a pre-condition to the importation by RBEs. In lieu of the bond, the RBE may provide for guarantee from the principal stockholder/s or other form of guarantee to ensure performance.
BOI, after due notice and hearing, may cancel the registration, suspend the enjoyment of incentives under MC 2023-004 and/or require refund of incentives, including interests and monetary penalties, for any misrepresentation of information for the purpose of availing more incentives than what the RBE is entitled to. – Roumina Pablo
RELATED READ: BIR clarifies guidelines on availing zero VAT
