PEZA to dialogue with BIR-BOC-DOF to strengthen integration of BIR-BOC monitoring and compliance requirements in PEZA systems in ecozones
07 March 2021 (Sunday)
Pasay City – In order to protect government interests and ensure PEZA ecozone locators’ compliance, cooperation, trust and confidence in government, PEZA is set to hold talks this week with Bureau of Internal Revenue (BIR) Commissioner Caesar R. Dulay, together with the representative of the Department of Finance (DOF) in the PEZA Board, DOF Undersecretary Antonette C. Tionko, to strengthen PEZA’s assistance to BIR in its monitoring and compliance requirements by further integrating into PEZA systems BIR requirements that are not yet part of PEZA’s processes, including those pertaining to PEZA-registered export enterprises manufacturing cigarettes and tobacco products that are exporting 100% of their production.
As explained by PEZA Director General Charito "Ching” Plaza, this collaboration is in line with the brand of service PEZA is known for – transparency, no corruption, no red tape.
PEZA has also initiated talks with Bureau of Customs (BOC) Commissioner Rey Leonardo Guerrero to also strengthen collaboration between PEZA and Bureau of Customs and to resolve other PEZA and BOC concerns in relation to the movement of goods of PEZA enterprises and other BOC requirements.
“Along with BIR and BOC, PEZA vow to strengthen, integrate monitoring, compliance systems and processes in our economic zones to prevent smuggling, promote efficient tax collection, preserve investors’ cooperation, and maintain their trust and confidence in the government’s policies and processes,” noted the PEZA Chief.
At present, PEZA already assists BIR in ensuring that all PEZA enterprises file their Income Tax Returns by way of PEZA’s requirement for all its registered enterprises to submit to PEZA annually copies of their annual Income Tax Returns and Audited Financial Statements, with proof of receipt thereof by the BIR, including proof of their payment of applicable taxes to the BIR.
In case certain enterprises fail to submit these documents within the period prescribed by PEZA, PEZA withholds issuance to the non-compliant enterprise of their Annual Certification of Entitlement to Incentives and entitlement to VAT zero-rating on their local purchases. This is in addition to PEZA’s imposing penalties of fine per day of delay in their submission of these documents and, in case of continued failure to submit these documents to PEZA, PEZA withholds the issuance of Import Permits and Export Declaration to the erring PEZA enterprise.
As to the collection of excise tax on cigarettes manufactured by PEZA enterprises and sold locally, PEZA, in 2017, had an extensive dialogue with the BIR’s excise tax officers for the purpose of PEZA’s enforcement of BIR’s requirements for excise tax on local sales of cigarettes manufactured by PEZA enterprises. PEZA has since been implementing these requirements for local sales of cigarettes manufactured by PEZA enterprises. Under the PEZA Law (R.A. No. 7916, as amended) which provides incentives to PEZA enterprises contained in the Omnibus Investments Code of 1987, PEZA export enterprises are allowed to sell locally their manufactured products to the extent of 30% of their annual total revenues if foreign-owned, and up to 50% of total revenues if Filipino-owned, subject to payment of duties and taxes to the Bureau of Customs. Payment of duties and taxes is made to the Customs office stationed in every PEZA zone where PEZA-registered export manufacturing enterprises are located. Likewise, a PEZA office is stationed in every PEZA ecozone with PEZA-registered export manufacturing enterprises.
These duties and taxes, and in the case of cigarettes, including excise taxes, are required by PEZA to be paid to the Bureau of Customs (the deputized BIR collection agent for internal revenue taxes inside the PEZA ecozones) by the PEZA enterprise before their goods for local sale are allowed by PEZA and the Bureau of Customs stationed in the PEZA zone, to leave the PEZA ecozone where the manufacturing facility of the PEZA enterprise is located.
PEZA has also been collaborating with the BIR on the VAT zero-rating entitlement of PEZA enterprises on their local purchases related to their registered activities. PEZA regularly submits to BIR a list of PEZA enterprises entitled to the VAT zero-rating incentive, for which PEZA issues annually a Certification of Entitlement to each PEZA enterprise to this incentive after checking their compliance with PEZA’s reportorial requirements and other compliance requirements of PEZA. PEZA has also equipped these Certifications with a QR Code so that BIR can check the authenticity of these Certifications when presented to BIR by local suppliers of PEZA enterprises.
PEZA also submits to BIR all PEZA approvals and evaluation reports on income tax holiday extension years granted to qualified PEZA enterprises in accordance with criteria prescribed in the Omnibus Investments Code of 1987. In addition, pursuant to Republic Act No. 10708, the Tax Incentives Management and Transparency Act (TIMTA), PEZA religiously submits to BIR, since this law was enacted in 2015, an annual report on PEZA enterprises’ availment of tax incentives.
As to the movement of import and export shipments and other goods of PEZA enterprises, PEZA Director General Charito Plaza explains that PEZA has in place rigid measures to ensure that imports and exports and all movement of goods of PEZA-registered enterprises are controlled and monitored. PEZA, she explains further, has a long history of collaboration with the Bureau of Customs via a series of Memoranda of Agreement to jointly control and monitor the movement of import and export shipments and other movement of goods of PEZA enterprises.
Among these are the presence of Bureau of Customs offices in all of the PEZA economic zones supervised by PEZA where PEZA-registered export manufacturing enterprises are located. The Customs officers in the PEZA zones jointly inspect with PEZA officers in the PEZA offices also stationed in all PEZA zones where manufacturing enterprises are located, the incoming and outgoing goods of PEZA enterprises. Import Permits, Export Declarations and all other Permits issued by PEZA for all types of movement of goods of PEZA enterprises into and out of the PEZA economic zones are provided to and are accessible to the Customs officers at the PEZA zone.
In accordance with a Memorandum of Agreement between PEZA and the Bureau of Customs, PEZA offices are stationed at the international ports of entry such as the Manila International Container Port. Port of Manila (South Harbor), NAIA, Cebu International Seaport, Mactan International Airport, particularly to double check all Import Permits issued to PEZA enterprises before these are endorsed by the PEZA office to the Bureau of Customs at the Port for processing of the corresponding Bureau of Customs Transshipment Permit for the import shipment. Import Permits issued by PEZA to its registered enterprises are equipped with bar codes so that even BOC can check on their authenticity. More recently, BOC has implemented its E-TRACC (Electronic Tracking of Containerized Cargo) System on containerized import shipments of PEZA enterprises. The E-TRACC system utilizes an electronic lock equipped with GPS attached to the container.
BIR and PEZA are currently investigating two PEZA-registered enterprises engaged in manufacturing cigarettes for 100% export, which were found to be deficient in compliance with BIR registration requirements for cigarette manufacturers. PEZA continues with its own investigation into this matter and had earlier withheld import shipments of these enterprises until a Writ of Preliminary Injunction was issued by the Court. PEZA will apply its own rules and regulations on penalties applicable to these enterprises based on PEZA’s own investigation. This is distinct and different from whatever penalties BIR may impose upon these enterprises. Other cigarette manufacturers registered with PEZA engage best practices, such as JT International Asia Manufacturing Corp.
Director General Plaza adds that in order to enhance PEZA’s smuggling prevention efforts, PEZA is strengthening its intelligence capability and will continue to coordinate and collaborate with BOC and BIR to protect government revenues. PEZA will also closely coordinate with the PNP, AFP, LGUs and other agencies of government not only to protect government revenues but also to ensure trust and confidence of investors in our processes, and their safety inside the PEZA ecozones. PEZA, she says further, is now in the process also of enhancing its automated systems to include monitoring and compliance requirements.