THE Board of Investments [BOI] has unveiled the guidelines on the availment of duty exemption/value-added tax [VAT] and customs duty exemption on importation of capital equipment, raw materials, among others under the Corporate Recovery and Tax Incentives for Enterprises [CREATE] law.
The attached agency to the Department of Trade and Industry [DTI] released the rules, dated June 30, 2023, mandated by Republic Act No. 11534 or the CREATE law.
According to the BOI, these guidelinesâas enclosed in Memorandum Circular (MC) No. 2023-004âare applicable to its registered business enterprises (RBEs).
Under the guidelines, importation by RBEs of capital equipment, raw materials, spare parts, or accessories âshall be exempt from customs duty,â but certain conditions are attached to the rule.
Among the conditions: it âshall only apply to the importation of capital equipment, raw materials, spare parts, or accessories directly and exclusively used in the registered project or activity by RBEs.â
Another condition to be exempt from customs duty is that the capital equipment, raw materials, spare parts, or accessories are âdirectly and reasonablyâ needed by the RBE; and will be used âexclusively in and as part of the direct costâ of the registered project or activity of the RBE.
The guidelines also stressed that capital equipment, raw materials, spare parts or accessories would be exempt from customs duty provided they are not produced or manufactured domestically âin sufficient quantity or of comparable quality and at reasonable prices.â In compliance with this condition, the rules said the RBE shall secure the Certificate of Non-Local Availability (CNLA) from the BOI-Legal and Compliance Service prior to importation.
The BOI also emphasized the approval process prior to the importation of goods.
âThe approval of the BOI, through the Certificate of Authority to Import (CAI), must be obtained by the RBE prior to the importation of the goods,â the MC noted.
But, the MC said, this is provided the application for importation is accompanied âby a quotation/pro forma invoice in the name of the applicant RBE as consignee to whom the shipment will be released.â
Meanwhile, the BOI MC noted that VAT exemption on importation shall only apply to goods âdirectly and exclusivelyâ used in the registered project or activity of a registered export enterprise during the period of registration of the registered project.
Also, within the first five years from the date of importation, the RBE shall secure the BOI approval before the âsale, transfer, or dispositionâ of the capital equipment, raw materials, spare parts, or accessories which were granted customs duty exemption.
The BOI circular also cited a circumstance wherein the imported items will be used for a ânon-registeredâ project or activity by the RBE at any time within the first five years from date of importation. Under this situation, it said, âthe RBE shall secure prior approval from the BOI and pay the amount corresponding to the exempt customs duty on importation thereof.â
For part-time utilization in a non-registered project or activity, the amount corresponding to the customs duty exempt on a specific capital equipment, raw materials, spare parts, or accessories âshall be paid in proportion to its utilization for the non-registered project or activity.â
To apply for VAT and customs duty exemption on importation of capital equipment, raw materials, spare parts or accessories, the BOI circular requires these: Notarized BOI CAI application form and pro forma invoice or quotation from the supplier.
On top of such requirements, BOI said in case of importation of raw materials, a âFormula of Manufactureâ per registered product, as certified by Industrial Technology Development Institute of the Department of Science and Technology (ITDI-DOST); and other relevant documents, may be required by BOI.
The rules say the Certificate of Authority to Import is ânon-transferableâ and shall be valid for a period of one year from the date of issuance, unless earlier invalidated or revoked.
âIf the CAI remained unutilized during its validity period, the RBE shall surrender it to the BOI within 15 days from its expiration,â the circular noted.