Paragraph (2)(a)(2) of Section 106 of the National Internal Revenue Code (NIRC), as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Act (TRAIN Law), provides that those considered as “export sales” under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, shall be considered as “export sales” subject to zero percent rate.
Article 23 and Article 77 of the Omnibus Investment Code of 1987 provides for export transactions deemed or considered “export sales”:
Article 23. xxx Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents: Provided, further, That without actual exportation the following shall be considered constructively exported for purposes of this provision: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones; (3) sales to registered export traders operating bonded trading warehouses supplying raw materials used in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue and the Bureau of Customs; (4) sales to foreign military bases, diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not: Provided, further, That export sales of registered export trader may include commission income: and Provided, finally, That exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee.
Sales of locally manufactured or assembled goods for household and personal use to Filipinos abroad and other non-residents of the Philippines as well as returning Overseas Filipinos under the Internal Export Program of the government and paid for in convertible foreign currency inwardly remitted through the Philippine banking systems shall also be considered export sales.
Article 77. Tax Treatment of Merchandise in the Zone:
(2) Merchandise purchased by a registered zone enterprise from the customs territory and subsequently brought into the zone, shall be considered as export sales…
These sales, when done by VAT-registered persons, shall be subject to zero percent (0%) rate under the NIRC. Consequently, sellers thereof may apply for either a refund or tax credit with the BIR to recover the VAT (input tax) paid for the goods subject of the aforementioned sales.