Here’s a clear, practice-oriented legal article on VAT Exemption / Zero-Rating Rules for PEZA-Registered Companies in the Philippines—written for laypersons but careful about the usual statutory logic and agency practice. (General information only; not legal advice. You asked me not to search, so I’m drawing from stable principles and commonly applied rules. Details may shift with new revenue regulations, circulars, and court rulings—always confirm your specific fact pattern with your RDO/PEZA zone office.)

1) The “cross-border” idea in one minute

For VAT, an eco-zone is treated as if it were outside the Philippine customs territory for many tax purposes. In practice, that means:

Exports (sales by a PEZA locator to customers abroad or to other eco-zones) are generally VAT zero-rated (0% VAT).
Imports by PEZA locators of capital equipment, raw/packaging materials and supplies for their registered activity are typically VAT-exempt at importation (handled through PEZA/Bureau of Customs procedures).
Domestic suppliers selling directly and exclusively used goods/services to a PEZA locator can often treat those sales as VAT zero-rated—but only if they meet documentary and approval conditions (discussed below).

“Zero-rated” ≠ “exempt.” Zero-rating keeps the sale taxable at 0% so the seller can claim input VAT. Exempt sales are outside VAT—no output VAT but input VAT becomes a cost (no credit/refund), unless a separate rule says otherwise.

2) Who we’re talking about

PEZA-registered export enterprise (manufacturing, IT-BPM, logistics, etc.) operating inside an ecozone/IT park.
Ecozone developer/operator (different incentive set; many of the same VAT mechanics apply on qualified transactions).
Domestic enterprise supplying a PEZA locator (goods or services).
PEZA locator buying locally (how to get zero-rating) vs buying abroad (import VAT exemption under zone procedures).

Your exact VAT posture depends on (a) the type of project/activity registered with PEZA, (b) whether a purchase is directly and exclusively used in that activity, and (c) whether required approvals/certifications were secured.

3) PEZA locator’s own transactions

A) Exports by a PEZA locator

Sale of goods to foreign customers (or to another ecozone/FTA warehouse treated as export): VAT zero-rated.
Export-type services (e.g., IT/BPM serving non-resident clients with paid-in acceptable foreign currency): typically VAT zero-rated if recipient/use is outside the Philippines and other conditions are met.

Invoicing must say “VAT ZERO-RATED SALE” and show the legal basis (e.g., “export sale to PEZA/export customer”) along with the locator’s VAT-registration details if the locator is VAT-registered.

B) Sales to the domestic market (DTA)

If a PEZA locator sells to a non-PEZA domestic customer, VAT consequences flip: the sale is subject to 12% VAT (unless a special rule says otherwise).
Domestic sales ceilings and permits (PEZA rules) still apply; VAT follows ordinary domestic rules.

C) Importations by a PEZA locator

Qualified importations for the registered activity pass VAT-exempt through customs under PEZA procedures (plus duty exemptions where applicable).
Keep your import permit, packing lists, and PEZA clearances tight; misuse or diversion can retro-trigger VAT and duties plus penalties.

D) Utilities, rent, construction, and similar

Inside the zone and directly and exclusively used in the registered activity → often zero-rated when purchased from domestic suppliers with proper approvals (see Section 4).
Non-qualifying portions (e.g., canteen for non-production staff, corporate branding fit-out, mixed-use utilities without metering) may be 12%-VATable to the supplier; the VAT becomes a cost to the locator unless a refund route applies (see Section 6).

4) Domestic suppliers → selling to a PEZA locator (the “zero-rate” playbook)

A domestic supplier can zero-rate its sale only when all conditions below are satisfied. Otherwise, it must charge 12%.

Core conditions (practical list):

Customer is a PEZA-registered enterprise (provide valid PEZA Certificate of Registration/Letter of Authority; note project/activity description and site).
The goods/services are “directly and exclusively used” in the PEZA-registered project/activity.
- Direct = essential to, and exclusively consumed by, production/delivery of the registered activity (e.g., production raw mats, line machinery, process utilities, directly used IT seats, facility O&M tightly tied to the line).
- Not direct: general corporate overhead, HR recruitment ads, entertainment, head-office consulting, non-production security, mixed-use rent without segregation.
Documentary & approval trail is complete before zero-rating is applied:
- PEZA locator’s purchase request/blanket certificate identifying the items/services as direct and exclusive,
- Supplier’s zero-rated VAT invoice with the proper legend (e.g., “VAT ZERO-RATED SALE under the cross-border doctrine / sale to a PEZA-registered enterprise for direct and exclusive use in its registered activity”),
- Any BIR/PEZA zero-rating confirmation or certification your RDO requires for the specific period/line-item (practice has varied over time),
- Delivery receipts, service acceptance, and proof of payment.

If any of those pieces is missing or disputable, the safer route for the supplier is to charge 12%, and the PEZA buyer can decide whether to seek refund/credit (if available) or accept the VAT as a cost.

Commonly zero-rated to PEZA locators (when directly/exclusively used):

Production raw and packaging materials; capital machinery and spare parts; line-side MRO; directly metered power/water for the production line; rent of production floor; construction services for production areas; IT seats and telecom directly used for the export service; logistics/warehousing inside zone related to export activity.

Commonly kicked back as 12% (not directly/exclusively used):

HR & recruitment services, generic legal/audit, corporate branding, employee shuttle/catering (unless tightly required by the line and accepted by RDO), office flowers/marketing, mixed utilities without sub-metering, general head-office rent.

5) Ecozone developer/operator (EDO) notes

Sales/leases to locators for production space/utilities may qualify for zero-rating when the developer is the supplier and the use is within the zone and for the registered activity.
Sales to the domestic market (e.g., leasing to non-locators or off-zone services) follow ordinary VAT rules (often 12%).

6) Input VAT: refunds, credits, and strategy

If you are a PEZA locator

Ideally, your qualified local purchases are zero-rated so no input VAT arises in the first place.
If a supplier charged 12% (e.g., documentation gap), you generally cannot credit that VAT against zero-rated output, because your outputs are 0%. Your options are:
- Refund of input VAT attributable to zero-rated sales (returns + administrative claim).
- Or, treat it as a cost if the item is non-qualifying or refund proof is weak.

Refunds require robust scheduling of input VAT by transaction, matching to zero-rated outputs, and a complete docket (invoices, ORs, proofs of payment, export docs, PEZA certificates, etc.). Processing timelines and documentation standards are strict; plan ahead.

If you are a domestic supplier

Zero-rated sales still let you claim input VAT on your own purchases (or seek refund) because your sale is taxable at 0%.
If an examiner later reclassifies your zero-rated sale to 12%, you may face output VAT assessment + penalties; keep the file audit-ready (customer’s PEZA COR, direct-and-exclusive certification, delivery proofs, zero-rated invoice legends, any BIR/PEZA approvals in force at the time).

7) Invoicing and paperwork—what must appear

For a zero-rated sale (supplier → PEZA locator), the VAT invoice should clearly show:

Supplier and customer TINs and addresses (customer’s zone address),
Exact description of goods/services (tie to PO/contract),
Legend such as: “VAT ZERO-RATED SALE to a PEZA-registered enterprise for direct and exclusive use in its registered activity,” plus reference to the customer’s PEZA COR/LOA number and any BIR/PEZA zero-rating confirmation if your RDO requires it,
Quantity, unit price, extended price (with 0.00 output VAT line),
Delivery/acceptance references, and the date (period matching any approval coverage).

Keep aligned delivery receipts, service acceptance, POs, and proofs of payment. For services, keep timesheets/milestones linking work to the registered activity.

8) Special transaction buckets (quick guides)

Tolling/sub-contracting: When a domestic toller processes your imported materials inside or for the zone, classify whether the toller’s service is export of service (often zero-rated) or a domestic service (12%)—depends on where the processing occurs, who the service beneficiary is, and whether it’s direct/exclusive to the locator’s registered activity with proper approvals.
Inter-zone transfers: Sales between PEZA locators may be treated as export/zero-rated when properly documented; physical movement must clear PEZA/BIGS (or successor) procedures.
Power/water/telecom: Sub-metering and use-segregation are key. Production meters often qualify; common area/office meters often don’t.
Construction services: Inside-zone build/fit-out for the registered activity can qualify as zero-rated with full documentary trail; mixed-use/amenities frequently do not.

9) Governance & internal controls (what auditors expect)

A board/management policy defining “direct and exclusive use” for your project, aligned to your PEZA registration.
A pre-clearance workflow: procurement checks the zero-rating eligibility before PO issuance; finance verifies approval coverage and invoice legends before payment.
Metering/segregation for utilities; floor plans that distinguish production vs admin space.
Master file per supplier: PEZA docs, contracts, approvals, samples of invoices/DRs, and a matrix mapping each item to the registered activity.
A refund calendar (if applicable) with cut-offs, completeness checks, and claims tracking.

10) Common pitfalls (and quick fixes)

Assuming everything is zero-rate because “PEZA.” Fix: Use a line-by-line “direct & exclusive” screen; re-paper suppliers where needed.
Missing approval/certification for local zero-rating. Fix: Secure the current period approvals required by your RDO/PEZA; maintain continuity across renewals.
Vague invoice legends. Fix: Standardize the exact zero-rate legend and citation; train vendors.
Mixed-use utilities and rent. Fix: Sub-meter or allocate via defensible ratios; zero-rate only the production portion.
Late or weak refund dockets. Fix: Monthly compile complete folders (invoices, ORs, export docs, proofs of payment, schedules); don’t wait until year-end.

11) Decision trees (printer-friendly)

A) Supplier → Can I zero-rate this invoice?

Buyer is PEZA-registered? Yes → 2 / No → 12% VAT.
Item direct & exclusive to PEZA registered activity? Yes → 3 / No → 12% VAT.
Period covered by approvals and documents complete? Yes → Zero-rate / No → 12% VAT (buyer may pursue refund if eligible).

B) PEZA locator → Will this local purchase be zero-rated?

Is it for the registered activity (not general admin)? Yes → 2 / No → likely 12%.
Is it inside the zone or clearly tied to production/service delivery? Yes → 3 / No → proceed with caution.
Do we have supplier alignment + approvals in place before billing? Yes → zero-rate; No → expect 12% and consider refund.

12) Mini-templates you can adapt

Supplier zero-rating legend (on invoice):

“VAT ZERO-RATED SALE under the cross-border doctrine: sale of [goods/services] directly and exclusively used in the PEZA-registered activity of [Customer Name], PEZA COR No. [__], located at [Ecozone address]; approved/covered under [reference to certification/permit, if required].”

PEZA locator certificate to supplier (per PO):

“We certify the items/services under PO [__] are directly and exclusively used in our PEZA-registered activity [describe] at [zone site]. Please issue a VAT zero-rated invoice and retain this certificate with supporting PEZA documents.”

Internal approval memo (utilities/rent):

“Based on sub-meter [ID], [X%] of consumption pertains to the production line (zero-rate eligible); [Y%] pertains to admin/common areas (VATable). Apply split billing.”

13) Quick FAQs

Are all purchases of a PEZA locator zero-rated? No. Only those directly and exclusively used in the registered activity and supported by the required approvals/documentation.

If my supplier billed 12% by mistake, can I just tell them to credit note it later? Only if you both have complete zero-rating support for the period and your RDO accepts the correction. Otherwise, you may need to treat as 12% and consider a refund route (if eligible).

Can we zero-rate construction of a cafeteria or admin office? Typically no (not direct/exclusive to production/service delivery). Production floor build-outs often qualify; amenities usually don’t.

We sell part of our output domestically—what happens? Those domestic sales are generally 12% VATable. Keep clear cut-offs between export and domestic to avoid misclassification.

Bottom line

Think in buckets: (1) exports (0%), (2) imports (exempt via zone procedures), (3) local purchases (zero-rate only if direct & exclusive + approved), (4) domestic sales (12%).
Documentation is destiny. Invoices, legends, approvals, and metering decide your VAT outcome more than labels do.
Build a pre-clearance workflow and keep audit-ready files—that’s how you avoid expensive reclassifications and win refunds.

If you share your exact scenario (what you buy/sell, where used, how your zone is set up, and whether you’re making any domestic sales), I can map which line items are safely zero-rate, which are 12%, and draft the invoice legends/certificates tailored to your RDO’s typical asks.