THE classification of economic zone logistics services enterprises (ELSEs) as eligible for incentives under the Strategic Investment Priorities Plan (SIPP) is expected to raise investment in the industry, the Philippine Economic Zone Authority (PEZA) said.

In a statement on Tuesday, PEZA Officer-in-Charge Tereso O. Panga said ELSEs can now avail of incentives under Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.  

The industry was ruled eligible by the Board of Investments (BoI) in Memorandum Circular (MC) No. 2023-001 issued on Jan. 31, which clarified that ELSEs were covered under the 2022 SIPP.

PEZA also issued MC No. 2023-010 while the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 15-2023, both dated Feb. 3, which also ruled ELSEs eligible.  

“With the clarification issued by the BoI and BIR, the existing ELSEs can now enjoy their incentives (i.e., zero value-added tax rating on qualified local purchases) pursuant to the sunset provision. For new ELSEs, they may be entitled to the incentives under the CREATE Act,” Mr. Panga said.

According to PEZA, ELSEs are traders supplying production-related raw materials and equipment that cater exclusively to the needs of ecozone locators.

It added that ELSEs provide critical services to export manufacturing companies, which require logistics support for their import and export shipments, raw materials sourcing, inventory management, just-in-time delivery, localization, and process customization. 

Mr. Panga said companies providing support to export activities had been barred from availing of incentives prior to the clarification from the MCs.

The MCs affirmed the right to zero VAT rating incentives on local purchases by ELSEs. However, 70% of ELSE output or services should be provided to other registered export enterprises via direct or constructive exports in order to be considered exporters under the CREATE law.  

PEZA said there are 340 registered ELSEs which have taken in P11.15 billion worth of investments to date. Japanese ELSEs have taken on P3.50 billion worth of investment.  

Some of the registered Japanese ELSEs are Nagase Philippines International Services Corp.; Inabata Philippines, Inc.; Lima Logistics Corp.; Tokai Electronics Philippines, Inc.; and NX Logistics Philippines, Inc.

“Overall, the 884 Japanese locator companies continue to be the biggest investors in the PEZA ecozones accounting for P745.637 billion in investments, or 27.42% of the total investments in PEZA. These companies also generated $15.865 billion worth of exports and 315,619 direct jobs as of November 2022,” PEZA said. — Revin Mikhael D. Ochave