Skip to content

Telephone: +6328734-9673

Mobile: +63917-436-3437

Email: info@acctaxph.com

Schedule a Free Consultation
  • HOME
  • SERVICES
  • ARTICLES
    • Bureau of Internal Revenue
    • Court of Tax Appeals Decisions
    • Securities and Exchange Commission
    • BIR Rulings
    • Supreme Court Decisions
  • ABOUT US
  • CAREERS
  • CONTACT US
Menu
  • HOME
  • SERVICES
  • ARTICLES
    • Bureau of Internal Revenue
    • Court of Tax Appeals Decisions
    • Securities and Exchange Commission
    • BIR Rulings
    • Supreme Court Decisions
  • ABOUT US
  • CAREERS
  • CONTACT US

RMC No. 24-2022 clarifying issues relative to RR No. 21-2021 implementing the amendments to the Value-Added Tax (VAT) zero rating provisions under Sections 106 and 108 of the National Internal Revenue Code of 1997 (Tax Code), in relation to Sections 294(E) and 295(D), Title XIII of the Tax Code, introduced by RA No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act Implementing Rules and Regulations.

RMC No. 24-2022 clarifying issues relative to RR No. 21-2021 implementing the amendments to the Value-Added Tax (VAT) zero rating provisions under Sections 106 and 108 of the National Internal Revenue Code of 1997 (Tax Code), in relation to Sections 294(E) and 295(D), Title XIII of the Tax Code, introduced by RA No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act Implementing Rules and Regulations. You may access the copy of the BIR Circular HERE.

Prior to CREATE LAW
Ecozones and Freeport Zones were regarded as foreign territories. The sale of goods and services by a VAT-registered seller to registered enterprises in these economic and freeport zones were treated as constructive export subject to zero-percent (0%) VAT (Cross-border doctrine)

 

Upon Effectivity of CREATE LAW
The “cross border doctrine” has been rendered inoperative for the following reasons:

  • Only those goods and services that are directly and exclusively used in the registered project or activity of Registered Business Enterprise (‘RBEs”) qualify as VAT 0% local purchases;
  • CREATE sets certain parameters for the availment of VAT zero-rating on local purchases of registered export enterprises, regardless of location; and
  •  The effectively zero-rated sales shall only apply to sales of goods and services rendered to persons or entities who have direct and indirect tax-exemption granted pursuant to special laws or international agreements to which the Philippines is a signatory.
VAT incentives RBEs registered with IPA shall have the following incentives:

  • VAT exemption for RBEs enjoying the 5% gross income earned (GIE) or special corporate income tax (SCIT);
  • VAT exemption on importation and VAT zero-rating on local purchases of goods and services

Enterprises registered prior to the effectivity of the CREATE Act shall continue to enjoy the foregoing until the expiration of the transitory period (10 years)

Coverage of zero-rated sales to exempt entities pursuant to special laws can no longer be invoked RBE registered with IPA shall only be accorded VAT zero-rating on their local purchases of goods and/or services that are directly and exclusively used in the registered project or activity of the registered export enterprises.

 

Effect of Previous BIR Regulations
Effectivity Treatment
 

RR 9-2021

 

June 27 to June 30, 2021 (4 days)

 

Seller Buyer
 

Seller should declare the sale as subject to 12% VAT.

 

·       Purchaser, if VAT registered, can utilize the passed on VAT as input tax and shall be deducted from the output tax, if any; or

·       If purchaser is engaged in zero-rated activities, the same can be recovered through VAT refund

·       If the purchaser is not a VAT-registered taxpayer, the VAT paid may be claimed as part of the cost of sales or expenses.

 

July 1 to July 27 (also covered by RR No. 21-2021) Sale of goods billed and/or collected during this period:

 

Seller Buyer
1 Same as above
2 Revert to zero-rated (and amend the VAT return; retrieve the VAT SI/OR for replacement of zero-rated SI/OR) Reimbursement

 

 

RR No. 15-2021

 

July 1, 2021 to December 9, 2021

  • Non-retroactivity may be applied as this will be prejudicial to the taxpayer;
  • Transactions that have been considered by the seller as VAT zero-rated shall still remain as VAT zero-rated from July 1, 2021 to December 9, 2021
 

RR No. 21-2021

 

December 10, 2021

  • Covers transaction entered into the third quarter of the taxable year 2021 (July) and onwards;
  • Retroactive application is justified as it will be more beneficial to the taxpayer affected.
RR 9-2021 – Subjects to VAT those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special law

RR No. 15-2021 – Defers the implementation of RR 9 -2021; Possible effect: VATable sales from July 1, 2021 up to December 10, 2021

RR No. 21-2021

Key provisions –  Sales subject to zero-rated:

  • Sales to entities exempted from direct and indirect taxes under special laws (goods and services)
  • Sale of raw materials, inventories, supplies, equipment, packaging materials and goods to a registered export enterprise to be used directly and exclusively in its registered project or activity for a maximum of 17 years from the date of registration, unless otherwise extended under the SIPP
  •  Sale of services, including provision of basic infrastructure, utilities and maintenance, repair and overhaul of equipment for a maximum period  of 17 years for the date of registration, unless otherwise extended under the SIPP

 

 

VAT Treatment Upon Effectivity of CREATE
Sale of goods and/or services by VAT registered seller to registered export enterprise (regardless of the location, enjoying fiscal incentives
  • Zero-rated
  • Note: Applicable only to goods and/or services directly and exclusively used in the registered project or activity of the registered export enterprise
  • Maximum period of 17 years from the date of registration unless otherwise extended under SIPP
  • Date of registration = date indicated in its Certificate of Registration issued by IPA
RBEs not entitled to VAT zero-rating on their local purchases (subject to VAT)
  •  Categorized as Domestic Market Enterprises (DME)
  • Service enterprises engaged in the following services: 1. Customs brokerage; 2. Trucking services; 3. Forwarding services; 4. Janitorial services; 5. Security services; 6. Insurance; 7. Banking and other financial services; 8. Consumers’ cooperatives; 9. Credit unions; 10. Consultancy services; 11. Retail enterprises; 12. Restaurants; and 13. Such other similar services as may be determined by the FIRB
Sale by DMEs located in ECOZONES and non-RBEs
  • The DME under the 5% Gross Income Tax (GIT) or Special Corporate Income Tax (SCIT) regime, registered as a VAT exempt entity, shall treat its revenues as VAT exempt.
  • The VAT passed on to it by its VAT-registered local suppliers shall form part of its cost or expenses
Sale:

–        By registered export enterprise to another registered export enterprise

 

 

Same applies to:

  • Sales by DME to another registered export enterprise; and
  • Non-RBE exporter to a registered export enterprise (only A)
 

Seller Treatment
a VAT registered + ITH Zero-rated sale
b 5% GIE + 70% threshold VAT exempt

 

70% – the goods/services will form part of the final export product or services of at least 70% of the total production or output

Non-RBE export-oriented enterprise Incentives shall be limited only to VAT zero-rate on its direct export sale of goods or services However, if the non-RBE exporter is VAT registered and sells goods and services to a registered export enterprise, sale shall be zero-rated
RBE Sells, transfers, or disposes the previously VAT-exempt imported capital equipment, raw materials, spare parts, and accessories

 

 

Seller Purchaser Treatment of purchase
 

RBE

 

Registered export enterprise (regardless of location)  

·  Zero-rated

·  Condition:

·  direct/exclusive used in registered activity

 

 

Non-registered export enterprise or DME (regardless of location)

 

 

·   VAT exempt – under SCIT/5% GIT

·  12% VAT – not under 5% SCIT

 

Basis: net book value

Exception: zero-rated (purchaser is registered export enterprise

 

Imported capital equipment, raw materials, spare parts, and accessories utilized in the non-registered project or activity
  • Corresponding VAT on importation should be paid accordingly.
  • For partial utilization in a non-registered project or activity, the amount corresponding to the VAT on a specific capital equipment, raw materials, spare parts, or accessories shall be paid in proportion to its utilization for the non-registered project or activity.
Other enterprises covered by special laws (Renewable Energy Act, International Rice Research Institute, Asian Development Bank) Subject to zero-rated VAT

 

Existing Export Enterprise Prior to CREATE
Sales of suppliers:

  • From the customs territory
  • To existing registered export enterprises located inside the Ecozones or Freeport zones
  • Zero-rated
  • Until the expiration of the transitory period or the remaining period of their incentives as specified in Rule l8 of the CREATE IRR.
  • It shall only apply to goods and/or services directly and exclusively used in the registered project or activity of a registered export enterprise.
Sales of suppliers:

  •  From the customs territory
  •  To existing registered NON-export enterprises located inside the Ecozones or Freeport zones

 

 

Subject to 12% VAT

 

Sales of suppliers:

  • VAT registered
  • To existing registered export enterprises
  • OTHER THAN PEZA or Freeport zones  registered with the BOI and IPAs)
  • Zero-rated
  • Until the expiration of the transitory period or the remaining period of their incentives as specified in Rule l8 of the CREATE IRR.
  • It shall only apply to goods and/or services directly and exclusively used in the registered project or activity of a registered export enterprise.
Expired registration and not available for renewal A VAT-registered RBE whose registration with an IPA has already expired, shall be subject to VAT
12% VAT on sale of goods or services to foreign buyers
  • Sale by Non-RBE (not enjoying incentives)
  • Sold to Non-resident foreign buyers
  • Delivered or rendered to export-oriented companies in PH
VAT-exempt sale on sale of services (processing, manufacturing, or repacking of goods) to foreign buyer
  • Sale  by PEZA RBEs entitled to 5% GIT or SCIT
  • to persons doing business outside the Philippines
  • goods are subsequently exported,
  • Services are paid for in acceptable foreign currency
  • The service fee shall be indicated in the Official Receipt and VAT returns as a VAT exempt sale.
VAT-exempt sale of raw or packaging materials by PEZA RBE to  non-resident buyer
  • For delivery to a resident local export-oriented enterprise
  •  to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods
  •  Paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP
  • PEZA RBE entitled to 5% GIT or SCIT

 

VAT (exempt/zero-rated) on transaction of registered export enterprise with multiple incentives regime (ITH for 1 registered activity and 5% GIT/SCIT regime for registered activity) VAT-exempt under the 5% GIT or SCIT (required to change registration within 2 months from effectivity of this circular to change registration)

Zero-rated under ITH

 

Application for VAT Zero-Rating
Previously approved applications for VAT-zero rating remain effective
  • Should taxpayer revert the same as VAT-zero rated
  • Except for the 4-day period (June 27 to June 30, 2021)
  • Provided it shall apply to goods and/or services directly and exclusively used in the registered project or activity of a registered export enterprise
Local suppliers are required to secure BIR approval for VAT zero-rating
  • Absence of prior approval from the BIR may result in the disallowance of the VAT zero-rated sale of the supplier.
  • IPA to issue annually a zero-rated VAT certification only to registered export enterprise
  • IPA is required to submit to the BIR the list of RBE

 

Documents to be provided by registered export enterprise-buyers to their local suppliers prior to availment of VAT zero-rate incentives prior to the transaction.
  • Photocopy of the BIR – Certificate of Registration,
  • Certificate of Registration and VAT certification issued by the concerned IPA
  • A sworn declaration stating that the goods and/or services being purchased shall be used directly and exclusively in the registered project.
Processing of VAT zero-rating application
  • Governed by Revenue Memorandum Order (RMO) No. 7-2006.
  • Attachments:
  • Certificate of Registration and VAT Certification issued by concerned IPA
  • Sworn affidavit executed by the registered export enterprise-buyer,
  • Other documents to corroborate entitlement to VAT zero-rating such as but not limited to duly certified copies of purchase order, job order or service agreement. sales invoices and/or official receipts, delivery receipts, or similar documents to prove existence and legitimacy of the transaction

 

 

Refund of Local Suppliers and Recovery of Input VAT Passed on to Registered Export Enterprises
Additional requirement approved application for VAT zero-rating.

 

Registered export enterprise may seek reimbursement of VAT inadvertently passed on by the supplier The previously issued SI/OR to the registered export enterprise having VAT imposed must be surrendered/returned to the local supplier for cancellation and replacement.

 

 

Treatment of input VAT passed on if purchase of goods/services are not directly and exclusive used in the registered project or activity

 

Options Conditions
1 Input tax credit and apply against future output VAT ITH
2 Refund No sales subject to VAT

Upon expiration of VAT registration (i.e. end of ITR and start of 5% SCIT)

3 Charge to cost/expense Non-VAT registered

 

 

Bureau of Internal Revenue - Dumlao & Co.
Senate of the Philippines - Dumlao & Co.
Securities and Exchange Commission - Dumlao & Co.
Tax Management Association of the Philippines - Dumlao & Co.
House of Representative - Dumlao & Co.
Court of Tax Appeals - Dumlao & Co.
Copyright 2025 Dumlao & Co. All Rights Reserved.

Articles

  • Court of Tax Appeals Decisions
  • Securities and Exchange Commission
  • Bureau of Internal Revenue
  • BIR Rulings
  • Supreme Court Decisions
  • Court of Tax Appeals Decisions
  • Securities and Exchange Commission
  • Bureau of Internal Revenue
  • BIR Rulings
  • Supreme Court Decisions

Contact Us

  • Unit 2006, 20th Floor, Park Triangle Corporate Plaza North Tower, 32nd Street corner 11th Avenue Bonifacio Global City, Taguig City, Philippines
  • +6328734-9673
  • ron@acctaxph.com

Newsletter