BIR reveals new VAT Registration options in the Philippines for RBEs

These new VAT Registration options in the Philippines were created under Sections 244 and 245 of the Tax Code of the Philippines. These policies were made to implement Section 5, Rule 18 of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and were prescribed in BIR Revenue Regulations (RR) No. 13-2023 which was released on November 10, 2023.  

Features of the Optional VAT Registration

RBEs that are classified as a DME located within an Economic or Freeport Zone may choose either of the following: 

• Retain the availment of the 5% Gross Income Tax incentive during the ten (10) year transitory period under Section 311 (C) of the CREATE Act.
• Register as a Value Added Tax (VAT) taxpayer given they can secure a Certification from the concerned Investment Promotion Agency (IPA) that specifically excludes VAT from the ‘5% GIE in lieu of all tax incentives’ that were granted to them.
  Note:Said certification needs to expressively state that the five percent (5%) GIE shall be in place of all taxes except VAT.

Requirements of the Optional VAT Registration

To secure the foregoing Certification, the RBE needs to submit the following documentary requirements to the concerned IPA:

1. A Request letter stating its intention to avail of the option to register as a VAT taxpayer with the BIR;
2. A Notarized "Deed of Waiver of Right to Avail of the VAT Exemption Incentive" in the form prescribed in the Regulations; and
3. Other documents that may be prescribed by the concerned IPA.

It should be noted that the waiver rights to avail of the VAT exemption incentive shall be irrevocable from the time it is made and shall be binding in the remaining transitory period.

Other policies on optional VAT Registration in the Philippines

Any RBEs aiming to use the new VAT Registration options in the Philippines that are Non-VAT registered and have also been issued with the Certification must update their registrations with the appropriate Revenue District Office (RDO) to confirm their registration from being a Non-VAT entity to a VAT taxpayer. After the confirmation, said RBE will be treated on par with regular corporations insofar as the VAT imposition and compliance are concerned.   

Lastly, the RR states that upon the implementation of its regulations, said concerned IPA needs to:

“Furnish the BIR through the Assessment Service, Attention: Audit Information, Tax Exemption and Incentives Division (AITEID) within twenty (20) days following the close of each taxable quarter a list of RBEs that have been issued the Certification. In order to obtain relevant information, for audit purposes, the Commissioner of Internal Revenue may prescribe a report template in a separate revenue issuance.”

These new policies will be applied following Section 3 of the amended CREATE act, however, any DMEs inside the economic or freeport zone that decide to register as VAT taxpayers under the Regulations shall not be allowed to claim for VAT refund relating to its transactions before the effectivity of the amended IRR of the CREATE act.