In keeping with its mandate to promulgate the necessary rules and regulations for the effective implementation of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act (CREATE MORE), the Bureau of Internal Revenue has released Revenue Regulations (RR) 10-2025 last Feb. 25, 2025. This regulation introduces amendments to RR 16-2005, also known as the Consolidated VAT Regulations, as amended, particularly on VAT zero-rated and VAT-exempt transactions and the key changes made to the process of VAT refund claims.
Under CREATE MORE, the local sale of goods and services to export-oriented enterprises which are directly attributable to the enterprises’ export-oriented activity are subject to zero VAT, provided the 70 percent export sales threshold is satisfied.
This is based on Sections 106 and 108 of the Tax Code, as amended. As elaborated by RR 10-2025, the task of determining compliance (or non-compliance) by export-oriented enterprises is given to the Export Management Bureau (EMB) of the Department of Trade and Industry (DTI) which shall issue a certification for the taxable period applicable. However, the issuance of the certificate by the EMB is without prejudice to the conduct of a post audit/investigation by the BIR.
Export-oriented enterprises should not be confused with registered business enterprises (RBEs) which refer to those registered with Investment Promotion Agencies (IPA) such as the Philippine Economic Zone Authority (PEZA) or the Board of Investments (BOI), among others.
For RBEs, the VAT zero rating on local purchases of goods and services are based on Title XIII of the Tax Code, as amended, instead of Sections 106 and 108. The VAT zero-rating certification for RBEs is issued by the concerned IPA without prejudice to post audit verification by the BIR.
It is noteworthy to mention that registered export enterprises (REEs) may still avail themselves of the VAT zero rating on local purchases of goods and services even after the expiration of their entitlement to VAT zero-rating on local purchases under Title XIII if they comply with the conditions set forth in Sections 106 and 108, as amended.
If the local suppliers of the export-oriented enterprises or RBEs passed on VAT to them despite securing VAT zero-rating certificate from the EMB or IPA, as the case may be, the concerned enterprises’ recourse is to demand reimbursement from the local supplier. In that instance, the invoice initially issued which contains 12 percent VAT should be surrendered to the local supplier for cancellation and the latter is required to issue a VAT zero-rated invoice.
Another noteworthy change under CREATE MORE is the reversion of the treatment of sales of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing or repacking in the Philippines of the non-resident buyer’s goods and paid in acceptable foreign currency inwardly remitted into the Philippine banking system from 12 percent VAT to zero percent VAT.
Section 109 on VAT exempt transactions was also amended to include importation of goods by export-oriented enterprises. This is subject to the condition that such importations satisfy the same requirements for export sales, i.e., the imported goods are directly attributable to the export activity of the export-oriented enterprise and the 70 percent export sales requirement. Again, this is subject to confirmation by the EMB during a post audit.
Among the noteworthy developments introduced by CREATE MORE that are covered by RR 10-2025 are the amendments to the provisions of the Tax Code on VAT refunds. In the past, VAT refund claims required strict compliance with substantiation requirements, necessitating submission of original copies of supporting documents with a few exceptions such as the taxpayer-applicant’s registration documents, among others.
With the implementation of CREATE MORE under RR 10-2025, the process has been improved to ease the burden on taxpayer-applicants. Now, instead of submitting original invoices, receipts, and other documentary requirements, certified true copies of supporting documents are accepted, making the refund process more accessible and efficient.
Lastly, RR 10-2025 emphasized the new requirement introduced by CREATE MORE, which is a request for reconsideration within 15 days from receipt of the decision in case of partial or full denial of the refund claim. While submission of additional supporting documents will not be accepted during this administrative appeal, this provides an avenue for taxpayers to raise legal arguments in defense of its input VAT claim prior to seeking for the judicial remedy with the Court of Tax Appeals. Note that the failure to file a request for reconsideration within the 15-day period will render the decision of the BIR final.
The CREATE MORE Act is like a powerful engine, ready to drive economic growth and attract both local and international investments.
But just like any high-performance vehicle, the real key to its success lies in the fine-tuning of the implementing rules that guide taxpayers and ensure that they can efficiently navigate the updated regulations, maximize incentives and fully leverage the benefits intended by CREATE MORE.
Jonathan Casey Angala is a senior tax analyst under the Tax Group of R.G. Manabat & Co. (KPMG in the Philippines), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
For more information, you may reach out to senior tax analyst Jonathan Case Angala or head of tax Maria Myla Maralit through ph-kpmgmla@kpmg.com, social media or visit www.home.kpmg/ph.