Evolving Rules on VAT in the Philippines: A Closer Look at the CREATE Act

• The IRR for the Create Act was signed on June 21, 2021, with subsequent amendments to address issues regarding incentives for eligible enterprises.
• The recent amendment to Rule 18, Section 5 addresses concerns related to value-added tax (VAT).
• Registered business enterprises (RBEs) retaining existing income tax incentives can maintain duty exemption, VAT exemption on importation, and VAT zero-rating on local purchases.
• Registered export enterprises (REEs) whose income tax-based incentives have expired can continue to enjoy VAT zero-rating on local purchases until certain conditions are met.
• Domestic market enterprises (DMEs) located inside economic or freeport zones during the transitory period can register as a VAT taxpayer but cannot claim VAT refunds for transactions prior to the amendment’s effectivity.
• The BIR issued Revenue Regulations 13-2023, prescribing policies and guidelines for the voluntary VAT registration of DMEs.
• DMEs must obtain certification from the IPA excluding VAT from the 5 percent gross income earned tax and submit required documents to avail of the option to register as a VAT taxpayer.
• Once the taxpayer waives its rights to avail of the VAT exemption incentive, the decision is irrevocable throughout the remaining transitory period.
• IPAs must provide the BIR with a list of RBEs with certifications to monitor the implementation of the optional registration.
• Further amendments or issuances may be expected as the government continues to implement the Create Act.

Source: www2.deloitte.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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