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DOF, BIR Clarify VAT Rules For Local Sales Of RBEs
Photo credit: BIR
The Department of Finance (DOF) and Bureau of Internal Revenue (BIR) have released new guidelines on how value-added tax (VAT) should be applied to local sales by Registered Business Enterprises (RBEs).
The updated rules, issued through Revenue Regulations No. 1-2026, amend RR No. 9-2025 to address questions raised by businesses about Section 295(D) of the Tax Code, as amended under the CREATE MORE Act.
Under the new rules, VAT on business-to-business (B2B) transactions inside economic zones and freeports is generally filed and paid per transaction. For bulk shipments covered by multiple invoices, buyers can make a single consolidated payment using BIR Form 0605, as long as the required documents are submitted to the Bureau of Customs before the goods are released.
RBEs under the 5% Special Corporate Income Tax (SCIT) or Gross Income Earned (GIE) regime can now choose to register for VAT solely for their local sales. The DOF and BIR stressed that this will not affect existing incentives, such as VAT zero-rating on local purchases or VAT exemptions on imports, as long as they relate to registered activities.
The regulations also clarify which transactions are excluded from VAT coverage, particularly to protect Domestic Market Enterprises (DMEs) that cannot recover input VAT. Excluded cases include certain DMEs, sales already zero-rated or exempted, entities registered under special laws but not availing Title XIII incentives, and local sales tied to unregistered activities. In these cases, the RBE seller must file and pay VAT directly to the BIR.
RBEs now have until December 31, 2026 to update their invoicing systems to show “VAT on Local Sales” in the breakdown of sales.
BIR Commissioner Charito Martin S. Mendoza said the move is part of the agency’s D.A.R.E.S. initiative, which focuses on improving taxpayer service and engagement. “This move reinforces the government’s goal of maintaining a fair and investment-friendly tax system,” he added.
The updated rules, issued through Revenue Regulations No. 1-2026, amend RR No. 9-2025 to address questions raised by businesses about Section 295(D) of the Tax Code, as amended under the CREATE MORE Act.
Under the new rules, VAT on business-to-business (B2B) transactions inside economic zones and freeports is generally filed and paid per transaction. For bulk shipments covered by multiple invoices, buyers can make a single consolidated payment using BIR Form 0605, as long as the required documents are submitted to the Bureau of Customs before the goods are released.
RBEs under the 5% Special Corporate Income Tax (SCIT) or Gross Income Earned (GIE) regime can now choose to register for VAT solely for their local sales. The DOF and BIR stressed that this will not affect existing incentives, such as VAT zero-rating on local purchases or VAT exemptions on imports, as long as they relate to registered activities.
The regulations also clarify which transactions are excluded from VAT coverage, particularly to protect Domestic Market Enterprises (DMEs) that cannot recover input VAT. Excluded cases include certain DMEs, sales already zero-rated or exempted, entities registered under special laws but not availing Title XIII incentives, and local sales tied to unregistered activities. In these cases, the RBE seller must file and pay VAT directly to the BIR.
RBEs now have until December 31, 2026 to update their invoicing systems to show “VAT on Local Sales” in the breakdown of sales.
BIR Commissioner Charito Martin S. Mendoza said the move is part of the agency’s D.A.R.E.S. initiative, which focuses on improving taxpayer service and engagement. “This move reinforces the government’s goal of maintaining a fair and investment-friendly tax system,” he added.
Feb 24, 2026
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