New VAT Rules on RBE Local Sales
By: Atty. Ernesto N. Dayao Jr.
"Since the VAT on the DMEs’ local sales is paid by the buyer, the DMEs are therefore left with no output taxes from which they can offset the input taxes paid on their purchases. Their input taxes accumulate. Neither can they refund these accumulated input taxes since almost all their sales are local sales which are not zero-rated, but rather subject to the 12% VAT."
Under the CREATE MORE Act (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy), local sales of goods and services by Registered Business Enterprises (RBEs) are subject to 12% VAT, regardless of their income tax incentives regime and location. The rule applies to all RBEs, both export enterprises (REEs) and domestic market enterprises (DMEs). Local sales cover sales to DMEs or non-RBEs, regardless of whether the sale occurs within the freeport or economic zones. The law further provided that the liability to pay and remit the VAT to the government rests with the buyer of the goods or services.
Revenue Regulations (RR) No. 9-2025 was thereafter issued, prescribing the rules on the remittance of the 12% VAT. In particular, under the said RR, in business-to-business (B2B) transactions involving the supply or delivery of goods or services to persons engaged in business in the Philippines, the buyer will pay the VAT using BIR payment/remittance forms. As a rule, the RBE-seller would still report and subject the sales to VAT in the tax returns but shall thereafter credit against its output tax the input VAT paid by the buyer. The filing and payment of VAT is made either on a per transaction or monthly basis, depending on whether the sale involves sale of goods or sale of services, and depending further on the registration and tax regime of the RBE.
This procedure deviates from the usual manner of paying VAT due on regular transactions. Normally, it is the seller that directly pays and remits the VAT to the government.
Further, this scheme has put the Domestic Market Enterprises (DMEs) at a disadvantage compared to other RBEs and other VAT taxpayers in general. To recall, unlike in the case of REEs, most, if not all, of the sales of DMEs are local, and are thus subject to 12% tax. The purchases of these DMEs are also subject to 12% input tax. Unlike the REEs, not all DMEs are entitled to VAT exemption on importations and VAT zero-rating on their local purchases of goods and services. Only the high-value DMEs enjoy these VAT incentives on their purchases.
Since the VAT on the DMEs’ local sales is paid by the buyer, the DMEs are therefore left with no output taxes from which they can offset the input taxes paid on their purchases. Their input taxes accumulate. Neither can they refund these accumulated input taxes since, as previously mentioned, almost all their sales are local sales which are not zero-rated, but rather subject to the 12% VAT.
The implementation of RR No. 9-2025 has also likewise become challenging. As mentioned, the reporting and remittance of VAT depends on a lot of factors. The payment can be made each time a transaction occurs. This means that the buyer shall file the respective BIR form/return to remit the VAT every time a transaction occurs. If the transaction is made in bulk and covered by several invoices, the buyer must file multiple BIR forms/returns to comply with the rule.
Thankfully, to address these issues, the BIR released RR No. 1-2026 as a remedial measure.
RR No. 1-2026 changed the manner of payment of the VAT due on the local sales of DMEs that are not qualified to enjoy the VAT incentives (i.e., non-high-value DMEs). The local sales of these DMEs shall no longer be subject to the buyer's payment and remittance of VAT. Instead, the DME-seller shall directly file and pay the corresponding VAT to the BIR as a regular VAT taxpayer. The BIR deemed it necessary to revert the burden of remitting the VAT on the transactions to the seller. This will restore the DMEs' output VAT liability, which can then be offset against their input taxes.
To the buyers of goods and services from the RBEs, this new rule means that they need to determine if the RBE-sellers are export enterprises or DMEs, and if the RBEs are DMEs, the buyer needs to check further if they are high-value or not.
Under RR No. 1-2026, the filing and payment of the VAT on B2B local sales of goods by RBEs was made simpler. Under the new regulations, if the shipment of the goods purchased in the ecozone or freeport is in bulk (e.g., delivered through a single container truck) and is covered by several invoices, the buyer may now opt to pay the VAT due thereon in a single payment. The payment form covering the payment of all the invoices together with the list of all the invoices covered shall be presented prior to the release of the goods. This is a good improvement since this will ease the administrative burden on the buyer’s part.
Hopefully, with these new rules in place, compliance would be made easier on the part of both the buyers and sellers.
The author is a Senior Associate II of Du-Baladad and Associates Law Offices (BDB Law).
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 340.