The Bureau of Internal Revenue issued guidelines for optional value-added tax registration for domestic market enterprises
Transitory domestic market enterprises in economic zones can now choose to register as VAT taxpayers under Revenue Regulations No. 13-2023
The regulation follows an amendment to the Corporate Recovery and Tax Incentives for Enterprises Act implementing rules addressing VAT issues for transitory registered business enterprises
Registered business enterprises in the economic or freeport zone can keep the 5% gross income earned incentive for 10 years and register as VAT taxpayers with certification from the relevant investment promotion agency
Transitory registered domestic market enterprises (DME) within economic or freeport zones now have the option to register as VAT taxpayers, based on a new Bureau of Internal Revenue (BIR) ruling.
BIR Revenue Regulations (RR) No. 13-2023, dated November 10, outlines policies and guidelines for optional VAT registration of registered business enterprises (RBEs) classified as DME under the 5% tax on gross income earned (GIE) during the ten-year transitory period. This is pursuant to Rule 18, Section 5 of the amended implementing rules and regulations (IRR) of Republic Act No. 11534, also known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
In August, the Department of Finance and Department of Trade and Industry approved the amendment to the IRR of CREATE Act, particularly Rule 18, to resolve VAT issues raised by transitory RBEs.
The new BIR ruling enables VAT-registered DMEs covered by the transitory provisions of CREATE to either charge output VAT to domestic customers or receive a refund from the BIR for input VAT directly attributable to their zero-rated sales.
According to RR 13-2023, an RBE classified as DME located inside the economic or freeport zone may retain the 5% GIE incentive during the ten-year transitory period under Section 311(C) of the CREATE Act. They can register as a VAT taxpayer if they secure a certification from the relevant investment promotion agency (IPA), explicitly excluding VAT from the 5% GIE incentive.
The certification must state that the 5% GIE will be in lieu of all taxes except VAT. To avail of this option, the RBE should submit a request letter, a notarized “Deed of Waiver of Right to Avail of the VAT Exemption Incentive,” and any other documents prescribed by the concerned IPA.
The waiver of rights is irrevocable and binding for the remaining transitory period. Non-VAT registered RBEs with certification should update their registrations with the BIR revenue district office, transitioning from non-VAT to VAT taxpayer status.
Consequently, the RBE will be treated the same as regular corporations regarding VAT rules and compliance.
Upon the effective date of RR 13-2023, the IPA must provide the BIR with a list of certified RBEs within 20 days after each taxable quarter’s close. The regulation applies prospectively following Section 3 of the amended IRR of the CREATE Act.
DMEs within economic or freeport zones opting for VAT registration under RR 13-2023 cannot claim VAT refunds for transactions before the amended IRR of the CREATE Act’s effectivity.