No VAT left behind: VAT refund transition relief for export-oriented enterprises

Tax incentives may be clear in principle, but putting them into practice can raise unexpected but practical questions.

This became evident after Republic Act No. 12066, or the CREATE MORE Act, took effect. Among its provisions are VAT zero-rating on qualified local purchases and VAT exemption on qualified importations of export-oriented enterprises (EOEs), subject to conditions prescribed by law.

To qualify as an EOE for this VAT treatment, an enterprise must generally have export sales amounting to at least 70% of its total annual production or gross sales for the preceding taxable year. Qualified EOEs must also secure a VAT zero-rating certification from the Department of Trade and Industry-Export Marketing Bureau (DTI-EMB).

The transition to this certification system, however, created a timing issue. Some EOEs continued to be charged VAT on local purchases and importations while waiting for their certifications to be issued. This raised a practical question: Could the VAT passed on during the waiting period pending issuance of certification still be recovered through a refund?

Revenue Memorandum Circular (RMC) No. 96-2026 answers that question. It clarifies the rules under RMC No. 37-2025 concerning passed-on VAT on local purchases and importations by EOEs during the transition to the DTI-EMB certification system.

The transition issue

The CREATE MORE Act took effect on 28 November 2024, but DTI-EMB certifications were issued on different dates. Based on the master list cited by the Bureau of Internal Revenue (BIR), the certifications issued during the transitory period had varying validity start dates. 

During this interval, EOEs could still be charged VAT on local purchases and importations. Without a specific rule addressing this gap, it was unclear whether the VAT passed on before certification could be recovered through a refund.

RMC No. 37-2025 had prescribed the procedures and documentary requirements for VAT refund claims under Section 112 of the Tax Code. RMC No. 96-2026 now clarifies how these rules apply to EOEs that secured their certifications during the transition.

The clarification

Under RMC No. 96-2026, EOEs that were passed on VAT on local purchases and importations attributable to zero-rated sales may claim a refund covering the period from 28 November 2024, up to the issuance of their DTI-EMB VAT zero-rating certifications. The certification must have been issued during the transitory period ending 31 December 2025. 

The clarification recognizes that EOEs obtained their certifications on different dates. It gives qualified EOEs a way to recover VAT passed on while their certifications were still being secured, without removing the certification requirement itself.

The period covered must therefore be determined separately for each EOE. It begins on 28 November 2024 and runs up to the issuance of the enterprise’s certification. The amount potentially eligible for refund may consequently vary depending on when the certification was issued and the VAT passed on during the relevant period.

Refund is not automatic
While RMC No. 96-2026 provides relief, it does not dispense with the requirements for claiming a VAT refund under Section 112 of the Tax Code.

The claimant must establish that the input VAT is allowable under Section 112 and directly attributable to qualified zero-rated sales. The mere fact that an enterprise qualifies as an EOE does not make all its input VAT refundable. The claim must still comply with the applicable documentary, substantiation, attribution, and verification requirements. 

Taxpayers should therefore maintain invoices, importation documents, accounting records, and other supporting documents that establish the purchases or importations, the VAT passed on, and their connection to qualified zero-rated sales.

Double recovery is also prohibited. No refund will be allowed to the extent that the VAT has already been reimbursed, credited, adjusted, recovered from suppliers, or otherwise utilized under existing tax laws and regulations. 

Proper reconciliation is therefore important. The amount claimed should be supported by the taxpayer’s VAT returns, accounting records, and source documents, after accounting for VAT previously recovered or utilized.

EOEs without certification

EOEs that met the 70% export threshold for the preceding taxable year but failed to secure the required DTI-EMB certification, including during the transitory period, are not allowed to claim a VAT refund immediately for the succeeding year. Their unutilized input VAT, however, may be carried forward to subsequent taxable quarters and applied against future VAT liabilities. 

The distinction has practical implications. An EOE that secured its certification during the transitory period may qualify for a refund of VAT covered by the clarification. On the other hand, an EOE that failed to secure the certification may instead have to carry the unutilized input VAT forward for application against future VAT liabilities.

Practical points for EOEs

EOEs considering a refund claim should begin by reviewing the relevant dates and the VAT covered by the claim.

First, they should identify the VAT passed on from 28 November 2024 up to the issuance of their DTI-EMB certifications. Second, they should confirm that their certifications were issued during the transitory period ended 31 December 2025. Third, they should establish that the VAT claimed is directly attributable to qualified zero-rated sales. Finally, they should verify that the same VAT has not already been reimbursed, credited, adjusted, recovered, or otherwise utilized. 

Supporting records remains essential. EOEs should retain their DTI-EMB certifications and documents establishing the relevant purchases or importations, the VAT passed on, and the connection of those transactions to qualified zero-rated sales.

The procedures and documentary requirements under RMC No. 37-2025 also continue to apply. Preparing and reconciling the required records before filing may help identify unsupported items and amounts that have already been recovered or used elsewhere.

EOEs that did not obtain a DTI-EMB certification should check the implications carefully. They should consider the treatment of any unutilized input VAT under the existing VAT rules, assess the potential financial impact of any unrecoverable VAT, and ensure that records supporting their purchases, importations, VAT payments, and export sales are properly maintained. Given the amounts that may be involved, a careful assessment of the available remedies and corresponding support would be helpful before taking a position. 

Closing the transition gap

RMC No. 96-2026 addresses a practical issue created by the timing of the DTI-EMB certification process. It recognizes that an EOE may have satisfied the substantive qualifications but may still have been charged VAT while waiting for its certification.

The clarification provides relief, but only for EOEs that satisfy the conditions prescribed by the BIR. The certification must have been issued during the prescribed transitory period, and the VAT claimed must be allowable under Section 112, directly attributable to qualified zero-rated sales, and properly supported.

RMC No. 96-2026 therefore closes a transition gap, but it does not provide a shortcut around the VAT refund rules. For affected EOEs, the outcome of a claim will depend on the period covered, the basis for entitlement, the supporting records, and confirmation that the same VAT has not already been recovered or utilized.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

As published in BusinessWorld, dated 15 September 2026