The Bureau of Internal Revenue (BIR) has issued Revenue Regulations No. 3-2023 to inform all concerned on the amendments on the VAT rules applicable to Registered Export Enterprises (REEs) pursuant to Revenue Regulations (RR) No. 16-2005 as amended by RR No. 21-2021, implementing Sections 294(E) and 295(D), Title XIII of the Tax Code as amended by Republic Act No. 11534, also known as the CREATE Act and its Implementing Rules and Regulations.

The following amendments/clarifications on the rules on VAT zero-rating of purchases by Registered Export Enterprises (REE) were provided under RR No. 03-2023:

A. Support for VAT zero-rating of qualified purchases by REEs

  • Local suppliers of goods and services of REEs shall no longer be required to apply for prior approval of VAT zero-rating with the BIR.
  • The VAT zero-rating on local purchases of goods and services may be availed by the REE based on VAT zero-rating certification issued by the concerned Investment Promotion Agency (IPA).  However, the Bureau of Internal Revenue (BIR) may still conduct a post audit investigation/verification that the goods/services are indeed directly and exclusively used by the REE in its registered project or activity.
  • In issuing a VAT zero-rating certification to the REE, the concerned Investment Promotion Agency shall be guided by the rule that the local purchases of goods and services are directly attributable to the registered project or activity of the RE, without which such registered project or activity cannot be carried out (i.e. indispensable costs without which the project or activity cannot proceed and include expenses that are required depending on the nature of the registered project or activity of the REEs).
  • The concerned IPA shall furnish the BIR through the Assessment Service, and Audit Information, Tax Exemption and Incentives Division (AITEID) a list of REEs issued with VAT zero-rating certification within twenty (20) days following the end of each taxable quarter.

B. Purchases directly and exclusively used in registered project or activity

  • The following services and related purchase of goods shall not be considered as "directly and exclusively used" in the registered project or activity of REEs:
  1. janitorial services;
  2. security services;
  3. financial services;
  4. consultancy services;
  5. marketing and promotion; and
  6. services rendered for administrative operations such as Human Resources (HR), legal, and accounting.

Nonetheless, the REE is not precluded from further proving, with supporting evidence, that any of the above-listed services or any purchase of goods relating to the above-listed services are indeed directly and exclusively used in their registered project or activity.

  • Health maintenance organization (HMO) plans acquired by REEs for employees directly and exclusively involved in their registered projects or activities and forming part of their compensation package shall be considered “directly and exclusively used” in the registered project/activity of the REE.
  • If the purchased goods or services are used in both the registered project or activity and administrative operations, REEs shall adopt an allocation method to best apportion the same. Otherwise, if a proper allocation cannot be determined, the purchase of goods and services shall be subject to twelve percent (12%) VAT.

C. Effectivity and transitory provisions

  • RR No. 03-2023 is effective immediately following its publication in Manila Times on April 28, 2023.
  • All VAT zero-rating applications, with accompanying VAT zero-rating certification issued by the concerned IPA, received but not yet acted upon by the BIR prior to April 28, 2023, shall be granted VAT zero-rating treatment from the date of filing of such application, subject to the abovementioned post audit investigation/verification by the BIR.

Please be guided accordingly.



P&A Grant Thornton

Certified Public Accountants

P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.


As published in SunStar Cebu, dated 10 May 2023