Revenue Regulations No. 009-2025 — VAT on Local Sales by Registered Business Enterprises

SECTION 1 – Scope and Legal Basis

• Authority: Sections $244$ & $245$ of the National Internal Revenue Code of $1997$ ("Tax Code") in relation to Sections $18$ & $32$ of Republic Act (RA) No. $12066$.
• Implements Section $295(D)$ of the Tax Code as amended by RA $12066$.
• Core rule quoted:
  • Local sales of goods/services by a Registered Business Enterprise (RBE) subject to $12\%$ VAT unless exempt/zero-rated under Titles IV or XIII.
  • “Local sales” = sales to domestic-market enterprises or non-RBEs wherever made (inside or outside freeport/economic zone).
  • VAT liability shifts to the buyer.

SECTION 2 – Tax Treatment of Local Sales

• Universal VAT application: All local sales by RBEs carry $12\%$ VAT except specific exemptions/zero-rating in the Tax Code.
  • Applies regardless of income-tax incentive regime (ITH, $5\%$ GIE / SCIT, EDR, RCIT).
  • Location irrelevant: Whether sale occurs in ecozone, freeport, customs territory, or BOI-registered REE area.
• VAT liability: Buyer must pay/remit to government.

SECTION 3 – Manner of Implementation (Buyer Type–Based)

A. Business-to-Business (B2B) Buyers

• Definition: Any natural/juridical person engaged in business in the Philippines, incl. NGAs, LGUs, GOCCs.
• Procedures:
  1. Invoicing & Payment
  • RBE issues invoice showing VAT on Local Sales as separate line.
  • Invoice total excludes that VAT; buyer pays purchase price exclusive of VAT.
  1. Liability: Buyer files/pays VAT.
  2. Filing & Payment Mechanics a. Goods from ecozone/freeport:
     • Per-transaction filing using future dedicated form; interim: BIR Form 0605.
     • Form transmitted to RBE-seller before goods are released.
       b. Services from ecozone/freeport:
     • Monthly filing via future form; interim: BIR Form 1600-VT.
     • File/pay on or before 10th day of month following transaction.
     • Buyer issues BIR Form 2307 (withholding VAT certificate) quarterly or upon RBE demand.
       c. Purchases from BOI-registered enterprises (goods and/or services):
     • Same monthly rule, use BIR Form 1600-VT (due 10th day next month).
     • Issue BIR Form 2307 as above.
  3. RBE-Seller Compliance a. Quarterly VAT Returns (QVRs)
     • Non-VAT RBEs (enjoying $5\%$ GIE/SCIT) → no QVR filing.
     • VAT-registered RBEs (ITH, EDR, RCIT) → must file; declare B2B local sales; attach Form 2307/0605 as proof to claim input credits.
     • Mixed-activity RBEs → same requirement.
       b. Summary List of Local Sales
     • Non-VAT RBEs: quarterly list to BIR (format via future issuance) indicating whether buyer paid VAT.
     • VAT-registered RBEs: follow regular summary-list rules.

B. Business-to-Consumer (B2C) Buyers (Not Engaged in Business)

• Administrative impracticality to make consumers file VAT; RBE-seller remits instead.
• Distinction by RBE tax regime:
  1. RBE under $5\%$ GIE / SCIT
  • Generally VAT-exempt & not VAT-registered.
  • Must file BIR Form 0605 (due 10th day of month after transaction) to remit VAT collected from consumers.
  • If RBE also has other VAT-registered activities, it must register for VAT; report consumer sales in quarterly VAT return BIR 2550Q; apply any 0605 payments as VAT credit for the quarter.
  1. RBE under ITH / EDR / Regular CIT
  • Already VAT-registered → file QVR (BIR 2550Q) including VAT on local consumer sales.
• Invoicing: RBE bills inclusive of VAT; “VAT on Local Sales” shown separately; buyer pays full amount.

SECTION 4 – Optional VAT Registration for $5\%$ GIE/SCIT RBEs

• RBEs subject solely to $5\%$ GIE or SCIT may elect VAT registration for local sales.
• Election does not forfeit existing incentives (e.g., VAT zero-rating on local purchases, VAT-exempt importations).
• Binding period: $3$ years (Tax Code §236(G)); cannot cancel VAT registration within that window.

SECTION 5 – Input-Tax Claim by VAT-Registered Buyers

• No input VAT may be claimed until the corresponding VAT on purchase is actually paid.
• Required documents:
  A. Sales Invoice from RBE stating amount of “VAT on Local Sales”.
  B. Copy of duly-filed BIR Form 1600-VT or 0605 (whichever used).
• Non-VAT buyers: VAT becomes part of cost/expense.

SECTION 6 – Government Withholding VAT Adjustment

• Under RR $16-2005$ (as amended), creditable withholding VAT rate on purchases from RBEs by Government entities is now $12\%$ effective upon these Regulations.

SECTION 7 – Transitory Rules (Invoices & Systems)

• Manual invoices previously showing “VAT/VAT Amount” may be stamped “VAT on Local Sales” until exhausted—no BIR approval needed.
• Future Authority-to-Print applications must replace “VAT/VAT Amount” with “VAT on Local Sales”.
• Exempt/VAT-Exempt invoice templates lacking the VAT line must likewise add the new label via stamp or new layout.
• RBEs using CRM/POS, CAS, or other systems: must reconfigure labels to “VAT on Local Sales” (or add if none) on or before December $31, 2025$; subject to BIR post-verification.

SECTION 8 – Separability Clause

• If any provision is declared invalid/unconstitutional, remainder stays effective.

SECTION 9 – Repealing Clause

• All prior issuances inconsistent with these Regulations are repealed, amended, or modified accordingly.

SECTION 10 – Effectivity

• Regulation becomes effective $15$ days after publication in the Official Gazette or on the BIR website, whichever is earlier.

Key Numerical & Legal Highlights

• Standard VAT rate applicable: $12\%$.
• Income-tax regimes covered: ITH, $5\%$ GIE, SCIT, EDR, RCIT.
• VAT filing deadlines:
  • Goods (eco-zone) – per transaction.
  • Services (eco-zone) & BOI purchases – 10th day following month.
  • Form 0605 (consumers / non-VAT RBEs) – 10th day following month.
• Binding VAT-registration election term: $3$ years.
• Deadline for system re-labeling: December $31, 2025$.

Practical & Administrative Implications

• Shift of VAT liability to buyers changes cash-flow & compliance burden; sellers must educate customers.
• Uniformity across zones eliminates location-based tax arbitrage for local sales.
• Government purchases now withhold full $12\%$, affecting contract pricing.
• Systems & invoicing overhaul required before end-$2025$; delay risks BIR penalties.
• VAT-registered buyers must secure proof of payment (0605/1600-VT) before input-tax credit—possible supply-chain cash-flow delays.