Special InTAX: March 2025 Issue 3 | Volume 1

Department of Finance

The Department of Finance (DOF) issued the following:

Revenue Regulations (“RR”) No. 5-2025, 27 February 2025, to further amend the provisions of Section 2.57.2 (H) and (X) of RR No. 2-98, as amended, by revising the withholding tax rates and adjusting the basis of certain income payments pursuant to Republic Act (RA) No. 12066 or the Corporate Recovery and Tax Incentives For Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, as follows:

RR No. 5-2025 shall take effect 15 days following its publication in the Official Gazette or the Bureau of Internal Revenue (BIR) official website, whichever comes first.

RR No. 6-2025, 27 February 2025, to implement Sections 135 and 135-A of the National Internal Revenue Code of 1997, as amended (Tax Code) by CREATE MORE: on the exemption from excise tax of petroleum products sold to international carriers and exempt entities or agencies and refund of excise tax on exempt petroleum products.

• Sale of petroleum products to the following are exempt from excise taxes:

1. International carriers of Philippine or foreign registry directly importing petroleum products, on their use or consumption outside the Philippines, subject to compliance with importation requirements and use of bonded storage tanks duly accredited by the Bureau of Customs (BOC);
2. Exempt entities or agencies covered by tax treaties, conventions and other international agreements subject to the condition that the country of said exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies; and
3. Entities which are by law exempt from direct and indirect taxes.

• The suppliers of petroleum products to international carriers shall be allowed to file a claim for refund of excise tax paid on such products upon presenting proof that the petroleum products were sold to international carriers of Philippine or foreign registry, for their use or consumption outside the Philippines, following the procedure under Section 135-A of the Tax Code.
• No refund of excise tax paid shall be allowed unless the supplier of petroleum products to international carriers and exempt entities or agencies files a written claim for refund within two (2) years after the payment of excise tax.  The return filed showing an overpayment shall be considered a written claim for refund.
• The CIR or his duly authorized representative shall process and decide on the claim for refund within 90 days which shall begin upon submission of the complete documents in support of the application. 
• The taxpayer has 15 days from receipt of the denial to file a request for reconsideration which shall be limited only to questions of law and no additional documentary requirements particularly those unsubmitted/unsupported mandatory requirements during the filing of the claim shall be accepted. The CIR or his duly authorized representative shall decide on the request for reconsideration within 15 days from actual receipt thereof.  Failure to file a request for reconsideration within the 15-day period shall render the decision final.
• The taxpayer may appeal to the Court of Tax Appeals (CTA) within 30 days

– after the expiration of the 90-day period to decide on the application for refund in case of inaction on the part of the CIR or his duly authorized representative; or

– from the receipt of the decision denying the request for reconsideration; or

– after the lapse of 15-day period to decide on the request for reconsideration in case of inaction on the part of the CIR or his duly authorized representative on the request for reconsideration.

• When no decision is rendered within the 90-day period or the 15-day period and the taxpayer-claimant opted to seek for a judicial remedy within 30 days from such period, the administrative claim for refund or the request for reconsideration shall be considered moot and shall no longer be processed.
• Approved excise tax refund shall be subject to post audit by the Commission on Audit (COA).
• The RR shall cover claims for refund that are filed beginning 01 April 2025.

RR No. 6-2025 shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

RR No. 7-2025, 27 February 2025, to implement Sections 27, 28 and 34 of the Tax Code, as amended by CREATE MORE: on the reduced income tax rates for domestic and resident foreign corporations classified as Registered Business Enterprises (RBEs) under the Enhanced Deductions Regime (EDR) and additional allowable deductions from gross income.

Salient points of RR No. 7-2025 are as follows:

• Income tax rates for domestic and resident foreign corporations

* RBEs under the EDR availing of the reduced 20% income tax rate shall only cover the taxable income derived from registered projects or activities during each taxable year.  Income from non-registered projects or activities shall be subject to applicable income tax rates.

• Input tax paid on local purchases attributable to VAT-exempt sales shall be deductible from the gross income in accordance with Section 34(C)(8) of the Tax Code.
• For RBEs who availed of the EDR and have already filed their annual income tax return covering calendar year 2024 or fiscal year ending before the effectivity of this RR, the excess income tax payments as result of the reduction of tax rate from 25% to 20% upon effectivity of the CREATE MORE may be carried forward to the succeeding taxable quarter/year.

RR No. 7-2025 shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

RR No. 8-2025, 27 February 2025, to implement Sections 112(C) and 135-A of the Tax Code, as amended by CREATE MORE: on the procedures in the resolution of requests for reconsideration on the denial of claims for refund of creditable input taxes [Section 112(A) and (B) of the Tax Code] and excise tax on petroleum products [Section 135-A of the Tax Code].

Other salient provisions of the RR are as follows:

• Notice of full or partial denial shall cite the factual and legal bases stating the law, rules and regulations, and jurisprudence, if any, on which such denial is based.
• Requests for reconsideration are limited to questions of law. Factual issues shall not be entertained.
• Only documents previously attached to the application for tax refund and relevant to the issues raised may be submitted with the request for reconsideration.
• Introduction of new evidence/document, as well as questions of law that were already addressed in the notice shall not be allowed.
• No supplemental or amended appeal, or any other pleading of similar import, shall be allowed.
• No second request for reconsideration shall be allowed.
• Failure to file with the correct Processing Office shall render the request for reconsideration invalid and shall not toll the running of the 15-day period to file. The denial shall become final and executory after the lapse of such period.
• Processing time to act on request for reconsiderations shall be within 15 days from the date of actual receipt of the request for reconsideration.
• Upon timely filing of the request for reconsideration and if granted, the processing of the refund claim subject of the request for reconsideration shall be made within 20 days from the date the decision is issued.
• Failure to comply with any of the requirements shall constitute sufficient ground for the outright denial of the same.
• The filing of the request for reconsideration may be withdrawn at any time before it is finally resolved, in which case, the full or partial denial shall stand as though no such request for reconsideration has been filed.
• Appeal to the CTA
• Full or partial denial of the request for reconsideration – within 30 days from receipt of decision
• Inaction - within 30 days from lapse of the 15-day period to decide.

RR No. 8-2025 shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

RR No. 9-2025, 27 February 2025, to implement the pertinent provision under Section 295(D) of the Tax Code, as amended by CREATE MORE: on the treatment of local sales of goods and/or services by RBEs.

Tax Treatment

• Local sales by an RBE shall be subject to VAT, unless otherwise exempt or zero-rated under Titles IV and XIII of the Tax Code, regardless of the income tax regime of the RBE. Local sales shall include sales to DMEs and non-RBEs, regardless of location.
• The location of the transaction and the RBE are no longer the determining factors in so far as the taxability for local sales of RBEs for VAT purposes is concerned.
• The liability to pay and remit the VAT to the government rests with the buyer of the goods or services. CREATE MORE has shifted to the buyer this liability for local sales of RBEs.

Manner of Implementation

A.   Buyer is Engaged in Business [Business-to-Business (B2B)] – supply or delivery of goods or services is to natural or juridical persons engaged in business located in the Philippines, and to Philippine Government

1.   Invoicing by the RBE-Seller and Payment of the Buyer

• RBE-seller shall bill the transaction inclusive of VAT, which is shown as a separate item in the invoice that will be tagged as "VAT on Local Sales". Since the remittance of VAT will be on the account of the buyer, this will not be included in the total amount due from the buyer.
• Buyer, on the other hand, shall pay the purchase price to the RBE-seller, exclusive of VAT on local sales.

2.   Liability to File and Pay VAT

• The buyer of the goods or services shall be liable to pay and remit the corresponding VAT from the transaction.

3.  Manner of Filing and Payment by the Buyer

4.   Compliance Requirement for RBE-Sellers

• Filing of quarterly VAT returns (QVRs) and Submission of Summary List of Local Sales (SLLS)

B.  Buyer is NOT Engaged in Business [Business-to-Consumer (B2C)]

• Seller shall bill the transaction inclusive of VAT, which is shown as a separate item in the invoice that will be tagged as "VAT on Local Sales".
• Buyer shall pay the purchase price to the RBE-seller, inclusive of VAT on local sales.
• RBE-seller shall remit the 12% VAT to the government , as follows:

Optional VAT Registration

• If all registered activities of RBE are under 5% SCIT, RBE may opt to register for VAT for its local sales but shall not be entitled to cancel its registration once it elected to be registered as such for the next three years.
• This will not affect the RBE's existing fiscal and non-fiscal incentives, including VAT zero-rating on local purchases and VAT exemption on importation that are directly attributable to the RBE’s registered activity.

Claim of Input VAT

• VAT-registered buyers of RBEs cannot claim input VAT credits until the corresponding VAT has been paid on the purchase from RBE-sellers.  Documents required from local buyers of RBEs, are as follows:
  • Sales Invoice issued by the RBE showing the amount of VAT on local sales; and
  • Copy of the corresponding duly-filed BIR Form No. 1600-VT or BIR Form No. 0605, whichever is applicable.
  • ·VAT paid shall form part of the cost or charged to expense account.

Withholding of VAT on Government Money Payments

The creditable withholding tax rate on the purchase of goods and services by the Philippine Government or any of its political subdivisions, instrumentalities, or agencies, shall now be amended to 12% upon the effectivity of RR No. 9-2025.

Transitory Provisions

• Upon effectivity of RR No. 9-2025:
  • RBEs with remaining registered manual invoices that include the term "VAT/VAT Amount" in the breakdown of sales may be stamped with "VAT on Local Sales" upon issuance to buyers, until fully consumed (approval from BIR Office is NOT required). For subsequent applications, the new layout should replace the term "VAT/VAT Amount" with "VAT on Local Sales".
  • RBEs with remaining registered manual Exempt/VAT-Exempt Invoices that do not include the term "VAT/VAT Amount," the same provision shall apply. For subsequent applications for Authority to Print Invoices, the new layout shall include the term "VAT on Local Sales" in the said invoice.
  • RBEs using registered Cash Register Machines/Point-of-Sales (CRM/POS), Computerized Accounting System (CAS), Computerized Books of Accounts with Accounting Records or other registered invoicing system/software shall reconfigure/rename their system by changing/renaming the term "VAT/VAT Amount" in the breakdown of sales with "VAT on Local Sales", or adding the same in case the "VAT/VAT Amount" is not applicable, until 31 December 2025 (subject to post-verification of the BIR office having jurisdiction over the RBE).

Effectivity

RR No. 9-2025 shall take effect 15 days following its publication in the Official Gazette or the BIR Official Website, whichever comes first.

RR No. 10-2025, 27 February 2025, amending the pertinent provisions of RR No. 16-2005 to implement the amendments introduced by CREATE MORE on VAT provisions under Sections 106, 108, 109, and 112 of the Tax Code.

Section 4.106-5 of RR No. 16-2005, as amended, on the zero-rated sale of goods or properties is further amended to include and/or modify the following:

(a)    Export sales. - xxx;

(2)   Sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods and paid for in acceptable currency and accounted for in accordance with the rules and regulations of the BSP (not part of export sales and subject to 12% VAT already under CREATE and in RR Nos. 9-2021, 21-2021 and RR No. 3-2023);

(3)   Sale of goods to an export-oriented enterprise, subject to the following conditions:

i.  Export sales of the export-oriented enterprise is at least seventy percent (70%) of the total annual production of the preceding taxable year;

ii.  Such goods are directly attributable to the export activity of the export-oriented enterprise;

iii. The Export Marketing Bureau (EMB) of the Department of Trade and Industry (DTI) shall determine compliance with the aforementioned threshold through the issuance of a certification, which is different from the VAT zero-rating issued by Investment Promotion Agencies (IPAs);

(4)   xxx (previously numbered 2 in RR Nos. 9-2021, 21-2021 and RR No. 3-2023);

(5)   Sales to bonded manufacturing warehouses of export-oriented enterprises;

(b)    xxx; and

(c)    Sale of raw materials, inventories, supplies, equipment, packaging and goods to registered business enterprises (RBEs) qualified for VAT zero-rating on their local purchases.

Section 4.108-5 of RR No. 16-2005, as amended, on the zero-rated sale of services, is further amended to include and/or modify the following:

1. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP (subject to 12% VAT already under CREATE and in RR Nos. 9-2021, 21-2021 and RR No. 3-2023);
2. xxx (previously numbered 1 in RR Nos. 9-2021, 21-2021 and RR No. 3-2023);
3.  xxx (previously numbered 2 in RR Nos. 9-2021, 21-2021 and RR No. 3-2023);
4. xxx;
5. Services performed for an export-oriented enterprise. To qualify for VAT zero-rating under this provision the following conditions shall be necessary:

(1)  Export sales of the export-oriented enterprise is at least seventy percent (70%) of the total annual production of the preceding taxable year.

(2)  Services are directly attributable to the export activity of the export-oriented enterprise.

(3)  The EMB of the DTI shall determine compliance with the threshold through the issuance of a certification which is to be distinguished from the VAT zero-rating certification issued by the Investment Promotion Agencies (IPAs) on the sale to Registered Business Enterprises (RBEs) which is covered under Title XIII of the Tax Code.

6.  xxx (previously numbered 5 in RR Nos. 9-2021, 21-2021 and RR No. 3-2023);

7.   xxx (previously numbered 6 in RR Nos. 9-2021, 21-2021 and RR No. 3-2023);

8.  Services, including provision of basic infrastructure, utilities, and maintenance, repair and overhaul of equipment, rendered to qualified RBEs as defined under Title XIII of the Tax Code, that are directly attributable to the registered project or activity of the qualified RBE, including incidental expenses thereto.

Please note that in the case of sale of goods and services to export-oriented enterprises that have already secured the VAT zero-rating from EMB, the VAT passed on local purchases of goods directly attributable to export activity may be contested and/or resolved with the local supplier for the reimbursement of the VAT paid, if any.

Additionally, in case of a shift of the classification of sales from 12% to 0% VAT, the previously issued invoice by the supplier with VAT charged shall be surrendered or returned to the local supplier for the cancellation and replacement to VAT zero-rated invoice.

Section 4.109 of RR No. 16-2005, as amended, on the VAT-exempt transactions, is further amended to include and/or modify the following:

1. Importation of fuel, goods, and supplies used for international shipping or air transport operations is now VAT-exempt. Section 4.109(u) was amended to remove reference to “importation of fuel, goods, and supplies by persons engaged in international shipping or air transport operations” under the old provision of RR No. 16-2005, as amended.
2. A new provision, Section 4.109(dd), was added to include in the list of VAT-exempt transactions, importation of goods by an export-oriented enterprise whose export sales is at least seventy percent (70%) of the total annual productions or sales of the preceding taxable year, provided that such goods are directly attributable to the export activity of the export-oriented enterprise. The EMB of the DTI shall determine compliance with the above-mentioned threshold.

Section 4.112 of RR No. 16-2005, as amended, on claiming for an input VAT refund or tax credit certificate, is further amended to include and/or modify the following salient provisions:

(a)  xxx;

(b)  Within two (2) years from the date of cancellation provided that the taxpayer-claimant shall be entitled to a refund if it has no internal revenue tax liabilities against which the tax credit certificate may be utilized. For purposes of dissolution or cessation of business, the date of cancellation being referred to is the date of the issuance of BIR Tax Clearance.

(c)  Claims for tax credits/refunds shall be filled with the appropriate BIR Office.

(d)  In proper cases, the CIR shall grant refund on creditable input taxes within 90 days from the submission of certified true copies of invoices and other documents. If the CIR find that the grant of refund is not proper, the CIR must state in writing the legal and factual basis for the denial.

The taxpayer shall have 15 days from receipt of the full or partial denial to request for reconsideration. In case of full or partial denial of the request for reconsideration, or failure of the CIR to act on the application for refund, the affected taxpayer may appeal to the CTA within 30 days:

a.  After the expiration of the 90-day period to decide on the application for refund, where no action is made by the CIR on the application;

b.  From the receipt of the decision denying the request for reconsideration; or

c. After the lapse of the 15-day period to decide on the request for reconsideration in cases no action is made by the CIR on the request for reconsideration.

(e) VAT refund claims shall be classified into low-, medium-, and high-risk. Medium- and high-risk claims shall be subject to audit or other verification processes in accordance with the BIR’s national audit program.

(f) Refunds shall be made upon warrants drawn by the CIR or by his duly authorized representative without the necessity of being countersigned by the Chairman of Commission on Audit (COA).

RR No. 10-2025 shall take effect 15 days following its publication in the Official Gazette or the BIR Official Website, whichever comes first.

RR No. 11-2025, 27 February 2025, to implement Sections 237 and 237-A of the Tax Code, as amended by CREATE MORE: on the issuance of electronic invoices, electronic sales reporting, and the related additional allowable deduction.

Salient points of RR No. 11-2025 are as follows:

• Section 2 provides for the definitions of Electronic Invoice, Electronic Invoicing, Electronic Sales Reporting System (ESRS), Electronic Commerce (e-commerce) and Internet Transaction.

Electronic invoice is a system-generated invoice containing the vital information prescribed in existing rules and regulations and issued to the buyers electronically in a digital/electronic format or subsequently printed, provided that it is system-generated in a structured invoice data which can be easily extracted electronically from the invoice and its data can be readily transmitted electronically to the BIR for electronic sales reporting.

Electronic sales reporting system refers to the electronic reporting or process of storing, transmitting and/or receiving the electronic invoice data, through direct system-to-system data transfer without manual entry, to the BIR in a structured electronic format and not in pdf or image format.

• The following taxpayers are mandated to issue electronic invoices:

a.  Taxpayers engaged in e-commerce (refer to Section 3(C) of the RR for the covered taxpayers) or internet transactions;

b. Taxpayers under the jurisdiction of the Large Taxpayers Service (LTS);

c.  Taxpayers classified as Large Taxpayers (LT) under RA No. 11976 (Ease of Paying Taxes or EOPT Act) and RR No. 8-2024;

d. Taxpayers using Computerized Accounting System (CAS), and Computerized Books of Accounts (CBA) with Accounting Records (with electronic invoicing) and other invoicing software; and

e. Upon establishment by the BIR of a system capable of storing and processing the required data to be transmitted to it:

i.  Taxpayers engaged in the export of goods and services pursuant to Sections 106 and 108 of the Tax Code, except those falling under (d) above;

ii. Registered Business Enterprises (RBEs) availing of Tax Incentives under Section 304(D) of the Tax Code, as amended, except those falling under (d) above;

iii. Taxpayers using Point-of-Sales (POS) System; and

iv.  Other taxpayers as may be required by the Commissioner.

If the above taxpayers or business activities are registered as a Branch Office, the Head Office and all its Branch Offices are mandated to issue electronic invoices.

All CAS, CBA with Accounting Records (with electronic invoicing), or other invoicing software are mandated to generate a system-generated invoice in a structure invoice data that can be easily extracted and readily transmitted electronically to the BIR for electronic sales reporting. Otherwise, the invoices shall be classified as traditional, manually issued invoices, not qualified as electronic invoices.

• Upon establishment by the BIR of a system capable of storing and processing the required data to be transmitted to it, the taxpayers enumerated above that are mandated to issue electronic invoices are also mandated to electronically report their sales data to the BIR, subject to the rules and regulations to be issued for this purpose.

If the required taxpayers or business activities are registered as a Branch Office, the Head Office and all its Branch Offices are also covered by the electronic sales reporting.

• Micro Taxpayers are exempt from the mandatory use of electronic invoices but may choose to use them voluntarily.
• All required taxpayers and those who voluntarily complied with both the issuance of electronic invoice and electronic reporting of their sales data to the BIR shall be allowed the following additional allowable deductions from their taxable income:

a.  Micro and Small Taxpayers – 100% of the total cost for setting up an electronic sales reporting system

b.  Medium and Large Taxpayers – 50% of the total cost for setting up an electronic sales reporting system

The deduction can only be availed of once within the taxable year the electronic sales reporting system is completed, or the final payment is made. Importation of such system shall likewise be exempt from taxes.

• The following taxpayers have one (1) year from the effectivity of RR No. 11-2025 or until 14 March 2026 to comply with the electronic invoicing requirements:

a.  Taxpayers engaged in e-commerce or internet transactions;

b.  Taxpayers under the jurisdiction of the LTS; and

c.  Taxpayers classified as LT under the EOPT Act.

• On the other hand, the following taxpayers are mandated to comply with the issuance of electronic invoice and electronic sales reporting system requirements upon the establishment by the BIR of a system capable of storing and processing the required data:

a.  Taxpayers engaged in the export of goods and services pursuant to Sections 106 and 108 of the Tax Code, except those using CAS, and CBA with accounting Records (with electronic invoicing) and other invoicing software;

b.  RBEs availing of Tax Incentives under Section 304(D) of the Tax Code, as amended, except those using CAS, and CBA with accounting Records (with electronic invoicing) and other invoicing software;

c.  Taxpayers using POS System; and

d.   Other taxpayers as may be required by the Commissioner.

A separate RR shall be issued for this purpose.

• Any violation of or non-compliance with the RR shall be subject to the penalties as defined in Sections 264 and 264-A of the Tax Code.

RR No. 11-2025 shall take effect 15 days following its publication in the BIR Official Website

(RGM&Co. Note: RR Nos. 5-2025, 6-2025, 7-2025, 8-2025,9-2025, 10-2025 and 11-2025 were posted in the BIR website on 27 February 2025 and effectivity will be on 14 March 2025.)

Here are the full text of the issuances: RR No. 5-2025, RR No. 6-2025, RR No. 7-2025, RR No. 8-2025, RR No. 9-2025, RR No. 10-2025 and RR No. 11-2025.