Tax Alert No. 32 [Revenue Regulations (RR) No. 13-2023 dated 10 November 2023]

Prescribes the Policies and Guidelines for the Optional VAT-Registration of Registered Business Enterprises (“RBE”) Classified as Domestic Market Enterprise (“DME”) Under the 5% Tax on Gross Income Earned (“GIE”) in Lieu of all Taxes Regime During the Transitory Period Pursuant to Rule 18, Section 5 of the Amended IRRs of Republic Act No. 11534 (CREATE Act)

Please be informed that RR No. 13-2023 has been issued to provide guidelines for optional VAT registration of RBEs classified as DMEs. DMEs located inside the Economic or Freeport Zone may retain availment of the 5% GIE incentive during the ten (10) year transitory period and be allowed to register as a VAT taxpayer, provided it secures from the concerned Investment Promotion Agency (“IPA”) a Certification expressly stating that the 5% GIE shall be in lieu of all taxes, except VAT.

For this purpose, DMEs shall submit to the concerned IPA the following documentary requirements:

• Request letter stating its intention to avail of the option to register as a VAT taxpayer with the BIR;
• Notarized “Deed of Waiver of Right to Avail of the VAT Exemption Incentive” in the form prescribed in Annex “A” of the Regulations; and
• Other documents that may be prescribed by the concerned IPA.

The waiver of rights to avail of the VAT exemption incentive shall be irrevocable from the time it is made and shall be binding in the remaining transitory period.

Non-VAT registered DMEs that have been issued the Certification shall update their registration with the concerned Revenue District Office (“RDO”) to reflect their registration from non-VAT to VAT taxpayer. Consequently, such DMEs shall be treated on par with regular corporations insofar as the VAT imposition and compliance is concerned.

Upon the effectivity of these Regulations, the concerned IPA shall furnish the BIR through the Assessment Service, Attention: Audit Information, Tax Exemption and incentives Division (“AITEID”) within 20 days following the close of each taxable quarter a list of RBEs that have been issued the Certification.

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