The Department of Finance and the Bureau of Internal Revenue issued Revenue Regulation No. 1‑2026 on Feb. 23. The new rule amends Revenue Regulation No. 9‑2025. It clarifies how Registered Business Enterprises (RBEs) must file and pay value‑added tax (VAT) on local sales.
For B2B sales inside economic zones or freeports, the buyer must file and pay VAT per transaction. If the buyer receives bulk shipments covered by several invoices, they may make one payment using BIR Form 0605. The buyer must attach a list of the invoices. The list must be shown to the Bureau of Customs before the goods are released.
RBEs that use the 5 % Special Corporate Income Tax or the Gross Income Earned regime can now register for VAT only for local sales. The optional registration does not affect existing tax incentives. It also does not change the zero‑rating on local purchases or the import‑VAT exemption tied to the RBE’s activities.
The regulation also removes certain enterprises from the scope of Section 295(D) of the Tax Code. Excluded are:
VAT‑registered Domestic Market Enterprises that cannot claim zero‑rating or import exemption.
Sales already covered by VAT zero‑rating under Sections 106, 108 or Title XIII, and sales exempt under Section 109.
Entities registered with the Board of Investments under a special law but not using Title XIII incentives.
Local sales of items not registered with any investment promotion agency, such as scrap, machinery, and equipment.
For the excluded sales, the seller must still file and pay VAT to the BIR.
The deadline to reprogram cash register, POS, or accounting systems has been pushed to Dec. 31, 2026. Systems must replace the label “VAT/VAT Amount” with “VAT on Local Sales,” or add the new label where none exists.
BIR Commissioner Charito Martin S. Mendoza said, “We will improve taxpayer service by paying attention and immediately addressing stakeholder concerns, especially those adversely affected by the new tax provisions.” She added, “Investors drive economic growth, and addressing their concerns will improve the country’s investment climate.”
The changes aim to streamline tax compliance, protect incentives, and ensure fair administration under the CREATE MORE Act.
DOF, BIR Clarify VAT Rules for Local Sales
