Picture this: you’re a business owner working with suppliers inside economic zones or freeports, and you find yourself caught in a maze of unclear VAT rules. Who’s responsible for paying VAT? When should it be remitted? To resolve this confusion, the Bureau of Internal Revenue (BIR) recently released Revenue Regulations No. 9-2025.
This regulation significantly clarifies and streamlines VAT obligations on local sales by Registered Business Enterprises (RBEs), aiming to simplify transactions and improve compliance.
The Issue It Addresses
Prior to RR 9-2025, VAT treatment for local sales made by RBEs was unclear, leading to frequent confusion about who was responsible for VAT. This ambiguity resulted in inconsistent tax payments, disputes, and added administrative strain for both businesses and the BIR.
For instance, enterprises operating within economic zones were often unsure whether they—or their buyers—should handle VAT, leading to compliance errors and triggering audits.
Key Provisions: What’s Different Now?
RR 9-2025 establishes clear, structured rules:
- VAT Application: All local sales by RBEs are now explicitly subject to 12% VAT unless specifically exempt or zero-rated.
- Buyer Liability: In B2B transactions, the buyer is required to remit VAT directly to the government.
- Invoice Requirements: VAT must be shown separately on invoices as “VAT on Local Sales.”
- Filing Obligations:
-For goods, VAT must be remitted per transaction.
– For services, VAT is remitted monthly.
– Use BIR Forms 0605 (goods) and 1600-VT (services) as prescribed. - Optional VAT Registration: RBEs under the 5% Gross Income Earned (GIE) or Special Corporate Income Tax (SCIT) regime may opt to register for VAT to simplify their compliance.
Think of it like moving from a confusing “split-the-bill” situation to a clear, structured agreement where everyone knows their role.
Who Benefits from This?
- Businesses: More clarity means fewer mistakes, fewer disputes, and smoother operations.
- Consumers/Taxpayers: Better transparency in how VAT is applied improves trust.
- Government (BIR & LGUs): Easier compliance leads to more consistent revenue and less admin workload.
- Investors: Transparent, predictable tax rules help build investor confidence and support economic growth.
Implementation & Compliance: What to Do Next
To stay compliant:
1. Ensure invoices clearly state “VAT on Local Sales.”
2. Buyers must file VAT using the correct forms (0605 for goods, 1600-VT for services).
3. RBEs under alternative tax regimes should assess whether VAT registration is advantageous.
4. Update internal systems and invoicing formats promptly—compliance deadline is December 31, 2025.
Failure to comply may result in penalties, fines, and increased BIR attention.
Final Takeaway & Action Steps
RR 9-2025 offers much-needed clarity on VAT duties, helping businesses boost efficiency and meet their tax obligations with confidence. Act now: audit your invoicing practices, refine your VAT processes, and consult a tax professional to ensure your business stays ahead of the curve.
DISCLAIMER: This article is developed by subject matter experts at Babylon2k. This is for general information only and does not constitute expert advice. It is based on current regulations and may not account for all related topics. Any tax or compliance guidance provided cannot be used to avoid penalties or promote specific actions. Laws and interpretations may change over time, which could affect the accuracy of this report. We are not obligated to update this advisory if new regulations arise.
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RESOURCES
RR No. 9-2025 RBEs CREATE More | View here.
