Revenue Regulation No. 3-2023 removes the requirement for BIR prior approval for VAT zero rating, simplifying the process for taxpayers and reducing administrative burden

The Bureau of Internal Revenue (BIR) has recently issued Revenue Regulation (RR) No. 03-2023, amending certain provisions of RR No.16-2005, as amended by RR No. 21-2021. In accordance with the regulation, Registered Export Enterprises are no longer required to apply for approval of VAT zero rating with the BIR for their local purchase of goods and services directly and exclusively used in its registered activity/ies.

Further, RR No. 03-2023 emphasized the following local purchases of goods and services that are not considered as “directly and exclusively use” in the registered project or activity of a registered export enterprise:

1. Janitorial services;
2. Security services;
3. Financial services;
4. Consultancy services;
5. Marketing and promotion; and
6. Services rendered for administrative operations such as Human Resources (HR), legal, and accounting.

Moreover, pending applications will be accorded VAT zero-rating treatment effective from the date of their filing. However, this treatment will be subject to a post-audit by the BIR.

The new regulation will simplify the process for taxpayers, reduce administrative burden, and ensure that Registered Export Enterprises can efficiently access VAT zero-rating status for their local purchases of goods and services.

For your reading pleasure, you may refer to RR No. 03-2023 attached herein.

---

DISCLAIMER: The advisory is not a substitute for an expert opinion and is purely a general research that may have not considered the entirety of other related topics. Any tax and/or compliance advice is not intended or written by the author to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on by the regulatory bodies, or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

The opinion or advice expressed in this advisory is based on the facts and circumstances gathered. Any inaccuracy in any of the assumptions set forth above may have the effect of changing all or part of this report, and this report may not apply. The advice is based on our interpretation of the provisions of the Code, the Revenue Regulations promulgated and issued by the tax bureau, BIR positions as set forth in published Revenue Rulings, other pronouncement, orders and circulars, and judicial decisions in effect on the date of this report, any of which could be changed at any time. Any such changes may be retroactive and could significantly modify the statements and opinions/ advice expressed herein In effect, this might render the advisory obsolete or incorrect in partial or in full. We undertake no obligation to advise you of changes that may hereafter be brought to our attention.