No more gray areas. No more guesswork.
The Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) have thrown down the gauntlet with Revenue Regulations (RR) No. 1-2026 — a hard reset on how Value-Added Tax (VAT) applies to local sales of Registered Business Enterprises (RBEs).
This isn’t a minor tweak. This is a direct strike at confusion, loopholes, and inconsistent compliance inside economic zones and freeports.
And at the center of it?
Finance Secretary Ralph G. Recto’s point man at DOF, Secretary Go, and BIR Commissioner Atty. Charlie Martin Mendoza — now tightening the screws.
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🔥 WHAT’S THE BIG MOVE?
RR No. 1-2026 amends RR No. 9-2025 and clarifies how Section 295(D) of the Tax Code (as amended by CREATE MORE or RA 12066) should actually work on the ground.
Translation?
If you’re doing business-to-business (B2B) sales inside ecozones or freeports, VAT filing and payment must now generally be done per transaction.
No blanket cover. No vague reporting.
However — and this is key — the BIR is allowing bulk shipments to be paid in one consolidated filing using BIR Form 0605, provided all supporting documents are presented to the Bureau of Customs before the goods are released.
Tighter system. Clear paper trail. No excuses.
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💣 RBEs UNDER 5% SCIT OR GIE — HERE’S YOUR OPTION
RBEs enjoying the 5% Special Corporate Income Tax (SCIT) or Gross Income Earned (GIE) regime now have the option to register for VAT solely for local sales.
And here’s the power play:
This VAT registration does NOT cancel their incentives.
They still retain:
•VAT zero-rating on local purchases tied to registered activities
•VAT exemption on qualified importations
•Their fiscal and non-fiscal perks
In short:
You can comply — without sacrificing your incentives.
That’s regulatory precision.
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🚫 WHO’S EXCLUDED?
The government also drew a clear red line.
Some enterprises and transactions are excluded from VAT coverage on local sales to prevent unfair tax consequences — especially for Domestic Market Enterprises (DMEs) that can’t recover input VAT.
Excluded are:
•VAT-registered DMEs not entitled to zero-rating or import exemption
•Transactions already zero-rated or VAT-exempt under the Tax Code
•Entities under special laws not availing of Title XIII incentives
•Sales related to non-registered business activities
For these transactions?
The RBE-seller must file and pay VAT directly to the BIR.
No passing the buck.
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🧾 DEADLINE EXTENDED — BUT DON’T GET COMPLACENT
RBEs now have until December 31, 2026, to reconfigure invoicing systems — specifically to reflect “VAT on Local Sales” in breakdowns.
That’s breathing room.
But make no mistake — this is not a soft extension. It’s a final window to get systems aligned before enforcement tightens.
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⚡ SEC. GO & COMMISSIONER MENDOZA: NO MORE MIXED SIGNALS
This regulation sends a loud message from the top.
DOF Secretary Go is pushing for clarity in the CREATE MORE framework — making sure incentives attract investors without turning into tax leakages.
Meanwhile, BIR Commissioner Atty. Charlie Martin Mendoza is advancing his D.A.R.E.S. initiative — focused on stronger enforcement, improved taxpayer service, and sharper stakeholder coordination.
Their message is blunt:
Investment-friendly doesn’t mean compliance-optional.
Incentives are earned — not abused.
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BOTTOM LINE
The government is cleaning up the VAT maze inside ecozones.
The rules are clearer.
The process is stricter.
The compliance burden is sharper — but more defined.
For RBEs, DMEs, and investors alike, the playbook is now on the table.
And under DOF and BIR’s watch, the era of ambiguity is over.
This is tax policy with teeth.
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