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REVENUE REGULATIONS NO. 10-2025 issued on February 27, 2025, amends the pertinent provisions of Revenue Regulations No. 16-2005, as amended, to implement the Value-Added Tax (VAT) particularly on the following provisions of the Tax Code:

a. VAT zero-rating under Section 106(A)(2) for sale of goods;
b. VAT zero-rating under Section 108(B) for sale of services;
c. VAT-exempt transactions under Sections 109(u) and 109(dd); and
d. VAT refund/credit under Section 112(C).

A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods or properties, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these Regulations. The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

a. Export Sales
b. Sales to persons or entities whose exemption from direct and indirect taxes under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero-rate.
c. Sale of raw materials, inventories, supplies, equipment, packaging materials and goods, to RBEs qualified for VAT zero rating on their local purchases under Title XIII of the Tax Code.

A zero-rated sale of service (by a VAT-registered person is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of services related to such zero-rated sale shall be available as tax credit or refund in accordance with these Regulations. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate:

a. Processing, manufacturing or repacking goods for other persons doing business outside in the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP;

b. Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP;

c. Services rendered to persons or entities whose exemption from direct and indirect taxes under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;

d. Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, that these services shall be exclusively for the international operations, not domestic operations, of persons engaged in international shipping or air transport operations. Thus, the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to 12% VAT under Sec. 108 of the Tax Code;

e. Services performed for an export-oriented enterprise. For purposes of this provision, “ExportOriented Enterprise” refers to a person, natural or juridical, engaged in the sale of services 2 from the Philippines to a foreign country or economy as contemplated under Section 4.108- 5(b)(2) of these Regulations.

f. Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign country. Gross sales of international air or shipping carriers doing business in the Philippines to another country shall be exempt from VAT; however, they are still liable to a percentage tax of three percent (3%) based on their gross sales derived from transport of cargo from the Philippines to another country as provided for in Sec. 118 of the Tax Code:

g. Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other emerging sources using technologies such as fuel cells and hydrogen fuels; Provided, however, that VAT zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power.

h. Services, including provision of basic infrastructure, utilities, and maintenance, repair and overhaul of equipment, rendered to qualified RBEs as defined under Title XIII of the Tax Code, that are directly attributable to the registered project or activity of the qualified RBE, including incidental expenses thereto.

The following transactions shall be exempt from VAT:

  • Importation of fuel, goods, and supplies used for international shipping or air transport operations. Said fuel, goods and supplies shall be sued exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Philippines unless docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes bound for abroad: Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to twelve percent (12%) VAT. (amended Section 4.109(u) of RR No. 16-2005) 
  • Importation of goods by an export-oriented enterprise whose export sales is at least seventy percent (70%) of the total annual production or sales of the preceding taxable year: Provided, further, That the EMB of the DTI shall determine the compliance with the aforementioned threshold. For this purpose, “directly attributable” shall follow the same definition under Section 4.106(a)(3)(ii) of these Regulations. (Section 4.109(dd) added to RR No. 16-2005)

For VAT credit/refund claims pursuant to Section 112(A) and 112(B) of the Tax Code, these Regulations shall apply to VAT credit/refund claims that are filed starting April 1, 2025 onwards to provide ample time for taxpayers and the BIR to adjust with the new requirements and procedures that will be imposed for this purpose.