REVENUE MEMORANDUM CIRCULAR NO. 21-2024 issued on February 7, 2024
clarifies the answer to Question No. 31 of Revenue Memorandum Circular (RMC) No. 49-
2022 in relation to Revenue Regulations (RR) No. 4-2022, implementing Section 295(F) of the
Tax Code of 1997, as amended by Republic Act No. 11534 (CREATE Act).

          The revised answer in Q & A No. 31 pursuant to RMC No. 49-2022 required the
following types of Registered Export Enterprises (REE) to change their registration status from
Value-Added Tax (VAT)-registered entity to non-VAT:
          a. Within two (2) months from the expiration of their Income Tax Holiday (ITH):
Those whose sales are generated only from the registered activity and have shifted
from ITH to 5% Gross Income Tax (GIT) or Special Corporate Income Tax (SCIT)
regime; and
          b. Within two (2) months from the effectivity of RMC No. 49-2022: Those enjoying
5% GIT regime but are still VAT-registered at the time the CREATE Act took
effect. 

          The said RMC likewise provides that if the taxpayer has other activities other than those
registered with the Investment Promotion Agency (IPA) that are subject to VAT (i.e., VAT at
12% and 0%), it shall remain as a VAT taxpayer and shall report the sales in the VAT returns
as VATable, zero-rated and/or VAT-exempt, as the case may be.

          On the basis of the said guidelines, some importers of petroleum products located in
freeport zones or special economic zones which do not have other activities other than those
registered with the IPA changed their registration status from VAT-registered entity to nonVAT in order to avail of either the 5% GIT or SCIT regime.
          However, a disparity of treatment inadvertently arose between petroleum importers
located inside the freeport zone or special economic zone and those located within the customs
territory in the application of the guidelines in Q & A No. 31 of RMC No. 49-2022 in
conjunction with the intention of Section 295 (F) of the Tax Code of 1997, as amended, which
states:

                “(F) Persons who directly import petroleum products defined under Republic Act
                No. 8479, otherwise known as the ‘Downstream Oil Industry Deregulation Act of
                1998′, for resale in the Philippine customs territory and/or in free zones as defined
                under Republic Act No. 10863, otherwise known as the Customs Modernization
                and Tariff Act, shall not be entitled to the foregoing tax and duty incentives, and
                shall be subject to appropriate taxes imposed under this Code.
                Any law to the contrary notwithstanding, the importation of petroleum products
                by any person, including registered business enterprises shall be subject to the
                payment of applicable duties and taxes as provided under Republic Act No. 10863,
                otherwise known as the Customs Modernization and Tariff Act, and this Code,
                respectively, upon importation into the Philippine customs territory and/or into
                free zones as defined under Republic Act No. 10863, otherwise known as the
                Customs Modernization and Tariff Act:
                Provided, That the importer can file for claims for the refund of duties and taxes
                applicable under Republic Act No. 10863, otherwise known as the Customs
                Modernization and Tariff Act, and this Code, respectively, for direct or indirect
                export of petroleum products, and/or tax-exempt sales under the Customs
                Modernization and Tariff Act and other special laws within the period provided
                therein:
                Provided, further, That the importers who subsequently export fuel, subject to the
                appropriate rules of the fuel marking program, may apply for a refund of duties
                and taxes, as applicable under Republic Act No. 10863, otherwise known as the
                Customs Modernization and Tariff Act, and this Code.”

           Based on the foregoing, REE petroleum importers, including those located inside the
freeport zones or special economic zones, were required to pay the applicable duties and taxes
on their import transactions including VAT. Correspondingly, they may be refunded of the
duties and taxes for the direct or indirect export of petroleum products, and/or tax-exempt sales
pursuant to RR No. 4-2022.
            In relation thereto, under Section 112(A) of the Tax Code of 1997, as amended,
provides that only VAT-registered persons or entity may file for VAT refund. Hence, the
clarification.
            Therefore, the BIR clarifies that REEs enjoying the 5% GIT or SCIT located within
freeport zones or special economic zones, which directly import petroleum products and do
not have other activities subject to VAT, shall be permitted to register as a VAT taxpayer to
allow them to file for refund of input VAT incurred from importation of petroleum attributable
to zero-rated sales pursuant to RR No. 4-2022.
            The Circular shall be applied prospectively. Previous transactions of petroleum
products importers located in freeport zones or special economic zones, which changed their
status from VAT to non-VAT pursuant to RMC No. 49-2022, are not covered by the Circular.