CREATE MORE and VAT Zero-Rating on Indirect Exports: What Local Suppliers of Export Enterprises Need to Know

Republic Act No. 12066, the CREATE MORE Act, took effect in November 2024 and amended NIRC Sections 106 and 108 to zero-rate local sales of goods and services to export-oriented enterprises, registered export enterprises, and high-value domestic market enterprises — not just a local exporter’s own direct export sales. Follow-on rules under RR No. 10-2025 and RMC No. 10-2025 removed the requirement for a local supplier to get prior BIR approval before applying that 0% VAT rate.

This matters for any local business that sells to a PEZA-registered, BOI-registered, or otherwise incentivized export enterprise — the supplier, not just the exporter, is the one applying the VAT treatment on the invoice.

What CREATE MORE changed for indirect exporters #

CREATE MORE broadened VAT zero-rating for local suppliers beyond the old raw-materials-and-packaging standard to cover goods and services “directly attributable” to a registered export enterprise’s project or activity. Before the law, zero-rating for these local, indirect-export sales was narrower and less certain — mostly limited to raw materials or packaging materials used directly in the export enterprise’s own production — which had become a well-documented source of investor complaints and contested BIR assessments.

“[Goods and services] directly attributable to the registered project or activity of a registered export enterprise (REE) or high-value domestic market enterprise, including any incidental expenses.”

This reflects tax-alert coverage of RA 12066’s amendments to the NIRC by PwC Philippines and Grant Thornton Philippines. This session could not reach a primary BIR or Official Gazette copy of RA 12066 or its implementing regulations directly (network policy blocked the relevant government domains) to re-verify the exact statutory phrasing, so confirm the precise wording against the published law or RR before relying on it for a formal filing position.

The buyer categories covered are export-oriented enterprises (EOEs), registered export enterprises (REEs), and high-value domestic market enterprises (HVDMEs). A local supplier selling to any of these — for goods or services directly attributable to the buyer’s registered project — can now qualify for 0% VAT, well beyond the old raw-material-only carve-out.

No more prior BIR approval — but the certification still has to be valid #

Under RR No. 10-2025 and RMC No. 10-2025, a local supplier no longer has to secure prior BIR approval before zero-rating a qualifying indirect-export sale — the supplier applies 0% directly based on the buyer’s zero-rating certification. That certification is issued by the DTI’s Export Marketing Bureau (EMB) or the relevant Investment Promotion Agency (IPA) — most commonly PEZA or the BOI — and it is what the supplier relies on, invoice by invoice, instead of waiting on a BIR pre-clearance.

This is a real simplification, but it shifts the risk onto the supplier’s diligence: zero-rating without a valid certification on file exposes the supplier to a deficiency VAT assessment, since the BIR can disallow the 0% treatment after the fact if the certification wasn’t valid at the time of the sale.

The refund gap: why an erroneous 12% charge can’t just be fixed with the BIR #

If a supplier mistakenly charges 12% VAT on a sale that should have been zero-rated, the buyer generally cannot get that VAT back from the BIR as an input VAT refund or credit — the overcharge has to be settled directly between supplier and buyer. This is the practical trap in the new regime: getting the zero-rating decision wrong doesn’t just cost the supplier a possible assessment — it also leaves the buyer without a BIR-side remedy, forcing a private reimbursement dispute instead.

That asymmetry is exactly why suppliers should check certification validity before invoicing, every time — not assume last quarter’s certification still applies, and not default to 12% “just to be safe” without checking whether a valid certification actually exists.

Worked example: Metro Packaging Solutions Inc. sells to a PEZA exporter #

Metro Packaging Solutions Inc., a local supplier of corrugated boxes, sells ₱500,000 worth of packaging to Luzon Circuit Exports Corp., a PEZA-registered electronics exporter — the VAT treatment depends entirely on whether a valid zero-rating certification is on file at the time of the sale.

In Scenario A, Metro Packaging invoices Luzon Circuit the full ₱500,000 with no VAT, keeps the certification on file to support the zero-rating on audit, and reports the sale as zero-rated in its RELIEF SLSP. In Scenario B, absent a valid certification, Metro Packaging should charge the standard 12% VAT rather than assume the sale qualifies — because if it zero-rates incorrectly, it is Metro Packaging, not Luzon Circuit, that faces the deficiency assessment risk described above.

The practical rule: check the certification before invoicing, every time — don’t assume last quarter’s certification is still current, and don’t guess at zero-rating eligibility without it.

Frequently Asked Questions #

What counts as an indirect export under CREATE MORE? #

An indirect export is a local sale of goods or services to an export-oriented enterprise (EOE), registered export enterprise (REE), or high-value domestic market enterprise (HVDME), rather than a direct export sale made by the exporter itself. CREATE MORE (RA 12066) zero-rates such local sales when they are directly attributable to the buyer’s registered project or activity.

Does a local supplier need BIR approval before applying 0% VAT to a sale to a PEZA or BOI enterprise? #

No. Under RR No. 10-2025 and RMC No. 10-2025, a local supplier no longer needs prior BIR approval to zero-rate a qualifying indirect-export sale. Instead, the supplier applies 0% VAT based on a valid VAT zero-rating certification the buyer presents from the DTI’s Export Marketing Bureau or the relevant Investment Promotion Agency, such as PEZA or the BOI.

What happens if a supplier mistakenly charges 12% VAT on a sale that should have been zero-rated? #

The buyer (the EOE, REE, or HVDME) generally cannot claim an input VAT refund or credit from the BIR for VAT that was erroneously passed on. The overcharge has to be resolved directly between the buyer and the supplier — as a reimbursement or billing correction between the two parties — rather than through a BIR refund claim.

What did CREATE MORE change compared to the VAT zero-rating rules before it? #

Before CREATE MORE (RA 12066), VAT zero-rating for local suppliers of export enterprises was narrower and largely limited to raw materials or packaging materials directly used in production, which was a frequent source of investor complaints and disputed BIR assessments. CREATE MORE broadened the standard to goods and services that are directly attributable to the export enterprise’s registered project or activity, not just raw or packaging materials.

What should a local supplier check before invoicing an export enterprise at 0% VAT? #

Confirm the buyer’s VAT zero-rating certification from the DTI Export Marketing Bureau or the relevant Investment Promotion Agency is current and valid before invoicing, not just on file from a prior quarter. Applying 0% without a valid certification risks a deficiency VAT assessment against the supplier, while defaulting to 12% out of excess caution denies the buyer its legitimate zero-rating.

Summary #

CREATE MORE (RA 12066) widened VAT zero-rating for local suppliers of export enterprises beyond raw materials and packaging to any goods or services directly attributable to the buyer’s registered project, and RR/RMC No. 10-2025 removed the old prior-BIR-approval step in favor of relying on the buyer’s EMB or IPA certification. Because a wrongly-charged 12% VAT can’t be recovered from the BIR as a refund, checking certification validity before every invoice is the single highest-leverage habit for a local supplier in this position. For the certification mechanics and export-sale basics behind this rule, see VAT Zero-Rating Certification Under PEZA and RR No. 3-2023, VAT Zero-Rating on Export Sale of Goods, and CREATE MORE Act Incentives for Registered Business Enterprises.