RR No. 1-2026: VAT on Local Sales by Registered Business Enterprises (RBEs)

Revenue Regulations (RR) No. 1-2026 amends Sections 3, 4, and 7 of RR No. 9-2025 on value-added tax (VAT) for local sales by Registered Business Enterprises (RBEs) under the Tax Code as amended by Republic Act (RA) No. 12066 (CREATE MORE). The regulation introduces optional VAT registration for RBEs under the 5% Special Corporate Income Tax (SCIT) or Gross Income Earned (GIE) regimes for local sales only (with a three-year lock-in), excludes certain Domestic Market Enterprise (DME) sellers from the buyer-remittance rule so they can use input VAT, allows a single BIR Form 0605 for bulk ecozone purchases, and extends the invoicing-system reconfiguration deadline to December 31, 2026.

This guide summarizes the practical changes confirmed in PwC Tax Alert No. 07 and Grant Thornton write-ups of RR No. 1-2026, with a worked remittance example for an ecozone buyer.

What problem did RR No. 1-2026 fix? #

RR No. 9-2025 made local sales by RBEs subject to 12% VAT and generally shifted remittance to the buyer. That buyer-remittance design left some DME sellers holding input VAT they could not offset against output VAT they no longer remitted. RR No. 1-2026, published on the BIR website on February 16, 2026 and effective March 3, 2026 (15 days after publication per Grant Thornton’s tax note), amends those rules to restore seller remittance for covered DMEs, offer optional VAT registration for SCIT/GIE RBEs, clarify exclusions, and give more time for system labels.

For ordinary VAT registration thresholds outside the RBE incentive regimes, see VAT Registration Threshold in the Philippines.

Optional VAT registration for SCIT / GIE RBEs #

An RBE under the 5% SCIT or GIE regime may elect VAT registration solely for its local sales without surrendering incentives such as VAT zero-rating on local purchases and VAT-exempt importations directly attributable to registered activities. Once elected, the VAT registration cannot be cancelled for three (3) years from the date of registration, per PwC Tax Alert No. 07 summarizing RR No. 1-2026.

That election is strategic: it lets the enterprise participate in the VAT chain on local sales while keeping Title XIII incentives intact — but the three-year lock-in means the choice should follow a real local-sales forecast, not a one-quarter spike.

DME sellers, buyer-remittance, and exclusions #

Covered DME sellers are taken out of the buyer-remittance scheme. Under RR No. 1-2026, local sales of VAT-registered DMEs that do not qualify for VAT zero-rating on local purchases or VAT-exempt importation are not covered by buyer remittance; the DME-seller files and pays VAT as a regular VAT taxpayer, restoring the ability to offset output VAT against input VAT.

RR No. 1-2026 also excludes specified transactions from VAT coverage on local sales under Section 295(D), including:

• VAT zero-rated goods under Section 106(A)(2) and zero-rated services under Section 108(B);
• VAT-exempt transactions under Section 109;
• VAT-exempt or zero-rated transactions under Title XIII of the Tax Code;
• certain Board of Investments (BOI) entities registered under a special law and not availing of Title XIII incentives; and
• local sales of RBEs relating to activities not registered with any Investment Promotion Agency (IPA), including many scrap/PPE disposals, which remain subject to regular 12% VAT with the RBE-seller filing as a regular VAT taxpayer.

Confirm each exclusion against the regulation text and your IPA registration before treating a sale as outside Section 295(D).

Bulk Form 0605 payments and the Dec 31, 2026 invoicing deadline #

Bulk ecozone or freeport shipments covered by multiple invoices may use one BIR Form 0605. The buyer presents the validated payment form and a consolidated list of covered invoices to the Bureau of Customs before release. That change cuts per-invoice remittance friction for containerized B2B withdrawals without removing border controls.

Invoicing systems — cash register machines (CRM), point-of-sale (POS), computerized accounting systems (CAS), and other BIR-registered invoicing software — have until December 31, 2026 to reconfigure labels to show “VAT on Local Sales” in lieu of or in addition to “VAT/VAT Amount,” extending the earlier RR No. 9-2025 deadline. For how VAT invoices interact with EOPT invoicing rules more generally, see VAT Invoice vs Official Receipt under EOPT.

A worked example: bulk ecozone withdrawal #

A VAT-registered distributor buys finished goods from an ecozone RBE. One container leaves the zone on March 20, 2026, supported by four invoices totaling ₱4,000,000 exclusive of VAT:

Under RR No. 1-2026, the buyer remits the ₱480,000 VAT through a single BIR Form 0605, attaches the consolidated invoice list, and presents the validated form to Customs before the container is released — instead of filing four separate remittances for the same truckload. If the seller were a covered DME under the amendment, remittance would instead sit with the seller as a regular VAT taxpayer so input VAT credits remain usable.

Frequently asked questions #

What is RR No. 1-2026? #

Revenue Regulations No. 1-2026 amends Sections 3, 4, and 7 of RR No. 9-2025 on the VAT treatment of local sales by Registered Business Enterprises (RBEs) under the Tax Code as amended by Republic Act No. 12066 (CREATE MORE). It clarifies remittance, optional VAT registration, exclusions, and invoicing-system deadlines.

Can an RBE under the 5% SCIT or GIE regime register for VAT on local sales only? #

Yes. Under RR No. 1-2026, an RBE availing of the 5% Special Corporate Income Tax (SCIT) or Gross Income Earned (GIE) regime may optionally register as a VAT taxpayer solely for its local sales without losing existing fiscal incentives, including VAT zero-rating on local purchases and VAT-exempt importations directly attributable to registered activities. Once elected, the VAT registration cannot be cancelled for three years.

Do Domestic Market Enterprise (DME) sellers still use the buyer-remittance rule? #

No for the DME sellers covered by the amendment. RR No. 1-2026 excludes local sales of VAT-registered DMEs that do not qualify for VAT zero-rating on local purchases or VAT-exempt importation from the buyer-remittance mechanism, so the DME-seller files and pays VAT as a regular VAT taxpayer and can offset output VAT against input VAT.

Can a buyer use one BIR Form 0605 for bulk ecozone purchases? #

Yes. Where goods purchased in an ecozone or freeport are shipped in bulk and covered by multiple invoices, RR No. 1-2026 allows the buyer to pay the VAT due through a single BIR Form 0605, presenting the validated payment form and a consolidated list of covered invoices to the Bureau of Customs before release of the shipment.

When must RBE invoicing systems show “VAT on Local Sales”? #

RR No. 1-2026 extends the deadline for RBEs to reconfigure registered CRM, POS, CAS, or other invoicing systems to rename or include the label “VAT on Local Sales” to December 31, 2026.

Summary #

RR No. 1-2026 is the corrective layer on RR No. 9-2025 for CREATE MORE local-sales VAT: optional three-year VAT registration for SCIT/GIE RBEs, seller remittance restored for covered DMEs so input VAT is usable again, consolidated Form 0605 for bulk ecozone pulls, and a December 31, 2026 grace period for “VAT on Local Sales” system labels. Cross-check IPA registration and Section 295(D) exclusions before changing remittance workflows, and compare digital-services VAT rules separately in VAT on Digital Services: RA 12023 and RR No. 3-2025. For the Supreme Court case that struck down the earlier rules limiting this VAT zero-rating to export enterprises only, see Subic Bay Freeport v. DOF in the Day in Court series.