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BIR's Risk-Based VAT Refund Classification Under CREATE MORE Explained

·10 mins
Guides VAT Tax Updates BIR Compliance CREATE MORE Act

The Bureau of Internal Revenue now sorts every VAT refund claim filed under Section 112(A) of the National Internal Revenue Code (NIRC) into one of three risk tiers — low, medium, or high — before deciding how much of it to verify. This risk-based system was codified for Section 112(A) claims by the CREATE MORE Act (Republic Act No. 12066) and implemented through Revenue Regulations (RR) No. 10-2025 and Revenue Memorandum Circular (RMC) No. 37-2025. A low-risk claim can clear on documentary completeness alone; a high-risk claim faces a full transaction-by-transaction audit.

This guide covers how the BIR assigns a risk tier, what each tier means for verification scope and payout speed, how it differs from the earlier EOPT-era framework, and a worked example for an exporter sizing up its own claim. For the underlying statutory deadline this system operates inside, see How to File a BIR VAT Refund Claim: The 90-Day Processing Rule Explained.

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What is the CREATE MORE risk-based VAT refund classification? #

Under Section 112(A) of the NIRC as amended by the CREATE MORE Act, every VAT refund claim for unutilized input tax is classified as low, medium, or high risk before the BIR decides how deeply to check the underlying sales and purchase transactions supporting it. RMC No. 37-2025, issued April 10, 2025, prescribes the streamlined procedures and revised mandatory documentary requirements for claims filed under Section 112(A) and (B) of the Tax Code “in line with the latest developments on VAT introduced by Republic Act No. 12066 or the CREATE MORE Act,” covering claims filed on or after April 1, 2025. RR No. 10-2025 (February 25, 2025) supplies the implementing rules, including the revised 90-day timing mechanics discussed below.

The classification is not a one-time label — the BIR re-evaluates risk factors on every new claim a taxpayer files, so a business’s tier can move up or down between refund cycles depending on its own filing pattern and compliance record.

What factors decide a claim’s risk tier? #

The BIR weighs the amount of the claim, how often the taxpayer files VAT refund applications, its tax compliance history, and other risk indicators the BIR may identify — no single factor is automatically disqualifying, but a combination of red flags pushes a claim into a higher tier. According to PwC Philippines’ analysis of the framework, “the BIR classifies applications into low-, medium-, or high-risk claims depending on the amount of the claim, tax compliance history, frequency of filing VAT refund claims, among others” (PwC Philippines, New risk-based approach for VAT refund process, 2025).

In practice, a taxpayer with a clean multi-year filing history and moderate, consistent claim amounts tends toward low risk, while a first-time claimant, a claim spiking well above the taxpayer’s usual sales volume, or a taxpayer with prior audit findings tends toward medium or high risk. Because the BIR has discretion over “other risk factors,” no taxpayer can assume a low-risk outcome — every claim still has to clear the documentary checklist first.

The three risk tiers compared #

Each tier keeps the same starting requirement — a complete Checklist of Mandatory Requirements — but the verification scope beyond that checklist scales sharply from zero verification at the low end to a full transaction-by-transaction audit at the high end. The table below summarizes what changes at each level and what it typically means for how quickly a claim moves toward payment within the statutory 90-day window.

Risk tierVerification scopeWhat it means for speed
Low riskDocumentary-completeness checklist only — no verification of underlying sales or purchase transactions; once the checklist is satisfied, the claim is automatically recommended for refundFastest path to approval within the 90-day period
Medium riskChecklist plus verification of at least 50% of both sales and purchase transactions against supporting invoices/receiptsModerate additional processing time inside the 90-day window
High riskChecklist plus verification of 100% of sales and purchase transactionsSlowest path; full audit-level review must still conclude within 90 days

“Low-risk claims do not go through verification and are limited to going through the checklist for completeness of the documentary requirements. Once these are met, low-risk claims are automatically recommended for refund. Medium-risk claims only require 50% verification.” — PwC Philippines, New risk-based approach for VAT refund process (2025), summarizing the classification framework implemented for CREATE MORE-era Section 112(A) claims.

Grant Thornton’s tax alert describes the underlying workflow in four steps: checklisting against the Checklist of Mandatory Requirements, a cursory completeness check of sales/purchase documents once the application is accepted, determination of the risk level, then processing and verification for medium- and high-risk claims specifically. That checklisting stage applies to every claim regardless of tier — it is the risk determination that follows it, not the intake step itself, that decides how much scrutiny comes next.

How is this different from the EOPT Act’s earlier risk-based system? #

The three-tier concept did not originate with CREATE MORE — the Ease of Paying Taxes (EOPT) Act (Republic Act No. 11976) introduced a risk-based verification approach for VAT refund claims in 2024 through RR No. 5-2024, applied mainly to processing under Section 112(C). CREATE MORE (RA No. 12066), signed into law on November 11, 2024 and effective November 28, 2024, went further by amending Section 112(A) of the NIRC directly — the provision governing a VAT-registered person’s underlying claim for a refund of input tax attributable to zero-rated sales — and RMC No. 37-2025 then codified the current low/medium/high framework, checklist, and documentary rules specifically for claims filed under the amended Section 112(A) and (B) from April 1, 2025 onward.

One concrete documentary change came with it: CREATE MORE and its implementing issuances allow claimants to submit certified true copies (CTCs) of invoices and official receipts rather than original documents, giving exporters and other claimants more flexibility in assembling a complete file without surrendering originals needed for other purposes.

How does this affect the 90-day processing clock? #

The statutory 90-day period under Section 112(C) of the NIRC is unchanged by the risk-based system — the BIR still must grant, deny, or partially grant a claim within 90 days — but RR No. 10-2025 clarifies exactly what starts and stops that clock. Per Section 6 of RR No. 10-2025, the 90-day period for claims filed under Section 112(A) and (B) runs “from the date of submission of the certified true copies of the invoices or official receipts and other documents in support of the application” through to the actual release of payment for the approved refund amount. Risk classification determines how the BIR spends those 90 days — a low-risk claim can move to approval almost immediately after the checklist is confirmed, while a high-risk claim’s full verification has to be squeezed into the same 90-day window. See the 90-Day Processing Rule guide for what happens if that deadline lapses and how the CTA appeal window works.

Worked example: classifying an exporter’s claim #

A garments exporter with five consecutive years of on-time VAT filings and no prior audit findings files a ₱1.5 million input VAT refund claim for zero-rated export sales — a claim size roughly consistent with its last three annual claims. Applying the classification factors:

FactorThis exporter’s profileRisk signal
Claim amount₱1.5 million, consistent with prior yearsLow
Filing frequencyRegular annual claimant, not a first-timerLow
Compliance historyFive years of on-time, unflagged filingsLow
Other risk factorsNo prior findings or discrepancies on recordLow

Given a consistent, unremarkable profile across every factor the BIR weighs, this claim is a strong candidate for low-risk classification — meaning the BIR checks its Checklist of Mandatory Requirements (invoices, official receipts, proof of export shipment, and BSP-compliant proof of inward foreign currency remittance) for completeness only, without verifying the underlying sales and purchase transactions line by line. If that same exporter instead filed its first-ever refund claim, or filed one this year for ₱15 million against a prior pattern of ₱1.5 million, the amount and novelty factors alone would likely push it into medium- or high-risk territory, triggering 50% or 100% transaction verification before the 90-day deadline runs out.

The practical lesson: a clean, boring, consistent compliance history is itself what buys a faster refund under this system — which is exactly the kind of “compliance history” input a taxpayer can actually manage by keeping VAT filings, sales invoices, and supporting schedules organized and consistent claim over claim, rather than something decided at the moment a claim is filed. Businesses building that compliance trail alongside broader CREATE MORE incentive registration should also review the CREATE MORE Act Incentives for RBEs guide, since VAT refund posture and RBE income-tax incentive elections often get evaluated together.

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Frequently asked questions #

What is the BIR’s risk-based VAT refund classification under CREATE MORE? #

It is a system that sorts every VAT refund claim filed under Section 112(A) of the NIRC into low-, medium-, or high-risk tiers, implemented through Revenue Regulations No. 10-2025 and Revenue Memorandum Circular No. 37-2025 issued to carry out the CREATE MORE Act (Republic Act No. 12066). The tier a claim falls into determines how much of it the BIR verifies before releasing the refund.

What factors determine whether a VAT refund claim is low, medium, or high risk? #

The BIR considers the amount of the VAT refund claim, the claimant’s frequency of filing refund claims, its tax compliance history, and other risk factors the BIR identifies. A first-time claimant, a claim involving a very large amount, or a taxpayer with prior compliance issues is more likely to land in the medium- or high-risk tier.

How much verification does a medium-risk VAT refund claim get? #

A medium-risk claim is subject to verification of at least 50% of both the sales and purchase transactions supporting the claim, on top of the same documentary-completeness checklist every claim must pass. A high-risk claim is subject to 100% verification of sales and purchases, while a low-risk claim skips transaction-level verification entirely once the checklist is complete.

Does the risk classification change the 90-day processing deadline? #

No. Section 112(C) of the NIRC still gives the BIR 90 days to decide a VAT refund claim. What CREATE MORE’s risk-based system changed is how that 90-day period is used and, under Section 6 of Revenue Regulations No. 10-2025, when the clock starts — from submission of certified true copies of invoices, official receipts, and other supporting documents through to the release of the approved refund payment.

Is the risk-based classification new under CREATE MORE, or did it exist before? #

The concept started earlier — the Ease of Paying Taxes (EOPT) Act introduced a risk-based verification approach for VAT refund claims in 2024 through Revenue Regulations No. 5-2024. The CREATE MORE Act (RA No. 12066) then amended Section 112(A) of the NIRC itself, and RMC No. 37-2025 (April 10, 2025) prescribed the current streamlined checklist and risk-tier procedure for claims filed under Section 112(A) and (B) from April 1, 2025 onward.

Summary #

CREATE MORE (RA No. 12066) amended Section 112(A) of the NIRC, and RR No. 10-2025 together with RMC No. 37-2025 (April 10, 2025) turned the BIR’s earlier EOPT-era risk concept into a formal three-tier system for VAT refund claims filed from April 1, 2025 onward: low risk clears on documentary completeness alone, medium risk gets 50% transaction verification, and high risk gets a full 100% audit. The statutory 90-day deadline under Section 112(C) is unchanged, but RR No. 10-2025 now ties that clock to submission of certified true copies of supporting documents. The single biggest lever a taxpayer controls is the compliance-history factor — consistent, on-time filings and stable claim amounts are what push a claim toward the low-risk tier and the faster refund path that comes with it.

Sources #