RMC No. 71-2025: Why the VAT Zero-Rating Certificate Now Says "Directly Attributable"
Revenue Memorandum Circular (RMC) No. 71-2025, effective July 11, 2025, prescribes a revised VAT Zero-Rating Certificate format that Investment Promotion Agencies (IPAs) issue to Registered Business Enterprises (RBEs) — and the key wording change is that qualifying local purchases must now be “directly attributable” to the registered project or activity, “including expenses incidental thereto,” replacing the older, narrower “directly and exclusively used” standard. That shift, made in response to amendments under Republic Act (RA) No. 12066 (the CREATE MORE Act), potentially brings incidental or supporting local purchases into VAT zero-rating that the old wording would have excluded.
Track Which Purchases Qualify for Zero-Rating FREE →What is RMC No. 71-2025, and why did the certificate format change? #
RMC No. 71-2025 replaced the VAT Zero-Rating Certificate format that Investment Promotion Agencies had used since RMC No. 36-2022, updating it to reflect CREATE MORE’s amendments to the VAT zero-rating rules for Registered Business Enterprises. Grant Thornton Philippines’ tax-notes coverage of the circular summarizes the change this way:
“In response to the amendments introduced under Republic Act (RA) No. 12066, otherwise known as the CREATE MORE Act, the Bureau of Internal Revenue (BIR) has released Revenue Memorandum Circular (RMC) No. 71-2025, which prescribes a revised format for the Value Added Tax (VAT) Zero-Rating Certificate, that shall be issued by investment promotion agencies (IPAs) to registered business enterprises (RBEs).”
This site relied on Grant Thornton’s published tax-notes summary (also syndicated by Sunstar Cebu) for this passage, since the BIR’s own circular PDF could not be directly re-fetched to re-verify the exact wording in this sandbox — confirm the precise certificate language against the BIR’s published circular before relying on it for a formal filing position. The certificate itself, per the same coverage, “shall serve as the primary documentary basis for RBEs in availing the zero percent (0%) VAT rate on its local purchases, without prejudice, however, to the conduct of post-audit verification by the BIR.”
This post is narrowly about the wording change inside the certificate format itself. For the income-tax side of CREATE MORE, see CREATE MORE Act Incentives for RBEs; for the earlier certification procedure under the original CREATE Act framework, see Selling to a PEZA Company? Why You Need a VAT Zero-Rating Certification, which covers RR No. 3-2023’s shift away from prior BIR approval — a separate question from what the certificate’s qualifying language actually says.
“Directly and exclusively used” vs. “directly attributable”: what actually changed? #
The old standard asked whether a purchase was used directly and exclusively for the registered activity — a strict, all-or-nothing test that excluded anything with a mixed or supporting purpose; the new standard asks whether a purchase is directly attributable to that activity, expressly including expenses incidental to it. That’s a meaningfully different question. “Exclusively used” invites disputes over purchases that support the registered activity without being consumed entirely by it. “Directly attributable… including expenses incidental thereto” instead asks whether the expense can reasonably be traced to the registered project, even if it isn’t itself the core input.
| Old standard (RMC No. 36-2022, under the original CREATE Act) | New standard (RMC No. 71-2025, under CREATE MORE) | |
|---|---|---|
| Qualifying test | “Directly and exclusively used” in the registered project or activity | “Directly attributable” to the registered project or activity |
| Incidental/supporting expenses | Generally excluded if not exclusively tied to the core activity | Expressly included — “including expenses incidental thereto” |
| Effect | Narrower; disputes common over mixed-use or supporting purchases | Broader; more supporting expenses can plausibly qualify |
| Effective | Under the CREATE Act (RA No. 11534) framework | July 11, 2025, under CREATE MORE (RA No. 12066) |
A related Grant Thornton publication states the substantive rule underlying the revised certificate directly:
“The VAT zero-rating on local purchases shall only apply to goods and services directly attributable to the registered project or activity by a registered business enterprise or a registered high-value domestic market enterprise, including expenses incidental thereto.”
Again, this is a secondary-source quote — Grant Thornton Philippines’ own published tax alert — used because the underlying BIR/CREATE MORE implementing text could not be directly fetched in this environment; verify the exact statutory or regulatory phrasing before citing it in a formal position.
Does this mean more local purchases now qualify? #
In practical terms, yes for a meaningful category of purchases — expenses that support a registered activity without being consumed exclusively by it now have a plausible path to zero-rating that the old wording foreclosed. This isn’t a blanket expansion to all local purchases; the purchase still has to trace back to the registered project or activity in some direct way, and the BIR retains post-audit verification rights to test that connection. What changed is the shape of the test: “was this used only for the registered activity and nothing else” versus “can this expense be directly attributed to the registered activity, including things incidental to running it.”
Worked example: an incidental security-service expense at a registered plant #
A CREATE MORE-registered manufacturing RBE operates a single plant dedicated entirely to its registered export activity, and contracts a local security agency to guard that plant. The security service isn’t itself an input consumed in manufacturing — it doesn’t become part of the product — so under the old “directly and exclusively used” standard, an examiner could argue the service supports the business generally rather than being used exclusively in the registered manufacturing process, creating a real dispute risk.
| Step | Old standard (“directly and exclusively used”) | New standard (“directly attributable… including expenses incidental thereto”) |
|---|---|---|
| Is the expense tied to the registered activity? | Yes — the plant only performs the registered activity | Yes — same fact pattern |
| Is the expense itself the registered activity’s direct input? | No — security is a support function, not a manufacturing input | Not required — the standard now expressly reaches incidental expenses |
| Likely zero-rating outcome | Disputable; an examiner could deny zero-rating for lack of “exclusive use” in production itself | More likely to qualify, since guarding the dedicated plant is incidental to operating the registered activity |
Before invoicing, the security agency (the local supplier) should still confirm it holds a current VAT Zero-Rating Certificate from the RBE’s IPA covering the current period, and that the certificate’s language — now following the RMC No. 71-2025 format — supports treating a plant-security contract as attributable to the registered activity. Absent that certificate, the safer default remains charging the standard 12% VAT rather than zero-rating on the strength of the RBE’s registration status alone, the same fallback rule covered in Selling to a PEZA Company? Why You Need a VAT Zero-Rating Certification.
What a supplier still needs on file #
The revised certificate wording changes what qualifies, not the two-document rule a supplier follows before zero-rating a sale. A local supplier selling to an RBE still needs:
- A current copy of the buyer’s BIR Certificate of Registration (BIR Form 2303), confirming the buyer’s registered-enterprise status.
- A current VAT Zero-Rating Certificate from the buyer’s IPA, in the RMC No. 71-2025 format, confirming the specific purchase is directly attributable to the buyer’s registered project or activity.
Form 2303 alone has never been sufficient — it establishes registration status, not that a specific purchase qualifies. That gap is exactly what the IPA-issued certificate closes, under whichever wording standard currently applies.
Frequently Asked Questions #
What is RMC No. 71-2025? #
Revenue Memorandum Circular (RMC) No. 71-2025 is a Bureau of Internal Revenue (BIR) issuance, effective July 11, 2025, that prescribes a revised format for the VAT Zero-Rating Certificate issued by Investment Promotion Agencies (IPAs) to Registered Business Enterprises (RBEs), in response to amendments introduced by Republic Act (RA) No. 12066, the CREATE MORE Act.
What changed in the wording of the VAT Zero-Rating Certificate? #
The certificate’s qualifying standard changed from purchases being “directly and exclusively used” in the RBE’s registered project or activity — the wording under the earlier RMC No. 36-2022 format tied to the original CREATE Act — to purchases being “directly attributable to the registered project or activity, including expenses incidental thereto,” a broader standard under RMC No. 71-2025.
Does “directly attributable” mean more local purchases now qualify for VAT zero-rating? #
The “directly attributable… including expenses incidental thereto” wording is broader than “directly and exclusively used,” and it is generally understood to bring in some incidental or supporting expenses tied to the registered activity that the narrower exclusivity-based standard would have excluded. Each purchase still needs to be assessed against the actual certificate an RBE holds and remains subject to BIR post-audit verification, so this is not a blanket expansion to all local purchases.
Does the VAT Zero-Rating Certificate replace a supplier’s need for the buyer’s BIR Certificate of Registration? #
No. A supplier still needs the buyer’s BIR Certificate of Registration (BIR Form 2303) to confirm the buyer’s registered-enterprise status, and separately needs the current VAT Zero-Rating Certificate from the buyer’s Investment Promotion Agency to confirm a specific purchase qualifies under the applicable standard. The two documents answer different questions and neither substitutes for the other.
Who issues the VAT Zero-Rating Certificate, and is post-audit review still possible? #
The buyer’s Investment Promotion Agency — such as the Philippine Economic Zone Authority for PEZA-registered enterprises — issues the VAT Zero-Rating Certificate. Under RMC No. 71-2025, the certificate serves as the RBE’s primary documentary basis for zero-rating local purchases, but the BIR retains the right to conduct post-audit verification confirming the purchases are genuinely directly attributable to the registered project or activity.
When did RMC No. 71-2025 take effect? #
RMC No. 71-2025 took effect on July 11, 2025.
Summary #
RMC No. 71-2025 didn’t change who can hold a VAT Zero-Rating Certificate or which agency issues it — it changed the wording that defines what qualifies, moving from “directly and exclusively used” to “directly attributable to the registered project or activity, including expenses incidental thereto.” That broader standard gives incidental and supporting local purchases, like plant security in the worked example above, a more defensible path to zero-rating than the older wording allowed, though post-audit verification and the underlying two-document rule (BIR Form 2303 plus a current certificate) remain unchanged. Pair this with CREATE MORE Act Incentives for RBEs for the income-tax side of the same law, and Selling to a PEZA Company? Why You Need a VAT Zero-Rating Certification for the certification procedure this certificate’s format sits inside.