VAT Zero-Rating for Exporters: BIR Requirements Under the EOPT Act
VAT zero-rating lets a VAT-registered exporter charge 0% output VAT on qualifying export sales while still claiming or refunding input VAT attributable to those sales, under Section 106(A)(2) of the National Internal Revenue Code (NIRC). Unlike a VAT-exempt sale, a zero-rated sale keeps the exporter inside the VAT system — the rate is just 0% instead of 12% — which is what protects the exporter’s input VAT credits.
Report Your Zero-Rated Sales Correctly FREE →What counts as a zero-rated export sale? #
A zero-rated export sale under NIRC Sec. 106(A)(2) generally requires actual shipment of goods out of the Philippines to a foreign country, paid for in acceptable foreign currency and accounted for under Bangko Sentral ng Pilipinas (BSP) rules. This “direct export” is the most common zero-rating category, but goods and services must also be directly attributable to the export activity to qualify.
“Directly attributable” purchases aren’t limited to raw materials or production inputs. Under the framework built out by the CREATE MORE Act, support services tied to the export operation — janitorial, security, and administrative or accounting services allocated to the export line of business — can also qualify for zero-rating on the supplier’s side, provided the link to the exporter’s registered export activity is documented.
What does CREATE MORE change for export-oriented enterprises? #
The CREATE MORE Act (Republic Act No. 12066) and its implementing Revenue Regulations No. 10-2025 (issued February 27, 2025) tightened who qualifies as an export-oriented enterprise and how zero-rating is documented, applicable to VAT zero-rating and refund claims filed starting April 1, 2025.
- An export-oriented enterprise must derive at least 70% of total annual production or output from export sales.
- Qualifying enterprises secure a DTI Export Marketing Bureau (DTI-EMB) certification confirming they meet that 70% threshold.
- This DTI-EMB certification is separate from the VAT zero-rating certifications that Investment Promotion Agencies (IPAs) issue to registered business enterprises (RBEs) — an exporter may need one, the other, or both depending on registration status.
| Pre-CREATE MORE practice | Under RR No. 10-2025 / RMC No. 10-2025 | |
|---|---|---|
| Export threshold | Not formally certified | 70% export ratio verified via DTI-EMB certification |
| Local supplier’s zero-rating | Often required prior BIR approval/ruling | No prior BIR approval needed — supplier relies on buyer’s valid certification |
| Certification source | Ad hoc / case-by-case | DTI-EMB (export ratio) and/or IPA (RBE registration) |
| Compliance burden | On BIR to approve each case | On the exporter to keep certification current and on the supplier to keep it on file |
Does a local supplier still need BIR approval before zero-rating a sale? #
No — under RMC No. 10-2025, a local supplier selling to a certified exporter no longer needs prior BIR approval before applying the 0% VAT rate. The supplier can rely on the buyer presenting a valid, current DTI-EMB or IPA certification, which shifts the compliance burden from case-by-case BIR clearance to simply keeping that certification on file and verifying it hasn’t lapsed.
That shift matters in practice: a supplier that zero-rates a sale based on an expired or invalid certification risks the BIR reclassifying the sale as subject to 12% VAT, with the supplier — not the exporter — on the hook for the deficiency output VAT.
A worked example #
A Cebu-based furniture manufacturer ships finished goods to a buyer in the United States, paid in US dollars remitted through a local bank under BSP rules — a straightforward direct export under NIRC Sec. 106(A)(2). Because more than 70% of its annual output goes to export sales, the manufacturer secures its DTI-EMB certification confirming that ratio. When it buys packaging materials from a local supplier, it presents that certification so the supplier can zero-rate the sale without first seeking a BIR ruling. The manufacturer still reports both its zero-rated export sales and its purchases in its regular VAT returns and supporting schedules — zero-rated does not mean unreported.
Summary #
VAT zero-rating keeps an exporter’s export sales at 0% output VAT while preserving input VAT credits, but under CREATE MORE and RR No. 10-2025 that status now runs through a documented 70% export-ratio certification from the DTI-EMB, layered alongside any IPA registration certificate. Local suppliers no longer need prior BIR approval to zero-rate a sale to a certified exporter — they just need a valid certification on file. See VAT Registration Threshold in the Philippines for when a business must register as a VAT taxpayer in the first place, Input VAT vs. Output VAT for how zero-rated sales interact with input tax credits, and CREATE MORE Act Incentives for the income-tax side of the same law. For how these same zero-rating principles apply to PEZA-registered enterprises specifically, see Coral Bay Nickel v. CIR, and for why domestic market enterprises qualify for zero-rating too, see Subic Bay Freeport v. DOF, both in the Day in Court series.