IN BRIEF:
• VAT zero‑rating incentive on local purchases for exporters under CREATE MORE is performance‑based. Export‑oriented enterprises must consistently meet the 70% export sales threshold to retain the incentive, as failure in one year results in loss of zero‑rating in the succeeding year.
• Certification, not registration, is the key trigger. Continued entitlement depends on obtaining and maintaining EMB certification, which suppliers rely on to apply VAT zero‑rating on local purchase of export oriented enterprises.
• To sustain the incentive, exporters must actively monitor export performance, clearly link costs to export activities, align suppliers, and remain audit‑ready under a streamlined but enforcement‑focused regime.
For many years, VAT zero-rating on local purchases was largely associated with enterprises registered with investment promotion agencies (IPAs). IPAs refer to government entities authorized to register businesses and administer fiscal and non-fiscal incentives under Philippine investment laws. Key IPAs include the Philippine Economic Zone Authority (PEZA), the Board of Investments (BoI), and similar bodies. In practice, VAT zero-rating was commonly viewed as an incentive tied to registration status and location within economic zones.
The CREATE MORE Act has fundamentally reshaped this understanding. VAT zero‑rating on local purchases is no longer reserved solely for IPA‑registered businesses. It is now also expressly available to export‑oriented enterprises (EOEs), including those that are not registered with any IPA or whose incentive periods have already lapsed.
VAT ZERO-RATING BEYOND IPAS
CREATE MORE clearly recognizes that exporters contribute to the economy in different ways and through different business models. As such, VAT zero-rating on local purchases and VAT exemption on importations may now be enjoyed by export-oriented enterprises, even outside traditional economic zones.
This does not mean, however, that VAT zero-rating has become easier to obtain.
While IPA-registered enterprises often operate within structured and time-bound incentive frameworks, export-oriented enterprises availing of VAT zero-rating outside IPAs must rely almost entirely on annual performance validation and documentary compliance. The incentive is no longer anchored on registration alone, but on whether the exporter can consistently satisfy the prescribed requirements.
THE NONNEGOTIABLE EXPORT THRESHOLD
At the core of the CREATE MORE framework for EOEs is a clear and objective rule: at least 70% of an enterprise’s total annual production in the preceding taxable year must consist of export sales.
This threshold is determinative. Failure to meet it does not merely result in technical non-compliance; it leads to the loss of VAT zero-rating in the succeeding taxable year. For many exporters, this forward-looking consequence is often underestimated, despite its direct impact on pricing, cash flow, and supplier arrangements.
VAT zero-rating for EOEs is therefore not a static tax incentive but an outcome that depends on continuous compliance.
A CLEAR COMPLIANCE GATE: EMB CERTIFICATION
CREATE MORE, together with its implementing regulations, makes an important clarification: Export Marketing Bureau (EMB) certification is now the operative basis for VAT zero-rating for export-oriented enterprises, not IPA registration.
A CREATE MORE EOE certificate issued by the EMB confirms that the exporter has met the required export sales threshold and is eligible to enjoy VAT zero-rating on local purchases and VAT exemption on importations.
Revenue Memorandum Circular No. 10-2025 reinforces this framework by providing that local suppliers are no longer required to secure prior BIR approval to apply the zero VAT rate, as long as the buyer presents a valid EMB certification. This streamlines transactions and places greater responsibility on exporters to ensure that their certifications are valid, current, and properly supported.
Without EMB certification, VAT zero-rating on local purchases cannot be availed of — regardless of how export-driven the enterprise may be.
WHAT IT TAKES TO SECURE AND MAINTAIN VAT ZERO-RATING
DTI Department Administrative Order (DAO) No. 25-03 provides the detailed rules on how export-oriented enterprises must demonstrate compliance.
The order outlines the documentary requirements, application procedures, validity period, and grounds for revocation of the EOE certificate. Exporters are required to submit financial statements, export sales data, proof of inward remittances, export documentation, and a sworn declaration that the export threshold was met in the preceding year.
Crucially, the certificate is valid only for the applicable taxable year. Delays in submission, incomplete documentation, or failure to meet the export threshold may result in revocation, immediately cutting off access to VAT zero-rating on local purchases.
DAO 25-03 also makes clear that certification does not eliminate audit exposure. Transactions remain subject to post-audit verification, particularly on whether purchases claimed as VAT zero-rated are reasonably connected to export activities.
BROADER ACCESS, HIGHER STAKES
Taken together, CREATE MORE, RMC No. 10‑2025, and DAO 25‑03 create a VAT zero‑rating regime that is more inclusive but also more exacting.
Export‑oriented enterprises now have a path to VAT zero‑rating even without IPA registration, but this narrow path must be navigated carefully. Once export performance falls below the threshold or compliance lapses, the incentive is quickly lost — often with immediate financial consequences.
For exporters outside IPAs, the absence of long‑term registrations means that annual compliance is the sole basis for entitlement. VAT zero‑rating becomes a privilege that must be renewed every year through performance and documentation.
THE REAL CHALLENGE: SUSTAINABILITY
CREATE MORE makes VAT zero rating more inclusive, but also more demanding.
Enterprises that approach compliance reactively — checking export ratios only at year’s end or treating certification as an administrative formality — face real risk. Once zero rating is lost, recovery is not immediate. The resulting cash flow strain can be significant, particularly for exporters with thin margins.
Sustaining VAT zero‑rating on local purchases for EOEs now requires the following:
• Continuous monitoring of export performance
• Clear identification of costs supporting export activities
• Timely and complete certification submissions
• Strong coordination between operations, finance, tax, and procurement teams
This makes sustaining a VAT zero-rating a management issue instead of just a tax compliance matter.
A CLEAR MESSAGE FOR BUSINESS LEADERS
The CREATE MORE framework sends a clear signal. VAT zero-rating on local purchases is no longer limited to PEZA- or BoI-registered enterprises. Export-oriented enterprises — including those without IPA registration — may now enjoy the same incentive, subject to strict compliance with the law and its implementing rules.
However, broader access does not mean relaxed standards.
The real challenge lies in sustaining compliance. VAT zero-rating today depends on consistent export performance, timely certification, proper documentation, and internal coordination. Enterprises that fail to meet the requirements risk losing the incentive in the succeeding year, with immediate implications on cost structures, cash flow, and commercial arrangements.
Under CREATE MORE, VAT zero-rating remains a valuable incentive — but one that must be actively managed and continuously earned.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Meynard Sardalla is a senior director from the Global Compliance & Reporting Sub-Service Line of SGV & Co.
