RBETS Guide: How to Register Under CREATE MORE Law

1

What is RBETS and CREATE MORE?

RBETS stands for Registered Business Enterprises Taxpayer Service. It's a registration system under Republic Act No. 12066, also known as the CREATE MORE Act (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy).

Think of RBETS as your gateway to special tax benefits if your business exports products or makes significant investments in the Philippines. When you register with RBETS, you can enjoy valuable tax incentives that can significantly reduce your operating costs and boost your competitiveness.

The CREATE MORE law was designed to attract more investments and encourage exports by offering these tax privileges to qualified businesses. It's part of the government's strategy to create jobs and strengthen the Philippine economy.

2

Who Can Register? REE vs HVDME

Registered Export Enterprises (REE)

An REE is a business that exports at least 70% of its total sales or production. If your company manufactures goods in the Philippines and sells most of them to foreign markets, you qualify as an REE.

Examples of REEs:

A furniture manufacturer in Cebu that exports 80% of its products to the US
A clothing factory in Pampanga that ships 75% of its output to Japan
A food processing plant in Davao that exports 90% of its products to Europe

Registered High-Value Domestic Market Enterprises (HVDME)

An HVDME is a business that operates primarily in the domestic market but meets specific investment capital requirements. These are companies that make substantial investments in the Philippines, creating jobs and contributing to economic growth.

Examples of HVDMEs:

A manufacturing plant with ₱15 billion in investment capital
A technology company with ₱10 billion in registered investments
A pharmaceutical firm with ₱20 billion in capital investment

3

Benefits of RBETS Registration

VAT Exemption on Importation

When you register as an REE or HVDME, you're exempt from Value Added Tax (VAT) on imported goods that you'll use for your registered business activities. This includes raw materials, equipment and machinery, and supplies and consumables.

Real savings example:

If you import ₱10 million worth of raw materials, normal VAT would be ₱1.2 million (12%). With RBETS registration, you save that entire amount.

VAT Zero-Rating on Local Purchases

Local purchases of goods and services for your registered business activities are zero-rated. This means you don't pay VAT on these purchases, you can claim input tax credits for VAT you've paid on related purchases, and your overall tax burden decreases significantly.

Practical impact:

This reduces your production costs and makes your products more competitive in both local and international markets.

Other Benefits

Streamlined tax compliance procedures
Priority processing for certain government transactions
Recognition as a preferred business partner
Access to other incentive programs

4

Eligibility Requirements

For Registered Export Enterprises (REE):

Export Sales Threshold: At least 70% of your total annual sales must come from exports
Business Registration: Must be registered with the SEC or appropriate government agency
Tax Compliance: Must have no outstanding tax liabilities
Operational Status: Must be actively operating and generating revenue

For Registered High-Value Domestic Market Enterprises (HVDME):

Investment Capital: Must meet the minimum investment capital requirement (typically ₱15 billion for manufacturing, varies by sector)
Business Registration: Must be registered with the SEC or appropriate government agency
Tax Compliance: Must have no outstanding tax liabilities
Domestic Market Focus: Primarily serves the Philippine domestic market

General Requirements for Both:

Philippine-based business operations
Valid business permits and licenses
Financial statements and audit reports
Company profile and business plan
Proof of export sales or investment capital

5

Step-by-Step Registration Process

Step 1: Prepare Your Documents

Gather all required documents before starting the application: SEC registration or DTI business name registration, Mayor's permit and business license, Financial statements for the past 3 years, Audit reports, Export sales records (for REEs), Proof of investment capital (for HVDMEs), Company profile and business plan, Tax identification number (TIN), BIR registration certificate

Step 2: Determine Your Enterprise Type

Decide whether you're applying as an REE or HVDME based on your business model: Calculate your export sales percentage (for REE), Verify your investment capital amount (for HVDME), Consult with a tax advisor if you're unsure

Step 3: Submit Application to PEZA or BOI

Depending on your business type, submit your application to: PEZA (Philippine Economic Zone Authority) for export-oriented businesses, BOI (Board of Investments) for domestic market enterprises

Step 4: Undergo Evaluation

The agency will review your application and supporting documents: Document verification (typically 5-10 business days), Site inspection (may be required), Financial assessment, Compliance check

Step 5: Receive Certificate of Registration

If approved, you'll receive: RBETS Certificate of Registration, Registration number, List of registered activities, Validity period (typically 5 years, renewable)

Step 6: Register with BIR

After receiving your RBETS certificate: Update your BIR registration, Apply for VAT exemption certificates, Set up special tax accounts if required

Step 7: Implement Compliance Systems

Set up systems to maintain your RBETS status: Track export sales vs domestic sales, Monitor investment capital levels, Maintain proper documentation, Implement internal controls

6

Understanding Export Sale Thresholds and Investment Requirements

Export Sale Threshold for REEs

The 70% export sales threshold is critical for REEs. Here's how it works:

Calculation Method:

Total Export Sales ÷ Total Sales × 100 = Export Sales Percentage

Must be ≥ 70% to qualify and maintain REE status

Example:

Total Sales: ₱100 million
Export Sales: ₱75 million
Export Sales Percentage: 75% ÷ 100 × 100 = 75% ✓ (Qualified)

Monitoring Period:

Calculated annually based on the immediately preceding year. Must maintain threshold each year to keep RBETS benefits. Falling below 70% triggers disqualification.

Investment Capital Requirements for HVDMEs

Investment capital requirements vary by industry and business activity:

Typical Minimum Thresholds:

Manufacturing: ₱15 billion
Technology: ₱10 billion
Services: ₱5 billion
Agribusiness: ₱3 billion

What Counts as Investment Capital:

Fixed assets (machinery, equipment, buildings)
Working capital
Technology transfers
Research and development investments
Training and development costs

7

Disqualification Criteria: What Causes Loss of VAT Exemption

⚠️ Critical Warning:

"Any Registered Export Enterprise (REE) that fails to meet the 70% export sale threshold in the immediately preceding year or Registered High-Value Domestic Market Enterprise (HVDME) that fails to meet the export sale or investment capital requirement shall be disqualified from availing of VAT exemption on importation and VAT zero-rating on local purchases."

Common Reasons for Disqualification:

Falling Below Export Threshold (REE): Export sales drop below 70% of total sales. Can happen due to market shifts, production issues, or strategic changes.
Failing Investment Capital Requirements (HVDME): Investment capital falls below minimum threshold. Can happen due to asset depreciation, divestment, or financial losses.
Tax Compliance Issues: Outstanding tax liabilities, Late tax filings, Tax audit findings.
False Information in Application: Misrepresentation of export sales, Inflated investment capital claims, Fraudulent documentation.
Non-Compliance with Reporting Requirements: Failure to submit annual reports, Missing quarterly declarations, Incomplete documentation.

Consequences of Disqualification:

Immediate loss of VAT exemption on importation
Loss of VAT zero-rating on local purchases
Potential retroactive tax assessments
Penalties and interest charges
Difficulty re-registering in the future

8

Compliance Requirements and Monitoring

Annual Reporting

Submit annual performance reports
Provide updated financial statements
Declare export sales percentage (for REEs)
Confirm investment capital levels (for HVDMEs)

Quarterly Declarations

Submit quarterly sales reports
Update export vs domestic sales breakdown
Report any significant business changes

Record Keeping

Maintain complete documentation for 7 years
Keep export sales records with proof (invoices, shipping documents)
Track all importations and local purchases
Document all capital investments

Audit Preparedness

Be ready for BIR audits
Maintain organized records
Have supporting documents for all claims
Implement internal audit procedures

Notification Requirements

Report any changes in business structure
Notify of ownership changes
Inform about significant business shifts
Update contact information

9

Tips for Maintaining RBETS Status

Strategic Planning

Diversify Export Markets: Don't rely on a single export market. If one market declines, others can help you maintain the 70% threshold.
Balance Production: Plan your production mix carefully to ensure export sales remain above 70%.
Monitor Trends: Track your export sales monthly, not just annually. This gives you time to adjust if you're approaching the threshold.

Financial Management

Maintain Investment Levels: For HVDMEs, ensure your investment capital doesn't fall below minimum thresholds through reinvestment.
Proper Accounting: Use accounting systems that can accurately separate export from domestic sales.
Regular Reviews: Conduct quarterly reviews of your RBETS compliance status.

Documentation Best Practices

Digital Records: Keep digital backups of all documents
Organized Filing: Use a systematic filing system for easy retrieval during audits
Timely Recording: Record transactions promptly to avoid backlogs

Professional Support

Tax Advisor: Work with a tax advisor who understands RBETS requirements
Legal Counsel: Consult legal counsel for complex business changes
Accounting Team: Ensure your accounting team is trained on RBETS compliance

10

Common Mistakes to Avoid

Mistake 1: Not Tracking Export Sales Regularly

Many REEs only calculate their export sales percentage at year-end. This is risky because by the time you realize you're below 70%, it's too late to fix it.

Solution: Track export sales monthly and set up alerts when you approach the threshold.

Mistake 2: Misclassifying Sales

Some businesses incorrectly classify sales as exports when they don't meet the technical definition of "export."

Solution: Understand the legal definition of export sales and ensure proper classification.

Mistake 3: Inadequate Documentation

Failing to maintain proper documentation is a common cause of disqualification during audits.

Solution: Implement a robust document management system and train staff on proper record-keeping.

Mistake 4: Ignoring Warning Signs

Businesses often ignore early warning signs that they might fall below thresholds.

Solution: Be proactive. If you see export sales declining, take action early to address the issue.

Mistake 5: Not Seeking Professional Help

Trying to navigate RBETS requirements without professional assistance can lead to costly mistakes.

Solution: Invest in qualified tax advisors and legal counsel who specialize in incentive programs.

Mistake 6: Late Filings

Missing filing deadlines for reports and declarations can trigger compliance issues.

Solution: Set up a calendar with all RBETS-related deadlines and implement reminder systems.

Mistake 7: Failing to Update Information

Not notifying authorities of business changes can lead to compliance problems.

Solution: Establish a process for reporting all significant business changes promptly.

Conclusion: Key Takeaways

RBETS registration under the CREATE MORE law offers significant tax benefits for qualified Philippine businesses. Here's what you need to remember:

For Export-Oriented Businesses (REEs):

Maintain at least 70% export sales annually
Enjoy VAT exemption on importations
Benefit from VAT zero-rating on local purchases
Track export sales monthly to avoid disqualification

For High-Value Domestic Businesses (HVDMEs):

Meet minimum investment capital requirements
Maintain investment levels to preserve status
Access the same VAT benefits as REEs
Monitor capital investments regularly

Critical Success Factors:

Proper documentation and record-keeping
Regular compliance monitoring
Professional tax and legal advice
Proactive compliance management

The Bottom Line:

RBETS can save your business millions in taxes, but it requires diligent compliance. If you're an export-oriented business or a high-value domestic enterprise, RBETS registration is worth pursuing. Just make sure you understand the requirements, maintain proper documentation, and monitor your compliance status regularly.

Take the time to evaluate whether your business qualifies, and if it does, start the registration process. The tax benefits can significantly improve your competitiveness and profitability in the Philippine market.

Need help with RBETS registration? Consider consulting with a tax professional who specializes in Philippine business incentives to guide you through the process and ensure ongoing compliance.