The Bureau of Internal Revenue (BIR) has clarified that registered business enterprises must pay the standard 12 percent value-added tax on “side” activities and asset disposals, narrowing the scope of tax perks to strictly core operations.

In a revenue regulation issued Monday, Feb. 16, the BIR ruled that local sales made by registered business enterprises (RBEs) that fall outside of activities registered with investment promotion agencies (IPAs) are subject to the full levy.

According to the BIR, this includes the sale of scraps, which the tax agency defines as materials, machinery, and property, plant, and equipment.

The new rules, designated as Revenue Regulation No. 001-2026, amend portions of previous guidelines to align with the CREATE MORE Act. The measure seeks to clarify the tax landscape for RBEs, which are government-registered entities eligible for specific incentives.

Under the updated framework, these companies must act as regular VAT taxpayers for any non-registered sales, requiring them to file and pay the 12 percent tax directly to the BIR.

The bureau also provided clarity on the buyer-pay-and-remit remittance system. The agency specified that this B2B system applies only to taxable transactions. It does not cover items that are already legally tax-free or zero-rated, such as basic necessities, professional services, or transactions tied to existing tax incentives.

The clarification comes as the BIR faces pressure to meet a ₱3.58 trillion revenue target for 2026. VAT collections typically represent about one-fifth of the bureau’s total take, trailing income taxes, which account for half of all collections. Excise taxes make up roughly a tenth of the total.

BIR Commissioner Charlito Martin R. Mendoza told reporters last week that the agency expects revenue to rise in tandem with gross domestic product growth.

The bureau is leaning on higher receipts from excise, income, and VAT to reach its goals. Last year, the BIR collected ₱3.11 trillion, slightly edging out a ₱3.10 trillion target despite a two-month suspension of tax audits.

A significant portion of the growth is expected to come from the digital economy. Mendoza noted that the BIR collected approximately ₱8 billion from VAT on foreign digital service providers last year. That figure is projected to exceed ₱20 billion in 2026 as the government tightens its grip on cross-border digital transactions.