On January 6, 2025, the Bureau of Internal Revenue (BIR) released Revenue Regulations (RR) No. 1-2025, which revises the provisions of Section 9 of RR No. 25-2003. These amendments pertain to the excise tax exemption process for hybrid and purely electric vehicles, as mandated by the Tax Reform for Acceleration and Inclusion (TRAIN) Law or Republic Act (RA) No. 10963.
Background on the TRAIN Law and Tax Exemptions
The TRAIN Law, enacted in December 2017, overhauled the Philippine tax structure and included adjustments to excise taxes on automobiles. One of its notable features is the tax exemption granted to hybrid and electric vehicles as part of the government’s efforts to encourage the use of environmentally sustainable transportation.
Key Amendments Under RR No. 1-2025
The latest regulation focuses on refining the documentary requirements that vehicle manufacturers, assemblers, and importers must submit to qualify for excise tax exemptions. The main updates include:
Required Certifications Entities must now provide formal certifications to prove that the vehicle is classified as either hybrid or fully electric. This measure ensures the accuracy of exemption claims.
Technical Details Manufacturers must submit comprehensive technical documentation, especially regarding the engine and powertrain system, to justify the vehicle’s eco-friendly classification.
Standards Compliance Additional documentation showing conformity with recognized national or international standards for hybrid/electric vehicles is also required as part of the exemption validation process.
Why This Matters to the Automotive Sector
These regulatory updates are designed to:
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- Ensure Proper Application of Tax Benefits The BIR aims to curb incorrect classifications and uphold the rightful granting of tax incentives.
- Encourage Green Transportation By tightening rules around vehicle eligibility, the agency continues to promote environmentally responsible choices in the automotive market.
- Clarify Compliance Procedures The more detailed documentation requirements help streamline the exemption process and minimize delays for compliant applicants.