V A T

A value added tax (VAT) is a form of consumption tax.
From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The purpose of VAT is to generate tax revenues to the government similar to the corporate income tax or the personal income tax. The value added to a product by or with a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.
Overview[edit source | editbeta]
A Belgian VAT receipt.
Maurice Laur, Joint Director of the France Tax Authority, the Direction Gnrale des Impts, was first to introduce VAT on 10 April 1954, although German industrialist Dr. Wilhelm von Siemens proposed the concept in 1918. Initially directed at large businesses, it was extended over time to include all business sectors. In France, it is the most important source of state finance, accounting for nearly 50% of state [1] revenues. Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT (input tax) on the products and services that they buy in order to produce further goods or services that will be sold to yet another business in the supply chain or directly to a final consumer. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. Value added taxes were introduced in part because they create stronger incentives to collect than a sales tax does. Both types of consumption tax create an incentive by end consumers to avoid or evade the tax, but the sales tax offers the buyer a mechanism to avoid or evade the tax persuade the seller that the buyer is not really an end consumer, and therefore the seller is not legally required to collect it. Therefore, the burden of determining whether the buyer's motivation is to consume or re-sell is on the seller, and the seller has no direct economic incentive to collect it. The VAT approach gives sellers a direct financial
stake in collecting the tax and eliminates a decision needing to be made by the seller about whether the buyer is or is not an end consumer.
Comparison with sales tax[edit source | editbeta]

Value added tax avoids the cascade effect of sales tax by taxing only the value added at each stage of production. For this reason, throughout the world, VAT has been gaining favor over traditional sales taxes. In principle, VAT applies to all provisions of goods and services. VAT is assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale/purchase). The seller charges VAT to the buyer, and the seller pays this VAT to the government. If, however, the purchaser is not an end user, but the goods or services purchased are costs to its business, the tax it has paid for such purchases can be deducted from the tax it charges to its customers. The government only receives the difference; in other words, it is paid tax on the gross margin of each transaction, by each participant in the sales chain. In many developing countries such as India, sales tax/VAT are key revenue sources as high unemployment and low per capita income render other income sources inadequate. However, there is strong opposition to this by many sub-national governments as it leads to an overall reduction in the revenue they collect as well as of some autonomy. In theory sales tax is normally charged on end users (consumers). The VAT mechanism means that the end-user tax is the same as it would be with a sales tax. The main difference is the extra accounting required by those in the middle of the supply chain; this disadvantage of VAT is balanced by application of the same tax to each member of the production chain regardless of its position in it and the position of its customers, reducing the effort required to check and certify their status. When the VAT system has few, if any, exemptions such as with GST in New Zealand, payment of VAT is even simpler. A general economic idea is that if sales taxes are high enough, people start engaging in widespread tax evading activity (like buying over the Internet, pretending to be a business, buying at wholesale, buying products through an employer etc.). On the other hand, total VAT rates can rise above 10% without [citation needed] widespread evasion because of the novel collection mechanism. However, because of its particular mechanism of collection, VAT becomes quite easily the target of specific frauds like carousel fraud, which can be very expensive in terms of loss of tax incomes for states
Implementation[edit source | editbeta]

The standard way to implement a value added tax involves assuming a business owes some fraction on the price of the product minus all taxes previously paid on the good. By the method of collection, VAT can be accounts-based or invoice-based. Under the invoice method of collection, each seller charges VAT rate on his output and passes the buyer a special invoice that indicates the amount of tax charged. Buyers who are subject to VAT on their own sales (output tax), consider the tax on the purchase invoices as input tax and can deduct the sum from their own VAT liability. The difference between output tax and input tax is paid to the government (or a refund is claimed, in the case of negative liability). Under the accounts based method, no such specific invoices are used. Instead, the tax is calculated on the value added, measured as a difference between revenues and allowable purchases. Most countries today use the invoice method, the only exception being Japan, which uses the accounts method.
[2]
By the timing of collection, VAT (as well as accounting in general) can be either accrual or cash based. Cash basis accounting is a very simple form of accounting. When a payment is received for the sale of goods or services, a deposit is made, and the revenue is recorded as of the date of the receipt of funds no matter when the sale had been made. Cheques are written when funds are available to pay bills, and the expense is recorded as of the cheque dateregardless of when the expense had been incurred. The primary focus is on the amount of cash in the bank, and the secondary focus is on making sure all bills are paid. Little effort is made to match revenues to the time period in which they are earned, or to match expenses to the time period in which they are incurred. Accrual basis accounting matches revenues to the time period in which they are earned and matches expenses to the time period in which they are incurred. While it is more complex than cash basis accounting, it provides much more information about your business. The accrual basis allows you to track receivables (amounts due from customers on credit sales) and payables (amounts due to vendors on credit purchases). The accrual basis allows you to match revenues to the expenses incurred in earning them, giving you more meaningful financial reports. Further information: Comparison of cash method and accrual method of accounting
[3]
Registered[edit source | editbeta]

VAT registered means registered for VAT purposes, that is entered into an official VAT payers register of a country. Both natural persons and legal entities can be VAT registered. Countries that use VAT have established different thresholds for remuneration derived by natural persons/legal entities during a calendar year (or a different period), by exceeding which the VAT registration is compulsory. Natural persons/legal entities that are VAT registered are obliged to calculate VAT on certain goods/services that they supply and pay VAT into a particular state budget. VAT registered persons/entities are entitled to a VAT deduction under legislative regulations of a particular country. The introduction of a VAT can reduce the cash economy because businesses that wish to buy and sell with other VAT registered businesses must themselves be VAT registered.
Examples[edit source | editbeta]

Consider the manufacture and sale of any item, which in this case we will call a widget. In what follows, the term "gross margin" is used rather than "profit". Profit is only what is left after paying other costs, such as rent and personnel.
Without any tax[edit source | editbeta]

A widget manufacturer spends $1.00 on raw materials and uses them to make a widget. The widget is sold wholesale to a widget retailer for $1.20, making a gross margin of $0.20 The widget retailer then sells the widget to a widget consumer for $1.50, making a gross margin of $0.30
With a sales tax[edit source | editbeta]

With a 10% sales tax: The manufacturer spends $1.00 for the raw materials, certifying it is not a final consumer.
The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same gross margin of $0.20. The retailer charges the consumer $1.50 + ($1.50 x 10%) = $1.65 and pays the government $0.15, leaving the gross margin of $0.30.
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The retailers have not paid any tax directly (it is the consumer who has paid the tax), but the retailer has to do the paperwork in order to correctly pass on to the government the sales tax it has collected. Suppliers and manufacturers only have the administrative burden of supplying correct certifications, and checking that their customers (retailers) aren't consumers. A large exception to this state of affairs is online sales. Typically if the online retail firm has no "presence" in the state where the merchandise will be delivered, no obligation is imposed upon the retailer to collect sales taxes from "out-of-state" purchasers. Generally, state law requires that the purchaser report such purchases to the state taxing authority and pay the sales tax. It is fair to say that many citizens are unaware of this obligation and that states make little effort to raise that awareness or provide a reasonably easy way of complying with the obligation.
With a value added tax[edit source | editbeta]

With a 10% VAT: The manufacturer spends $1.10 ($1 + ($1 10%)) for the raw materials, and the seller of the raw materials pays the government $0.10. The manufacturer charges the retailer $1.32 ($1.20 + ($1.20 10%)) and pays the government $0.02 ($0.12 minus $0.10), leaving the same gross margin of $0.20 ($1.32 $0.02 $1.10 = $0.20). The retailer charges the consumer $1.65 ($1.50 + ($1.50 10%)) and pays the government $0.03 ($0.15 minus $0.12), leaving the same gross margin of $0.30 ($1.65 $0.03 $1.32 = $0.30). The manufacturer and retailer realize less gross margin from a percentage perspective. Note that the taxes paid by both the manufacturer and the retailer to the government are 10% of the values added by their respective business practices (e.g. the value added by the manufacturer is $1.20 minus $1.00, thus the tax payable by the manufacturer is ($1.20 $1.00) 10% = $0.02).
With VAT, the consumer has paid, and the government received, the same dollar amount as with a sales tax. The businesses have not incurred any tax themselves. Their obligation is limited to assuming the necessary paperwork in order to pass on to the government the difference between what they collect in VAT (output tax, an 11th of their sales) and what they spend in VAT (input VAT, an 11th of their expenditure on goods and services subject to VAT). However they are freed from any obligation to request certifications from purchasers who are not end users, and of providing such certifications to their suppliers. On the other hand, they incur increased accounting costs for collecting the tax, which are not reimbursed by the taxing authority. For example, wholesale companies now have to hire staff and accountants to handle the VAT paperwork, which would not be required if they were collecting sales tax instead. If you calculate the added overhead required to collect VAT, businesses collecting VAT have less profits overall than businesses collecting sales tax.
The advantage of the VAT system over the sales tax system is that under sales tax, the seller has no incentive to disbelieve a purchaser who says it is not a final user. That is to say the payer of the tax has no incentive to collect the tax. Under VAT, all sellers collect tax and pay it to the government. A purchaser has an incentive to deduct input VAT, but must prove it has the right to do so, which is usually achieved by holding an invoice quoting the VAT paid on the purchase, and indicating the VAT registration number of the supplier.
Limitations to the examples[edit source | editbeta]

In the above examples, we assumed that the same number of widgets were made and sold both before and after the introduction of the tax. This is not true in real life. The supply and demand economic model suggests that any tax raises the cost of transaction for someone, whether it is the seller or purchaser. In raising the cost, either the demand curve shifts leftward, or the supply curve shifts upward. The two are functionally equivalent. Consequently, the quantity of a good purchased decreases, and/or the price for which it is sold increases. This shift in supply and demand is not incorporated into the above example, for simplicity and because these effects are different for every type of good. The above example assumes the tax is nondistortionary. This argument of limitations also assumes perfect competition, ignores post-scarcity, ignores artificial scarcity, ignores government-granted monopoly and other real life factors typically taken into account by economists when dealing with these issues. It is here to present a very simplified argument of limitations to illustrate possible arguments coming via the group of macroeconomic thought known as supply-side economics.
Limitations of VAT[edit source | editbeta]
A Supply-Demand Analysis of a Taxed Market
A VAT, like most taxes, distorts what would have happened without it. Because the price for someone rises, the quantity of goods traded decreases. Correspondingly, some people are worse off by more than the government is made better off by tax income. That is, more is lost due to supply and demand shifts than is gained in tax. This is known as a deadweight loss. If the income lost by the
economy is greater than the government's income; the tax is inefficient. It must be noted that a VAT and a Non-VAT has the same implications on the microeconomic model. The entire amount of the government's income (the tax revenue) may not be a deadweight drag, if the tax revenue is used for productive spending or has positive externalities in other words, governments may do more than simply consume the tax income. While distortions occur, consumption taxes like VAT are often considered superior because they distort incentives to invest, save and work less than most other types of taxation in other words, a VAT discourages consumption rather than production. In the diagram on the right: Deadweight loss: the area of the triangle formed by the tax income box, the original supply curve, and the demand curve Governments tax income: the grey rectangle that says "tax revenue" Total consumer surplus after the shift: the green area Total producer surplus after the shift: the yellow area
Imports and exports[edit source | editbeta]

Being a consumption tax, VAT is usually used as a replacement for sales tax. Ultimately, it taxes the same people and businesses the same amounts of money, despite its internal mechanism being different. There is a significant difference between VAT and Sales Tax for goods that are imported and exported: 1. VAT is charged for a commodity that is exported while sales tax is not 2. Sales Tax is paid for the full price of the imported commodity, while VAT is expected to be charged only for value added to this commodity by the importer and the reseller This means that, without special measures, goods that are imported from one country that does have VAT to another country that does not have VAT will be taxed twice. The exporting country will charge VAT and the importing country will charge sales tax. Vice versa, goods that are imported from a country that does not have VAT to another country that does have VAT will result in no sales tax for those goods, and only a fraction of the usual VAT. There are also significant differences in taxation for goods that are being imported / exported between countries with different VATs. Sales tax does not have all those problems it is charged in the same way for both imported and domestic goods, and it is never charged twice. To fix this problem of VAT, nearly all countries that use VAT use special rules for imported and exported goods: 1. All imported goods are charged VAT tax for their full price when they are sold for the first time 2. All exported goods are exempted from any VAT payments For these reasons VAT on imports and VAT rebates on exports form a common practice approved by the World Trade Organization.
Example[edit source | editbeta]

Consider a Ford car that cost $25,000 to produce in the USA (that does not have a VAT, but does have 10% Sales Tax) and an Opel car that costs $25,000 to produce in Germany (that does have 20% VAT).
Both prices are shown with all taxes imposed on manufacturers of these cars, including social taxes, income taxes, etc., but without taxes imposed on consumers that is, Sales Tax in USA and VAT in Germany. Without a special modification related to Export / Import, customer prices will be
Price paid for Ford by consumer
Price paid for Opel by consumer
Taxes paid for Ford by consumer
Taxes paid for Opel by consumer
In the USA $27,500
$33,000
$2,500 (Sales Tax only)
$8,000 (Sales tax and VAT)
In Germany
$25,000
$30,000
$0 (none)
$5,000 (VAT)
Note that Opel prices appear to be inherently higher than Ford ones. A common mistake in a lot of examples trying to prove that VAT rebates form as a trade barrier is, to set retail prices equal for both Ford and Opel. This way, prices are initially equal, but become different after all the additional VAT taxes and rebates described below. Such an approach doesn't take into account the simple fact that Opel prices in the table above always include VAT while Ford prices never include it. That's exactly why additional adjustments are made in VAT taxation. One may try to object that this simply means that Germany has generally higher taxes but, in fact, this is not the case for consumer taxes. Consider a hypothetical situation where consumer tax remains exactly the same in Germany as in the example above, but now it is collected as 16.7% Sales Tax:
Price paid for Ford Price paid for Opel by consumer by consumer
Taxes paid for Ford by consumer
Taxes paid for Opel by consumer
In the USA $27,500
$27,500
$2,500 (Sales Tax only) $2,500 (Sales Tax only)
In Germany $30,000
$30,000
$5,000 (Sales Tax only) $5,000 (Sales Tax only)
The amount of tax is clearly different in the USA and Germany, but the skew in taxes between Opel and Ford has gone. Now everything is taxed in same way: Opel isn't taxed twice, and Ford is taxed when its cars are imported to Germany. Note that the price of Opel cars in Germany is the same for both examples.
Rebating VAT on imports allows the same retail prices & customer taxation without abandoning VAT. Instead, the seller of imported Fords in Germany is charged 20% VAT for the whole price of Fords sold ($5,000), and the exporter of Opels is rebated $5,000 out of $30,000 he spent to buy each.
Different systems[edit source | editbeta]

Bangladesh[edit source | editbeta]
Value Added Tax in Bangladesh was introduced in 1991 replacing Sales Tax and most of Excise Duties. The Value Added Tax Act, 1991 was enacted that year and VAT started its passage from 10 July 1991. The 10 July is observed as National VAT Day in Bangladesh. Within the passage of 22 years, VAT has become the largest source of Government Revenue. About 56% of total tax revenue is VAT revenue in Bangladesh. Standard VAT rate is 15%. Export is Zero rated. Besides these rates, there are several reduced rates locally called Truncated Rate for service sector are available. Different rates for different services are applied. Truncated Rates are 1.5%, 2%, 2.25%, 3%, 4%, 4.5%, 5%, 6% and 9%. Bangladesh VAT is characterized by many distortions. Value declaration for product and service, branch registration, tariff value, truncated rates, many restriction on credit system, advance payment of VAT, excessive exemption etc. For many distortion, VAT-GDP ratio is about 4% here. To increase productivity of VAT, Government has enacted new act namely Value Added Tax and Supplementary Duty Act, 2012. This law will be in operation from 2015 with an automated administration. National Board of Revenue 1 is the apex organization administering Value Added Tax.
European Union[edit source | editbeta]

Main article: European Union value added tax The European Union value added tax (EU VAT) is a value added tax encompassing member states in the European Union VAT area. Joining in this is compulsory for member states of theEuropean Union. As a consumption tax, the EU VAT taxes the consumption of goods and services in the EU VAT area. The EU VAT's key issue asks where the supply and consumption occurs thereby determining which member state will collect the VAT and which VAT rate will be charged. Each Member State's national VAT legislation must comply with the provisions of EU VAT law as set out in Directive 2006/112/EC. This Directive sets out the basic framework for EU VAT, but does allow Member States some degree of flexibility in implementation of VAT legislation. For example different rates of VAT are allowed in different EU member states. However Directive 2006/112 requires Member states to have a minimum standard rate of VAT of 15% and one or two reduced rates not to be below 5%. Some Member States have a 0% VAT rate on certain supplies- these Member States would have agreed this as part of their EU Accession Treaty (for example, newspapers and certain magazines in Belgium). The current maximum rate in operation in the EU is 27% (Hungary), though member states are free to set higher rates. VAT that is charged by a business and paid by its customers is known as "output VAT" (that is, VAT on its output supplies). VAT that is paid by a business to other businesses on the supplies that it receives is known as "input VAT" (that is, VAT on its input supplies). A business is generally able to recover input VAT to the extent that the input VAT is attributable to (that is, used to make) its taxable outputs. Input
VAT is recovered by setting it against the output VAT for which the business is required to account to the government, or, if there is an excess, by claiming a repayment from the government. The VAT Directive (prior to 1 January 2007 referred to as the Sixth VAT Directive) requires certain goods and services to be exempt from VAT (for example, postal services, medical care, lending, insurance, betting), and certain other goods and services to be exempt from VAT but subject to the ability of an EU member state to opt to charge VAT on those supplies (such as land and certain financial services). Input VAT that is attributable to exempt supplies is not recoverable, although a business can increase its prices so the customer effectively bears the cost of the 'sticking' VAT (the effective rate will be lower than the headline rate and depend on the balance between previously taxed input and labour at the exempt stage). See also: Taxation in the United Kingdom#Value added tax
China[edit source | editbeta]

VAT was implemented in China in 1984 and is administered by the State Administration of Taxation. In 2007, the revenue from VAT was 15.47 billion yuan ($2.2 billion) which made up 33.9 percent of China's total tax revenue for the year. The standard rate of VAT in China is 17%. There is a reduced rate of 13% [4][citation needed] that applies to products such as books and types of oils.
The Nordic countries[edit source | editbeta]

MOMS (Danish: mervrdiafgift, formerly meromstningsafgift), Norwegian: merverdiavgift (bokml) or meirverdiavgift (nynorsk) (abbreviated MVA), Swedish: mervrdesskatt (earliermervrdesomsttningsskatt), Icelandic: virisaukask attur (abbreviated VSK), Faroese: meirvirisgjald (abbreviated MVG) or Finnish: arvonlisvero (abbreviated ALV) are the Nordic terms for VAT. Like other countries' sales and VAT taxes, it is an indirect tax.
Year Tax level (Denmark) 1962 9% 1967 10% 1968 12.5% 1970 15% 1977 18% 1978 20.25% 1980 22% 1992 25% Name OMS MOMS MOMS MOMS MOMS MOMS MOMS MOMS
In Denmark, VAT is generally applied at one rate, and with few exceptions is not split into two or more rates as in other countries (e.g. Germany), where reduced rates apply to essential goods such as foodstuffs. The current standard rate of VAT in Denmark is 25%. That makes Denmark one of the
countries with the highest value added tax, alongside Norway, Sweden and Croatia. A number of services have reduced VAT, for instance public transportation of private persons, health care services, publishing newspapers, rent of premises (the lessor can, though, voluntarily register as VAT payer, except for residential premises), and travel agency operations. In Finland, the standard rate of VAT is 24% as of 1 January 2013 (raised from previous 23%), along with [5] all other VAT rates, excluding the zero rate. In addition, two reduced rates are in use: 14% (reduced in October 2009 from 17% to 12% for non-restaurant food, increased to 13% from July 2010, also encompasses restaurant food from July 2010; increased to 14% 1 January 2013), which is applied on food and animal feed, and 10%, (increased from 9% 1 January 2013) which is applied on passenger transportation services, cinema performances, physical exercise services, books, pharmaceuticals, entrance fees to commercial cultural and entertainment events and facilities. Supplies of some goods and services are exempt under the conditions defined in the Finnish VAT Act: hospital and medical care; social welfare services; educational, financial and insurance services; lotteries and money games; transactions concerning bank notes and coins used as legal tender; real property including building land; certain transactions carried out by blind persons and interpretation services for deaf persons. The seller of these tax-exempt services or goods is not subject to VAT and does not pay tax on sales. Such sellers therefore may not deduct VAT included in the purchase prices of his inputs. In Iceland, VAT is split into two levels: 25.5% for most goods and services but 7% for certain goods and services. The 7% level is applied for hotel and guesthouse stays, licence fees for radio stations (namely RV), newspapers and magazines, books; hot water, electricity and oil for heating houses, food for human consumption (but not alcoholic beverages), access to toll roads and music. In Norway, VAT is split into three levels: 25% general rate, 15% on foodstuffs and 8% on on the supply of passenger transport services and the procurement of such services, on the letting of hotel rooms and holiday homes, and on transport services regarding the ferrying of vehicles as part of the domestic road [6] network. The same rate applies to cinema tickets and to the television licence. Financial services, health services, social services and educational services are all outside the scope of the VAT [7] [8] Act. Newspapers, books and periodicals are zero-rated. Svalbardhas no VAT because of a clause in the Svalbard Treaty. In Sweden, VAT is split into three levels: 25% for most goods and services, 12% for foods including restaurants bills and hotel stays and 6% for printed matter, cultural services, and transport of private persons. Some services are not taxable for example education of children and adults if public utility, and health and dental care, but education is taxable at 25% in case of courses for adults at a private school. Dance events (for the guests) have 25%, concerts and stage shows have 6%, and some types of cultural events have 0%. MOMS replaced OMS (Danish "omstningsafgift", Swedish "omsttningsskatt") in 1967, which was a tax applied exclusively for retailers.
Description
Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.
Who Are Required To File VAT Returns
Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties and renders services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed One Million Five Hundred Thousand Pesos (P1,500,000.00). A person required to register as VAT taxpayer but failed to register Any person, whether or not made in the course of his trade or business, who imports goods
Monthly VAT Declarations
Tax Form BIR Form 2550 M - Monthly Value-Added Tax Declaration (February 2007 ENCS) Documentary Requirements 1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No. 2307), if applicable 2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Duly approved Tax Credit Certificate, if applicable 5. Authorization letter, if return is filed by authorized representative. Procedures 1. Fill-up BIR Form No. 2550 M in triplicate copies (two copies for the BIR and one copy for the taxpayer) 2. If there is payment: File the Monthly VAT declaration, together with the required attachments, and pay the VAT due thereon with any Authorized Agent Bank (AAB) under the jurisdiction of the Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) where the taxpayer (head office of the business establishment) is registered or required to be registered. The taxpayer must accomplish and submit BIR-prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word "Received" on the return and machine validate the return as proof of filing the return and payment of the tax. In places where there are no duly accredited agent banks, file the Monthly VAT declaration, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered. The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.
3. If there is no payment:
File the Monthly VAT Declaration, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/ City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.
Deadline Manual Filing

Not later than the 20th day following the end of each month Through Electronic Filing and Payment System (eFPS):
Business Industry Period for filing Monthly VAT Declarations
Group A
Insurance and Pension Funding Activities Auxiliary to Financial Intermediation Construction Water Transport Hotels and Restaurants Land Transport
25 days following the end of the month
Group B
Manufacture and Repair of Furniture Manufacture of Basic Metals Manufacture of Chemicals and Chemical Products Manufacture of Coke, Refined Petroleum & Fuel Products Manufacture of Electrical Machinery & Apparatus N.E.C. Manufacture of Fabricated Metal Products Manufacture of Food, Products & Beverages Manufacture of Machinery & Equipment NEC Manufacture of Medical, Precision, Optical Instruments Manufacture of Motor Vehicles, Trailer & Semi-Trailers Manufacture of Office, Accounting & Computing Machinery Manufacture of Other Non-Metallic Mineral Products Manufacture of Other Transport Equipment Manufacture of Other Wearing Apparel Manufacture of Paper and Paper Products Manufacture of Radio, TV & Communication Equipment/ Apparatus Manufacture of Rubber & Plastic Products Manufacture of Textiles Manufacture of Tobacco Products Manufacture of Wood & Wood Products Manufacturing N.E.C. Metallic Ore Mining Non-Metallic Mining & Quarrying
Group C
Retail Sale Wholesale Trade and Commission Trade Sale, Maintenance, Repair of Motor Vehicle, Sale of Automotive Fuel Collection, Purification and Distribution of Water Computer and Related Activities
Real Estate Activities
Group D
Air Transport Electricity, Gas, Steam & Hot Water Supply Postal & Telecommunications Publishing, Printing & Reproduction of Recorded Media Recreational, Cultural & Sporting Activities Recycling Renting of Goods & Equipment Supporting & Auxiliary Transport Services
Group E
Activities of Membership Organizations, Inc. Health and Social Work Public Admin & Defense Compulsory Social Security Research and Development Agricultural, Hunting, and Forestry Farming of Animals Fishing Other Service Activities Miscellaneous Business Activities Unclassified
Quarterly Value-Added Tax Return
Tax Form BIR Form No. 2550Q - Quarterly Value-Added Tax Return (February 2007 ENCS) Attachments to the Return 1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable 2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable 3. Duly approved Tax Debit Memo, if applicable 4. Duly approved Tax Credit Certificate, if applicable 5. Previously filed return and proof of payment, for amended return 6. Authorization letter, if return is filed by authorized representative Procedures 1. Fill-up BIR Form 2550 Q in triplicate copies (two copies for the BIR and one copy for the taxpayer) 2. If there is payment:
File the Quarterly VAT Return, together with the required attachments, and pay the VAT due thereon with any AAB under the jurisdiction of the RDO/LTDO where the taxpayer (head office of the business establishment) is registered or required to be registered.
The taxpayer must accomplish and submit BIR- prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word "Received" on the return and machine validate that return as proof of filing the return and payment of the tax.
In places where there are no duly accredited agent banks, file the Quarterly VAT Return, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered.
The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.
3. If there is no payment: File the Quarterly VAT Return, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.
Reminders: 1. Only one consolidated Monthly VAT Declaration/Quarterly VAT Return shall be filed covering the results of operation of the head office as well as the branches for all lines of business subject to VAT. 2. The Quarterly List of Sales and Purchases shall be submitted in magnetic form using 3.5-inch floppy diskette following the format provided under Section 4.114-3(g) of RR No. 16-2005. 3. The Quarterly List of Sales and Purchases shall be submitted through electronic filing facility for taxpayers under the jurisdiction of the Large Taxpayers Service (LTS) and those enrolled under the eFPS.
Deadline Within twenty five (25) days following the close of taxable quarter.
Tax Rates
On sale of goods and properties - twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged On sale of services and use or lease of properties - twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties On importation of goods - twelve percent (12%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such as tax to be paid by the importer prior to the release of such goods from customs custody; provided, that where the customs duties are determined on the basis of quantity or volume of the goods, the VAT shall be based on the landed cost plus excise taxes, if any. On export sales and other zero-rated sales - 0%
Related Revenue Issuances
Revenue Regulations (RRs)
Issuance No. RR No. 13-2008
SUBJECT Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar; Amending and/or Revoking All Revenue Issuances Issued to this Effect, and for Other Related Purposes Prescribing the Rules on the Advance Payment of Value-Added Tax/Percentage Tax on the Transport of Naturally Grown Planted Timber Products Suspension of the Implementation of Revenue Regulations No. 6-2007 Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking all Revenue Issuances Issued to this Effect, and for Other Related Purposes Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005 Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005 Consolidated Value-Added Tax Regulations of 2005. Implementing Sec. 109(bb) and (cc) of the National Internal Revenue Code, as Amended by RA 9238, Excluding Services Rendered by Doctors of Medicine duly Registered with the Professional Regulatory Commission (PRC), and Services Rendered by Lawyers Duly Registered with the Integrated Bar of the Philippines (IBP) from the Coverage of Value-Added Tax. Supplementing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar as Provided for in RR 2-2004. Further Enhancing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar, Amending RR 7-89 and 29-2002 Advance Payment of VAT on the Sale of Flour Amending Further Pertinent Provisions of RR 2-98 as Amended, Relative to the Issuance of Certificate of Value-Added Tax Withheld at Source, Thereby Amending RR 4-2002; and For the Purpose. Regulations Further Amending the Transitory Provisions of RR 18-99 as Amended by RR 12-2003, Pertaining to the Deadline for the Usage of Properly Stamped Unused Non-VAT Invoices or Receipts. Rules and Regulations To Implement The Remittance of the Following: (a) 70% Share of the ARMM in the Withholding Tax Payments of National Government Agencies (NGAs) and in the National Collections from Taxpayers Other Than NGAs Provided for Under Section 9, Article IX of RA 9054, Amending Therein Certain Sections of RR 4-98; (b)Allotment to the Regional Government (RG) of the 30% Share of the National Government (NG) of all Current Year Collections of Internal Revenue Taxes Within ARMM for a Period of Five (5) Years as may be Provided in the Annual Appropriations Act as Provided for Under Section 15, Article IX of RA 9054; and c) 50% of the 80% Share of the NG from the Yearly Incremental Revenue From VAT Collections Within ARMM Received by the Central Government as Provided for Under Section 15, in Relation to Section 9, both of Article IX of RA 9054 As Well As in Relation to Section 283 of the National Internal Revenue Code (NIRC) of 1997. Enhancing the Rules on the Advance Payment of Value- Added Tax on the Sale of Refined Sugar, thereby Amending RR 7-89, and Other Purposes. Amending Further Pertinent Provisions of RR 7-95, as Amended , With Respect to the Time of Filing of Quarterly VAT Returns; Contents and Submission of Quarterly Total of Monthly Sales and Purchases Per Supplier or Customer, and Providing for the Penalties and Effect of Non-Submission Thereof; and Clarifying Further the Mode of Remittance of VAT Due From Non-Residents. Implementing Republic Act No. 8424, "An Act Amending the National Internal
Date 9/19/2008
RR No. 13 - 2007
10/15/2007
RR No. 11-2007 RR No. 6-2007
8/15/2007 3/21/2007
RR No. 4-2007 RR No. 2-2007 RR 16-2005 RR 7-2004
2/7/2007 12/22/2006 9/1/2005 5/7/2004
RR 4-2004 RR 2-2004 RR 29-2003 RR 28-2003
3/22/2004 1/2/2004 10/30/2003 10/15/2003
RR 27-2003
6/30/2003
RR 5-2003
1/22/2003
RR 29-2002 RR 8-2002
12/9/2002 6/13/2002
RR 2-98
4/17/98
Revenue Code (NIRC) as Amended" relative to the Withholding on Income Subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable VAT and other Percentage Taxes Revenue Memorandum Orders(RMOs) Issuance No. RMO No. 3-2009 SUBJECT Amendment and Consolidation of the Guidelines in the Conduct of Surveillance and Stock-Taking Activities, and the Implementation of the Administrative Sanction of Suspension and Temporary Closure of Business Prescribing the Guidelines and Procedures in the Printing, Requisition, Reporting, Issuance and Distribution of Certificate of Advance Payment of Value-Added Tax/ Percentage Tax on the Transport of Naturally Grown and Planted Timber Products as Prescribed in RR No. 13-2007 Dated October 15, 2007 Prescribing Additional Procedures in the Audit of Input Taxes Claimed in the VAT Returns by Revenue Officers and Amending "Annex B" of RMO No. 53-98 With Respect to the Checklist of Documents to be Submitted by a Taxpayer Upon Audit of his/its VAT Liabilities as well as the Mandatory Reporting Requirements to be Prepared by the Assigned Revenue Officer/s Relative Thereto, All of Which Shall Form an Integral Part of the Docket Prescribing the guidelines and procedures in the processing of applications for zero-rating of effectively zero-rated transactions for Value-Added Tax purposes Suspension of issuance of assessments for deficiency Value-Added Tax against cinema/theater operators/owners Value-Added Tax (VAT) Exemption Certificate/ Identification Card Issued to qualified foreign embassies and their qualified personnel Amending/ Modifying RMO No. 81-99 Prescribing the guidelines and procedures in the implementation of RR No. 292003 on the advance payment of Value-Added Tax on the sale of flour Prescribing the guidelines and procedures in the processing and issuance of Authority to Release Imported Goods (ATRIG) for Excise and Value-Added Tax Purposes Tax treatment of sales of goods, properties and services made by VATregistered suppliers to BOI-registered manufacturers-exporters with 100% export sales Issuance of Value-Added Tax (VAT) Exemption Certificate to all qualified embassies and their personnel Prescribing the Modified Procedures on the Processing of Claims for VAT Credit/ Refund Revenue Memorandum Circulars (RMCs) Issuance No. RMC No. 77-2008 SUBJECT Taxability of Directors Fees Received By Directors Who are not Employees of the Corporation for VAT or Percentage Tax Purposes as Espoused Under Revenue Memorandum Circular No. 34-2008 Clarification of Issues Concerning Common Carriers by Air and Their Agents Relative to the Revenue and Receipt from Transport of Passengers, Goods/Cargoes and Mail, and from Excess Baggage Tax Treatment of Directors Fees for Income Tax and Business Tax Purposes Clarifying the Effect of Suspension of RR No. 6-2007, Otherwise Known As the "Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking All Revenue Issuances Issued to this Effect and for Other Related Purposes" Reiteration of the Amendment Made by RA No. 9337 Imposing VAT on the Sale of Non-Food Agricultural Products, Marine and Forest Products and on the Sale of Cotton and Cotton Seeds in their Original State Date 11/24/2008 Date 1/15/2009
RMO No. 6-2008
12/31/2007
RMO No. 16-2007
7/20/2007
RMO No. 7-2006
12/15/2005
RMO No. 26-2005 RMO No. 22-2004
10/11/2005 5/24/2004
RMO No. 5-2004 RMO No. 35-2002
12/29/2003 10/28/2002
RMO No. 9-2000
2/2/2000
RMO No. 81-99 RMO No. 40-94
10/8/1999 5/6/1994
RMC No. 46-2008
2/1/2008
RMC No. 34-2008 RMC No. 59-2007
4/15/2008 9/12/2007
RMC No. 53-2007
8/7/2007
RMC No. 39-2007 RMC No. 35-2006 RMC No. 31-2006 RMC No. 30-2006
Clarifying the Income Tax and VAT Treatment of Agency Fees/Gross Receipts of Security Agencies Including the Withholding of Taxes Due Thereon Clarifying the Proper VAT and EWT Treatment of Freight and Other Incidental Charges Billed by Freight Forwarders Value Added Tax (VAT) on the Construction or Renovation of Official Buildings or Properties of the United States of America Embassy Prescribing the Submission of a Narrative Memorandum Report to Accompany the VAT Credit Evaluation Report and Requiring the Attachment of Certain Documents Prior to Approval of the Tax Credit Certificate (TCC) Recommended by the Tax and Revenue Group (TRG), Department of Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOFOSS) Clarifying certain issues relating to the implementation of the increase in the Value-Added Tax rate from 10% to 12% on the sale of goods pursuant to Republic Act No. 9337 Clarification of Issues on How to Fill-up the new Version of VAT Forms (September, 2005 Version) and other Related Issues Clarifying certain issues relating to the implementation of the increase in the VAT rate from 10% to 12% pursuant to Republic Act No. 9337 Prescribing the use of the Government Money Payment Chart Implementing Sections 2.57.2, 4.114 and 5.116 of Revenue Regulations No. 2-98 as amended by Revenue Regulations No. 16-2005 in relation to Sections 57 (B), 114 (C) and 116 to 123 of Republic Act No. 8424 as amended by Republic Act No. 9337 Transition procedures for all Electronic Filing and Payment System filers (Large Taxpayers/Top 10,000 Corporations) in filing tax returns affected by the new VAT Law (R.A. 9337) Enhanced VAT forms BIR Form No. 2550M (Monthly Value-Added Tax Declaration) and BIR Form No. 2550Q (Quarterly Value-Added Tax Return) September 2005 version Revised guidelines in the registration and invoicing requirements including clarification on common issues affecting Value-Added Tax (VAT) taxpayers Pursuant to RA No. 9337 (An Act Amending Sections 27, 28, 34, 106, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, as Amended, and for other Purposes) Attachments to the quarterly VAT return to be filed starting October 25, 2005 Value-Added Tax (VAT) Liability of the Tollway Industry Clarifying the provisions of Republic Act No. 9337 (VAT Law of 2005) applicable to the petroleum industry Clarification on proper determination of amount of Value-Added Tax on VAT invoices or VAT official receipts Clarification regarding the withholding of creditable Value-Added Tax by government offices for purchases of P1,000.00 and below Settlement of the Value-Added Tax liabilities of pawnshops for taxable years 1996 to 2002 Guidelines and Policies Applicable to the Business Tax Applicable to Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions and other Non-Bank Financial Intermediaries As A Result of the Enactment and Effectivity of Republic Act No. 9238, An Act Amending Certain Provisions of the National Internal Revenue Code of 1997, As Amended, by Excluding Several Services from the Coverage of the Value-Added Tax and Re-Imposing the Gross Receipts Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions and Other Non-Bank Financial Intermediaries Beginning January 1, 2004
1/22/2007 6/21/2006 5/29/2006 3/23/2006
RMC No. 22-2006
4/5/2006
RMC No. 21-2006 RMC No. 8-2006 RMC No. 5-2006
3/24/2006 1/31/2006 11/2/2005
RMC No. 72-2005
12/16/2005
RMC No. 68-2005
12/1/2005
RMC No. 62-2005
10/18/2005
10/18/2005 9/28/2005 6/29/2005 11/20/2004
RMC No. 70-2004
8/20/2004 6/16/2004 2/19/2004
RMC No. 6-2003
Clarifying Certain Issues Relative to the Services Rendered by Individual Professional Practitioners, General Professional Partnerships, Entertainers, and Professional Athletes Who Are Subject to the Value-Added Tax or Percentage Tax, Whichever is Applicable, Beginning January 1, 2003 Clarifying the issues on VAT taxable transactions of Philippine Ports Authority Amending Revenue Memorandum Circular No. 20-88, Pursuant to Republic Act No. 7716 As Implemented by Revenue Regulations No. 7-95 Issuance of VAT Invoices/Receipt for Non-VAT/Exempt Sale of Goods, Properties or Services Amending Answer to Question Number 17 of Revenue Memorandum Circular No. 42-2003 and Providing Additional Guidelines on Issues Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters Clarifying certain issues raised relative to the processing of claims for ValueAdded Tax (VAT) credit/refund, including those filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters Clarification of Paragraph 1-Q of Revenue Memorandum Circular No. 282003 Taxability of Health Maintenance Organizations (HMOs) for VAT purposes. Taxability of Pawnshop Operators for VAT Purposes Taxability of Movie/Cinema House Operators for VAT Purposes Disseminating the Ruling of the Commissioner of Internal Revenue on the Non-eligibility for VAT Zero-Rating of Automobile Sales to Entities Registered with PEZA, SBMA and Clark Development Authority Japanese Contractors undertaking Overseas Economic Cooperation Fund of Japan (OECF) Funded Project are Exempt from the eight and one half percent (8.5%) creditable VAT imposed under Section 114(C) of the Tax Code of 1997 and to the One Percent (1%) Expanded Withholding Tax (EWT) imposed under Section 2.57.2(E) of RR No. 2-98 implementing Section 57(B) of the Tax Code of 1997
1/15/2003
RMC No. 2-2004
12/26/2003
RMC No. 61-2003 RMC No. 49-2003
10/6/2003 8/15/2003
RMC No. 42-2003
7/15/2003
RMC No. 30-2003 RMC No. 56-2002 RMC No. 45-2001 RMC No. 28-2001 RMC No. 25-99
5/20/2003 12/13/2002 10/12/2001 7/2/2001 3/18/1999
RMC No. 32-99
I. General VAT Queries Who are liable to register as VAT taxpayers? Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if: a. b. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos (P1,500,000.00): or There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).
When is a new VAT taxpayer required to apply for registration and pay the registration fee? New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding registration fee of five hundred pesos (P500.00) using BIR Form No. 0605 for every separate or distinct establishment or place of business before the start of their business following existing issuances on registration. Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos (P500.00) not later than January 31, every year. What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically? The following compliance activities must be performed by a VAT-registered taxpayer: a. Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales;
b. c. d.
e.
Register the books of accounts of the business/occupation/calling, including practice of profession, before using the same; Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use on transactions subject to VAT. (If there are other transaction not subject to VAT, a separate set of non-VAT invoices or non-VAT official receipts need to be registered for use on transactions not subject to VAT); Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable month (for manual filers)/on or before the prescribed due dates enunciated in RR No. 16-2005 (for e-filers) using BIR Form No. 2550M and of the Quarterly VAT Return on or before the 25th day following the end of the taxable quarter using BIR Form No. 2550Q, reflecting therein gross receipts (for seller of service)/ gross sales (for seller of goods) and output tax (VAT on sales); purchases of goods and services made in the course of trade or business/exercise of profession and input tax (VAT on purchases), other allowable tax credits as in the case of advance VAT payment and VAT withheld by government payors, and VAT payable or excess input VAT, whichever is applicable, with the accredited agent banks (AABs) of the BIR or Revenue Collection Officers (RCOs) of the BIR (in areas without AAB), for returns with payment, or with the RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns without payment. (The monthly VAT Declaration and the Quarterly VAT Return shall reflect the consolidated total for all the taxable lines of activity and all the establishments - head office and branches); Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax (if the quarterly sales exceed P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic Purchases and Input Tax/ the soft copy of the Schedule of Transactional/Individual Importation ( if the quarterly total purchases exceed P1,000,000.00), reflecting therein the required data prescribed under existing revenue issuances.
How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities? In determining the main or principal business of a taxpayer, we apply the predominance test. Under this test, if more than fifty (50%) of its gross sales and/or gross receipts comes from its business/es subject to VAT, its main/principal business falls within the VAT system making its status as a VAT person. Otherwise, he can not be considered as a VAT person eligible for the election provided for under Section 109(2) of the Tax Code. What is the liability of a taxpayer becoming liable to VAT and did not register as such? Any person who becomes liable to VAT and fails to register as such shall be liable to pay the output tax as if he is a VATregistered person, but without the benefit of input tax credits for the period in which he was not properly registered. Who may opt to register as VAT and what will be his liability? 1. 2. 3. 4. Any person who is VAT-exempt under Sec. 4.109-1 (B) (1) (V) not required to register for VAT may, in relation to Sec. 4.109-2, elect to be VAT-registered by registering with the RDO that has jurisdiction over the head office of that person, and pay the annual registration fee of P500.00 for every separate and distinct establishment. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed transactions) may opt that the VAT apply to his transactions which would have been exempt under Section 109(1) of the Tax Code, as amended [Sec. 109(2)]. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed ten million pesos (P10,000,000.00) derived from the business covered by the law granting the franchise may opt for VAT registration. This option, once exercised, shall be irrevocable. (Sec. 119, Tax Code). Any person who elects to register under optional registration shall not be allowed to cancel his registration for the next three (3) years.
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the calendar quarter and shall pay the registration fee unless they have already paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. Once registered as a VAT person, the taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day of the month following registration. What are the instances when a VAT-registered person may cancel his VAT registration? 1. 2. If he makes a written application and can demonstrate to the commissioner's satisfaction that his gross sales or receipts for the following twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will not exceed one million five hundred thousand pesos (P1,500,000.00); or If he has ceased to carry on his trade or business, and does not expect to recommence any trade or business within the next twelve (12) months.
When will the cancellation for registration be effective? The cancellation for registration will be effective from the first day of the following month the cancellation was approved. What is the invoicing/ receipt requirement of a VAT-registered person? A VAT registered person shall issue : 1. 2. A VAT invoice for every sale, barter or exchange of goods or properties; and A VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services.
May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions?
Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided that the invoice or receipt shall clearly indicate the break-down of the sales price between its taxable, exempt and zero-rated components and the calculation of the Value-Added Tax on each portion of the sale shall be shown on the invoice or receipt. May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-VAT transactions? Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and zero-rated component of its sales provided that if the sales is exempt from value-added tax, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt and if the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice or receipt. How is the Value-Added Tax presented in the receipt/ invoice? The amount of the tax shall be shown as a separate item in the invoice or receipt. Sample: Sales Price VAT Invoice Amount 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. P100,000.00 12,000.00 P112,000.00
What is the information that must be contained in the VAT invoice or VAT official receipt? Name of Seller Business Style of the Seller Business Address of the Seller Statement that the seller is a VAT-registered person, followed by his TIN Name of Buyer Business Style of Buyer Address of Buyer TIN of buyer, if VAT- registered and amount exceed P1,000.00 Date of transaction Quantity Unit cost Description of the goods or properties or nature of the service Purchase price plus the VAT, provided that:
The amount of tax shall be shown as a separate item in the invoice or receipt; If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt; If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice receipt; and
If the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate the breakdown of the sales price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. 14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt. What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt? The non-VAT registered person shall, in addition to paying the percentage tax applicable to his transactions, be liable to VAT imposed in Section 106 or 108 of the Tax Code without the benefit of any input tax credit plus 50% surcharge on the VAT payable (output tax). If the invoice/ receipts contain the required information, purchaser shall be allowed to recognize an input tax credit. What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT-exempt transactions? If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction but fails to display prominently on the invoice or receipt the words "VAT-EXEMPT SALE", the transaction shall become taxable and the issuer shall be liable to pay the VAT thereon. The purchaser shall be entitled to claim an input tax credit on his purchase. What is "output tax"? Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or services by any person registered or required to register under Section 236 of the Tax Code. What is "input tax"? Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods, properties or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period. What comprises "goods or properties"? The term "goods or properties" shall mean all tangible and intangible objects, which are capable of pecuniary estimation and shall include, among others: a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
b. c. d. e.
The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; The right or privilege to use in the Philippines of any industrial, commercial or scientific equipment; The right or the privilege to use motion picture films, films, tapes and discs; and Radio, television, satellite transmission and cable television time.
What comprises "sale or exchange of services"? The term "sale or exchange of services" means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, whether in kind or in cash, including those performed or rendered by the following: a. b. c. d. e. f. g. h. i. j. k. l. m. n. Construction and service contractors; Stock, real estate, commercial, customs and immigration brokers; Lessors of property, whether personal or real; Persons engaged in warehousing services; Lessors or distributors of cinematographic films; Persons engaged in milling, processing, manufacturing or repacking goods for others; Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts, theatres, and movie houses; Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places, including clubs and caterers; Dealers in securities; Lending investors; Transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes; Common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines; Sales of electricity by generation, transmission, and/or distribution companies; Franchise grantees of electric utilities, telephone and telegraph, radio and/or television broadcasting and all other franchise grantees, except franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed Ten Million Pesos (P10,000,000.00), and franchise grantees of gas and water utilities; Non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and Similar services regardless of whether or not the performance thereof calls for the exercise of use of the physical or mental faculties.
o. p.
The phrase "sale or exchange of services" shall likewise include: a. b. c. d. e. f. g. h. The lease of use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; The lease or the use of, or the right to use of any industrial, commercial or scientific equipment; The supply of scientific, technical, industrial or commercial knowledge or information; The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right or any such knowledge or information; The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person; The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme; The lease of motion picture films, films, tapes and discs; and The lease or the use of or the right to use radio, television, satellite transmission and cable television time.
What is a zero-rated sale? It is a sale, barter or exchange of goods, properties and/or services subject to 0% VAT pursuant to Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sales, shall be available as tax credit or refund in accordance with RR No. 16-2005. What transactions are considered as zero-rated sales? The following services performed in the Philippines by VAT-registered person shall be subject to zero percent (0%) rate: a. b. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); Services rendered to persons or entities whose exemption under special laws or international agreements to which
c.
d.
e. f.
g.
the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting Feb. 1, 2006; Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceeds seventy percent (70%) of total annual production; Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. Gross receipts of international air carriers doing business in the Philippines and international sea carriers doing business in the Philippines are still liable to a percentage tax of three percent (3%) based on their gross receipts as provided for in Sec. 118 of the Tax Code but shall not be liable to VAT; and Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other shipping sources using technologies such as fuel cells and hydrogen fuels; Provided, however that zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power .
The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: a. Export sales o The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, paid in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); o The sale of raw materials or packaging materials to a non-resident buyer for delivery to as resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods, paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP; o The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; o Sale of gold to the BSP; o Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws; and o The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations; Provided, that the same is limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port, or vice-versa without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than the mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to twelve percent (12%) output VAT. Foreign Currency Denominated Sales
b.
The sale to a non-resident of goods, except those mentioned in Sections 149 and 150 of the Tax Code, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. c. Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement
Sale of goods or property to persons or entities who are tax-exempt under special laws or international agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc. Where will taxpayers file their applications for VAT zero-rating? Taxpayers shall file their application directly with the Audit Information, Tax Exemption and Incentives Division (AITEID) under the Assessment Service, or with the LTAID I and II, BIR National Office, as the case may be. What is a Contractor's Final Payment Release Certificate and where should taxpayers file their application for this? The Contractor's Final Payment Release Certificate is issued by the BIR before a government contractor is fully paid for his contract with the government. Taxpayers may file their application at the BIR National Office at the Audit Information, Tax Exemption and Incentives Division (AITEID) What transactions are considered deemed sales? The following transactions are considered as deemed sales:
a. b.
Transfer, use or consumption, not in the course of business, of goods or properties originally intended for sale or for use in the course of business. Transfer of goods or properties not in the course of business can take place when VAT-registered person withdraws goods from his business for his personal use; Distribution or transfer to: o Shareholders or investors as share in the profits of the VAT-registered person; or o Creditors in payment of debt or obligation Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period are not deemed sold; Retirement from or cessation of business, with respect to all goods on hand, whether capital goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or successor. The following circumstances shall, among others, give rise to transactions "deemed sale"; o Change of ownership of the business. There is a change in the ownership of the business when a single proprietorship incorporated; or the proprietor of a single proprietorship sells his entire business. o Dissolution of a partnership and creation of a new partnership which takes over the business.
c. d.
What is VAT-exempt sale? It is a sale of goods, properties or service and the use or lease of properties which is not subject to output tax and whereby the buyer is not allowed any tax credit or input tax related to such exempt sale. What are the VAT-exempt transactions? a. b. c. d. Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefore; Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals considered as pets); Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-resident citizens coming to resettle in the Philippines; Provided, that such goods are exempt from custom duties under the Tariff and Customs Code of the Philippines; Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery and other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bonafide; Services subject to percentage tax under Title V of the Code, as amended; Services by agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw sugar; Medical, dental, hospital and veterinary services except those rendered by professionals; Educational services rendered by private educational institutions duly accredited by the Department of Education (DepED), the Commission on Higher Education (CHED) and the Technical Education and Skills Development Authority (TESDA) and those rendered by the government educational institutions; Services rendered by individuals pursuant to an employer-employee relationship; Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines; Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws except those granted under P.D. No. 529 - Petroleum Exploration Concessionaires under the Petroleum Act of 1949; Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA) to their members, as well as of their produce, whether in its original state or processed form, to nonmembers, their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce; Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good standing with the Cooperative Development Authority; Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in good standing with CDA; Provided, that the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P15,000.00) and regardless of the aggregate capital and net surplus ratably distributed among the members; Export sales by persons who are not VAT-registered; The following sales of real properties are exempt from VAT, namely: 1. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business; 2. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the "Urban Development and Housing Act of 1992" and other related laws, such as RA No. 7835 and RA No. 8763; 3. Sale of real properties utilized for specialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws;
e. f. g. h. i. j. k. l.
m. n. o. p.
q.
r. s.
t.
u.
v.
w. x.
Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or house and lot and other residential dwellings valued at Two Million Five Hundred Thousand Pesos (P2,500,000.00) and below where the instrument of sale/ transfer/ disposition was executed on or after July 1, 2005; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year. Lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos (P10,000.00), regardless of the amount of aggregate rentals received by the lessor during the year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO; Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements; Sale, importation or lease of passenger or cargo vessels and aircraft, including engine equipment and spare parts thereof for domestic or international transport operations; Provided, that the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be limited to those of one hundred fifty (150) tons and above, including engine and spare parts of said vessels; Provided, further, that the vessels to be imported shall comply with the age limit requirement, at the time of acquisition counted from the date of the vessel's original commissioning, as follows: (a) for passenger and/or cargo vessel, the age limit is fifteen (15) years old, (b) for tankers, the age limit is ten (10) year old, and (c) for high-speed passengers crafts, the age limit is five (5) years old; Provided, finally, that exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping Development Act of 2004"; Importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates, used for shipping transport operations; Provided, that the exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping Development Act of 2004". Importation of capital equipment, machinery, spare parts, life-saving and navigational equipment, steel plates and other metal plates including marine-grade aluminum plates to be used in the construction, repair, renovation or alteration of any merchant marine vessel operated or to be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions of Section 19 of Republic Act No. 9295, otherwise known as the "The Domestic Shipping Development Act of 2004". Importation of fuel, goods and supplies engaged in international shipping or air transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice-versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated form abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other that the mentioned in the paragraph, such portion of fuel, goods and supplies shall be subject to 12% VAT; Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Sections 121 and 122, respectively of the Tax Code; and Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00). Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shall be adjusted to its present value after using the Consumer Price Index, as published by the NSO.
4.
What are the previously exempt transactions that are now subject to VAT?
Medical services such as dental & veterinary services rendered by professionals; Legal services; Non-food agricultural products; Marine and forest products; Cotton and cotton seeds; Coal and natural gas; Petroleum products; Passenger cargo vessels of more than 5,000 tons; Work of art, literary works, musical composition; Generation, transmission and distribution of electricity including that of electric cooperatives; Sale of residential lot valued at more than P1,500,000.00; Sale of residential house & lot/dwellings valued at more than P2,500,000.00; Lease of residential unit with a monthly rental of more than P10,000;
II. RELIEF-Related Queries What is "RELIEF"? RELIEF means Reconciliation of Listing for Enforcement. It supports the third party information program of the Bureau through the cross referencing of third party information from the taxpayers' Summary Lists of Sales and Purchases prescribed to be submitted on a quarterly basis. Who are required to submit Summary List of Sales? VAT taxpayers with quarterly total sales/receipts (net of VAT), exceeding Two Million Five Hundred Thousand Pesos (P2,500,000.00) are required to submit a Summary List of Sales. Who are required to submit Summary List of Purchases? VAT taxpayers with quarterly total purchases (net of VAT) of goods and services, including importation exceeding One Million Pesos (P1,000,000.00) are required to submit Summary List of Purchases. What are the Summary Lists required to be submitted?
Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/ Customers and Output Tax Quarterly Summary of List of Local Purchases and Input tax; and Quarterly Summary List of Importation.
When is the deadline for submission of the above Summary Lists?
The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or before the twney-fifth (25th) day of the month following the close of the taxable quarter -- calendar quarter or fiscal quarter.
What are the penalties for failure to submit the Summary Lists?
For failure to file, keep or supply a statement, list or information required on the date prescribed shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for each such failure, unless it is shown that such failure is due to reasonable cause and not to willful neglect; and An aggregate amount to be imposed for all such failures during a taxable year shall not exceed Twenty-Five Thousand Pesos (P25,000.00).
III. What is the treatment for Withholding of VAT on Government Money Payments?
The goverment or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or services taxed at twelve percent (12%) VAT pursuant to Sections 106 and 108 of the Tax Code, deduct and withhold a Final VAT due at the rate of five percent (5%) of the gross payment.
The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller. The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Should actual input VAT attributable to sales to government exceeds seven percent (7%) of gross payments, the excess may form part of the sellers' expense or cost. On the other hand, if actual input VAT attributable to sale to government is less than seven percent (7%) of gross payment, the difference must be closed to expense or cost.
The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall withhold twelve percent (12%) VAT with respect to the following payments:
1. 2.
Lease or use of properties or property rights owned by non-residents; and Other services rendered in the Philippines by non-residents.
IV. In what grounds can the Commissioner of Internal Revenue suspend the business operations of a taxpayer?
The Commissioner or his authorized representative is empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations: (a) In the case of a VAT-registered Person:
Failure to issue receipts or invoices; Failure to file a value-added-tax return as required under Section 114; or Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.
(b) Failure to any Person to Register as Required under Section 236
The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.
Scope and Rates

What supplies are liable to VAT?
VAT is an indirect tax imposed on the sale, barter, exchange or goods and/or properties, on the sale of services in the Philippines, and on the importation of goods in the Philippines.
1.
Sale of Goods and Properties
The term goods or properties refers to all tangible and intangible objects which are capable of pecuniary estimation and shall include, among others:
real properties held primarily for sale to customers or held for lease the right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right the right or the privilege to use any industrial commercial or scientific equipment the right or the privilege to use motion picture films, films, tapes and discs and radio, television, satellite transmission and cable television time.
Also, included in the sale of goods or properties are transactions considered as deemed sale and subject to 12 percent VAT, such as
Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business; e.g., withdrawal of goods from business for personal use of employees. Distribution or transfer: as property dividends which constitute stocks in trade or properties primarily held for sale or lease declared out of retained earnings and distributed to shareholders and
to creditors in payment of debt or obligation. consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. retirement from or cessation of business with respect to inventories of taxable goods, existing goods as of the date of such retirement or cessation of business.
2.
Importation of Goods
VAT is imposed on goods brought into the Philippines, whether for use in business or not, unless specifically exempted. VAT will apply to technical importation of goods sold by a person located in the special economic zone to a customer located outside the economic zone.
3.
Sale of Services and Use or Lease of Properties
Sale or exchange of services" means the performance of all kind of services in the Philippines for others for a fee, remuneration or consideration, whether in kind or in cash, including those performed or rendered, among others, by the following:
construction and service contractors lessors of property, whether personal or real lessors or distributors of cinematographic films proprietors or operators of hotels, rest houses, pension houses, inns, resorts proprietors or operators of restaurants, cafes and other eating places, including clubs and caterers dealers in securities lending investors common carriers by air and sea relative to their transport of passengers, goods or cargoes sales of electricity by generation, transmission, and/or distribution companies franchise grantees of electric utilities, telephone and telegraph, radio and/or television broadcasting and all other franchise grantees non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies the use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right the supply of services by a non-resident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person the supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme the lease of motion picture films, films, tapes, and discs; and the lease or the use of, or the right to use, radio, television, satellite transmission and cable television time.
What is the standard rate of VAT?
The standard rate of VAT is 12 percent of the gross selling price or gross receipts.
Are there any reduced rates, zero rates, or exemptions?
The Philippine VAT laws provide for transactions subject to zero-percent rate or VAT exempt.
VAT exempt transactions refer to sale of goods or properties and/or services not subject to VAT (output tax) and the seller is not allowed any tax credit of input VAT. On February 2012, the thresholds of certain VAT exempt transactions were increased, as follows:
1. 2. 3. 4.
sale of residential lot valued at one million nine hundred nineteen thousand five hundred Philippine pesos
(Php1,919,500.00) and below sale of house and lot and other residential dwellings valued at Three million one hundred ninety-nine thousand two hundred Philippine pesos (Php3,199,200.00) and below lease of residential unit with a monthly rental not exceeding Twelve thousand eight hundred Philippine pesos (Php12,800.00) and sale of goods or properties or performance of service, the gross annual sales and/or receipts does not exceed One million nine hundred nineteen thousand five hundred Philippine pesos (Php1,919,500.00).
Other VAT example sales are: educational services; services rendered by individuals pursuant to an employee-employer relationship; services rendered by regional or area headquarters established in the Philippines by multinational corporations; and the sale, importation or lease of passenger or cargo vessels and aircraft including engine, equipment and spare parts for domestic or international transport operations.
A zero-percent (0 percent) rated sale of goods or properties, on the other hand, is a taxable transaction for VAT purposes but shall not result in any output tax. Instances of 0 percent rated VAT are:
services rendered in the Philippines to a non-resident person/entity not engaged in business in the Philippines, wherein the service fee is paid for in foreign currency in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas and Sale of power of fuel generated through renewable sources of energy such as but not limited to biomass, solar, wind, hydropower, geothermal, ocean energy, and other energy sources using technologies such as fuel cells and hydrogen fuels.
What are the other local indirect taxes beside VAT?
Percentage taxes percentage tax on domestic carriers and keepers of garages
o o o o o o o o o o o o
percentage tax on international carriers tax on franchises tax on overseas dispatch, message or conversation originating from the Philippines tax on banks and non-bank financial intermediaries tax on finance companies tax on life insurance premiums tax on agents of foreign insurance companies amusement taxes tax on winning tax on sale, barter or exchange of shares of stock listed and traded through the local stock exchange or through Initial Public Offering. Excise taxes payment of excise taxes on imported articles excise tax on alcohol, tobacco, petroleum, mineral products and other miscellaneous items. Customs duty. top
Registration
Who is required to register for local VAT?
Any person or entity who, in the course of trade or business, sells, exchanges or leases goods or properties, or renders services, and any person who imports goods, shall be liable to VAT; hence, as a general rule, required to register as a VAT taxpayer. A tax identification number (TIN) shall be provided by the Bureau of Internal Revenue (BIR) to a taxpayer, which shall be applied for all tax types, including income tax and VAT. There is no separate registration for VAT only.
Persons Required to Register for Value-added Tax
See discussion immediately above. However, if gross sales or receipts per annum is One million nine hundred nineteen thousand five hundred Philippine pesos (P1,919,500.00) or less, the taxpayer may opt to be exempted from VAT, but will then be subject to percentage tax of 3 percent of gross quarterly sales or receipts.
Optional Registration for Value-added Tax of Exempt Person
Any person who is not required to register for VAT may elect to register for VAT, which shall not be cancelled for the next three (3) years.
To deal with their VAT affairs, businesses which are not established in the European Union, must appoint a VAT representative with joint and several liability to the tax authorities.
Are there penalties for not registering or late registration?
Persons/entities required to be VAT registered and fails to register will still be liable to output tax as if a VAT-registered person, but without the benefit of input tax credits in the period in which the taxpayer was not properly registered. In addition to other administrative and penal sanctions provided for in the Tax Code and implementing rules and regulations, the Commissioner of Internal Revenue or his duly authorized representative may order the suspension or closure of a business establishment for a period of not less than five (5) days.
Is voluntary VAT registration possible for an overseas company?
No. In order for a taxpayers identification number (TIN) shall be issued by the Bureau of Inter nal Revenue, a license to transact business with the Philippines is required. Therefore, effectively overseas company will have an investment entity, such as a branch or subsidiary in the Philippines in order to be issued a TIN and to be considered registered under the VAT system.
Services performed in the Philippines by an overseas company, including lease of properties or royalty, will be subject to withholding VAT.
Are there any simplifications that could avoid the need for an overseas company to register for VAT?
Under the Philippine VAT system there is no registration solely for VAT. When applicable, the mechanism in the Philippines is withholding VAT on payments to an overseas company.
Does an overseas company need to appoint a fiscal representative?
The appointment of a fiscal representative is not required. In the case of payment to overseas company subject to VAT, the Philippine taxpayer paying for the services shall withhold the VAT. top
VAT grouping
Is VAT grouping possible?
There is no VAT grouping under the Philippine VAT system.
Can an overseas company be included in a VAT group?
There is no VAT grouping under the Philippine VAT system. top
Returns
How frequently are VAT returns submitted?
See below.
Are there any other returns that need to be submitted?
In general, every taxpayer liable to pay VAT shall file the following returns:
monthly VAT declaration within twenty (20) days after the end of the month quarterly VAT Return [BIR Form No. 2550Q] within twenty-five (25) days following the close of taxable quarter and if applicable, Remittance Return of VAT and Other Percentage Taxes Withheld [BIR Form No. 1600] for those required to withhold VAT.
If a business receives a purchase invoice in foreign currency, which exchange rate should be used for VAT reporting purposes? (e.g. central banks exchange rate applicable on the date of the invoice)
Actual conversion or the prevailing Philippine Dealing System (PDS) exchange rate on transaction date, whichever is applicable. top
VAT recovery
Can a business recover VAT if it is not registered?
No. Under Philippine laws, only VAT-registered person are entitled to claim creditable input VAT and/or to file a claim for refund on excess input VAT.
Does your country apply reciprocity rules for reclaims submitted by non-established businesses?
No. Not applicable in the Philippines.
Are there any items that businesses cannot recover VAT on?
Only the following excess input tax may be claimed as refund:
excess input tax attributable to 0 percent rated sales and excess input VAT upon closure or cessation of business. Hence, excess input tax attributable to exempt sales may not be claimed as refund. Finally, excess input tax subject of a refund must be fully substantiated. top
International Supplies of Goods and Services

How are exports of goods and services treated?
Exports of goods and services are subject to VAT at zero-percent (0 percent) rate.
How are goods dealt with on importation?
Importation of goods is subject to 12 percent VAT, as a general rule.
How are services which are brought in from abroad treated for VAT purposes?
The tax situs of the performance of services is the place where services were performed. Thus, all services performed in the Philippines shall be subject to 12 percent VAT, as a general rule. Services performed outside of the Philippines are not subject to VAT. top
Invoices
Is a business required to issue tax invoices?
A VAT-registered person is required to issue:
1. 2.
a VAT invoice for every sale, barter or exchange of goods or properties or a VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.
What do businesses have to show on a tax invoice?
A VAT-registered person shall issue:
a VAT invoice for every sale, barter or exchange of goods or properties and a VAT official receipt for every sale or exchange of services, including lease of goods or properties.
The following information shall be indicated in VAT invoice or VAT official receipt:
o o o o
a statement that the seller is a VAT-registered person the total amount which the purchaser pays or is obligated to pay to the seller with the indication whether or not such amount is subject to VAT hence: the amount of tax shall be shown as a separate item in the invoice or receipt if the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt if the sale is subject to zero-percent VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt and if the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or VATexempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zerorated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.
The name, address and TIN of the purchaser, customer or client, shall also be indicated in the invoice or official receipt.
Can businesses issue invoices electronically?
Philippine seller of goods can provide e-invoices with prior approval from the Philippine tax authorities.
Is it possible to operate self-billing?
This option is not available under Philippine laws and regulations.
Can a business issue VAT invoices denominated in a foreign currency?
Yes. top
Transfers of Business
Is there a relief from VAT for the sale of a business as a going concern?
Philippine VAT laws and regulations provide for transaction deemed sale on the transfer, use or consumption of goods or properties not in the course of business but originally intended for sale or for use in the course of business. Philippine tax courts had the occasion to hold that VAT applies to a supply [sale] in the course or furtherance of business includes: (1) the disposition of the assets and liabilities of a business, (2) the disposition of a business as going concern; and (3) anything done in connection with the termination or intended termination of a business. Different rules apply to mergers and consolidations which may be exempt from VAT. top
Options to Tax
Are there any options to tax transactions?
N/A. top
Head Office and Branch transactions

How are transactions between head office and branch treated?
The VAT treatment of the transactions between the foreign head office and its Philippine branch office has been the subject of conflicting point of views. However, the prevailing view considers the transaction between the head office and branch as distinct from the single corporate entity concept and that sale of service may qualify for zero-rated VAT . top
Bad Debt
Are businesses able to claim relief for bad debts?
No. Relief for bad debts under the Philippine VAT law is unavailable. top
Anti-Avoidance
Is there a general anti-avoidance provision under VAT law?
The Philippine Tax Code provides that any person who willfully attempts in any manner to evade or defeat any tax imposed under the Tax Code or the payment thereof shall, in addition to other penalties provided by law, upon conviction shall be punished by a fine of not less than Php30,000 but not more than Php100,000 and suffer imprisonment of not less than two (2) years but not more than four (4) years.
top
Penalty Regime
What is the penalty and interest regime like?
In general, the penalties are the following:
interest is at the rate of 20 percent per annum from the date prescribed for payment until the amount is fully paid 25 percent surcharge on basic deficiency tax imprisonment ranging from not less than one year to not more than ten years, depending on the infraction and closure of business temporary/permanent, depending on the infraction. top
Tax authorities
Tax audits
How often do tax audits take place?
Tax audits by the BIR may be conducted or authorized yearly. As a rule, however, internal revenue taxes may only be assessed within the 3-year prescriptive period. In case of a false or fraudulent return with intent to evade tax or failure to file a return, the tax may be assessed at any time within 10 years after the discovery of the falsity, fraud, or omission. As a general principle, deficiency tax findings of the BIR have the presumption of correctness; hence, the burden to proof is with the taxpayer.
Are there audits done electronically in your country (e-audit)? If so, what system is in use?
Tax audits are still done manually, as generally understood. However, with the implementation of the Electronic Filing and Payment System (commonly referred to as eFPS) and the increase in the use of computerized accounting system especially by multinational companies, financial and tax data in electronic form are now more frequently used; e.g., returns electronically submitted to the BIR system. Correspondence and tax audit findings are however still required to be issued and manually received.
Advance rulings and decisions from the tax authority
Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?
Yes, application for a formal ruling with the BIR is allowed. However, only actual transactions may be the subject of a confirmatory ruling. Hypothetical transactions are not ruled upon as a matter of policy.
Are rulings and decisions issued by the tax authorities publicly available in your country?
Yes, copies of the rulings may be sourced directly from the National Office of the BIR and/or its website. Decisions of the tax courts, the three divisions of the Court of Tax Appeals and Court of Tax Appeals En Banc, are available from the said courts directly. While Supreme Court decisions may be accessed through its website - http://sc.judiciary.gov.ph . top
Miscellaneous
In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?
Withholding of VAT on sales to Philippine Government: there is a 5 percent withholding VAT mechanism imposed on the sale of goods and/or services to the Philippine government or any of its political subdivisions, instrumentalities or agencies including government owned that is and controlled corporations prior to reporting the sale of goods and/or services as transactions subject to 12 percent VAT
transitional input VAT presumptive input VAT.
VAT regime for construction work and scrap
Yes. For instance, entities located and registered with designated Philippine economic zones may enjoy a 5 percent preferential tax rate on gross income that is in lieu of all other taxes; hence, sales are effectively exempt from VAT.
A collection of Philippine laws, statutes and codes not included or cited in the main indices of the Chan Robles Virtual Law Library.
This page features the full text of Republic Act No. 7716 AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASED AND ENHANCING ITS ADMINISTRATION
AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES.
REPUBLIC ACT NO. 7716
AN ACT RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASED AND ENHANCING ITS ADMINISTRATION AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES.
SECTION 1. Section 99 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary
"Sec. 99. Persons Liable. Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be liable to the value-added tax (VAT) imposed in Sections 100 to 102 of this Code. chan robles virtual law library "The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rules likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of this Act.
chan robles virtual law library "The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or an economic activity, including transactions incident thereto, by any person regardless of whether or not the person engaged therein is a non-stock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.chanrobles virtual law library "The rules of regularity, to the contrary, notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business."
Sec. 2. Section 100 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 100. Value-added-tax on sale of goods or properties. (a) Rate and base of tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods, or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.chanrobles virtual law library chan robles virtual law library "(1) The term 'goods or properties' shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: "(A) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; chan robles virtual law library
"(B) The right or privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; chan robles virtual law library "(C) The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment; "(D) The right or the privilege to use motion picture films, films, tapes and discs; and "(E) Radio, television, satellite transmission and cable television time. "The term 'gross selling price' means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, one such goods or properties shall form part of the gross selling price. "(2) The following sales by VAT-registered persons shall be subject to 0%:chanroblesvirtualawlibrary
"(A) Export sales. The term `export sales' means: chan robles virtual law library "(i) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
chan robles virtual law library "(ii) Sale of raw materials or packing materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral Pilipinas (BSP);chan robles virtual law library "(iii) Sale of raw materials of packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production; "(iv) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and "(v) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws. "(B) Foreign currency denominated sale. The phrase `foreign currency denominated sale' means sale to a nonresident of goods, except those mentioned in Sections 149 and 150, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). "(C) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero-rate. "(b) Transactions deemed sale. The following transactions shall be deemed sale: "(l) Transfer, use, or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business.chanrobles virtual law library chan robles virtual law library
"(2) Distribution or transfer to: "(A) Shareholders or investors as share in the profits of the VATregistered persons; or chan robles virtual law library "(B) Creditors in payment of debt "(3) Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. chan robles virtual law library "(4) Retirement from or cessation of business, with respect to investment of taxable goods existing as of such retirement or cessation.chanrobles virtual law library "(c) Changes in cessation of status of a VAT-registered person. The tax imposed in paragraph (a) of this section shall also apply to goods disposed of or existing as of a certain date if under circumstances to be prescribed in regulations to be promulgated by the Secretary of Finance, the status of a person as a VAT-registered person changes or is terminated.chanrobles virtual law library chan robles virtual law library "(d) Determination of the tax. (1) The tax shall be computed by multiplying the total amount indicated in the invoice by 1/11. chan robles virtual law library "(2) Sales returns, allowances and sales discounts. The value of goods or properties sold and subsequently returned or for which allowances were granted by a VAT-registered person may be deducted from the gross sales or receipts for the quarter in which a refund is made or a credit memorandum or refund is issued. Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not depend upon the happening of a future event may be excluded from the gross sales within the same quarter it was given.chanrobles virtual law library
"(3) Authority of the Commissioner to determine the appropriate tax base. The Commissioner shall, by regulations, determine the appropriate tax base in cases where a transaction is deemed a sale, barter or exchange of goods or properties under paragraph (b) hereof, or where the gross selling price is unreasonably lower than the actual market value.
"Sec. 102. Value-added tax on sale of services and use or lease of properties. (a) Rate and base of tax. There shall be levied, assessed and collected, a value-added tax equivalent to 10% of gross receipts derived from the sale or exchange of services, including the use or lease of properties. chan robles virtual law library chan robles virtual law library "The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, models, rest houses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; landing investors; operators of taxicabs; utility cars for rent or hire driven by the lessees (rent-a-car companies), tourist buses; and other common carriers by land, air, and sea relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise
grantees except those under Section 117 of this Code; services of banks, non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances) including surety, fidelity and indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. The phrase `sale or exchange of services' shall likewise include:chanroblesvirtualawlibrary "(1) The lease or the use of or the right privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; chan robles virtual law library "(2) The lease or the use of, or the right to use of any industrial, commercial or scientific equipment; chan robles virtual law library "(3) The supply of scientific, technical, industrial or commercial knowledge or information; "(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3); or "(5) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery, or other apparatus purchased from such nonresident person; "(6) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme; "(7) The lease of motion picture films, films, tapes and discs; and
"(8) The lease or the use of or the right to use radio, television, satellite transmission and cable television time. "Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines. chan robles virtual law library "The term 'gross receipts' means the total amount of money or its equivalent representing the contract price compensation, service fee, rentals or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax. "(b) Transactions subject to zero-rate. The following services performed in the Philippines by VAT-registered persons shall be subject to 0%: "(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). chan robles virtual law library chan robles virtual law library "(2) Services other than those mentioned in the preceding subparagraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).chanrobles virtual law library chan robles virtual law library "(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such services to zero rate.chanrobles virtual law library "(4) Services rendered to vessels engaged exclusively in international shipping; and "(5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production. "(c) Determination of the tax. The tax shall be computed by multiplying the total amount indicated in the official receipt by 1/11."
"Sec. 103. Exempt transactions. The following shall be exempt from the value-added tax:
"(a) Sale of nonfood agricultural products; marine and forest products in their original state by the primary producer or the owner of the land where the same are produced; chan robles virtual law library "(b) Sale of cotton and cotton seeds in their original state; and copra; chan robles virtual law library
"(c) Sale or importation of agricultural and marine food products in their original state, except importation of meat, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor.chan robles virtual law library "Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, smoking or stripping. Polished and/or husked rice, corn grits, locally produced raw cane sugar and ordinary salt shall be considered in their original state: "(d) State or importation of fertilizers, seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty foods for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets); "(e) Sale or importation of petroleum products (except lubricating oil, processed gas, grease wax, and petrolatum) subject to excise tax imposed under Title VI; "(f) Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products subject to excise tax, except lubricating oil, processed gas, grease, wax, and petrolatum. "(g) Importation of passenger and/or cargo vessels of more than five thousand tons, whether coastwise or ocean-going, including engine and spare parts of said vessel to be used by the importer himself as operator thereof; "(h) Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines;
"(i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessels, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide; "(j) Services subject to percentage tax under Title V; "(k) Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar; "(l) Medical, dental, hospital and veterinary services except those rendered by professionals; "(m) Educational services rendered by private educational institutions, duly accredited by the Department of Education Culture and Sports, and those rendered by government educational institutions; "(n) Sale by the artist himself of his works of art, literary works, musical compositions and similar creations, or his services performed for the production of such works; "(o) Services rendered by individual pursuant to an employeremployee relationship; "(p) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines; chan robles virtual law library
"(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, and 1950, and non-electric cooperatives under Republic Act No. 6938, or international agreements to which the Philippines is a signatory; "(r) Export sales by persons who are not VAT-registered; "(s) Sale of real properties are primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws; "(t) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount prescribed in regulation to be promulgated by the President upon the recommendation by the Secretary of Finance which shall not be less than Four hundred eighty thousand pesos (P480,000.00) or more than Seven hundred twenty thousand pesos (P720,000.00) subject to tax under Section 112 of this Code. "The foregoing exemptions to the contrary notwithstanding any person whose sale of goods or properties or services which are otherwise not subject to VAT, but who issues a VAT invoice or receipt thereof shall, in addition to his liability to other applicable percentage tax, if any, be liable to the tax imposed in Section 100 or 102 without the benefit of input tax credit, and such tax shall not, also be recognized as input tax credit to the purchaser under Section 104, all of this Code."
"Sec. 104. Tax Credits. (a) Creditable input tax. Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 108 hereof on the following transactions shall be creditable against the output tax:chanroblesvirtualawlibrary "(1) Purchase or importation of goods: "(A) For sale; or chan robles virtual law library chan robles virtual law library "(B) For conversion into or intended to form part of a finished product for sale including packing materials; or chan robles virtual law library "(C) For use as supplies in the course of business; or "(D) For use as materials supplied in the sale of service; or "(E) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts. "(2) Purchase of services on which a value-added tax has been actually paid.chanrobles virtual law library "The input tax on domestic purchase of goods or properties shall be creditable: "(AA) To the purchaser upon consummation of sale and on importation of goods or properties; chan robles virtual law library "(BB) To the importer upon payment of the value-added tax prior to the release of the good from the custody of the Bureau of Customs. chan robles virtual law library chan robles virtual law library
"However, in the case of purchase of services, lease or use of properties the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. "A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed input tax credit as follows: "(A) Total input tax which can be directly attributed to transactions subject to value-added tax; and chan robles virtual law library "(B) A ratable portion of any input tax which cannot be directly attributed to either activity. chan robles virtual law library "The term 'input tax' means the value-added tax due from or paid by a VAT-registered persons in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section 135 of this Code. "The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 107 of this Code. "(b) Excess output or input tax. If at the end of the any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenues taxes, subject to the provisions of Section 106. chan robles virtual law library
"(c) Determination of creditable input tax. The sum of the excess input tax carried over from the preceding month or quarter and the input tax creditable to a VAT-registered person during the taxable month or quarter shall be reduced by the amount of claim for refund or tax credit for value-added tax and other adjustments, such as purchase returns or allowances and input tax attributable to exempt sale. chan robles virtual law library "The claim for tax credit referred to in the foregoing paragraph shall include not those filed with the Bureau of Internal Revenue (BIR) but also those filed with the other government agencies, such as the Board of Investments (BOI) and the Bureau of Customs (BOC)." chan robles virtual law library chan robles virtual law library
Sec. 6. Section 106 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary
"Sec. 106. Refunds or tax credits of creditable input tax. (a) Any VAT-registered person, whose sales are zero-rated or effectively zero-rated, may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 100(a)(2)(A)(i), (ii) and (b) and Section 102(b)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP). Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services,
and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.
"(b) Capital goods. A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods importer or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years, after the close of the taxable quarter when the importation or purchase was made.chanrobles virtual law library chan robles virtual law library "(c) Cancellation of VAT-registration. A person whose registration has been cancelled due to retirement from a cessation of business, or due to changes in or cessation of status under Section 100(c) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax which may be used in pursuant of his other internal revenues taxes. "(d) Period within which refund or tax credit of input taxes shall be made. In proper cases, the Commissioner shall grant a refund or issue the tax credit for creditable input taxes within sixty (60) days from the date of submission of complete documents in support of the application filed in accordance with sub-paragraphs (a) and (b) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the sixty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals. "(c) Manner of giving refund. Refund shall be made upon warrants drawn by the Commissioner or by his duly authorized
representative without the necessity of being countersigned by the Chairman Commission on Audit, the provisions of the revised Administrative Code, to the contrary notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by the Commission on Audit."
Sec. 7. Section 107 of the National Internal Revenue Code, as amended is hereby further amended to read as follows:
"Sec. 107. Registration of value-added taxpayers. (a) In General. Any person subject to a value-added tax under Sections 100 and 102 of this Code shall register with the appropriate Revenue District Officer and pay an annual registration fee in the amount of One thousand pesos (P1,000.00) for every separate or distinct establishment or place of business and every year thereafter on or before the last day of January. Any person just commencing a business subject to the value-added tax must pay the fee before engaging therein.chan robles virtual law library chan robles virtual law library "A person who maintains a head or main office and branches in different places shall register with the Revenue District Office which has jurisdiction over the place wherein the main or head office is located. However, the fee shall be paid to the Revenue District Officer, collection agent, authorized treasurer of the municipality where each place of business or branch is situated. chan robles virtual law library "(b) Persons commencing business. Any person who expects to realize gross sales or receipts subject to value-added tax in excess of the amount prescribed under Section 103(t) of this Code for the next 12-month period from the commencement of the business shall, within thirty (30) days before the start of the said business, register with the Revenue District Officer who has jurisdiction over
his principal place of business and shall pay the annual registration fee prescribed in the preceding paragraph. "(c) Persons becoming liable to the value-added tax. Any person whose gross sales or receipts in any 12-month period exceeds the amount prescribed under Section 103(t) of this Code for exemption from the value-added tax shall register and pay the annual registration fee prescribed in paragraph (a) of this section within thirty (30) days after the end of the last month of that period, and shall be liable to the value-added tax commencing from the first day of the month following his registration. "(d) Optional registration of exempt person. Any person whose transactions are exempt from value-added tax under Section 103(t) of this Code, or any person whose transactions are exempt from value-added tax under Section 103(a), (b), (c) and (d) of this Code with respect to his export sales only, may apply for registration as a VAT-registered person not later than ten (10) days before the beginning of the taxable quarter and shall pay the annual registration fee prescribed in sub-paragraph (a) of this section. "In any case, the Commissioner may, for administrative reason, deny any application for registration. "For purposes of this Title, any person registered in accordance with the provision of this section shall be referred to as `VAT-registered person.' Each VAT-registered person shall be assigned only one taxpayer's identification number. "(c) Cancellation of Registration. The registration of any person who ceases to be liable to the value-added tax shall be cancelled by the Commissioner upon filing of an application for cancellation of registration. Any person who opted to be registered under paragraph (d) of this section may, under regulation of the Secretary of Finance, apply for cancellation of such registration."
"Sec. 108. Invoicing and accounting requirements for VATregistered persons. (a) Invoicing requirements. A VATregistered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 238, the following information shall be indicated in the invoice or receipt: "(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); andchan robles virtual law library chan robles virtual law library "(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax.chanrobles virtual law library "(b) Accounting requirements. Notwithstanding the provisions of Section 223, all persons subject to the value-added tax under Sections 100 and 102 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance."
Sec. 9. Section 110(c) of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary
"(c) Withholding of Creditable Value-Added Tax. The government or any of its political subdivision, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of its purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 100 and 102 of this
Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installments payment which shall be creditable against the value-added tax liability of the sellers on contractor: Provided, however, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent."
"Sec. 112. Tax on persons exempt from value-added tax (VAT). Any person whose sales or receipts are exempt under Section 103(t) of this Code from the payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) upon the effectivity of this Act and four percent (4%) two (2) years thereafter, of his gross quarterly sales or receipts."
Sec. 11. Section 115 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary
"Sec. 115. Percentage tax on carriers and keepers of garages. Keepers of garages, and common carriers by land, air or water for the transport of passengers, except owners of bancas, and owners of animal-drawn two-wheeled vehicles, shall pay a tax equivalent to three per centum (3%) of their quarterly gross receipts.
"The gross receipts of common carriers derived from their incoming and outgoing freight shall not be subjected to the local taxes imposed under Republic Act No. 7160, otherwise known as the Local Government Code of 1991.chanrobles virtual law library "In computing the percentage tax provided in this Section, the following shall be considered the minimum quarterly gross receipts in each particular case:chanroblesvirtualawlibrary "Jeepney for hire 1. Manila and other cities P2,400.00 chan robles virtual law library 2. Provincial 1,200.00 "Public utility bus Not exceeding 30 passengers P3,600.00 chan robles virtual law library Exceeding 30 but not exceeding 50 passengers 6,000.00 Exceeding 50 passengers 7,200.00 "Taxis 1. Manila and other cities P3,600.00 2. Provincial 2,400.00 Car for hire (w/ chauffeur) 3,000.00 Car for hire (w/one chauffeur) 1,800.00"
"Sec. 117. Tax on franchises. Any provision of general or special law to the contrary notwithstanding there shall be levied, assessed and collected in respect to all franchises on electric, gas and water utilities a tax of two (2%) on the gross receipts derived from the business covered by the law granting the franchise. chan robles virtual law library "The grantee shall file the return with, and pay the tax due thereon to, the Commissioner of Internal Revenue or his duly authorized representative in accordance with the provisions of Section 125 of this Code and the return shall be subject to audit by the Bureau of Internal Revenue, any provision of any existing law to the contrary notwithstanding." chan robles virtual law library
Sec. 13. The first paragraph of Section 121 of this Code is hereby further amended to read as follows:
"Sec. 121. Tax on Life Insurance Premium. There shall be collected from every person, company, or corporation (except purely cooperative companies or associations) doing life insurance business of any sort in the Philippines a tax of five per centum (5%) of the total premium collected, whether such premiums are paid in money, notes, credits or any substitute for money, but premiums refunded within six months after payment on account of rejection of risk or returned for other reason to a person insured shall not be included in the taxable receipts; nor shall any tax be paid upon reinsurance by a company that has already paid the tax; nor upon premiums collected or received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a
nonresident, if any tax on such premium is imposed by the foreign country where the branch is established; nor upon premiums collected or received on account of any reinsurance, if the insured of personal insurance resides against covered property located outside the Philippines, if any tax on such provisions is imposed by the foreign country where the original insurance has been issued or perfected; nor upon that portion of the premiums collected or received by the insurance companies on variable contracts (as defined in Sec. 232(2) of Presidential Decree No. 612), in excess of the amounts necessary to insure the lives of the variable contract workers."
Sec. 14. Section 236 of the National Internal Revenue Code as amended, is hereby further amended to read s follows:
"Sec. 236. Indication of taxpayer identification number (TIN). For tax identification purposes, any person required under the authority of this Code, to make, render, or file a return, statement, or a document, shall be supplied with or assigned a taxpayer identification number (TIN) which shall be indicated on such return, statement or document.chanrobles virtual law library chan robles virtual law library "Any person who shall secure more than one TIN or who fails to indicate his correct TIN as required in the foregoing paragraph, shall be criminally liable under the provisions of Section 274 of this Code."
"Sec. 237. Registration of name or style with the revenue district officer of collection agent. Every person, other than persons required to the registration under the provisions of Section 107 engaged in any business shall, on or before the commencement of his business, or whenever he transfers to another revenue district, register with the Revenue District Officer concerned within 10 days from the commencement of business or transfer and shall pay the annual registration fee in the amount of one thousand pesos (P1,000.00) for every separate or distinct establishment or place of business and every year thereafter on or before the last day of January. The fee shall be paid to the Revenue District Officer, collection agent, authorized treasurer of the municipality where each place of business or branch is situated. In cities or municipalities where no revenue district officer is stationed, such person shall register and pay the fee prescribed herein with the collection agent. The registration shall contain his name or style, place of residence, business, the place where such business is carried on and such other information as may be required by the Commissioner in the form prescribed therefor. In the case of a firm, the names and residences of the various persons consisting the same shall also be registered. The Commissioner, after taking into consideration the volume of sales, financial condition and other relevant factors, may require the registrant to guarantee the payment of his taxes by way of advance payment, or the posting or filing of a security, guarantee or collateral acceptable to the Commissioner."
Sec. 16. Section 238 of the National Internal Revenue Code, as amended is hereby further amended to read as follows:
"Sec. 238. Issuance of receipts or sales or commercial invoices. All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at P25.00 or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of
service: Provided, however, That in the cases of sales, receipts or transfers in the amount of P100.00 or more, or, regardless of amount, where the sales or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or, where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer, or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the taxpayer's identification number of the purchaser. chan robles virtual law library "The original of each receipt of invoices shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period. chan robles virtual law library "The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this section."
Sec. 17. Effectivity of the Imposition of VAT on Certain Goods, Properties and Services. The value-added tax shall be levied assessed and collected on the following, two (2) years after the effectivity of this Act:
(a) Services performed in the exercise of profession or calling subject to the professional tax under the Local Government Code or Republic Act No. 7160, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers and emcees; radio and television broadcasters,
choreographers; musical, radio, movie, television and stage directors; and professional athletes; chan robles virtual law library (b) Services rendered by banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions; (c) Freight services rendered by international cargo vessels; and (d) The lease or use of sports facilities and equipment by amateur players, as provided under Republic Act No. 6847, except sports facilities and equipment which are exclusively or mainly for the private use of shareholders or members of the club or organization which owns or operates such sports facilities and equipment.
Prior to their inclusion in the coverage of the value-added tax, the above services shall continue to pay the applicable tax prescribed under the present provisions of the National Internal Revenue Code, as amended.
chan robles virtual law library
However, when public interest so requires, the President, taking into account the impact on the prices of goods and services, may, upon the recommendation of the Secretary of Finance, exclude any of the above services from the coverage of the value-added tax: Provided, however, That in the event of the exclusion of any of the above services the existing applicable tax under the provisions of the National Internal Revenue Code, as amended, shall continue to be paid on the services so excluded.chanrobles virtual law library
Sec. 18. Tax Administration Development Fund. For the effective implementation of this Act, there is hereby created a Tax Administrative Development Fund to be sourced from five percent (5%) of the increase in value-added tax collectors for 1995 over that of the immediately proceeding year and annually thereafter for a period of four (4) years five percent (5%) of the increase over the collection of the preceding year. Such amount which shall be retained by the Bureau of Internal Revenue shall be considered receipts automatically appropriated for the first year. Disbursements from this fund shall be subject to such rules and guidelines as may be promulgated by the Department of Finance upon recommendation of the Commissioner of Internal Revenue. These funds shall not be used for the purchase of vehicles, the payment of salaries and incentives, creation of regular positions, and construction of buildings and offices. Sec. 19. Rules and Regulations. For the effective implementation of this Act, the Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and regulations within ninety (90) days from effectivity hereof.cralaw Sec. 20. Repealing Clauses. The provisions of any special law relative to the rate of franchise taxes are hereby expressly repealed. Sections 113, 114 and 116 of the National Internal Revenue Code are hereby repealed. chan robles virtual law library Paragraphs (c), (d), and (e) of Article 39 of Executive Order No. 226, otherwise as the Omnibus Investment Code of 1987, are hereby repealed: Provided, however, That the benefits and incentives under said paragraphs shall continue to be enjoyed by enterprises registered with the Board of Investments before the effectivity of this Act.cralaw Unless otherwise excluded by the President pursuant to Section 17 hereof, Sections 19 and 20 of the National Internal Revenue Code shall be repealed upon the expiration of two (2) years from the effectivity of this Act. During the period that the freight services rendered by international cargo vessels are not covered by the value-added tax imposed under this Act, said services shall pay a
tax at a rate of three per centum (3%) of their quarterly gross receipts derived from outgoing cargoes. All other laws, orders, issuances, rules and regulations of parts thereof inconsistent with this Act are hereby repealed, amended or modified accordingly.cralaw Sec. 21. This Act shall take effect fifteen (15) days, after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation whichever comes earlier.
Approved: May 5, 1994

V A T

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

V A T

Uploaded by

Copyright:

Available Formats

A value added tax (VAT) is a form of consumption tax.

Overview[edit source | editbeta]

A Belgian VAT receipt.

Comparison with sales tax[edit source | editbeta]

Implementation[edit source | editbeta]

Registered[edit source | editbeta]

Examples[edit source | editbeta]

Without any tax[edit source | editbeta]

With a sales tax[edit source | editbeta]

With a value added tax[edit source | editbeta]

Limitations to the examples[edit source | editbeta]

Limitations of VAT[edit source | editbeta]

A Supply-Demand Analysis of a Taxed Market

Imports and exports[edit source | editbeta]

Example[edit source | editbeta]

Price paid for Ford by consumer

Price paid for Opel by consumer

Taxes paid for Ford by consumer

Taxes paid for Opel by consumer

In the USA $27,500

$2,500 (Sales Tax only)

$8,000 (Sales tax and VAT)

Taxes paid for Ford by consumer

Taxes paid for Opel by consumer

In the USA $27,500

$2,500 (Sales Tax only) $2,500 (Sales Tax only)

$5,000 (Sales Tax only) $5,000 (Sales Tax only)

Different systems[edit source | editbeta]

European Union[edit source | editbeta]

China[edit source | editbeta]

The Nordic countries[edit source | editbeta]

Who Are Required To File VAT Returns

Monthly VAT Declarations

Deadline Manual Filing

25 days following the end of the month

24 days following the end of the month

23 days following the end of the month

Real Estate Activities

22 days following the end of the month

21 days following the end of the month

Quarterly Value-Added Tax Return

Related Revenue Issuances

Revenue Regulations (RRs)

Issuance No. RR No. 13-2008

RR No. 11-2007 RR No. 6-2007

RR No. 4-2007 RR No. 2-2007 RR 16-2005 RR 7-2004

2/7/2007 12/22/2006 9/1/2005 5/7/2004

RR 4-2004 RR 2-2004 RR 29-2003 RR 28-2003

3/22/2004 1/2/2004 10/30/2003 10/15/2003

RMO No. 6-2008

RMO No. 16-2007

RMO No. 7-2006

RMO No. 26-2005 RMO No. 22-2004

RMO No. 5-2004 RMO No. 35-2002

RMO No. 9-2000

RMO No. 81-99 RMO No. 40-94

RMC No. 46-2008

RMC No. 34-2008 RMC No. 59-2007

RMC No. 53-2007

1/22/2007 6/21/2006 5/29/2006 3/23/2006

RMC No. 22-2006

RMC No. 21-2006 RMC No. 8-2006 RMC No. 5-2006

3/24/2006 1/31/2006 11/2/2005