To be VAT or not to be non-VAT registered

ByATTY. PEACHES ARANAS

August 26, 2018

ATTY. PEACHES ARANAS

Earlier on, we discussed Revenue Regulations (RR) No. 13-

2018,implementing the value-added tax (VAT) and percentage tax provisions

of Republic Act (RA) No. 10963, the “Tax Reform for Acceleration and

Inclusion” (Train) Law. RR No. 13-2018 took effect January 1, 2018, the
effectivity date of the Train Law.

With the passage of the Train Law, a ceiling or threshold, which has been set

at p3,000,000, has been fixed to determine whether one may register as a

VAT taxpayer or a Non-VAT taxpayer. If you will recall, the same

p3,000,000 VAT threshold is used to determine the income tax liability of

self-employed individuals and/or professionals. Under RR 8-2018 (Income

Tax Regulations), individuals earning income purely from self-employment
and/or practice of profession whose gross sales/receipts do not exceed the
VAT threshold shall have the option to avail of:

The new graduated income tax rates; OR

An 8 percent tax on gross sales or receipts in excess of p250,000 in lieu of the

graduated income tax rates and the percentage tax under Section 116 of the
Tax Code.

If you’re an existing VAT-registered taxpayer, and your gross sales/receipts

in the preceding taxable year did not exceed the VAT threshold of

p3,000,000, could you still continue to be a VAT-registered taxpayer? Of

course, you can. You just have to avail of the “Optional Registration for

Value-Added Tax of Exempt Person,” file a BIR Application for Registration

Update (BIR Form No. 1905), and submit the same with the accompanying

documentary requirements with the BIR. Note that once you’ve availed of

this option, you may not cancel your VAT registration for the next three (3)
years.

What if you’re an existing VAT-registered taxpayer, and your gross

sales/receipts in the preceding taxable year did not exceed the VAT threshold
of p3,000,000 and you’ve decided to be a Non-VAT registered taxpayer,
what are you supposed to do?

Under RR 13-2018, a taxpayer should file a BIR Application for Registration

Update (BIR Form No. 1905) for an update of registration from VAT to Non-
VAT and accomplish the following requirements:

– submit an inventory list of unused invoices and/or receipts as of the date of

filing of BIR Form No. 1905, indicating the number of booklets and its
corresponding serial numbers; and

– Surrender the said invoices and/or receipts for cancellation.

Alternatively, upon approval of the BIR, a number of unused VAT

invoices/receipts may still be allowed for use, provided the phrase “Non-

VAT registered as of (date of filing of BIR Form No. 1905). Not valid for

claim of input tax.” shall be stamped on the face of each and every copy, until

new registered non-VAT invoices or receipts have been printed and received
by the taxpayer.

Quite recently, the Department of Finance (DoF) through the BIR, has issued

RR No. 19-2018 which provides for a deadline, or until August 31, 2018 for
taxpayers to use the VAT invoices/receipts as discussed above. Particularly,
taxpayers have until August 31, 2018, or until receipt of newly-printed

registered non-VAT invoices or receipts, whichever comes earlier, to use the

VAT invoices/receipts. Upon receipt of the newly-printed registered non-

VAT invoices or receipts, the taxpayer shall submit, on the same day, a new

inventory list of all unused previously-stamped invoices/receipts, and

surrender them to the BIR for cancellation.

I am a registered professional earning below P3 million (the value-added

tax or VAT threshold), but I recently read that taxpayers may register as a
VAT taxpayer even if the gross revenues fall below the VAT threshold. Is
this correct? Any advantage of registering as a VAT taxpayer?

Yes. Regardless of gross revenues earned or projected, the self-employed or

professionals may register as a VAT taxpayer. The advantage is that the VAT can be
passed on to consumers, while percentage tax is assumed as part of gross sales to be
remitted directly to the government. Also, VAT-registered individuals or corporations
would normally prefer dealing with VAT-registered suppliers or professionals to claim
input VAT.