Registration and

Compliance
VAT Registration
General Requirements

Sec. 236 of the Tax Code, as amended, provides that every person subject to internal revenue tax
shall register once with the appropriate Revenue District Office (RDO):

1. Within ten (10) days from date of employment, or

2. On or before the commencement of business, or

3. Before payment of any tax due, or

4. Upon filing of a return, statement or declaration as required in the Tax Code.

VAT Registration
Registration Requirements - VAT

Any person who, in the course of trade or business, sells, barters, exchanges goods or properties,
or engages in the sale of services subject to VAT, shall register with the appropriate RDO and pay
an annual registration fee of P500 for every separate and distinct establishment or place of
business before the start of such business and every year thereafter on or before the last day of
January.

Separate or distinct establishment shall mean any branch or facility where sale transactions occur.

Branch means a fixed establishment in a locality which conducts sales operation of the business
as an extension of the principal office.
VAT Registration
Registration Requirements - VAT

Principal place of business refer to the place where the head or main office is located as appearing
in the corporation’s Articles of Incorporation. In the case of an individual, the principal place of
business shall be the place where the head or main office is located and where the books of
accounts are kept.
VAT Registration
Mandatory registration

Any person who, in the course of trade or business, sells, barters, exchanges goods or properties,
or engages in the sale of services shall be liable to register if:

1. His gross sales or receipts for the past 12 months other than those that are exempt, have
exceeded P3,000,000; or

2. There are reasons to believe that his gross sales or receipts for the next 12 months, other than
those that are exempt, will exceed P3,000,000.
VAT Registration
Mandatory registration - Consequence of non-registration

Every person who becomes liable to be registered but fails to register, shall be liable to pay the
output tax as if he were a VAT-registered persons, but without the benefit of input tax credits for
the period in which he was not properly registered.
VAT Registration
Optional registration

1. Any person who is VAT exempt under the Tax Code, and is not required to register for VAT may
elect to register for value-added tax by registering with the RDO that has jurisdiction over the
head office of that person and paying the annual registration fee. Once registered, he shall not
be allowed to cancel his registration for the next 3 years.

2. 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 the Tax Code, as amended.
VAT Registration
Application for registration

The application shall be filed with the RDO where the principal place of business, branch, storage
place, or premises is located, as the case may be, before commencement of business or
production or qualification as a withholding agent.

The applicant-taxpayer shall accomplish BIR Form No. 1903 (Application for Registration For
Corporations, Partnerships (Taxable/Non-Taxable), Including GAIs, LGUs, Cooperatives and
Associations) and submit the same together with the other documentary requirements such as the
Articles of Incorporation, Mayor’s permit, etc.
VAT Registration
Cancellation of registration

A VAT-registered person may cancel his registration for VAT if:

1. He makes a written application and can demonstrate to the Commissioner of Internal Revenue
(CIR) satisfaction that his gross sales or receipts for the following 12-months, other than those
exempt under the Tax Code, will not exceed P3,000,000;

2. He has ceased to carry on his trade or business, and does not expect to recommence any
trade or business within the next 12 months.
Compliance Requirements
Invoicing requirements

A VAT-registered person shall issue:

1. A VAT invoice for every sale, barter or exchange of goods or properties; and

2. A VAT official receipts for every lease of goods or properties, and for every sale, barter or
exchange of services.

Only VAT-registered persons are required to print their TIN followed by the word “VAT” in their
invoice or official receipts. Said documents shall be considered as a “VAT Invoice” or VAT official
receipt.

All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not
give rise to any input tax.
Compliance Requirements
Invoicing requirements

VAT invoice /official receipt shall be prepared at least in duplicate, the original to be given to the
buyer and the duplicate to be retained by the seller as part of his accounting records.

Compliance Requirements
Issuance of receipts and invoices

1. All persons subject to an internal revenue tax shall, for each sale and transfer of merchandise
or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered
receipts or sale or commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature of service.

2. In the case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or
more, or regardless of the amount, where the sale or transfer is made by a person liable to VAT
to another person also liable to VAT.

The original of each receipt or invoice 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 three (3) years from the close
of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept
and preserved by the issuer, also in his place of business, for a like period.
Compliance Requirements
Information contained in VAT invoice or o cial receipts

The following information must be stated in a VAT invoice or VAT official receipts:

1. Name of the Seller

2. Business Style of the Seller

3. Business Address of the Seller

4. A statement that the seller is a VAT-registered person, followed by his TIN

5. Name of the Buyer

6. Business Style of the Buyer

7. Address of the Buyer

8. TIN of the Buyer, if VAT-registered and amount exceed P1,000

9. Date of Transaction

10. Quantity

11. Unit Cost

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Compliance Requirements
Information contained in VAT invoice or o cial receipts

12. Description of goods or properties or nature of the service

13. Purchase price plus the VAT provided that

• The amount of the 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 or receipt

• If the sale involves goods, properties or services some of which are subject to and some
of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate
the break-down of the sale 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

14. Authority to Print Receipt Number at the lower corner of the invoice or receipt.

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Compliance Requirements
Consequences of incomplete information contained in VAT
invoice or o cial receipts

1. The input tax cannot be claimed by the purchaser/buyer as credit to its output tax.

2. A seller who fails to segregate the amount of VAT is subject to penalty of Php1,000.00 for each
receipt or sales invoice but does not exceed Php50,000.00
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Compliance Requirements
Consequences of issuing erroneous VAT invoice/OR

If a person who is not VAT-registered issues an invoice or receipt showing his TIN, followed by the
word “VAT”, he shall be liable for the following:

1. The percentage taxes applicable to his transactions;

2. VAT due on the transactions under the Tax Code, without the benefit of any input tax credit;
and

3. A 50% surcharge;

However, input tax shall be recognized by the purchaser provided that the required information for
a VAT invoice or official receipts are shown.
Compliance Requirements
Issuance of VAT invoice/OR on an exempt transaction by VAT-
registered person

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 VAT thereon. The purchaser
shall be entitled to claim an input tax credit on his purchase.

Compliance Requirements
Substantiation requirements - Input VAT

1. The sale of services shall be substantiated with official receipts

2. The sale of goods shall be substantiated with invoices.

As such, the period of recognizing/reporting the sales of services in the VAT returns should
coincide with the period/date indicated in the official receipts related to such sales, regardless of
when the service was performed.

In other words, for VAT purposes, the accrual method of accounting (i.e., the income is reported in
the period it is earned regardless of whether it has been received or not) must be employed in the
case of sale of goods or properties while the cash method of accounting (i.e., the income is
reported based on gross receipts/collection) must be adopted in the case of sale of services, lease
or use of properties.
Compliance Requirements
Substantiation requirements - Input VAT

3. For the importation of goods - import entry or other equivalent document showing actual
payment of VAT on the imported goods.

4. For the purchase of real property – public instrument i.e., deed of absolute sale, deed of
conditional sale, contract/agreement to sell, etc., together with VAT invoice issued by the seller.

5. Transitional input tax shall be supported by an inventory of goods as shown in a detailed list to
be submitted to the BIR.

6. Input tax from payments made to non-residents (such as for services, rentals and royalties)
shall be supported by a copy of the Monthly Remittance Return of Value Added Tax Withheld
(BIR Form 1600) filed by the resident payor in behalf of the non-resident evidencing remittance
of VAT due which was withheld by the payor.

7. Input tax from sales to government entities and instrumentalities shall be supported by a copy
of the Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307)
Compliance Requirements
Reporting requirements - Filing and payment

Every person liable to pay VAT shall file a quarterly return of the amount of his quarterly gross sales
or receipts within 25 days following the close of taxable quarter using the Quarterly VAT Return
(BIR Form 2550Q).

The term “taxable quarter” shall mean the quarter that is synchronized to the income tax quarter of
the taxpayer (i.e., the calendar quarter or fiscal quarter).

Amounts reflected in the monthly VAT declarations for the first 2 months of the quarter shall still be
included in the quarterly VAT return which reflects the cumulative figures for the taxable quarter.
Payments in the monthly VAT declarations shall, however, be credited in the quarterly VAT return to
arrive at the net VAT payable or excess input tax/over-payment as of the end of a quarter.
Compliance Requirements
Reporting requirements - Filing and payment

The monthly VAT Declarations (BIR Form 2550M) of taxpayers shall be filed and the taxes paid not
later than the 20th day following the end of each month.

Any person, whose registration has been cancelled in accordance with the Tax Code, as
amended, shall file a return and pay the tax due thereon within 25 days from the date of
cancellation of registration: Provided, That only one consolidated return shall be filed by the
taxpayer for his principal place of business or head office and all branches.
Compliance Requirements
Reporting requirements - Filing and payment

However, beginning January 1, 2023, the filing and payment required under the Tax Code shall be
done within 25 days following the close of each taxable quarter. Stated differently, there is no
monthly filing and payment of VAT beginning 2023.
Compliance Requirements
Reporting requirements - Place of ling and payment of tax

Except as the Commissioner otherwise permits, the VAT return shall be filed with and the tax paid
to an authorized agent bank, Revenue Collection Officer or duly authorized city or municipal
Treasurer in the Philippines located within the revenue district where the taxpayer is registered or
required to register.

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Compliance Requirements
Reporting requirements - Mode of ling of tax return

The VAT returns shall be filed either manually via eBIR Forms or electronically via the electronic
Filing and Payment System (eFPS).

Deadline for filing and payment of monthly VAT made via eFPS is extended up to 5 days
depending on the groupings in which the taxpayer belongs, as follows:

Group A - 25th day after the end of the month

Group B - 24th day after the end of the month

Group C - 23rd day after the end of the month

Group D - 22nd day after the end of the month

Group E - 21st day after the end of the month

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Compliance Requirements
Reporting requirements - Failure to le and pay VAT

If a taxpayer fails to file and pay the VAT on time, or in a wrong venue, aside from the tax, he is
also liable for the following:

A. 12% interest per annum

B. 25% surcharge

C. Compromise penalty (refer to the Revised Compromise Schedule of the BIR)

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Compliance Requirements
Withholding on VAT

1. The Government 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 services which are subject to the 12% VAT, deduct
and withhold 5% VAT on the gross payment.

2. The payment for lease or use of properties or property rights to nonresident owners or
payment of services rendered by nonresidents in the Philippines shall be subject to 12%
withholding on VAT at the time of payment.

The VAT withheld shall be remitted within ten (10) days following the end of the month the
withholding was made using the BIR Form 1600.
Compliance Requirements
Submission of Quarterly Summary List of Sales and Purchases

All persons liable for VAT such as manufacturers, wholesalers, service-providers, among others are
required to submit Summary List of Sales (SLS) and Summary List of Purchases (SLP).

The quarterly summary list of sales or purchases (SLSP), whichever is applicable, shall be
submitted to the RDO or LTDO or LTAD having jurisdiction over the taxpayer, on or before the
twenty-fifth (25th) day of the month following the close of the taxable quarter (VAT quarter)-
calendar quarter or fiscal quarter. However, taxpayers under the jurisdiction of the LTS, and those
enrolled under the EFPS, shall, through electronic filing facility submit their SLSP to the RDO/
LTDO/LTAD, on or before the thirtieth (30th) day of the month following the close of the taxable
quarter.

Refund or Tax Credit of Input Tax

Zero-Rated or E ectively Zero-Rated Sales

Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within 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

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, only the proportionate
share of input taxes allocated to zero-rated or effectively zero-rated sales can be claimed for
refund or issuance of a tax credit certificate.

Provided, finally, that for a person making sales that are zero-rated, the input taxes shall be
allocated ratably between his zero-rated and non-zero-rated sales.
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Refund or Tax Credit of Input Tax
Cancellation of VAT Registration

A person whose registration has been cancelled due to retirement from or cessation of business,
or due to changes in or cessation of status under the Tax Code, as amended, may, within 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 payment of his other internal revenue taxes.
Power of the Commissioner
of Internal Revenue
Power of the Commissioner of Internal Revenue

The Commissioner or his authorized representative is hereby empowered to suspend the business
operations and temporarily close the business establishment of any person for any of the following
violations:

1. In case of VAT-registered person

• Failure to issue receipts or invoices;

• Failure to file VAT as required;

• Understatement of taxable sales or receipts by 30% or more of his correct taxable sales or
receipts for the taxable quarter.


2. Failure of any person to register as required under Section 236 (Registration Requirements)

• The temporary closure of the establishment shall be for the duration of not less than 5 days and
shall be lifted only upon compliance with whatever requirements prescribed by the
Commissioner in the closure order.