INTRODUCTION TO VALUE

ADDED TAX
Prepared by: Maria Kristina L. Acosta, CPA
 VALUE-ADDED TAX DESCRIPTION

Value-Added Tax (VAT) 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 Three Million Pesos (Php3,000,000.00)
• 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

• BIR Form 2550M - Monthly Value-Added Tax Declaration (February 2007 ENCS)
Documentary Requirements
• Duly issued Certificate of Creditable VAT Withheld at Source (
BIR Form No. 2307), if applicable
• Summary Alphalist of Withholding Agents of Income Payments Subjected to
Withholding Tax at Source (SAWT), if applicable
• Duly approved Tax Debit Memo, if applicable
• Duly approved Tax Credit Certificate, if applicable
• Authorization letter, if return is filed by authorized representative
Deadline
•Manual Filing - Not later than the 20th day following
the end of each month
THRU EFPS
 QUARTERLY VALUE-ADDED TAX RETURN

• BIR Form No. 2550Q  - Quarterly Value-Added Tax Return (February 2007 ENCS)
Documentary Requirements
• Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable
• Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding
Tax at Source (SAWT), if applicable
• Duly approved Tax Debit Memo, if applicable
• Duly approved Tax Credit Certificate, if applicable
• Previously filed return and proof of payment, for amended return
• Authorization letter, if return is filed by authorized representative
• Within twenty five (25) days following the close of the taxable quarter.
 VALUE-ADDED 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%
 FREQUENTLY ASKED QUESTIONS

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:
• 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 Three
Million Pesos (P3,000,000.00): 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 Three Million Pesos (P3,000,000.00).
 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. Register the books of accounts of the business/occupation/calling,
including practice of profession, before using the same;
c. 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 transactions 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);
 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:
d. 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);
 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:
e. 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.
 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 VAT-registered
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?
• Any person who is VAT-exempt under Sec. 109 of the Tax Code, as
amended, may, in relation to Sec. 109 (2) of the same Code, 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 of the Tax Code, as amended.
 WHO MAY OPT TO REGISTER AS VAT AND
WHAT WILL BE HIS LIABILITY?
• 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?

• 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 Three Million Pesos
(P3,000,000.00); 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 :

• 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?
 WHAT IS THE INFORMATION THAT MUST BE
CONTAINED IN THE VAT INVOICE OR VAT OFFICIAL
RECEIPT?
• Name of Seller
• Description of the goods or properties or nature of the service
• Unit cost
• Quantity
• Date of transaction
• TIN of buyer, if VAT- registered and amount exceeds P1,000.00
• Address of Buyer
• Business Style of Buyer
• Name of Buyer
• Statement that the seller is a VAT-registered person, followed by his TIN
• Business Address of the Seller
• Business Style of the Seller
 WHAT IS THE INFORMATION THAT MUST BE
CONTAINED IN THE VAT INVOICE OR VAT OFFICIAL
RECEIPT?
• 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.

• Authority to Print Receipt Number at the lower left corner of the invoice or
receipt
 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.
 DOES AMORTIZATION OF INPUT VAT STILL
ALLOWABLE?
• Yes , but is only allowed until December 31, 2021 after which
taxpayers with unutilized input VAT on capital goods purchased or
imported shall be allowed to apply the same as scheduled until fully
utilized: Provided, That 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.
WHAT WILL BE THE BASIS OF THE DATE OF
CANCELLATION?
• It is the date of issuance of tax clearance by the BIR, after full
settlement of all tax liabilities relative to cessation of business or
change of status of concerned taxpayer
 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:
• Real properties held primarily for sale to customers or held for lease in the ordinary
course of trade or business;
• 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:
• 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;
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:
• 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;
• Sale of electricity by generating, transmission by any entity including the National Grid Corporation of the Philippines
(NGCP), and distribution companies including electric cooperatives shall be subject to twelve percent (12%) VAT on their
gross receipts.;
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:
• 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.
 THE PHRASE "SALE OR EXCHANGE OF
SERVICES" SHALL LIKEWISE INCLUDE
• 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 PHRASE "SALE OR EXCHANGE OF
SERVICES" SHALL LIKEWISE INCLUDE
• 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 non-resident 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 existing
regulations.
WHAT TRANSACTIONS ARE CONSIDERED
AS ZERO-RATED SALES?
WHAT TRANSACTIONS ARE CONSIDERED
AS ZERO-RATED SALES?
WHAT ARE THE TRANSACTIONS WHICH ARE NO
LONGER SUBJECT TO ZERO-PERCENT (0%)?
WHAT TRANSACTIONS ARE CONSIDERED
DEEMED SALES?
WHAT TRANSACTIONS ARE CONSIDERED
DEEMED SALES?
 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.
 REFERENCE

• https://www.bir.gov.ph/index.php/tax-information/value-added-tax.html