Value-Added Tax

Value-Added Tax (VAT) is a consumption tax placed on sellers engaged in

trade or business in the Philippines. VAT applies to the SELLER’s
products and SERVICES during the manufacturing or retail process. VAT
may be SHIFTED or PASSED on to the buyer, transferee or lessee of
goods, properties or services. BIR also levies imported goods from
abroad with VAT.
 Current VAT Rates
The BIR imposed tax rates for the following items subject to VAT in the
Philippines:
• Sale of Goods and Properties
o 12% VAT for the gross selling price or gross value in money of goods and properties
sold, bartered or exchanged.
• Sale of Services and Use or Lease of Properties
o 12% VAT of gross receipts acquired from the sale or exchange of services, including
properties used or leased by individuals.
• Export Sales and Other Zero-Rated Sales
o Sale of Goods and Services are subject to 0% VAT for PEZA-registered entities enjoying
fiscal incentives. However, Under the CREATE Law, export sale are already vatable.
Entities Required to File VAT Returns
The following individuals are required by law to file and declare their VAT Returns:
• VAT-registered individuals or businesses engaged in selling, exchanging, leasing of goods
or properties, and rendering services, if the actual gross sales or receipts accumulate up
to Php 3,000,000.00;
• Taxpayers required to sign up as a VAT taxpayer but failed to register; and
• Any individual who imports goods regardless if it’s in line with the course of their
business or not.
Note:
As per BIR’s guidelines, VAT taxpayers must file their declarations as long as their
VAT registration is ongoing, regardless if there are no taxable transactions during the
month or the business does not exceed the P3,000,000.00 threshold for 12 months.
 Table of BIR Forms for VAT
VAT registered individuals, must file the following tax returns for their
businesses:
BIR Form Form Name Prescribed Filing Period*

Monthly Value-Added Tax Declaration Manual:

2550M (for first and second quarter of the Not later than the 20th day following
month) the end of the month.
Not later than the 25th day following
the end of each taxable quarter.
Quarterly Value-Added Tax Return “Taxable quarter” means that the
2550Q
(for the thirds month of the Quarter) quarter is synchronized with the
taxpayer’s income tax quarter (e.g.
Calendar Quarter or Fiscal Quarter)
Sample form
 Quarterly Value-Added Tax Return
Quarterly Value-Added Tax Return Documentary Requirements (BIR
Form No. 2550Q )
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR
Form 2307), if applicable (in PDF File)
2. Summary Alphalist of Withholding Agents of Income Payments
Subjected to Withholding Tax at Source (SAWT), if applicable (SAWT
DOT File shall be submitted thru www.esubmission.bir.gov.ph)
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
 Filing Procedures
Fill-up BIR Form 2550M/2550Q in triplicate copies (two copies for the BIR and one copy for the taxpayer)
1. If there is payment:
o File the Monthly/Quarterly 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.

o 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.
o In places where there are no AAB, file the Monthly VAT declaration, together with the required
attachments and pay the VAT due with the Revenue Collection Officer (RCO)
o The RCO shall issue a Revenue Official Receipt upon payment of the tax.
 Filing Procedures
Fill-up BIR Form 2550Q in triplicate copies (two copies for the BIR and one
copy for the taxpayer)
2. If there is no payment:
o File the Monthly VAT return using the EBIFORM, then submit it
online and print the email confirmation

o File Quarterly VAT Return, together with the required attachments

with the RDO/LTDO/Large Taxpayers Assistance Division, Collection
Agent having jurisdiction over the registered address of the taxpayer
(head office of the business establishment).
 Reminders
• 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.

• The Quarterly Summary Lists of Sales and Purchases (SLSP) shall be

submitted in Compact Disk-Recordable (CDR) following the format provided
under Section 4.114-3(g) of RR No. 16-2005, as amended by RR No. 1-2012.
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:
• 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:
• Pay the annual registration fee of P500.00 for every place of business or
establishment that generates sales;
• Register the books of accounts of the business/occupation/calling, including practice
of profession, before using the same (Journal Ledger, Cash Receipts Book, Cash
Disbursements Book, Subsidiary Sales Journal and Subsidiary Purchases Journal);
• 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:
• 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:
• 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 (SLSP)
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.
 What is the invoicing/receipt requirement of a VAT-
registered person?

A VAT registered person shall issue :

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

b. 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 P 100,000.00
VAT 12,000.00
Invoice Amount 112,000.00
What is the information that must be contained in the VAT
invoice or VAT official receipt?
1. Name of Seller
2. Description of the goods or properties or nature of the service
3. Unit cost
4. Quantity
5. Date of transaction
6. TIN of buyer, if VAT- registered and amount exceeds P1,000.00
7. Address of Buyer
8. Business Style of Buyer
9. Name of Buyer
10. Statement that the seller is a VAT-registered person, followed by his TIN
 What is the information that must be contained in the VAT
invoice or VAT official receipt?

11. Business Address of the Seller

12. Business Style of the Seller
13. Purchase price plus the VAT, provided that
o The amount of tax shall be shown as a separate item in the invoice or receipt;
o If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or printed
prominently on the invoice or receipt;
o 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
o 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 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.

Example: Capital goods (Vehicle)

 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 twenty-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).
 What transactions are considered deemed sales?
The following transactions are considered as deemed sales:
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;
a. 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
b. 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;
 What transactions are considered deemed sales?
The following transactions are considered as deemed sales:
c. 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.