VALUE-ADDED TAX in money of the goods or properties sold, bartered, or

exchanged, or deemed sold in the Philippines.

VAT is a tax on consumption levied on the sale, barter,
exchange or lease of goods or properties and services in
the Ph.
VATABLE TRANSACTIONS:
SELLER is the one statutorily liable for the payment of the
tax but the amount of the tax may be shifted or passed on VAT on the Sale of Services and Use or Lease of
to the buyer, transferee or lessee of the goods, properties Properties.
or services.
Sale or exchange of services, as well as the use or lease
In the case of importations, the importer is liable for the of properties, as defined in Sec. 108 (A) of the Tax Code
VAT. shall be subject to VAT, equivalent to twelve percent (12%)
(starting February 1, 2006) of the gross receipts.

Sale, transfer or exchange of imported goods by tax- GROSS SELLING PRICE:

exempt persons.
The term "gross selling price" means the total amount of
In the case of goods imported into the Philippines by VAT- money or its equivalent which the purchaser pays or is
exempt persons, entities or agencies which are obligated to pay to the seller in consideration of the sale,
subsequently sold, transferred or exchanged in the barter or exchange of the goods or properties, excluding
Philippin to son-exempt persons or entities, the latter shall VAT.
be considered the importers thereof and shall be liable for
VAT due on such importation. The tax due on such The excise tax, if any, on such goods or properties shall
importation shall constitute a lien on the goods, superior to form part of the gross selling price.
all charges/or liens, irrespective of the possessor of said
goods. VATABLE TRANSACTIONS:

Section 236 of the NIRC: VAT on Importations. There shall be levied, assessed and
collected on every importation of goods a value-added tax
(G) Persons Required to Register for Value-Added Tax. equivalent to twelve percent (12%) based on the total
value used by the Bureau of Customs in determining tariff
Any person who, in the course of trade or business, sells, and customs duties plus customs duties, excise taxes, if
barters or exchanges goods or properties, or engages in any, and other charges, such tax to be paid by the
the sale or exchange of services, shall be liable to register importer prior to the release of such goods from customs
for value-added tax if: custody: Provided, That where the customs duties are
determined on the basis of the quantity or volume of the
His gross sales or receipts for the past twelve (12) goods, the value-added tax shall be based on the landed
months, other than those that are exempt under Section cost plus excise taxes, if any.
109(A) to (BB), have exceeded Three million pesos
(P3,000,000); or ZERO-RATED

(H) Optional Registration for Value-Added Tax of 1. Export of Goods

Exempt Person.
2. Export of Services
Any person may elect to register for value-added tax by
registering with the Revenue District Office that has a 3. Covered by special laws or international agreements
jurisdiction over the head office of that person, and paying
the annual registration fee. 4. Services to international shipping or air transport
operations, including leases of property for use
Any person who elects to register under this Subsection
shall not be entitled to cancel his registration under 5. Services to export-oriented (70%)
Subsection (F)(2) for the next three (3) years.
6. Transport of passengers and cargo by domestic air or
•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• sea carriers from the Philippines to a foreign country

VATABLE TRANSACTIONS: 7. Sale of power or fuel generated through renewable

sources of energy
1. Sale of Good or Properties

2. Sale or Exchange of Services EXEMPT TRANSACTIONS:

3. Lease of Properties 1. Sale or importation of agricultural and marine food

products in their original state, livestock and poultry if or
4. Transactions Deemed Sale kind generally used as, or yielding or producing foods for
human consumption; and breeding stock and genetic
5. Importations materials therefor.

VAT ON SALE OF GOODS OR PROPERTIES. 2. Sale or importation of fertilizers; seeds, seedlings and
fingerlings; fish, prawn, livestock and poultry feeds,
VAT is imposed and collected on every sale, barter or
exchange, or transactions "deemed sale" of taxable goods 3. Importation of professional instruments and implements,
or properties at the rate of twelve percent (12%) (starting tools of trade, occupation or employment,
February 1, 2006) of the gross selling price or gross value
4. Transactions which are exempt under international taxpayer has a VAT payable, it cannot be entitled to a
agreements to which the Philippines is a signatory or refund or issuance of TCC even if the input VAT being
under special laws, except those under Presidential claimed for refund or issuance of TCC is from zero-rated
Decree No. 529; activities. Any input VAT from both VATable and zero-rated
activities must be offset against any output VAT before it
6. Gross receipts from lending activities by credit or multi- can be said that an excess input VAT exists.
purpose cooperatives duly registered with the Cooperative
Development Authority; FINAL TO CREDITABLE VAT:

•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• RA No. 10963 (RR No. 18-2018)

SALES TO GOVERNMENT: Withholding of VAT on Government Money Payments and

Payments to Non- Residents
All the input taxes that can be directly attributed to
transactions subject to VAT may be recognized for input Withholding of Value-added Tax. The Government or any
tax credit; of its political subdivisions, instrumentalities or agencies,
including government-owned or -controlled corporations
INVOICING REQUIREMENTS: (GOCCs) shall, before making payment on account of
each purchase of goods and services which are subject to
What is the invoicing/receipt requirement of a VAT- the value-added tax imposed in Sections 106 and 108 of
registered person? this Code, deduct and withhold the value- added tax
imposed in Sections 106 and 108 of this Code, deduct and
withhold a final value-added tax at the rate of five percent
(5%) of the gross payment thereof:
A VAT registered person shall issue:
FINAL TO CREDITABLE VAT:
(1) A VAT invoice for every sale, barter or exchange of
goods or properties; and RA No. 10963 (RR No. 18-2018)

(2) A VAT official receipt for every lease of goods or Withholding of VAT on Government Money Payments and
properties and for every sale, barter or exchange of Payments to Non-Residents
services.
Provided, that beginning January 1, 2021, the VAT
VALUE-ADDED TAX: withholding system under this subsection shall shift from
final to a creditable system.
What is the rule on claims for input tax on purchases of
depreciable capital goods (local/imported) if purchase ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
amount exceeds PIM?
DEADLINE FOR FILING VAT RETURNS:
If aggregate acquisition cost of all depreciable goods
acquired in a month exceeded PIM, the claims for input BIR Form 2550M 20th day following the close of the
tax shall be spread over the life of the depreciable goods month
or sixty (60) months, whichever is shorter.
BIR Form 2550Q- 25th day following the close of the
CLAIMS FOR INPUT TAX ON DEPRECIABLE GOODS quarter

The amortization of the input VAT shall only be allowed

until December 31, 2021 after which taxpayers with SALE OF GOODS OR PROPERTIES
unutilized input VAT on capital goods purchased or • Vat is based on the sales price
imported shall be allowed to apply the same as scheduled • Tax rate is 12% and 0% (0-rated) and exempl
until fully utilized.
The tax formula
VALUE-ADDED TAX: • Output taxes less input taxes = Vat payable (due)
• Output tax is selling price x 12% or 0%
REVENUE REGULATIONS NO. 16-2005 Input taxes are Vat paid on the purchase or importation of
goods, services, supplies, capital goods
SECTION 4.112-1. Claims for Refund/Tax Credit
Certificate of Input Tax. Vat on sales to government
• Final value added tax is 5% on payment to be made
Where the taxpayer is engaged in both zero-rated or
effectively zero-rated sales and in taxable and the amount Vat on acquisition of capital goods
of creditable input tax cannot be directly and entirely • The input VAT is deductible from the output VAT in full
attributed to any one of the transactions, only the regardless of the amount
proportionate share of input taxes allocated to zero-rated • The excess of input VAT can be used as creditable in the
or effectively zero-rated sales can be claimed for refund or next VAT reporting period
issuance of a tax credit certificate.
Sales invoice and accounting records
EXCESS INPUT TAX: a. A Vat registered person shall issue:
b. A Vat invoice for every sale, barter, or exchange of
In the latter scenario where the taxpayer engages in both goods or properties
VATable and zero-rated activities but the input VAT cannot c. A vat official receipt for every lease of goods or
be directly attributable to such zero-rated activities, the properties and for every lease of goods or properties and
taxpayer may only file a claim for refund or issuance of for every sale, barter or exchange of services
TCC if it has excess and unutilized input VAT, że., its input
VAT is greater than its output VAT. Necessarily, if the Vat declarations and return
  THE SUBMISSION OF THE SUMMARY LISTS
Returns should be prepared quarterly thru 2550Q OF SALES AND PURCHASES IS ON THE 25
OF THE MONΤΗ
Payments should be paid every 20th of the ensuing 1st
quarter month VAT PAYMENT

The corresponding Summary List of Sales and Purchases WHETHER YOU ARE ENGAGE IN BUSINESS OR NOT
should be submitted on the 25th of the ensuing 1 quarter YOU HAVE TO PAY THE VAT.
month (SSLP)
1. IF VAT REGISTERED CLAIM VAT AS INPUT TAX
2. IF NON-VAT, VAT PAID IS AN EXPENSE
•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 3. IF NOT ENGAGE IN BUSINESS, VAT IS YOUR
EXPENSE
Filing of returns
VAT REGISTRATION
The quarter vat declarations (BIR form 2550Q) shall be
filed and the vat paid not later than 20th day of the next ANY PERSON WHO IN THE COURSE OF TRADE OR
month BUSINESS SELLS, BARTERS EXCHANGES GOODS
OR PROPERTIES OR ENGAGES IN SERVICES IS
The corresponding attachments should be submitted not SUBJECT TO VAT EXCEPT THOSE MANDATED AS
later than the 25th of next month following the quarter NON-VAT TAXPAYERS OR THOSE WHO ELECT TO BE
VAT REGISTERED

Vat filing of returns ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

Taxable quarter - refers to the quarter that is synchronized BASIC REGISTRATION INFO
with the income tax quarter
WHEN: BEFORE THE START OF THE BUSINESS
Payments in the monthly vat declarations shall be credited
in the quarterly vat return to arrive at the net vat payable WHERE: WITH THE REO WHERE THE PLACE OF
or excess input tax BUSINESS IS LOCATED

PRESENTATION OUTLINE WHAT TO PAY: ANNUAL REGISTRATION FEE OF

Php500 THRU BIR FORM 0605 FOR EVERY SEPARATE
 Registration OR DISTINCT ESTABLISHMENT OR PLACE OF
 Invoicing BUSINESS ON OR BEFORE JAN 30
 Bookkeeping Requirements
 Filing of Returns and Payment of Vat
 Summary List of Sales and Purchases
 Refunds and Tax Credit Certificates
VAT MANDATORY REG'N
TO REGISTER AS VAT OR NON-VAT
1. THE GROSS SALES FOR THE PAST 12 MONTHS
YOU HAVE YOUR OPTION IF YOUR SALE OF GOODS EXCEEDED THE Php 3million THRESHHOLD
OR SERVICES DOMESTICALLY DOES NOT EXCEED
THE THRESHOLD 2. THERE ARE REASONABLE GROUNDS TO BELIEVE
THAT THE GROSS SALES OR RECEIPTS WILL FOR
TO REGISTER AS VAT OR NON- VAT THE NEXT 12 MONTHS
VAT THRESHOLD IS Php 3 million
However If you decide to be a Non-Vat CANCELLATION OF REG'N
A VAT-REGISTERED PERSON MAY CANCEL HIS
TO REGISTER AS VAT OR NON- VAT REGISTRATION IF,

 Tax compliance is simpler 1. He makes written application and can demonstrate to

BIR satisfaction that his gross sales or receipts for the
 File Form 25510
following 12 months will not exceed the vat threshold
 Pay Percentage Tax based on your Gross Sales
2. He has ceased to carry on his trade or business within
VAT REGISTRATION
the next 12 months
IF YOU HAVE NO OPTION BUT TO REGISTER AS VAT
CANCELLATION OF REG'N
COMPANY
1. Change of ownership in case of a single proprietorship
 FILE FORM 2550M OR 25500
 FILE THE SUMMARY LIST OF SALES AND 2. Dissolution of a partnership or corporation
PURCHASES (SLSPI
3 merger or consolidation with respect to dissolved
VAT REGISTRATION corporation
 VAT IS WITHHELD BY THE PAYOR EXCEPT 4. A person who has registered but failed to actually start
IN CASES OF ZERO RATED SALES the business
 VAT IS REMITTED TO THE BIR ON THE 20TH
OF THE MONTH 5. A person has retired from business

REGISTRATION UPDATE
WHEN BIR UPDATE FORM 1905 IS NEEDED:  The invoice and the official receipts are the
sources of vat inputs
1. A persons business has become exempt
VAT INVOICING
2. A change in the nature of business from vat to vat-
exempt  12% VAT - the amount of the tax shall be shown
as a separate item in the invoice or official
3. A person who is vat exempt but voluntarily registered as receipt
vatable but after the lapse of 3 years applies for
cancellation  Zero-rated sales shall be printed prominently
ON THE INVOICE OR OFFICIAL RECEIPT
4. When sales of a vat registered company for 3
consecutive years did not meet the threshold requirement
VAT INVOICING
COMPLIANCE ACTIVITIES AFTER REG'N VAT
TAXPAYERS The 12%, o-rated, and exempt sales the invoice/receipt
shall indicate the breakdown of the sale price between
1. Pay annual registration fee of php500 taxable, exempt and zero-rated and the calculation of the
vat shall be shown it is recommended that when multiple
2. Register books of accounts transaction occurs where vatable, exempt or zero rated a
separate invoice shall be issued on each transaction
3. Register invoices or official receipts
PROPER ISSUANCE OF INVOICE
4. File monthly vat declaration and quarterly vat return
 All vat registered taxpayers should separately
5. Submit quarterly summary list of sales and purchases bill the vat

COMPLIANCE ACTIVITIES AFTER REG'N NON-VAT  The amount of tax be shown as separate item in
TAXPAYERS the invoice/receipt
1. Pay annual registration fee PENALTY FOR ERRONEOUS INVOICING
2. Register books of accounts  Vat registered taxpayer without indicating "vat
exempt sale shall be subject to 12% vat
3. Register non-vat invoices or offficial receipts
FILING OF RETURNS
4. File monthly percentage tax return
1st month of the quarter- vat monthly declaration for the
REGISTRATION UPDATE transaction during the said month
 A short period return for the remaining period 2nd month of the quarter- vat monthly declaration for the
that he was vat registered shall be filed within transactions during the said
25 days from date of cancellation of registration
3rd month of the quarter- vat quarterly return for the
 For percentage tax the taxpayer shall file the transactions for the said month plus transactions for the
initial monthly return for the month following the first and second month
month of registration

VAT INVOICING FILING OF RETURNS

1 NAME, TIN, ADDRESS  The monthly vat declarations (BIR form 2550m)
2. DATE OF TRANSACTION shall be filed and the vat paid the 20th day the
3. NAME, TIN, BUSINESs ADDRESS OF VAT ensuing month
REGISTERED PURCHASERS
4. THE SELLING AMOUNT  The quarterly vat return shall be filed and the vat
5. THE VAT AMOUNT paid not later than the 25th the ensuing month
6. THE TOTAL INVOICE AMOUNT
SHORT PERIOD RETURN
VAT INVOICING WHEN REQUIRED?
WHAT TO USE FOR SALES OF (TANGIBLE) GOODS
 when retiring from business after due notice to
1. Sales invoice
revenue district office
2. When collecting collection receipt
 when vat registration has been cancelled
VAT INVOICING
WHEN SELLING SERVICES
SHORT PERIOD RETURN
WHEN TO FILE THE QUARTERLY RETURN?
1. Use billing invoice
2. When collecting use official receipt
 25 days after the end of month

VAT INVOICING  Subsequent monthly declarations and quarterly

 In actual practice returns should still be filed if winding up reveal
taxable transactions
 INFO IN THE SLP
SHORT PERIOD RETURN
NEW VAT TAXPAYER WHEN LIABLE? 1. BIR REGISTERED NAME OF BUYER
2. ADDRESS OF SELLER/SUPPLIER
 On effective date of registration (registration 3. TIN OF SELLER
date on the face of the cor) 4. EXEMPT PURCHASES
5. ZERO RATED PURCHASES
 Non-vat taxpayer is liable on the first day of the
month following the registration INFO IN THE SLI

1. IMPORT ENTRY
SHORT PERIOD RETURN 2. ASSESSMENT/RELEASE DATE
WHEN REQUIRED TO FILE INITIAL DECLARATION AND 3. DATE OF IMPORTATION
RETURN? 4. NAME OF SELLER
5. COUNTRY OF ORIGIN
 Within 20 days after end of quarter 6. DUTIABLE VALUE
7. ALL CHARGES BEFORE RELEASE FROM CUSTOMS
 Initial quarterly return shall be filed on or before 8. LANDED COST
the 25th after end of the taxable quarter 9. VAT PAID
10. OR EVIDENCING TAX PAYMENT:
SHORT PERIOD RETURN 11. DATE OF VAT PAYMENT

 If the effective date of registration falls on the

3rd month, the returns should be filed on the QUARTER SLS AND SLP
25th following the end of the taxable quarter. No RULES FOR SLS AND SLP
monthly vat return need be filed 1. Vatable sales, exempt and zero rated
2. Vatable purchases, exempt and zero rated
3. Arrange names of sellers alphabetically
4 BIR registered name, tin and period covered
WHERE TO FILE AND PAY
QUARTERLY SLS AND SLP
1. Authorized bank under the jurisdiction of rdo where the HOW SUBMITTED?
company is registered
 BY EMAIL
2. Where no accredited agent bank, payment can be done  TO THE RDO HAVING JURISDICTION
to the  BEFORE THE DUE DATES DESIGNATED

a) RDO VAT ON SALE OF SERVICES

b) COLLECTION AGENT
c) TREASURER OF THE MUNICIPALITY • The vat on sale of services is based on gross receipts

• Gross receipts means the total amount of money or its

ONE VAT RETURN equivalent representing the contract price, compensation,
service fee, rental or royalty including the amount charged
 One consolidated quarterly vat return or monthly for materials supplied with the services and deposits
vat declaration covering the head office and the
branches • The tax is 12% or zero%

• In cases of sales to the government a final Vat of 5% is

SLS, SLP, SLI withheld

SLS: SUMMARY LIST OF SALES VAT TAX FORMULA

SLP: SUMMARY LIST OF PURCHASES
SLI: SUMMARY LIST OF IMPORTATION Output taxes
Less: Input taxes
ALL PERSONS LIABLE FOR VAT ARE REQUIRED TO Equals: Vat tax payable
SUBMIT THE SLS, SLP, SLI
INPUT TAXES
Input taxes are vat paid on:
SLS AND SLP 1. Purchase of:
a. Materials used in sale of services
SUBMISSION: thru the company email if possible b. Supplies used in the sales of services
dedicated for such C. Services
d. Capital goods subject to depreciation
2. Purchase of real property used in the sale of
INFO IN THE SLS services

1. MONTHLY TOTAL SALES VAT ON IMPORTATION

2. REGULAR BUYERS
3. CASUAL BUYERS 1. Importation of goods is subject to Vat
4. REGISTERED NAME OF BUYER
5 TIN OF BUYER 2. Vat is based on total value used by the Bureau of
6. EXEMPT SALES Customs in determining tariff and customs duties, excise
7. ZERO RATED SALES tax and other charges prior to the removal of goods from
Customs custody
3. When tariff and customs duties are determined on the EFFECTIVELY ZERO-RATED SALES
basis of quantity or volume of the goods, VAT is based on
landed cost Effectively zero-rated sales of goods and properties shall
refer to the local sale of goods and properties by a vat-
4. Landed cost is the invoice cost, freight, insurance, registered person to a person or entity who was granted
customs duties, excise tax and other charges indirect tax exemption under special laws:

VAT ON IMPORTATION 1. Sale of power or fuel generated through renewable

sources of energy: solar, wind, hydropower, geothermal
Typical charges prior to removal of goods from customs
custody: insurance, freight, postage, commission, interest, 2. Sales and services to persons granted indirect tax
bank charges, wharfage dues, arrastre charges, customs exemption under special laws: enterprises registered with
brokerage fees, stamps, processing fee, customs duty, the SBMA and CDA; PEZA; ADB and IRRI
and excise tax

• The Vat is payable prior to the removal of goods from

Customs

• The Vat is available as Vat input against the Vat output

PERCENTAGE TAXES

a. 3% on persons exempt from Vat threshold of P3 million

b. Domestic carriers
C. International carriers
d. Franchise tax
e. Overseas communication tax
f. Banks and quasi- bank activities
g. Non-bank financial intermediaries
Multiple Choice – VAT Theory: Part 2
h. Insurance companies
1. Generally, the tax basis of business tax is gone
i. Amusement tax
j. Winnings
k. Stock transactions A. SALES OR RECEIPTS

2. Who is the statutory taxpayer of business taxes?

ZERO-RATED TRANSACTIONS
A. THE SELLER WHO MUST BE ENGAGED IN TRADE
• Taxpayers belonging to this group are registered under OR BUSINESS
the Vat system However, they are engaged in sales or
exchanges of goods/services that are subject to output Vat 3. The economic taxpayers of consumption taxes are
rate of zero percent
d. Buyers, whether or not engaged in trade or
• These are mainly export sales by Vat registered persons business
which will generate the needed reserves of foreign
currencies 4. What is the method used to determine the VAT due and
payable?
• A zero-rated company shall not result in any output Vat;
but the input Vat on its purchases shall be available as
C. TAX CREDIT METHOD
a. Tax refund
b. Creditable input tax 5. Which statement is conceptually incorrect?
c. Tax credit certificate
B. THE BUYER PAYS THE CONSUMPTION TAX TO THE
REQUISITES OF ZERO-RATED EXPORT SALES GOVERNMENT

1. A vat-registered entity
2. Engaged in the sale and actual shipment of goods from 6. Which is correct?
the Phils to foreign country
3. Required to present certification that payments are B. THE SALES TO RESIDENTS MUST INCLUDE A
made in acceptable foreign currency BUSINESS TAX.

CONSIDERED EXPORT SALES 7. The deduction from Output VAT is called

1. Sales to bonded manufacturing warehouses of export-
C. INPUT VAT
oriented manufacturers
2. Sales to EPZA
3. Sales to foreign military bases 8. Which is a pure form of a sales tax?
4. Sales to non-resident Filipinos and balikbayans paid for
in foreign currency inwardly remitted thru the bank A. PERCENTAGE TAX
5. Commission income on export sales of export
registered trader 9. Statement 1. A business which pays VAT normally does not
6. Consigned goods actually sold by foreign consignees pay percentage tax. Statement 2: A business which pays
percentage tax also pays VAT. Which statement is correct?
 C. PAYABLE REGARDLESS OF THE PURPOSE OF THE
A. STATEMENT 1 IMPORTATION

10. Which of the following business taxes applies only for 20. The VAT on domestic sales is an example of good
domestic consumption?
a. VAT on sales B. AN INDIRECT TAX
b. Percentage tax
c. Excise tax
d. All of these

11. Excise tax is paid by

C. IMPORTERS OR MANUFACTURERS

12. Export sale is (select the incorrect one)

B. EXEMPT FROM VAT

13. Statement 1: Excise tax is always paid together with VAT or

percentage tax, Statement 2: Excise tax is paid at the point of
sale. Which statement is false?

C. BOTH STATEMENTS

14. Which is imposed with a tax of zero percent (0%)?

B. EXPORT SALES OF VAT-REGISTERED TAXPAYERS

15. Which is not subject to excise tax?

C. FOOD PRODUCTS

16. The tax basis of consumption tax on foreign purchase is

B. PURCHASE COSTS.

17. The consumption tax on domestic purchases is imposed

upon the
A. SALES OR RECEIPTS

18. Technically, the excise tax on the manufacture of certain

articles is payable only when the article is intended for

A. DOMESTIC CONSUMPTION

19. Which is correct with the VAT on importation?