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