VALUE ADDED TAX

What is Value Added Tax or VAT?

 VAT is a consumption tax that is added in a product or service you sell.

 It is an indirect tax that is passed on to buyers, consumers and end users.
Who shall File Value Added Tax or VAT?

This return/declaration shall be filed in triplicate by the following taxpayer:

 A person whose gross annual sales and/or receipts exceed P3,000,000
 A Person who chooses to be registered as VAT taxpayer
 A person that imports goods.
What are the Tax Rates involving Value
Added Tax or VAT?

 VAT 12%
 VAT Zero Rated (0%)
 VAT Exempt
Standard Rated Supplies

The standard rate of supplies in the Philippines is 12% on most goods and services.
Some of the standard rated supplies are:
 •Sales of goods and properties; 12% of the gross selling price or gross value of the
products and properties sold
 •Sales of services and use/lease of properties; 12% of gross receipts from the
exchange of sales of services
 •Importation of goods; the value of the tax used by the Bureau of Customs (BOC)
in determining tariff, custom duties, excise taxes, and other charges.
 •Any purchases made by a registered dealer in the course of business; VAT
computation is based on a particular percentage of the purchase cost will be
imposed on a VAT-registered dealer who buys goods or services from another
supplier.
Zero-Rated Supplies
The zero-rated supplies are supplies with 0% VAT. It means that the products and
services are taxable but with a 0% rate.
Here are some of the zero-rated supplies in the Philippines:
 Export of sales
 Any sales in foreign currency
 Any sales made to an individual or entity who are exempted under special
laws of an international agreement
 Any sales of services conducted outside the Philippines
Effective on June 27, 2021, the Revenue Regulations has issued a 12% VAT on
certain sales transactions that were subject to 0% VAT earlier.
Effective on June 27, 2021, the Revenue Regulations has
issued a 12% VAT on certain sales transactions that were
subject to 0% VAT earlier.

Following are the sales transactions that are 12% VAT as per the new rules:
 Any sales of raw materials or packing materials to a foreigner for delivery to a
local export-oriented enterprise
 Any sales of raw or packing materials to an export-oriented enterprise, whose
sales are greater than 70% of the total annual productions
 Any export sales activities under Executive Order (EO) No.226, or the
Omnibus Investment Code of 1987
 Any services performed by contractors or subcontractors in manufacturing,
processing, or converting goods for an entity whose export sales exceed 70%
of its total annual production.
Exempted Supplies
Tax-exempt supplies are goods and services free from tax - meaning that these
goods and services are not taxable.
Below is a list of products and services that are exempted from VAT under SEC
109 and CREATE LAW (as of 1 January 2021):
 Any services provided by the financial intermediaries
 Invoice sales or importation of medicine for cancer, mental illness, and kidney
diseases
 Any sales, importation, printing, or publication of the journal, or any
educational materials covered by the UNESCO
 Any sales or importation of COVID-19 related medicines, medical supplies,
and equipment from 1 January 2021 to 31 December 2023
 Any sales or importation of fertilizer, seeds, and seedlings
What is the Basis of Value Added Tax or
VAT?

 VAT on Sale of Goods, Properties, Services, or Lease of Properties is based on

the monthly gross sales and receipts.
 VAT on Importation is based on the total value used by the Bureau of Customs
in determining tariff and customs duties, plus custom duties, excise taxes,
and other charges to be paid by the importer prior to the release of such
goods from customs custody.

When and Where to File and Pay Value
Added Tax or VAT?

 Quarterly Value Added Tax Return (BIR Form 2550Q) shall be filed not later
than the 25th day of the following quarter.
 The return shall file through Electronic Bureau of Internal Revenue Forms
(eBIRForms) or Electronic Filing and Payment System (eFPS).
 And shall be paid through eFPS or Authorized Agent Bank (AAB) of the
Revenue District Office (RDO) where the taxpayer is registered and
conducting business.
 Taxpayers with branches shall file only one consolidated return/declaration
for his principal place of business or head office and all branches.
What is VAT Payable?

 VAT Payable is the tax you need to pay after deducting Input Tax from Output
Tax.

The Formula for computing VAT Payable is:

Output Tax
– Input Tax
VAT Payable / (Overpayment)
What is Input VAT?
 Input Tax is the 12% Value Added Tax due on the purchase, lease, or
importation of taxable goods, properties and services from a VAT Registered
Taxpayer or Foreign companies.
 Input tax also include Input Tax on Importation, Transitional Input Tax,
Presumptive Input Tax, and Deferred Input Tax.
What is Output VAT?

 Output Tax is the 12% Value Added Tax (VAT) due on the sale or lease of
taxable goods, properties, services.
What is the Summary List of Sales and
Purchases (SLSP)?

 All persons liable for VAT are required to submit Summary List of Sales and
Purchases (SLSP) every twenty-fifth (25th) of the month following the close of
the taxable quarter through BIR Software called Reconciliation of Listing for
Enforcement System (RELIEF).
BIR RELIEF DATA ENTRY Process

 BIR’s RELIEF Data Entry is where you input information like TIN number,
Registered Name, Business Address, Gross Sales or Purchases, Input Tax or
Output Tax, VAT Zero Rated, VAT Exempt, etc.
 After RELIEF Data Entry, you must check if there is no error using BIR’s RELIEF
Validation.
 After BIR RELIEF Validation, you can now Email it to esubmission@bir.gov.ph.

 After few days, you will receive an email confirmation from BIR. Print a
hardcopy as proof that you submit Summary List of Sales and Purchases
(SLSP).
What will happen if you sell or lease goods
and/or services to the Government?

 1. If you sell goods and/or services to the government, the government or any
of its agencies shall withhold a 5% Final value-added tax from you based on
their gross payment to you.
 2. If you’re a non-resident owner (OFW) and you lease your property to the
government, the government or any of its agencies shall withhold a 12% Final
value-added tax from you based on their gross payment to you.
 3. Payments for purchases of goods and services arising from projects funded
by Official Development Assistance (ODA) shall not be subject to the final
withholding tax system.
 4. Please note that Withholding of Creditable Income Tax (Expanded) is
different from the withholding of Final VAT. And that beginning January 1,
2021, the VAT Withholding System shall shift from final to creditable system
What are the Invoicing Requirements when
it comes to VAT?

 1. The amount of Input tax shall be shown as a separate item in the invoice or
receipt.
 2. If the Sale is exempt from VAT, the amount of VAT-exempt sale shall be
written or printed prominently on the invoice or receipt.
3. If the sale is subject to zero percent (0%) VAT, the amount of zero-rated
sale” shall be written or printed prominently on the invoice or receipt.
What will happen if you fail to display prominently on the
invoice or receipt the words “VAT-Exempt sale” on
Exempt Transaction?

1. The transaction shall become taxable and the issuer shall be liable to pay VAT
thereon.
2. The purchase shall be entitled to claim an input tax credit on his purchase.
Filing and Payment of VAT Return starting
January 1, 2023

According to Sec. 37 of TRAIN Law

 Filing and payment of Value Added Tax will be done on a quarterly basis
instead on a monthly basis.
 This shall be done within twenty five (25) days following the close of each
taxable quarter.
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

 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 VAT Train Law?

 A VAT is an indirect tax. Indirect tax means that you can pass on the taxes to
the buyer, user, or consumer of the goods, products, or services received.
 In VAT, any person, whether a franchise grantee, who in the course of trade or
business, sells, barters, exchange, leases, goods or properties, render services
shall impose a percentage tax. However, the tax base should be limited only
to the value-added to such goods, properties or services by the seller,
transferor, or lessor.
A Vat Registered Required to Pay Individual
Tax under Train Law 2019?

 Value-added tax is classified as a business tax. Business taxes are taxes

imposed on any transactions related to transferring goods or properties and
services to another with or without considerations.

 While individual tax is an income tax, any person who earned or generated
income must be taxed. Income taxes include doctors, lawyers, accountants,
and ordinary people who are earning incomes.

Therefore, Value Added Tax is imposed on the sale of services or goods,

properties while individual tax is a tax on the income received by the owner from
his business.
What is vat threshold Philippines 2018 and
tax rate?

 A VAT is a consumption tax levied on the sale, barter, exchange, or lease of

goods or properties and services in the Philippines and the importation of
goods into the Philippines.
 You will be subject to a value-added tax of 12% based on the gross sales or
receipts if the expected sales are more than 3 million. These transactions
include the sale of goods or commodities or selling of services. The tax base
or the VAT threshold increases from 1,919,500 to 3,000,000 as of this year.
 The tax base of the VAT is limited only to the value-added to such goods,
properties, or services by the seller, transferor or lessor.
Who is Subject to Value Added Tax Train Law?

 In General rule, any person is a VAT-registered and who is in the course of

business or trade, sells, barters, exchange, leases goods or properties,
renders services, and any person who imports goods shall be subject to the
Value Added Tax (VAT).
 Any person whose gross receipts or gross sales exceeds the threshold of Three
Million Pesos (3,000,000) in one year shall be subject to VAT.
If your gross sales or gross receipts are less than 3,000,000, you can either
choose to pay a percentage tax or an 8% income tax rate.
How To File and Pay Valued Added Tax in the
Philippines?

 Every Person shall file a quarterly return of the number of his gross sales or
receipts within twenty-five (25) days following the close of each taxable
quarter prescribed for each taxpayer.
 VAT registered persons shall pay the value-added tax every month.
Is a VAT Exempt Person not Subject to
Percentage Tax (3%)?
 The person who is not a VAT-registered sales or receipts are exempt from
payment of value-added tax but must pay a tax equivalent of Three percent
(3%) of his gross quarterly sales or receipts.

 However, It shall exempt any person engaged in cooperatives and self-

employed individuals and professionals availing of the 8% tax on gross sales or
receipts and other non-operating income from the payment of three percent
(3%) additional percentage tax.
PERCENTAGE TAX
What is Percentage Tax?

 Percentage Tax is a business tax that is imposed on persons who sell or lease
goods, properties or services in the course of their business.
Percentage Tax Under Train Law

 Before, the filing and paying of Percentage tax is done monthly. Now, the
filing and paying of Percentage Tax is done quarterly. (i.e April, July, October,
and January)
 Aside from that, the threshold of gross annual sales and/or receipt before the
taxpayer become VAT is increased from P1,915,500 to P3,000,000.
Who Shall File Quarterly Percentage Tax?
 1. Person whose gross annual sales and/or receipts do not exceed P3,000,000 and who are not
VAT- Registered Persons.
 2. Domestic Carriers and Keepers of Garages.
 3. International air and shipping carriers doing business in the Philippines.
 4. Franchises of Gas and Water Utilities.
 5. Franchises on radio/TV broadcasting companies whose annual gross receipts do not exceed
P10M
 6. Oversees dispatch, message or conversation originating from the Philippines except on
services involving the following:
 a. Government of the Philippines,
 b. Embassy and Consular Offices,
 c. International Organization with international agreement, and
 d. News Services which messages deal exclusively with the collection or dissemination of
news,
 7. Proprietors, lessees or operators of cockpits, cabarets, night or day clubs, boxing
exhibitions, professional basketball games, jai-alai and race tracks.
 8. Life assurance companies.
 9. Agents of foreign insurance companies.
 10. Banks, non-bank financial intermediaries and finance companies.
When and Where to File and Pay Quarterly
Percentage Tax?

 The taxpayer shall file and pay using BIR Form 2551Q within twenty-five (25)
days after the end of each taxable quarter.
 The return shall file through Electronic Bureau of Internal Revenue Forms
(eBIRForms) or Electronic Filing and Payment System (eFPS).
 And shall be paid through eFPS or Authorized Agent Bank (AAB) of the
Revenue District Office (RDO) where the taxpayer is registered and
conducting business.
 The taxpayer may file a separate return for the head office and for each
branches or a consolidated return for the head office and all the branches.
 In the case of large taxpayers, only one consolidated return is required.
What is the Basis of Quarterly Percentage
Tax?

 Taxable amount in the quarterly percentage tax return shall be the total gross
sales/receipts/premiums for the quarter.
 “Gross Receipts” means all amount received by the prime or principal
contractor, undiminished by any amount paid to any subcontractor under
subcontract arrangement.
 For the purpose of the amusement tax, the term “gross receipts” embraces
all the receipts of the proprietor, lessee or operator of the amusement place.
Said gross receipts also include income from television, radio and motion
picture rights.
What are the Tax Rates involving Quarterly
Percentage Tax?
What if the Filer Paid the Quarterly
Percentage Tax using 2551M?

 If this happens, the taxpayer still needs to file the quarterly percentage tax
return (BIR Form No. 2551Q) even if he/she already filed 2551M.
 Just indicate in the return the total gross sales/receipt for the quarter and
the total payment made in the quarter.
 For amended return, you’re required to attach the proof of payment and the
previously filed tax return.