Part 2

REVIEW
VAT is a consumption tax paid by the final consumer.
It is the businesses that act as intermediaries.
It collects VAT on behalf of the government.
Businesses:
charge VAT on their sales (output tax) and
receive credits for the VAT they pay on purchases and expenses
directly attributable to VAT transactions (input tax).
The goal is to tax the value added to goods and services at each stage
of the supply chain.
 INPUT TAX
VAT

OUTPUT TAX
 OUTPUT VAT
The TRAIN Law provides specific rates and guidelines
Output Tax is the VAT that a VAT- for the application of output tax:
registered taxpayer is required to charge VAT Rate: The standard VAT rate in the Philippines is 12%.
and collect from the buyer on the sale of Zero-Rated Sales: Certain transactions, although taxable,

taxable goods, properties, or services. are zero-rated. This is primarily applied to export sales and
sales to entities enjoying zero VAT privileges. Zero-rated
It is calculated based on the gross selling
transactions do not require the seller to collect output tax but
price or gross receipts derived from the
allow them to claim input VAT credits.
taxable transactions. Exempt Sales: Sales that are exempt from VAT & do not
The output tax collected from customers is require the collection of output tax, nor do they allow the
considered a liability payable to the Bureau taxpayer to claim input tax credits.
of Internal Revenue (BIR).
 INPUT VAT
Input Tax is the VAT that a VAT-registered
taxpayer pays on purchases of goods,
Claiming Input Tax Credit:
properties, or services necessary for
Input tax can be credited against output tax, subject to
conducting business.
specific rules and limitations.
It is the creditable portion of VAT paid on
Not all input taxes are immediately creditable, as there
inputs used directly in VAT-able
are instances when the input VAT may be deferred or
transactions, which may include:
disallowed.
VAT on domestic purchases of goods
and services
VAT on importations
Presumptive input tax on agricultural
products
 How does VAT credits work?
To determine the VAT payable to the government, a taxpayer calculates
the difference between the output tax and input tax
at the end of each VATable period:
This excess can either be:
01 02
Carried over to the
succeeding quarter or
VAT Payable: Excess Input Tax (VAT Refund): period, or
When output tax exceeds input When input tax exceeds output Claimed as a VAT refund
tax, the excess amount is the VAT tax, the taxpayer may have (for qualified taxpayers
payable, which the taxpayer must excess input tax. with zero-rated or
remit to the BIR. exempt sales, subject to
stringent rules and
documentary
requirements).
 Rules on Input & Output Tax
under EOPT,

Ease of Paying Taxes Act introduced reforms to improve VAT filing and crediting
process
Objective: to reduce taxpayer burden and simplify tax compliance.
Changes related to input and output tax are as follows:
Faster process to refund VAT
Improve mechanisms for creditable input VAT to reduce the likelihood of
excess credits
Streamlined process in VAT returns, payment schedules, and an expanded
electronic filing and payment system
VAT Deductions, Exemptions & Zero Rating Rules
under TRAIN Law and EOPT
TRAIN Law
raised VAT exemptions for certain goods and
services, such as residential lots and leasehold
properties up to certain thresholds, educational
services, agricultural products in original state, and
transactions by VAT-exempt entities.
Export sales remain zero-rated, meaning no output VAT is
collected on such transactions, but input VAT can still be
claimed as a refund or credit. This incentivizes exporters
by effectively nullifying their VAT liabilities
Input VAT from minimal-value purchases (falling below
specified thresholds) are also addressed with simplified
treatment to streamline credit claims.
 How to compute VAT
payable with input and
output tax?
The Value Added Tax is If you are the buyer of goods
computed by getting the and services, you will need to
difference of the output tax and pay VAT by computing for your
input tax. If you are the seller, output tax and input tax. Output
you pass on the VAT to your tax is computed by dividing
client by adding 12 percent to your total sales with the factor
your selling price. 9.3333.
 How to compute VAT
payable with input and
output tax?
If total expenses
If total sales is P112,000
(that have tax receipts)
Compute Output Tax
Compute Input Tax
P112,000/9.333 = P12,000
P44,800/9.333= P4,000

Compute VAT
P12,000 - 4,000 = P8,000