Professional Documents
Culture Documents
¡ VAT 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.
¡ Person liable:
¡ Any person who, in the course of trade or business,
¡ Sells, barters, or exchanges goods or properties (seller or transferor)
¡ Leases goods or properties (lessor)
¡ Renders services (service provider)
¡ The seller is the one statutorily liable for the payment of the tax but the amount of
the tax may be shifted or passed on to the buyer, transferee or lessee of the goods,
properties or services.
¡ In case of importations, the importer is liable for the VAT.
NATURE AND BASIC PRINCIPLES
¡ In the course of trade or business (Rule of Regularity):
¡ The regular conduct or pursuit of a commercial or economic activity,
including transactions incidental thereto
¡ Regardless of whether or not the person engaged therein is a non-stock,
non-profit private organization (irrespective of the disposition of its net
income and whether or not it sells exclusively to members or their guests,
or government entity).
¡ Taxable
¡ General Rate: 12%
¡ Special Rate: 0%
¡ Exempt
OUTPUT TAX
¡ Gross selling price means the total amount of money or its equivalent
which the purchaser is obligated to pay to the seller in consideration of
the sale, barter or exchange of the goods or properties, excluding VAT.
¡ Sales Discount may only be deducted from gross sales or receipts within the
same month/quarter it was given provided:
¡ It is determined and granted at the time of sale
¡ The discount is expressly indicated in the invoice
¡ Amount thereof should form part of gross sales duly recorded in the books
¡ The granting of the discount does not depend on the happening of a future event
TRANSACTIONS DEEMED SALE
¡ VAT shall apply to goods or properties originally intended for sale or use in business,
and capital goods which are existing as of the occurrence of the following:
¡ Change of business activity from VAT taxable status to VAT-exempt status
¡ The tax due on such importation shall constitute a lien on the goods,
superior to all charges/liens, irrespective of the possessor of said goods.
SALE OR EXCHANGE OF SERVICES
¡ Services: the performance of all kinds of services in the Philippines for others
for a fee, remuneration or consideration whether in kind or in cash
¡ VAT base = Gross Receipts
¡ ”Gross receipts” refers to:
¡ Total amount of money or its equivalent representing the contract price,
compensation, service fee, rental or royalty,
¡ Including the amount charged for materials supplied with the services,
¡ Deposits applied as payments for services rendered and
¡ Advance payments
¡ Actually or constructively received during the taxable period
¡ For the services performed or to be performed for another person,
¡ Excluding VAT.
ZERO-RATED SALES
¡ The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective on any shipping arrangement that may be agreed upon,
and paid for in acceptable foreign currency or its equivalent in goods or
services, and accounted for in accordance with the rules and regulations of
BSP
¡ Transport of passengers and cargo by domestic air or sea vessels from the Philippines
to a foreign country
¡ Sale of power or fuel generated through renewable sources of energy and other
emerging energy sources using technologies such as fuel cells and hydrogen cells
ZERO-RATED SALES
Sales which are subject to VAT at 0% rate, Sales which are not subject to VAT.
¡ It includes input taxes which can be directly attributable to transactions subject to the VAT
¡ Plus a ratable portion of any input tax which cannot be attributed to either the taxable or
exempt activity.
¡ Input taxes must be evidenced by VAT invoice for purchases of goods or VAT official
receipt for purchases of services.
ADJUSTMENTS TO INPUT TAX
¡ Amount of claim for VAT refund or Tax Credit Certificate (whether filed with the
BIR, the Department of Finance, the Board of Investments or the BOC)
¡ Other adjustments, such as purchase returns and allowances, input tax attributable
to exempt sales and input tax attributable to sales subject to final VAT withholding.
SOURCES OF INPUT TAX
¡ 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;
¡ Distribution or transfer to:
¡ Shareholders or investors as share in the profits of the VAT-registered persons; or
¡ Creditors in payment of debt;
¡ Consignment of goods if actual sale is not made within 60 days following the date such
goods were consigned; and
¡ Retirement from or cessation of business with respect to inventories of taxable goods
existing as of such retirement or cessation.
INPUT TAX BASE
¡ Carry-over
¡ Claim for Refund
¡ Tax Credit
CLAIM FOR REFUND/TAX CREDITS
¡ Any VAT taxpayer may apply for the issuance of a tax credit certificate or refund of any input tax
attributable to:
¡ Zero-rated sales; and
¡ File application within 2 years after close of taxable quarter when such sales were made
¡ Cancellation of VAT registration
¡ Cancellation is due to retirement from, cessation of business, or due to changes in or cessation of status as
VAT taxpayer
¡ File application within 2 years from date of cancellation
¡ TCC may be used in payment of other internal revenue liabilities
¡ Entitled to a refund if no internal revenue tax liabilities against which the tax credit may be utilized
¡ TO THE EXTENT THAT SUCH INPUT TAX HAS NOT BEEN APPLIED AGAINST THE OUTPUT TAX.
INPUT TAX ON CAPITAL GOODS
¡ 5 years or more estimated useful life – Monthly input tax = total input
tax/60 months
¡ Less than 5 years estimated useful life – Monthly input tax = total input
tax/estimated useful life in months
¡ Until December 31, 2021 only - TRAIN
INPUT TAX ON CAPITAL GOODS
¡ Claim for input tax shall commence in the calendar month of acquisition.
¡ If the depreciable capital good is sold/transferred within a period of 5
years or prior to the exhaustion of the amortizable input tax, the entire
unamortized input tax on the capital goods sold/transferred can be
claimed as input tax credit during the month/quarter when the sale or
transfer was made.
INPUT TAX ON CAPITAL GOODS
¡ Case:
¡ Company X purchased software with an estimated useful life of 3 years
at a price of Php3Million and VAT of Php360,000 on February 1, 2015.
How will the input tax be treated?
INPUT TAX ON CAPITAL GOODS
¡ Suggested answer:
¡ Php360,000 input tax should be amortized over a period of 3 years.
¡ Basis:
¡ Capital goods defined in RR No. 16-2005 – “depreciable assets for income tax
purposes”
¡ Capital goods defined in RR No. 4-2007 – Capital goods or properties refer to
goods or properties with estimated useful life greater than one year and which are
treated as depreciable assets under Sec. 34(F) of the Tax Code, used directly or
indirectly in the production or sale of taxable goods or services.
INPUT TAX ON CAPITAL GOODS
¡ Basis:
¡ Sec. 107 of RR No. 2
¡ Intangibles, the use of which in the trade or business is definitely limited in duration,
may be the subject of a depreciation allowance. Examples are patents, copyrights and
franchises
¡ If, however, an intangible asset acquired through capital outlay is know from experience
to be of value in the business for only a limited period, the length of which can be
estimated from experience with reasonable certainty, such intangible asset may be the
subject of a depreciation allowance, provided the facts are fully shown in the return or
prior thereto to the satisfaction of the CIR.
INPUT TAX ON CAPITAL GOODS
¡ Example:
¡ Questions:
¡ Does Corporation A need to withhold VAT and FWT?
¡ When should Corporation A withhold VAT?
¡ How much VAT should be withheld?
WITHHOLDING VAT
¡ Example:
¡ Suggested Answers:
¡ Does Corporation A need to withhold VAT and FWT?
¡ VAT – YES, because a portion of the services was rendered inside the Philippines,
notwithstanding the provision in the contract that says all services will be
provided outside the Philippines.
¡ FWT – NO, assuming that Tax Treaty Relief is obtained
¡ (See Deutsche Bank AG Manila v. CIR, GR No. 188550, August 19, 2013)
WITHHOLDING VAT
¡ Example:
¡ Suggested Answers:
¡ When should Corporation A withhold VAT?
¡ August 1, 2011 – This is the time of actual payment of fees to Corporation B.
¡ How much VAT should be withheld?
¡ The portion of the fee that can be identified to services actually provided in the
Philippines is subject to withholding VAT.
WITHHOLDING VAT
¡ Example:
¡ Suggested Answers:
¡ How much VAT should be withheld?
¡ What if there is no specified fee for services provided in the Philippines?
¡ Sec. 155 of Revenue Regulations No. 2 (Income Tax Regulations)
¡ Gross income from sources within the Philippines includes compensation for labor or personal services
performed within the Philippines regardless of the residence of the payor, of the place in which the contract
for service was made, or of the place of payment.
¡ If no accurate allocation or segregation of compensation for personal labor or personal services performed
within the Philippines can be made, or when such labor or service is performed partly within and partly
without the Philippines, the amount to be included in the gross income shall be determined by an
apportionment of the time basis, i.e., pro rata of the number of days of services performed in the
Philippines bears to the total number of days of labor or services performed in for which the payment is
made.
WITHHOLDING VAT
¡ Example:
¡ Suggested Answers:
¡ How much VAT should be withheld?
¡ VAT base = (3 months/12 months) x USD 100,000 = USD 25,000
¡ Withholding VAT = USD25, 000 x 12% = USD 3,000
WITHHOLDING VAT
¡ In case there are VAT and non-VAT activities, tax credit shall be allowed
as follows:
¡ Total input tax which can be directly attributed to transactions subjected to
VAT; and
¡ A ratable portion of any input tax which cannot be directly attributed to
either activity.
MIXED TRANSACTIONS
Input tax on purchases of real property Public instrument (i.e., deed of absolute sale,
Cash/Deferred Basis deed of conditional sale, contract/agreement
to sell, etc.) with VAT invoice for the entire
selling price and Non-VAT Acknowledgment
Receipts for the initial and succeeding
payments
Input tax from payments made to non-residents Monthly Remittance Return of Value Added Tax
(such as for services, rentals or royalties) Withheld (BIR Form 1600)
¡ Sections 113(B)(2) and 237 of the Tax Code require that the following
information be contained in the VAT Invoice or VAT OR, among others:
¡ Amount of VAT shown as a separate item;
¡ The date of transaction, quantity, unit cost and description of goods or
properties or nature of service; and
¡ The name, business style, if any, registered address and TIN of the purchaser,
customer or client, if VAT-registered.
SUBSTANTIATION REQUIREMENTS
Subsidiary Sales Journal Separate columns for each sales type (export, zero-rated,
exempt, taxable, deemed sales) and output taxes
Subsidiary Purchases Journal Separate columns for each purchase type (goods for sale,
supplies, raw materials, services, capital goods, from non-
VAT persons), input taxes, and input tax deemed paid
Subsidiary Ledger: Depreciable Purchase amount, date of purchase description of goods,
Assets/Capital Goods total input tax, monthly input tax claimed in VAT
declaration or return
ADMINISTRATIVE REQUIREMENTS (FOR UPDATING)
BIR Form 2550M Total amount of sales, purchases, E-filing – 21 to 25 days following
(Monthly VAT output tax and input tax for the end of month (depending on the
Declaration) month industry)
BIR Form 2550Q Cumulative totals of sales, E-filing and e-payment – 25 days
(Quarterly VAT purchases, output tax, input tax, following the close of the taxable
Declaration) VAT payable for the quarter quarter
(reduced by tax paid for previous
2 months) Manual filing and payment – 25
days following the close of the
taxable quarter
ADMINISTRATIVE REQUIREMENTS
Schedule Information to be Indicated Deadline for Filing
BIR Form 1600 Total amount of income payments to E-filing and e-payment – 10 days
(Monthly Remittance nonresidents subject to VAT and following end of month
Return of VAT & corresponding VAT withheld
OPT Withheld) Manual filing and payment – 10 days
following end of month
SAWT (Summary Total amount of income per payor and E-filing together with BIR Form 2550Q
Alphalist of claimed tax credits from all Certificates (Quarterly VAT Return) and BIR Form
Withholding Agents of CWT at Source 2550M (Monthly VAT Declaration)
of Income Payments
Subjected to
Withholding Tax
ADMINISTRATIVE REQUIREMENTS
Schedule Information to be Indicated Deadline for Filing
MAP (Monthly Total amount of payment per payee and E-fling together with BIR Form 1600
Alphalist of Payees) corresponding taxes withheld and (Monthly Remittance Return of VAT and
remitted OPT Withheld)
Quarterly Summary Name of buyer, TIN of buyer (if subject E-submission 30 days following the close
List of Sales to VAT), amount of each type of sales of the taxable quarter
(subject to VAT, exempt, zero-rated and
subject to final VAT withheld), output tax,
total amount of sales (system-generated)
ADMINISTRATIVE REQUIREMENTS
Schedule Information to be Indicated Deadline for Filing
Quarterly Summary Exempt purchases, zero-rated purchases, E-submission 30 days following the close
List of Purchases purchases subject to VAT on: services; of the taxable quarter
capital goods; other goods and purchases
subject to final VAT withheld, creditable
and non-creditable input tax, total
amount of purchases (system-generated)
Quarterly Summary Import Entry Declaration Number, E-submission 30 days following the close
List of Importations release date, date of importation, name of the taxable quarter
of seller, country of origin, dutiable value,
landed cost: exempt or taxable,VAT paid,
OR# evidencing payment of tax, date of
VAT payment
RULES OF PRESENTATION FOR SUMMARY LIST OF
SALES/PURCHASES
¡ Every failure to submit Summary List of Sales and/or Summary List of Purchases in
the prescribed format for a particular period, or submission of
erroneous/incomplete/falsified information in a particular Summary List:
¡ Grounds for the issuance of Subpoena Duces Tecum by the BIR
¡ Upon submission of Summary List in compliance with Subpoena, a compromise
penalty of Php10,000 for each non-submission of the required Summary List
of Sales and Purchases is imposed
¡ In case of corporations that fail to submit Summary Lists, the corporate officers
and employees shall be held criminally liable and be punished by a fine of not less
than Php50,000 but not more than Php100,000
NON-SUBMISSION OF SUMMARY LIST OF SALES/PURCHASES
¡ Every failure to submit Summary List of Sales and/or Summary List of Purchases in
the prescribed format for a particular period, or submission of
erroneous/incomplete/falsified information in a particular Summary List:
¡ Grounds for the issuance of Subpoena Duces Tecum by the BIR
¡ Administrative penalty of Php1,000 for each failure, unless it is shown that such
failure is due to reasonable cause and not to willful neglect. Administrative penalty
during a taxable year shall not exceed Php25,000.
¡ Upon submission of Summary List in compliance with Subpoena, a compromise
penalty of Php10,000 for each non-submission of the required Summary List
of Sales and Purchases is imposed
¡ In case of corporations that fail to submit Summary Lists, the corporate officers
and employees shall be held criminally liable and be punished by a fine of not less
than Php50,000 but not more than Php100,000
ADMINISTRATIVE AND PENAL PROVISIONS
(BIR’S OPLAN KANDADO – RMO 3-2009)
¡ If the taxpayer fails to file a protest to the VCN, he must comply and pay
the taxes assessed with the 5-day period
¡ If the taxpayer fails to do so, the BIR will prepare and execute the
Closure Order, including physically sealing the entrance to the
establishment with padlocks and putting the BIR signage by the entrance
¡ For at least 5 days, the closure will be in force until the taxpayer rectifies
the alleged violations
¡ In some cases, immediate or partial compliance may be considered
sufficient basis to lift the closure order
REGISTRATION REQUIREMENTS