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CODAL
REFERENCE
Sections 105 to 115 of the
National Internal Revenue Code
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page
FREQUENTLY
ASKED QUESTIONS
I. General VAT Queries
1) Who are required to file VAT returns and/or
pay VAT?
· Every person or entity who in the course
of his trade or business, sells or leases goods, properties and
services subject to VAT, if the aggregate amount of actual gross
sales or receipts exceed Five Hundred Fifty Thousand Pesos (P
550,000.00) for any twelve month period
· A person required to register as VAT taxpayer but failed
to register
· A person who imports goods
2) Where are VAT returns filed?
The Monthly VAT Declaration (BIR Form 2550M) and
Quarterly VAT Return (BIR Form 2550Q) shall be filed with any
Authorized Agent Bank (AAB) in the place where the taxpayer is
registered or required to be registered.
In cases of no-payment, the return shall be filed
with the Revenue District Office (RDO)/LTDO and LTAD where the
taxpayer is registered or required to be registered.
In places where there are no AABs, it shall be
filed with and the tax paid to the Revenue Collection Officer
or duly Authorized City or Municipal Treasurer of the place where
the RDO is located.
3) 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.
4) What is "input tax"?
Input tax means the VAT paid by a VAT-registered person in the
course of his trade or business on importation of goods or local
purchase of goods or services, including lease or use of property,
from a VAT-registered person. It shall also include the transitional
input tax determined in accordance with Section 111 of the Tax
Code
5) 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:
a) Real properties held primarily for sale to customers
or held for lease in the ordinary course of trade or business
b) 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
c) The right or the privilege to use in the Philippines any industrial,
commercial or scientific equipment
d) The right or the privilege to use motion picture film, films,
tapes and discs
e) Radio, television, satellite transmission and cable television
time
6) 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, including
those performed or rendered by the following:
a) Construction and service contractors
b) Stock, real estate, commercial, customs and immigration brokers
c) Lessors of property, whether personal or real
d) Warehousing services
e) Lessors or distributors of cinematographic films
f) Persons engaged in milling, processing, manufacturing or repacking
goods for others
g) Proprietors, operators or keepers of hotels, motels, resthouses,
pension houses, inns, resorts
h) Proprietors or operators of restaurants, refreshment parlors,
cafes and other eating places, including clubs and caterers
i) Dealers in securities
j) Lending investors
k) 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, air and water relative
to their transport of goods or cargoes
l) Services of franchise grantees of telephone and telegraph,
radio and television broadcasting and all other franchise grantees
except those under Section 119 of the Tax Code
m) Services of banks, non-bank financial intermediaries and finance
companies
n) Services of non-life insurance companies (except their crop
insurances), including surety, fidelity, indemnity and bonding
companies
o) Similar services regardless of whether or not the performance
thereof calls for the exercise or use of the physical or mental
faculties
The phrase "sale or exchange of services"
shall include:
a) The lease or the 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
b) The lease or the use of, or the right to use of any industrial,
commercial or scientific equipment
c) The supply of scientific, technical, industrial or commercial
knowledge or information
d) 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
e) 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
f) 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
g) The lease of motion picture films, films, tapes and discs
h) The lease or the use of or the right to use radio, television,
satellite transmission and cable television time
7) 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.
8) What transactions are considered as zero-rated
sales?
The following services performed in the Philippines
by VAT-registered persons shall be subject to zero percent (0%)
rate:
a) Processing, manufacturing or repacking goods
for other persons doing business outside the Philippines which
goods are subsequently exported where the services are paid for
in acceptable foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP)
b) Services other than those mentioned in the preceding paragraph,
the consideration for which is paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP)
c) Services rendered to persons or entities whose exemption under
special laws or international agreements to which the Philippines
is a signatory effectively subjects the supply of such services
to zero percent (0%) rate
d) Services rendered to vessels engaged exclusively in international
shipping
e) Services performed by subcontractors and/or contractors in
processing, converting, or manufacturing goods for an enterprise
whose export sales exceeds seventy percent (70%) of total annual
production
·
The following sales shall be subject to zero percent (0%) rate:
a) Sale of goods which are directly shipped by
a VAT-registered resident to a place outside the Philippines
b) Sale of goods which are considered as "deemed" export
sales by a VAT-registered person to certain entities who are also
residents of the Philippines:
· Sales to export-oriented enterprises which the Code considers
as export sales at the level of the supplier of raw materials
· Sales to entities, the exemption of which, under a special
law or an international agreement with the Government of the Philippines,
effectively zero rates such sales
· Sales of gold to the Bangko Sentral ng Pilipinas
· Foreign currency denominated sales of goods
c) Sales considered as exportation of goods under a special law
such as Executive Order No. 226 (Omnibus Investments Code of 1987)
and Republic Act No. 7916 (PEZA Law)
9) Where will taxpayers file their applications
for VAT zero-rating?
Taxpayers may file their application with the Audit
Information, Tax Exemption and Incentives Division (AITEID) at
the BIR National Office.
10) What is a Contractor's Final Payment Release
Certificate and where should taxpayers file their application
for this?
The Contractor's Final Payment Release Certificate
is issued by the BIR before a government contractor is fully paid
for his contract with the government. Taxpayers may file their
application at the BIR National Office at the Audit Information,
Tax Exemption and Incentives Division (AITEID)
11) What transactions are considered as deemed
sales?
The following transactions are considered as deemed
sales:
a) 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
b) Distribution or transfer to:
· Shareholders or investors as share in the profits of
the VAT-registered person; or
· Creditors in payment of debt
c) Consignment of goods if actual sale is not made within sixty
(60) days following the date such goods were consigned
d) Retirement from or cessation of business, with respect to inventories
of taxable goods existing as of such retirement or cessation
12) 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.
13) What are the VAT-exempt transactions?
a) Sale of non-food agricultural products, marine
and forest products in their original state by the primary producer
or owner of the land where the same were produced
b) Sale of cotton and cotton seeds in their original state and
copra
c) Sale or importation of agricultural and marine food products
in their original state, livestock and poultry of a kind generally
used as, or yielding or producing foods for human consumption
and breeding stock and generic materials thereof
d) Sale or importation of fertilizers; seeds, seedlings and fingerlings;
fish, prawn, livestock and poultry feeds, including ingredients,
whether locally produced or imported, used in the manufacture
of finished feeds (except specialty feeds for race horses, fighting
cocks, aquarium fish, zoo animals and other animals generally
considered as pets)
e) Sale or importation of coal and natural gas, in whatever form
or estate, and petroleum products (except lubricating oil, processed
gas, grease, wax and petrolatum) subject to the Excise Taxes imposed
under Title VI of the Tax Code
f) Sale or importation of raw materials to be used by the buyer
or importer himself in the manufacture of petroleum products subject
to excise tax, except lubricating oil, processed gas, grease,
wax and petrolatum
g) Importation of passenger and/or cargo vessels of more than
five thousand tons, whether coastwise or ocean-going, including
engine and spare parts of said vessel to be used by the importer
himself as operator thereof
h) Importation of personal and household effects belonging to
residents of the Philippines returning from abroad and nonresident
citizens coming to resettle in the Philippines; Provided, that
such goods are exempt from customs duties under the Tariff and
Customs Code of the Philippines
i) Importation of professional instruments and implements, wearing
apparel, domestic animals, and personal household effects (except
any vehicle, vessel, aircraft, machinery, other goods for use
in the manufacture and merchandise of any kind in commercial quantity)
belonging to persons coming to settle in the Philippines, for
their own use and not for sale, barter or exchange, accompanying
such persons, or arriving within ninety (90) days before or after
their arrival, upon the production of evidence satisfactory to
the Commissioner of Internal Revenue, that such persons are actually
coming to settle in the Philippines and that the change of residence
is bona fide
j) Services subject to percentage tax under Title V of the Code
k) Services by the agricultural contract growers and milling for
others of palay into rice, corn into grits, and sugar cane into
raw cane sugar
l) Medical, dental, hospital and veterinary services subject to
the provisions of Sec. 17 of RA 7716, as amended
m) Educational services rendered by private educational institutions,
duly accredited by the Dept. of Education Culture and Sports (DECS),
and Commission on Higher Education (CHED), and those rendered
by the government educational institutions
n) Sale by the artist himself of his works of art, literary works,
musical compositions and similar creations, or his services performed
for the production of such works
o) Services rendered by individuals pursuant to an employer-employee
relationship
p) Services rendered by regional or area headquarters established
in the Philippines by multinational corporations which act as
supervisory communications and coordinating centers for their
affiliates, subsidiaries or branches in the Asia-Pacific Region
and do not earn or derive income from the Philippines
q) Transactions which are exempt under international agreements
to which the Philippines is a signatory, or under special laws,
except those under the following laws:
· P.D. No. 66 - Export Processing Zone Authority (EPZA)
registered firms
· P.D. No. 529 - Petroleum Exploration Concessionaires
under the Petroleum Act of 1949
· P.D. No. 1590 - Philippine Airlines (PAL) relative to
domestic transport of goods or cargoes
r) Sales by agricultural cooperatives duly registered with the
Cooperative Development Authority (CDA) to their members as well
as sale of their produce, whether in its original state or processed
form, to non-members; their importation of direct farm inputs,
machineries and equipment, including spare parts thereof, to be
used directly and exclusively in the production and/or processing
of their produce
s) Sales by electric cooperatives duly registered with the Cooperative
Development Authority (CDA) or National Electrification Administration
(NEA), relative to the generation and distribution of electricity,
as well as their importation of machineries and equipment, including
spare parts, which shall be directly used in the generation and
distribution of electricity
t) Gross receipts from lending activities by credit or multi-purpose
cooperatives duly registered with the Cooperative Development
Authority (CDA) whose lending operation is limited to their members
u) Sales by non-agricultural, non-electric and non-credit cooperatives
duly registered with the Cooperative Development Authority: Provided,
that the share capital contribution of each member does not exceed
Fifteen Thousand Pesos (P 15,000) and regardless of the aggregate
capital and net surplus ratably distributed among the members
v) Export sales by persons who are not VAT-registered
w) Lease of a residential unit with a monthly rental not exceeding
Eight Thousand Pesos (P 8,000.00), regardless of the amount of
aggregate rentals received by the lessor during the year, provided
that the exemptions likewise applies to lease of residential units
where the monthly rental per unit exceeds P 8,000.00 but the aggregate
rentals of the lessor during the year do not exceed P 550,000.00.
x) Sale, importation, printing or publication of books and any
newspaper, magazine, review or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which
is not devoted principally to the publication of paid advertisements
y) Sale or lease of goods or properties or the performance of
services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts does not exceed
the amount of P 550,000.00
z) Sale of real properties not primarily held for sale to customers
or held for lease in the ordinary course of trade or business
or real property utilized for low-cost and socialized housing
as defined by Republic Act No. 7279, otherwise known as the Urban
Development and Housing Act of 1992 and other related laws, house
and lot and other residential dwelling valued at P 1,000,000 and
below.
II. RELIEF-Related Queries
1) What is 'RELIEF"?
RELIEF means Reconciliation of Listings for Enforcement.
It supports the third party information program of the Bureau
through the cross referencing of third party information from
the taxpayers' Summary Lists of Sales and Purchases prescribed
to be submitted on a quarterly basis.
2) Who are required to submit Summary List of Sales?
VAT taxpayers with quarterly total sales/receipts
(net of VAT) exceeding Two Million Five Hundred Thousand Pesos
(P 2,500,000) are required to submit a Summary List of Sales.
3) Who are required to submit Summary List of Purchases?
VAT taxpayers with quarterly total purchases (net
of VAT) exceeding One Million Pesos (P 1,000,000) are required
to submit Summary List of Purchases.
4) What are the Summary Lists required to be submitted?
a) Quarterly Summary List of Sales to Regular Buyers/Customers
and Casual Buyers/Customers and Output Tax;
b) Quarterly Summary List of Local Purchases and Input tax; and
c) Quarterly Summary List of Importation
5) Who are "Casual Buyers/Customers?"
Casual Buyers/Customers refer to buyers/customers
who are engaged in business/ exercise of profession but did not
qualify as regular buyers/customers, the amount of individual
transaction is P 100,000 or more but did not qualify as regular
buyers/customers.
6) Who are "Regular Buyers/Customers"?
They shall refer to buyers/customers who are engaged
in business or exercise of profession with whom the taxpayer has
transacted at least six (6) transactions in the previous year
or current year, regardless of the amount of sale per transaction.
7) What are the contents of the Quarterly Summary
List of Sales to Regular Buyers/Customers and Casual Buyers/Customers
and Output Tax?
The Quarterly Summary List of Sales to regular
buyers/customers and casual buyers/customers and output tax shall
indicate the following:
a) BIR Registered Name of the Buyer who is engaged
in business/exercise of profession
b) TIN of the Buyer for sales subject to VAT
c) Exempt Sales
d) Zero-Rated Sales
e) Sales Subject to VAT (exclusive of VAT)
f) Output Tax (VAT on Sales)
8) What are the contents of the Quarterly Summary
List of Local Purchases and Input Tax?
The Quarterly Summary List of Local Purchases and
Input Tax shall indicate the following:
a) BIR Registered Name of the Seller/Supplier/Service
Provider
b) Address of Seller/Supplier/Service Provider
c) Taxpayer Identification Number (TIN) of the Seller
d) Exempt Purchases
e) Zero-Rated Purchases
f) Purchases Subject to VAT (Exclusive of VAT) -
· On Services
· On Capital Goods
· On Goods and Other than Capital Goods
g) Creditable Input Tax
h) Non-Creditable Input Tax
9) What are the contents of the Quarterly Summary
List of Importations?
The Quarterly Summary List of Importations shall
indicate the following:
a) Import Entry Declaration Number
b) Assessment /Release Date
c) Date of importation
d) Name of Seller
e) Country of Origin
f) Dutiable Value
g) All Charges Before release from the Customs' Custody
h) Landed Cost:
· Exempt
· Taxable (Subject to VAT)
i) VAT Paid
j) Official Receipt (OR) No. of the Official Receipt Evidencing
Payment of the Tax
k) Date of VAT Payment
10) When and where will taxpayers file/submit the
Quarterly Summary List of Sales and Purchases?
The quarterly summary list of sales or purchases
whichever is applicable shall be submitted to the RDO or LTDO
or LTAD having jurisdiction over the taxpayer on or before the
twenty-fifth (25th) day of the month following the close of each
taxable quarter.
11) Can the VAT withheld and paid for the non-resident
recipient, which VAT is passed on to the resident withholding
agent by the non-resident recipient of the income, be claimed
as an input tax?
Yes. It can be claimed as an input tax by the said
VAT registered Withholding Agent upon filing his own VAT return,
subject to the rules on allocation of input tax among taxable,
zero-rated and exempt sales.
12) Are all Value Added Taxpayers required to mandatorily
file the summary list in magnetic form using 3.5 inch floppy diskette?
Yes. Submission of the summary list in diskette
form shall be required for the taxable quarter where the total
sales (taxable net of VAT, zero-rated, exempt) exceed P 2,500,000
or total purchases (taxable net of VAT, zero-rated, exempt) exceed
P 1,000,000.
13) What is the clear-cut rule on the mandatory
submission of summary lists in diskette form?
The following are the rules in the submission of
the said summary lists:
a) They are required to submit the said summary
lists in diskette form for the taxable quarter where the total
sales (taxable net of VAT, zero-rated, exempt) exceed P 2,500,000
or total purchases (taxable net of VAT, zero-rated, exempt) exceed
P 1,000,000.
b) Those who did not meet the threshold need not file summary
lists; however, if there is a taxable quarter where aforesaid
VAT taxpayers meet or exceed the threshold, they will be required
to submit the prescribed electronic format on such taxable quarter
and on the next three (3) succeeding taxable quarters, regardless
of whether or NOT such succeeding taxable quarter sales and/or
purchases meet/exceed the threshold.
14) What is the penalty for failure to submit the
quarterly summary list in the prescribed manner?
Administrative Penalty
P 1,000 - For each failure to file, keep or supply the required
documents
Aggregate amount not to exceed P 25,000 for the taxable year
Criminal Penalty
Willful failure to keep any record or to supply
the information at the time or times required shall be subject
to the criminal penalty under the Tax Code of 1997.
*Compromise on such violation SHALL NOT relieve the violating
taxpayer from the obligation to submit the required documents.
III. RELIEF Technical Queries
1) What needs to be done to resolve errors occurring
during the use of the RELIEF system?
Make sure that there is only one session of RELIEF
active at all times. Close all RELIEFsessions and re-activate
again. Make sure that a clean copy of the installer disk is on
hand. Get the latest copy from a nearest Revenue District Office
or Revenue Data Center or download from the BIR website at www.bir.gov.ph.
2) Is it possible to use the system for more than
one company in a single PC? (For accounting and law firms taking
charge of transactions of numerous companies)
Yes. Create new folder/s in your root directory. Rename the folder/s
with the company name for identification purposes. Copy all the
contents of the folder BIR_RLF and paste into each of the newly
created folders. Then create shortcuts for the BIRRLF.EXE file
found in each folder and paste them to your desktop. It is also
recommended to rename these files affixing them with the name
of the company (for example: ABC Company_Data Entry). Make sure
that Owner Information is changed/updated for newly created folders.
3) How can the user resolve the error "The
Input Tax/Output Tax must be equivalent to 10% of the transaction"
that occurs during validation?
If this is the only error, the user could ignore
this error and proceed to submitting the summary lists since the
RDO has the updated validation module. The user could also request
for a copy of the URLFVALID.EXE file from the RDO to update their
RELIEF Validation module. They only need to decompress the file
in the root directory of their PC.
4) What is the prescribed screen resolution for
the user to view all available options/buttons after selecting
a type of transaction?
Check the settings of the screen display (desktop)
by going to the Control Panel then go to Display and adjust the
screen setting to 800x600 or 1024x768 resolution.
5) Can the user submit their summary list using
their own extract program?
The user may use their own extract program provided
that their system has the ability to convert the database files
into comma delimited text files. Have their IT department develop
a script within their database program to do this. Please refer
to the prescribed templates / file formats available at RDO or
they can download the technical annexes from the BIR website.
User can also submit using the excel format as
long as it conforms with the BIR file format under RMC 24-2002.
User can ask their RDO for a copy of the Excel templates for their
guidance.
6) Where can the users get the RELIEF installer,
technical annexes and job-aids?
They can get copies from the RDO or RDC. If they
have access to the internet, they can access the BIR webpage (www.bir.gov.ph)
then go to BIR FORMS. Click on the 2550Q form to go to the location
of the downloadable installers, annexes and job-aids.
7) How can the user successfully validate a generated
file (.DAT) if upon clicking the Validate File button, a BIR System
Message stating "Command contains unrecognized phrase/keyword.
Error Number: 36" appeared?
The user must make sure that the generated file
is not located inside a folder where the foldername contains spaces.
The user can rename the folder wherein blank spaces are replaced
with underscores. The user can get the update patch from his RDO
or from the web to update their Validation module.
8) How will the user remove or uninstall the RELIEF
program from the computer?
Select RUN from the Taskbar Start Menu then type C:\BIR_RLF\SETUP\SETUP.EXE,
press the Enter key and follow the prompts.
9) For users who will submit using the Excel format,
what is the prescribed formula for computations?
Users always encounter the "Header not equal
to total details" Error during validation. All computations
in the Excel format must be rounded off to the nearest 2 decimal
places. (For example: L3=J3*K3 - it must be L3=round(J3*K3,2))
10) In case of detailed explanations for questions,
where can the user seek help?
User can get in touch with the Taxpayer Service
Section of their RDO or contact the BIR Helpdesk at 926-9630,
981-7050 to 51, 925-2015-17 or email at hdeskno@bir.gov.ph.
IV. VAT on Professionals
1) How to compute the VAT on professionals
The general formula is:
Output Taxes - Input Taxes = VAT Payable
Fees and Expenses including VAT: (a)
Professional Fee with VAT x 1/11 Output Tax
Less: Profession-related Expenses x 1/11 (with VAT Receipts) Input
Tax
Difference VAT Payable
Fees and Expenses excluding VAT: (b)
Professional Fee x 10% Output Tax
Less: Profession-related Expenses x 10% (with VAT Receipts) Input
Tax
Difference VAT Payable
NOTE:
(a) Computation is in accordance with Secs. 106D and 108C of the
Code.
(b) Computation per VAT Return presentation.
VAT Payable in (a) and (b) computations should be the same.
2) What are the allowable Input VAT?
· 10% of purchase price, exclusive of VAT
or 1/11 of total VAT invoice/OR amount on:
· Office Supplies / Equipment
· Rental of office
· Accountant's fees
· Other purchases of Goods and Services related to professional
fees earned
Note: 1) Supplier of goods/services must be VAT registered
2) Substantiated with VAT OR/invoice
3) Illustrations of VAT Computation
Assumption 1: PP absorbs the VAT
In CY 2002, Professional Fee for Services was P 1,000,000
In CY 2003, Professional Fee for Services is P 1,000,000
Treatment:
CY 2002: Income is P 1,000,000.00
CY 2003:
Income is 10/11 of P 1,000,000 P 909,091.00
Output VAT is 1/11 of P 1,000,000 90,909.00
Gross Receipt from Clients/Px + VAT P 1,000,000.00
Assumption 2: Payor absorbs the VAT
In CY 2002, Professional Fee for Services was P
1,000,000
In CY 2003, Professional Fee for Services is P 1,000,000, plus
10% VAT of
P 100,000
Treatment:
CY 2002: Income is P 1,000,000.00
CY 2003:
Income P 1,000,000.00
Income P1M x 10% Output tax 100,000.00
Gross Receipt from Clients/ Px + VAT P1,100,000.000
4) How can I compute the 20% Withholding Tax using
Assumptions 1 and 2?
CY 2002:
Income P 1,000,000.00
20% Withholding Tax 200,000.00
Net Amount Received from Payor P 800,000.00
CY 2003: (PP absorbs the VAT)
Income P 909,091.00
Add: 10% VAT 90,909.00
Gross Amount Rec'd. from Payor P 1,000,000.00
Less: 20% of P 909,091.00 181,818.00
Net Amount Received from Payor P 818,182.00
CY 2003: (Payor Absorbs the VAT)
Income P 1,000,000.00
Add: 10% VAT 100,000.00
Gross Amount Rec'd. from Payor P 1,100,000.00
Less: 20% of P 1,000,000 200,000.00
Net Amount Received from Payor P 900,000.00
5) How to record the professional fee in the Books of Accounts
of the Professional Practitioner
Debit: Cash 900,000
Debit: Creditable W/Tax 200,000
Credit: Professional Fees 1,000,000
Credit: Output VAT Payable 100,000
6) How to record the professional fee in the Books
of Accounts of the Clients/Patients
Debit: Expenses 1,000,000
Debit: Input VAT Credit 100,000
Credit: Cash 900,000
Credit: Withholding Tax Payable 200,000
7) How to issue a VAT Official Receipt by the Professional
Practitioner
CLICK
to View tthe Receipt
The invoice or official receipt of a VAT-registered
PP must show his name, address, TIN, and professional fee, with
VAT and other particulars.
8) Compliance Requirements for PPs
· Payment of P 500 annual registration fee,
and every year thereafter, on or before January 31.
· Printing and registration of VAT Official Receipts
· Registration and keeping of Books of Accounts
· Filing of monthly VAT declarations and quarterly VAT
returns
· If applicable, submission of the Summary List of Sales
and Purchases in softcopies (diskettes). Please use the BIR data
entry module.
Registration as a VAT Taxpayer
· File Form 1901 (Application for Registration)
and Form 1925 (TIN Capture Form) for new taxpayers with the RDO
having jurisdiction over PP's registered address. (By April 2003,
TIN application was made available through the Internet, via the
BIR Website at www.bir.gov.ph.)
· For old taxpayers registered as Non-VAT, file Form 1905
(Update Form) to change registration to VAT, or from NV-Exempt
to NV-3%.
· Each registrant (for new or for change of registration)
must indicate their specific profession (i.e., doctor, lawyer,
CPA, etc.) in the appropriate registration form.
Registration of Official Receipts
· Submit Inventory of Non-VAT unused receipts
(as of December 31, 2002) - number of booklets and serial numbers
not later than March 19, 2003.
· Stamp unused receipts with "VAT-registered as of
________" on ALL copies, and use only until June 30, 2003
· For new Official Receipts, secure BIR Permit to Print
Registration and Keeping of Books of Accounts
· Journal
· Ledger
· Subsidiary Professional Income Book
· Subsidiary Purchases / Expenses Book
Filing and Payment of VAT
Forms to be used:
· Form 2550M (Monthly VAT Declaration)
· Form 2550Q (Quarterly VAT Return)
Period/Form1st Month of the Quarter (Form 2550M)
Due dates20th day of the next month
2nd Month of the Quarter (Form 2550M) 20th day of the next month
3rd Month, con-solidated for the Quarter (Form 2550Q) 25th day
of the next month
Where to File and Pay the VAT
Pay to the Accredited Agent Bank (AAB) within the
Revenue District Office (RDO) where the PP is registered. In areas
where there are no AABs, pay to the Collection Agent in the municipality
of the RDO where registered. If without VAT payment, file return
with the RDO.
Other Transitional Requirements
· Submit Billings for Uncollected Professional
fee for Sale of Services Rendered on or before December 31, 2002,
not later than March 19, 2003.
· Submit Inventory of Goods (other than Capital Goods),
Materials, and Supplies, as of December 31, 2002, not later than
March 19, 2003, to claim transitional (presumptive) input VAT.
V. VAT on Doctors
1) If a doctor has several clinics located in different
districts, should he register and pay the corresponding fee for
each of the clinics?
Yes, the doctor should register and pay the corresponding
fee for each of the clinic located in different districts, as
each clinic is considered a separate and distinct establishment.
2) What is the tax treatment for a doctor who has
no clinic but is affiliated with several hospitals?
The doctor is considered a professional, subject
to 10% VAT provided the gross professional fees is more than P=
550,000.00 and 3% Percentage Tax if P= 550,000.00 and below. He
should register his clinic but not his affiliations.
3) A doctor operates a clinic and at the same time
hires (as employees) several doctors as part of his staff. For
the services provided to patients, the clinic issues the official
receipt of the clinic. How will the VAT be charged when the clinic
later gives to the individual doctors their professional fees?
If the hired doctors are employees receiving compensation
income, they are not subject to VAT. If, however, they share in
the professional fees, then there exists a professional partnership
and their income/fee is subject to VAT. Any amount they receive
from the clinic shall be considered as inclusive of VAT. But the
clinic is exempt from VAT as far as medical services are concerned,
but the professional fee received is subject to VAT.
4) Can a professional doctor claim input VAT? What
are the sources of input taxes?
Yes, he can claim input VAT on his purchases that
are related to the practice of profession and supported with a
VAT invoice/official receipts issued in his name.
5) Is a doctor with a maximum of 10 consultations
a year required to have his own receipts printed? Is this not
too costly for him?
Yes, the determining factor is his practice of
profession and not the number of transactions in a year. Section
237 of the Tax Code provides that all persons subject to internal
revenue tax shall for each sale/transfer of merchandise or for
services rendered valued at P= 25.00 or more must issue a duly
registered receipt or sales invoice.
6) Are the fees of physical therapists, not a GPP,
subject to VAT?
Yes, they are subject to 10% VAT if their gross
receipt is more than P= 550,000.00. If their gross receipt is
P= 550,000.00 or less they are subject to 3% Percentage Tax, unless
they opt to register as VAT taxpayer.
VI. VAT on Lawyers
1) What constitute gross receipts of lawyers that
is subject to VAT?
The gross receipts of lawyers may constitute of,
but not limited to the following: retainers' fees, acceptance
fees, appearance fees, consultation fees, notarial fees and the
like
2) If a lawyer, employed in the government, provides/operates
a notarial service, is he required to register as VAT taxpayer
with regard to his notarial fees?
Yes, because his notarial fees is part of his professional
income and not earned under an employee-employer relationship.
VII. VAT on Insurance Agents
1) An agent of a life insurance company has been
registered as a Non- VAT Taxpayer, is it necessary for him to
register as VAT Taxpayer?
An agent is required to register as VAT taxpayer
if he is earning more than P= 550,000.00 in any twelve-month period.
If his expected income for the 12-month period is P= 550,000.00
or less, he is subject to 3% Percentage Tax, unless he opts to
register as a VAT taxpayer.
2) Is the P= 500.00 registration fee a one-time
payment only? Will it apply to the succeeding years?
The P= 500.00 is a registration fee payable annually
on or before January 31 of each year.
3) What particular books of accounts are necessary
for taxation purposes?
Generally, the books of accounts necessary for
taxation purposes are Journals and Ledgers. Professional taxpayers
however, are required to keep Subsidiary Professional Income Book
and Subsidiary Purchases/Expense Book for their gross sales/gross
receipts and purchases/expenses.
4) Are they required to issue Official Receipts?
Yes, Section 237 of the Tax Code provides that
all persons subject to internal revenue tax shall for each sale/transfer
of merchandise or for services rendered valued at P= 25.00 or
more must issue a duly registered receipt or sales invoice. In
addition, in order to claim Input VAT, the name, address and TIN
of the purchaser/client must be indicated in the receipt/invoice.
VIII. Other Professional Practitioners
1) What about other individuals who practice certain
calling but need not undergo government exam?
Said individuals are subject to VAT if their gross
receipts/income is more than P= 550,000.00. They are subject to
3% Percentage Tax if their gross receipts/income is P= 550,000.00
or less, unless they opt to register as VAT taxpayer. However,
if their service is rendered under an employee-employer relationship,
then they are not subject to VAT nor to Percentage Tax.
Examples of individuals who practice certain calling
are tourist guides, trainers, masseurs, brokers and other individuals
who are paying occupational tax in the local or municipal government,
and there exist No employer-employee relationship.
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