Bureau of Internal Revenue
Republic of the Philippines


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VALUE-ADDED TAX

Description
Who are Required To File VAT Returns

Monthly VAT Declarations

Quarterly VAT Returns

Tax Rates

Related Revenue Issuances

Codal Reference

Frequently Asked Questions

- General VAT Queries
- RELIEF Related Queries
- RELIEF Technical Queries
- VAT on Professionals
- VAT on Doctors
- VAT on Lawyers
- VAT on Insurance Agents
- Other Professional Practitioners


DESCRIPTION
Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale of goods and services and on the imports of goods into the Philippines. It is an indirect tax, which can be passed on to the buyer.

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WHO ARE REQUIRED TO FILE VAT RETURNS
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

Professional practitioners
Professional Practitioners (PPs) are formerly classified as non-VAT taxpayers and were exempt from the Value-Added Tax and Percentage taxes under Section 109 of the National Internal Revenue Code (hereinafter referred to as the Code), until December 31, 2002. Prior to this date, they were subject only to Income Tax under Section 24 of the Code.
Effective January 1, 2003, however, by virtue of Republic Act Nos. 7716 and 9010, which were implemented by Revenue Regulation Nos. 1-2003 and 3-2003, services of PPs are also subject to either VAT (if gross professional fees exceed P 550,000.00 for a 12-month period) or 3% Percentage Tax (if gross professional fees totals P 550,000 and below for a 12-month period), depending on their gross professional fee for a twelve (12) - month period.
"Professional Practitioners" include the following:
· Certified Public Accountants
· Lawyers
· Doctors
· Insurance Agents (Life & Non-life)
· Other Professional Practitioners required to pass the government examination
· Others



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Monthly VAT Declarations

Tax Form
BIR Form 2550 M - Monthly VAT Declarations


Documentary Requirements
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable

2. Duly approved Tax Debit Memo, if applicable

3. Duly approved Tax Compliance Certificate, if applicable

4. Previously filed return and proof of payment, for amended return

Procedures
1. Fill-up BIR Form 2550 M in triplicate copies.

2. If there is payment:
· Proceed to the nearest Authorized Agents Banks (AAB's) of the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 M, together with the required attachments and your payment.
· In places where there are no AAB's, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 M, together with the required attachments and your payment.
· Receive your copy of the duly stamped and validated form from the teller of the AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. If there is no payment:
· Proceed to the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 M, together with the required attachments.
· Receive your copy of the duly stamped and validated form from the RDO representative


Deadline

Manual Filing

Not later than the 20th day following the end of each month

Filing Through eFPS

Group A - within twenty five (25) days following the end of the month
Group B - within twenty four (24) days following the end of the month
Group C - within twenty three (23) days following the end of the month
Group D - within twenty two (22) days following the end of the month
Group D - within twenty one (21) days following the end of the month


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Quarterly VAT Returns

Tax Form
BIR Form 2550 Q - Quarterly VAT Returns

Documentary Requirements
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable

2. Duly approved Tax Debit Memo, if applicable

3. Duly approved Tax Compliance Certificate, if applicable

4. Previously filed return and proof of payment, for amended return

5. Summary List of Sales (if quarterly total Sales/Receipts (net of VAT) exceeds P 2,500,000) with the following information:
a) BIR-registered name of the buyer who is engaged in business/exercise of profession;
b) Taxpayer Identification Number (TIN) of the buyer (Only for sales that are subject to VAT);
c) Exempt Sales;
d) Zero-rates Sales;
e) Sales subject to VAT (exclusive of VAT); and
f) Output Tax (VAT on Sales)

6. Summary List of Purchases (if quarterly total purchases (net of VAT) exceeds P 1,000,000) with the following information:
a) BIR-registered name of the seller/supplier/service-provider;
b) Address of seller/supplier/service-provider;
c) Taxpayer Identification Number (TIN) of seller/supplier/service-provider
d) Exempt purchases;
e) Zero-rated purchases;
f) Purchases subject to VAT (exclusive of VAT) - on services;
g) Purchases subject to VAT (exclusive of VAT) - on capital goods;
h) Purchases subject to VAT (exclusive of VAT) - on goods other than capital goods
i) Creditable Input Tax
j) Non-creditable Input Tax
NOTE: Creditable input taxes and non-creditable input taxes are to be computed not on a per supplier basis but on a per month basis.

7. The Quarterly Summary List of Importation with the following information:
a) Import Entry Declaration;
b) Assessment/Release Date;
c) Date of Importation;
d) Name of the Seller;
e) Country of Origin;
f) Dutiable Value;
g) All Charges Before Release from Customs Custody;
h) Landed Cost:
i) Exempt
j) Taxable (Subject to VAT)
k) VAT paid;
l) Official Receipt (OR) Number of the Official Receipt evidencing payment of tax; and
m) Date of VAT payment

Procedures
1. Fill-up BIR Form 2550 Q in triplicate copies.

2. If there is payment:
· Proceed to the nearest Authorized Agents Banks (AAB's) of the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 Q with the required attachments and your payment.
· In places where there are no AAB's, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 Q, together with the required attachments and your payment.
· Receive your copy of the duly stamped and validated form from the teller of the AAB's/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

3. If there is no payment:
· Proceed to the Revenue District Office where you are required to register and present the duly accomplished BIR Form 2550 Q, together with the required attachments.
· Receive your copy of the duly stamped and validated form from the RDO representative.

NOTE:
1. For taxpayers with branches, only one consolidated return shall be filed for the principal place of business or head office and all the branches.

2. The Quarterly List of Sales and Purchases shall be submitted in magnetic form using 3.5-inch floppy diskette following the format provided under Section 4.110-4 (Subsection G) of RR 8-2002.


Deadline
Within twenty five (25) days following the close of taxable quarter of the taxpayer (both for manual filing and filing through eFPS)



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Tax Rates
· For output tax (0% or 10%)
· For input tax
1. 0% or 10%

2. Transitional input tax rates (8% or 10%)

3. Presumptive input tax rate (1-1/2%) and

4. Creditable VAT withheld by the Government and the licensee or lessee (3%, 6%, 8.5% and 10%)

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RELATED REVENUE ISSUANCES
· RR No. 5-87-Regulations implementing the provisions of Title IV of the Tax Code imposing VAT on importation of goods and sales and services

· RR No. 3-89 - Regulations governing the imposition of 10% VAT on deposits for returnable containers

· RR No. 5-93 - Implementing guidelines requiring the monthly payment of VAT and amending thereby Section 110 of the Tax Code

· RR No. 7-95 - Consolidated Value-Added Tax Regulations

· RR No. 5-96 - Amendment to Sections 245 of the Tax Code in relation to Revenue Regulations No. 7716 - Export Services and Importation of Meat to WTO Member VAT exempt.

· RR No. 6-97 - Implementing Republic Act. No. 2241 An Act Amending Republic Act no. 7716, otherwise known as the Expanded Value-Added Tax Law, and other pertinent provisions of the National Internal Revenue Code, as amended and further amending Revenue Regulations No. 7-95, as amended otherwise known as the Consolidated Value-Added Tax Regulations

· RR No. 13-97 - Amending further Revenue Regulations No. 7-95 as last amended by Revenue Regulations No. 6-97

· RR No. 7-99 - Amends further Revenue Regulations No. 7-95 relative to the submission of the Summary Lists of Sales and Purchases in magnetic form

· RR No. 8-99 - Provides penalties for violation of the requirement that output tax on sale of goods and services should not be separately indicated in the sales invoice or official receipt

· RR No. 18-99 - Prescribes the regulations relative to the imposition of VAT on services of banks, non-bank financial intermediaries and finance companies beginning January 1, 2000

· RR No. 19-99 - Prescribes the regulations relative to the imposition of VAT beginning January 1, 2000 on the sale of services by persons engaged in the practice of profession or calling and professional services rendered by general professional partnerships; services rendered by actors, actresses, talents, singers, and emcees; radio and television broadcasters and choreographers; musical, radio, movie, televisions and stage directors; and professional athletes

· RR No. 4-2000 - Prescribes the posting in place of business of a notice on the requirement for the issuance of sales/commercial invoices and/or official receipts by persons engaged in trade or business, including the exercise of profession

· RR No. 6-2001 - Amends pertinent pro1visions of certain revenue issuances relative to the inclusion of additional taxpayers to be subject to Final Withholding Tax, revision of the Withholding Tax rates on certain income payments subject to Creditable Withholding Tax, time for the filing of various tax returns and payment of the taxes due thereon and others

· RR No. 11-2003 - Extends further the deadline for registration and other compliance requirements during the transitory period of the imposition of Value-Added Tax (VAT) on sale of services by professionals and brokers

· RR No. 12-2003 -Amends certain provisions of RR No. 18-99 which governs the imposition of VAT on services of banks, non-bank financial intermediaries and finance companies beginning January 1, 2003

· RR No. 14-2003 - Amending Revenue Regulations No. 2-98, as amended, in order to simplify the collection of tax, through withholding at the source, on sales of goods or services subject to 3% percentage tax under Section 116 of the Code, and/or to the value-added tax (VAT) under Sections 106 and 108 of the same Code


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CODAL REFERENCE
Sections 105 to 115 of the National Internal Revenue Code

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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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