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:. Value-Added Tax

Contents

 

Description

Value-Added Tax is a form of sales tax. It 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. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.



Who Are Required To File VAT Returns

  • Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties and renders services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).
  • A person required to register as VAT taxpayer but failed to register
  • Any person, whether or not made in the course of his trade or business, who imports goods



Monthly VAT Declarations

Tax Form
BIR Form 2550 M - Monthly Value-Added Tax Declaration (February 2007 ENCS)

Documentary Requirements
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No. 2307), if applicable

2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable

3. Duly approved Tax Debit Memo, if applicable

4. Duly approved Tax Credit Certificate, if applicable

5. Authorization letter, if return is filed by authorized representative.

Procedures
1. Fill-up BIR Form No. 2550 M in triplicate copies (two copies for the BIR and one copy for the taxpayer)

2. If there is payment:

       · File the Monthly VAT declaration, together with the required attachments, and pay the VAT due thereon with any Authorized Agent Bank (AAB) under the jurisdiction of the Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) where the taxpayer (head office of the business establishment) is registered or required to be registered.

·The taxpayer must accomplish and submit BIR-prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word "Received" on the return and machine validate the return as proof of filing the return and payment of the tax.

       · In places where there are no duly accredited agent banks, file the Monthly VAT declaration, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered.

· The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.

3. If there is no payment:

· File the Monthly VAT Declaration, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/ City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.

Deadline

· Manual Filing

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

· Through Electronic Filing and Payment System (eFPS):

Business Industry
Period for filing Monthly VAT Declarations
Group A

Insurance and Pension Funding                                                  

25 days following the end of the month

Activities Auxiliary to Financial Intermediation

Construction

Water Transport

Hotels and Restaurants

Land Transport

Group B
Manufacture and Repair of Furniture
24 days following the end of the month
Manufacture of Basic Metals
Manufacture of Chemicals and Chemical Products
Manufacture of Coke, Refined Petroleum & Fuel Products
Manufacture of Electrical Machinery & Apparatus N.E.C.
Manufacture of Fabricated Metal Products
Manufacture of Food, Products & Beverages
Manufacture of Machinery & Equipment NEC
Manufacture of Medical, Precision, Optical Instruments
Manufacture of Motor Vehicles, Trailer & Semi-Trailers
Manufacture of Office, Accounting & Computing Machinery
Manufacture of Other Non-Metallic Mineral Products
Manufacture of Other Transport Equipment
Manufacture of Other Wearing Apparel
Manufacture of Paper and Paper Products
Manufacture of Radio, TV & Communication Equipment/ Apparatus
Manufacture of Rubber & Plastic Products
Manufacture of Textiles
Manufacture of Tobacco Products
Manufacture of Wood & Wood Products
Manufacturing N.E.C.
Metallic Ore Mining

Non-Metallic Mining & Quarrying

Group C
Retail Sale
23 days following the end of the month
Wholesale Trade and Commission Trade

Sale, Maintenance, Repair of Motor Vehicle, Sale of Automotive Fuel

Collection, Purification and Distribution of Water
Computer and Related Activities

Real Estate Activities

Group D
Air Transport
22 days following the end of the month
Electricity, Gas, Steam & Hot Water Supply
Postal & Telecommunications
Publishing, Printing & Reproduction of Recorded Media
Recreational, Cultural & Sporting Activities
Recycling
Renting of Goods & Equipment

Supporting & Auxiliary Transport Services

Group E

Activities of Membership Organizations, Inc.
21 days following the end of the month
Health and Social Work
Public Admin & Defense Compulsory Social Security
Research and Development
Agricultural, Hunting, and Forestry
Farming of Animals
Fishing
Other Service Activities
Miscellaneous Business Activities
Unclassified



Quarterly Value-Added Tax Return

Tax Form
BIR Form No. 2550Q - Quarterly Value-Added Tax Return (February 2007 ENCS)

Attachments to the Return
1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable

2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable

3. Duly approved Tax Debit Memo, if applicable

4. Duly approved Tax Credit Certificate, if applicable

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

6. Authorization letter, if return is filed by authorized representative

Procedures
1. Fill-up BIR Form 2550 Q in triplicate copies (two copies for the BIR and one copy for the taxpayer)

2. If there is payment:

· File the Quarterly VAT Return, together with the required attachments, and pay the VAT due thereon with any AAB under the jurisdiction of the RDO/LTDO where the taxpayer (head office of the business establishment) is registered or required to be registered.

The taxpayer must accomplish and submit BIR- prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word "Received" on the return and machine validate that return as proof of filing the return and payment of the tax.

· In places where there are no duly accredited agent banks, file the Quarterly VAT Return, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered.

The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.

3. If there is no payment:

· File the Quarterly VAT Return, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.



Reminders:
1. Only one consolidated Monthly VAT Declaration/Quarterly VAT Return shall be filed covering the results of operation of the head office as well as the branches for all lines of business subject to VAT.

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 4.114-3(g) of RR No. 16-2005.

3. The Quarterly List of Sales and Purchases shall be submitted through electronic filing facility for taxpayers under the jurisdiction of the Large Taxpayers Service (LTS) and those enrolled under the eFPS.

Deadline
Within twenty five (25) days following the close of taxable quarter.



Tax Rates

· On sale of goods and properties - twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged


· On sale of services and use or lease of properties - twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties


· On importation of goods - twelve percent (12%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such as tax to be paid by the importer prior to the release of such goods from customs custody; provided, that where the customs duties are determined on the basis of quantity or volume of the goods, the VAT shall be based on the landed cost plus excise taxes, if any.


· On export sales and other zero-rated sales - 0%




Related Revenue Issuances

Revenue Regulations (RRs)

Issuance No.

SUBJECT

Date

RR No. 13-2008

Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar; Amending and/or Revoking All Revenue Issuances Issued to this Effect, and for Other Related Purposes

9/19/2008

RR No. 13 - 2007

Prescribing the Rules on the Advance Payment of Value-Added Tax/Percentage Tax on the Transport of Naturally Grown Planted Timber Products

10/15/2007

RR No. 11-2007

Suspension of the Implementation of Revenue Regulations No. 6-2007

8/15/2007

RR No. 6-2007

Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking all Revenue Issuances Issued to this Effect, and for Other Related Purposes

3/21/2007

RR No. 4-2007

Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005

2/7/2007

RR No. 2-2007

Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005

12/22/2006

RR 16-2005

Consolidated Value-Added Tax Regulations of 2005.

9/1/2005

RR 7-2004

Implementing Sec. 109(bb) and (cc) of the National Internal Revenue Code, as Amended by RA 9238, Excluding Services Rendered by Doctors of Medicine duly Registered with the Professional Regulatory Commission (PRC), and Services Rendered by Lawyers Duly Registered with the Integrated Bar of the Philippines (IBP) from the Coverage of Value-Added Tax.

5/7/2004

RR 4-2004

Supplementing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar as Provided for in RR 2-2004.

3/22/2004

RR 2-2004

Further Enhancing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar, Amending RR 7-89 and 29-2002

1/2/2004

RR 29-2003

Advance Payment of VAT on the Sale of Flour

10/30/2003

RR 28-2003

Amending Further Pertinent Provisions of RR 2-98 as Amended, Relative to the Issuance of Certificate of Value-Added Tax Withheld at Source, Thereby Amending RR 4-2002; and For the Purpose.

10/15/2003

RR 27-2003

Regulations Further Amending the Transitory Provisions of RR 18-99 as Amended by RR 12-2003, Pertaining to the Deadline for the Usage of Properly Stamped Unused Non-VAT Invoices or Receipts.

6/30/2003

RR 5-2003

Rules and Regulations To Implement The Remittance of the Following: (a) 70% Share of the ARMM in the Withholding Tax Payments of National Government Agencies (NGAs) and in the National Collections from Taxpayers Other Than NGAs Provided for Under Section 9, Article IX of RA 9054, Amending Therein Certain Sections of RR 4-98; (b) Allotment to the Regional Government (RG) of the 30% Share of the National Government (NG) of all Current Year Collections of Internal Revenue Taxes Within ARMM for a Period of Five (5) Years as may be Provided in the Annual Appropriations Act as Provided for Under Section 15, Article IX of RA 9054; and c) 50% of the 80% Share of the NG from the Yearly Incremental Revenue From VAT Collections Within ARMM Received by the Central Government as Provided for Under Section 15, in Relation to Section 9, both of Article IX of RA 9054 As Well As in Relation to Section 283 of the National Internal Revenue Code (NIRC) of 1997.

1/22/2003

RR 29-2002

Enhancing the Rules on the Advance Payment of Value- Added Tax on the Sale of Refined Sugar, thereby Amending RR 7-89, and Other Purposes.

12/9/2002

RR 8-2002

Amending Further Pertinent Provisions of RR 7-95, as Amended , With Respect to the Time of Filing of Quarterly VAT Returns; Contents and Submission of Quarterly Total of Monthly Sales and Purchases Per Supplier or Customer, and Providing for the Penalties and Effect of Non-Submission Thereof; and Clarifying Further the Mode of Remittance of VAT Due From Non-Residents.

6/13/2002

RR 2-98

Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue Code (NIRC) as Amended" relative to the Withholding on Income Subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable VAT and other Percentage Taxes

4/17/98

Revenue Memorandum Orders(RMOs)

Issuance No.

SUBJECT

Date

RMO No. 3-2009

Amendment and Consolidation of the Guidelines in the Conduct of Surveillance and Stock-Taking Activities, and the Implementation of the Administrative Sanction of Suspension and Temporary Closure of Business

1/15/2009

RMO No. 6-2008

Prescribing the Guidelines and Procedures in the Printing, Requisition, Reporting, Issuance and Distribution of Certificate of Advance Payment of Value-Added Tax/ Percentage Tax on the Transport of Naturally Grown and Planted Timber Products as Prescribed in RR No. 13-2007 Dated October 15, 2007

12/31/2007

RMO No. 16-2007

Prescribing Additional Procedures in the Audit of Input Taxes Claimed in the VAT Returns by Revenue Officers and Amending "Annex B" of RMO No. 53-98 With Respect to the Checklist of Documents to be Submitted by a Taxpayer Upon Audit of his/its VAT Liabilities as well as the Mandatory Reporting Requirements to be Prepared by the Assigned Revenue Officer/s Relative Thereto, All of Which Shall Form an Integral Part of the Docket

7/20/2007

RMO No. 7-2006

Prescribing the guidelines and procedures in the processing of applications for zero-rating of effectively zero-rated transactions for Value-Added Tax purposes

12/15/2005

RMO No. 26-2005

Suspension of issuance of assessments for deficiency Value-Added Tax against cinema/theater operators/owners

10/11/2005

RMO No. 22-2004

Value-Added Tax (VAT) Exemption Certificate/ Identification Card Issued to qualified foreign embassies and their qualified personnel Amending/ Modifying RMO No. 81-99

5/24/2004

RMO No. 5-2004

Prescribing the guidelines and procedures in the implementation of RR No. 29-2003 on the advance payment of Value-Added Tax on the sale of flour

12/29/2003

RMO No. 35-2002

Prescribing the guidelines and procedures in the processing and issuance of Authority to Release Imported Goods (ATRIG) for Excise and Value-Added Tax Purposes

10/28/2002

RMO No. 9-2000

Tax treatment of sales of goods, properties and services made by VAT- registered suppliers to BOI-registered manufacturers-exporters with 100% export sales

2/2/2000

RMO No. 81-99

Issuance of Value-Added Tax (VAT) Exemption Certificate to all qualified embassies and their personnel

10/8/1999

RMO No. 40-94

Prescribing the Modified Procedures on the Processing of Claims for VAT Credit/ Refund

5/6/1994

Revenue Memorandum Circulars (RMCs)

Issuance No.

SUBJECT

Date

RMC No. 77-2008

Taxability of Director’s Fees Received By Directors Who are not Employees of the Corporation for VAT or Percentage Tax Purposes as Espoused Under Revenue Memorandum Circular No. 34-2008

11/24/2008

RMC No. 46-2008

Clarification of Issues Concerning Common Carriers by Air and Their Agents Relative to the Revenue and Receipt from Transport of Passengers, Goods/Cargoes and Mail, and from Excess Baggage

2/1/2008

RMC No. 34-2008

Tax Treatment of Director’s Fees for Income Tax and Business Tax Purposes

4/15/2008

RMC No. 59-2007

Clarifying the Effect of Suspension of RR No. 6-2007, Otherwise Known As the "Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking All Revenue Issuances Issued to this Effect and for Other Related Purposes"

9/12/2007

RMC No. 53-2007

Reiteration of the Amendment Made by RA No. 9337 Imposing VAT on the Sale of Non-Food Agricultural Products, Marine and Forest Products and on the Sale of Cotton and Cotton Seeds in their Original State

8/7/2007

RMC No. 39-2007

Clarifying the Income Tax and VAT Treatment of Agency Fees/Gross Receipts of Security Agencies Including the Withholding of Taxes Due Thereon

1/22/2007

RMC No. 35-2006

Clarifying the Proper VAT and EWT Treatment of Freight and Other Incidental Charges Billed by Freight Forwarders

6/21/2006

RMC No. 31-2006

Value Added Tax (VAT) on the Construction or Renovation of Official Buildings or Properties of the United States of America Embassy

5/29/2006

RMC No. 30-2006

Prescribing the Submission of a Narrative Memorandum Report to Accompany the VAT Credit Evaluation Report and Requiring the Attachment of Certain Documents Prior to Approval of the Tax Credit Certificate (TCC) Recommended by the Tax and Revenue Group (TRG), Department of Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOF-OSS)

3/23/2006

RMC No. 22-2006

Clarifying certain issues relating to the implementation of the increase in the Value-Added Tax rate from 10% to 12% on the sale of goods pursuant to Republic Act No. 9337

4/5/2006

RMC No. 21-2006

Clarification of Issues on How to Fill-up the new Version of VAT Forms (September, 2005 Version) and other Related Issues

3/24/2006

RMC No. 8-2006

Clarifying certain issues relating to the implementation of the increase in the VAT rate from 10% to 12% pursuant to Republic Act No. 9337

1/31/2006

RMC No. 5-2006

Prescribing the use of the Government Money Payment Chart Implementing Sections 2.57.2, 4.114 and 5.116 of Revenue Regulations No. 2-98 as amended by Revenue Regulations No. 16-2005 in relation to Sections 57 (B), 114 (C) and 116 to 123 of Republic Act No. 8424 as amended by Republic Act No. 9337

11/2/2005

RMC No. 72-2005

Transition procedures for all Electronic Filing and Payment System filers (Large Taxpayers/Top 10,000 Corporations) in filing tax returns affected by the new VAT Law (R.A. 9337)

12/16/2005

RMC No. 68-2005

Enhanced VAT forms – BIR Form No. 2550M (Monthly Value-Added Tax Declaration) and BIR Form No. 2550Q (Quarterly Value-Added Tax Return) – September 2005 version

12/1/2005

RMC No. 62-2005

Revised guidelines in the registration and invoicing requirements including clarification on common issues affecting Value-Added Tax (VAT) taxpayers Pursuant to RA No. 9337 (An Act Amending Sections 27, 28, 34, 106, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, as Amended, and for other Purposes)

10/18/2005

RMC No. 57-2005

Attachments to the quarterly VAT return to be filed starting October 25, 2005

10/18/2005

RMC No. 52-2005

Value-Added Tax (VAT) Liability of the Tollway Industry

9/28/2005

RMC No. 29-2005

Clarifying the provisions of Republic Act No. 9337 (VAT Law of 2005) applicable to the petroleum industry

 

 

6/29/2005

RMC No. 70-2004

Clarification on proper determination of amount of Value-Added Tax on VAT invoices or VAT official receipts

 

11/20/2004

RMC No. 60-2004

Clarification regarding the withholding of creditable Value-Added Tax by government offices for purchases of P1,000.00 and below

8/20/2004

RMC No. 37-2004

Settlement of the Value-Added Tax liabilities of pawnshops for taxable years 1996 to 2002

6/16/2004

RMC No. 9-2004

 

Guidelines and Policies Applicable to the Business Tax Applicable to Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions and other Non-Bank Financial Intermediaries As A Result of the Enactment and Effectivity of Republic Act No. 9238, An Act Amending Certain Provisions of the National Internal Revenue Code of 1997, As Amended, by

Excluding Several Services from the Coverage of the Value-Added Tax and Re-Imposing the Gross Receipts Tax on Banks and Non-Bank Financial Intermediaries

Performing Quasi-Banking Functions and Other Non-Bank Financial Intermediaries Beginning January 1, 2004

2/19/2004

RMC No. 6-2003

Clarifying Certain Issues Relative to the Services Rendered by Individual Professional Practitioners, General Professional Partnerships, Entertainers, and Professional Athletes Who Are Subject to the Value-Added Tax or Percentage Tax, Whichever is Applicable, Beginning January 1, 2003

1/15/2003

RMC No. 2-2004

Clarifying the issues on VAT taxable transactions of Philippine Ports Authority Amending Revenue Memorandum Circular No. 20-88, Pursuant to Republic Act No. 7716 As Implemented by Revenue Regulations No. 7-95 

 

12/26/2003

RMC No. 61-2003

Issuance of VAT Invoices/Receipt for Non-VAT/Exempt Sale of Goods, Properties or Services

10/6/2003

RMC No. 49-2003

Amending Answer to Question Number 17 of Revenue Memorandum Circular No. 42-2003 and Providing Additional Guidelines on Issues Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters

8/15/2003

RMC No. 42-2003

Clarifying certain issues raised relative to the processing of claims for Value-Added Tax (VAT) credit/refund, including those filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters

 

7/15/2003

RMC No. 30-2003

Clarification of Paragraph 1-Q of Revenue Memorandum Circular No. 28-2003

5/20/2003

RMC No. 56-2002

Taxability of Health Maintenance Organizations (HMOs) for VAT purposes.

12/13/2002

RMC No. 45-2001

Taxability of Pawnshop Operators for VAT Purposes

10/12/2001

RMC No. 28-2001

Taxability of Movie/Cinema House Operators for VAT Purposes

 

7/2/2001

RMC No. 25-99

Disseminating the Ruling of the Commissioner of Internal Revenue on the Non-eligibility for VAT Zero-Rating of Automobile Sales to Entities Registered with PEZA, SBMA and Clark Development Authority

3/18/1999

RMC No. 32-99

Japanese Contractors undertaking Overseas Economic Cooperation Fund of Japan (OECF) Funded Project are Exempt from the eight and one half percent (8.5%) creditable VAT imposed under Section 114(C) of the Tax Code of 1997 and to the One Percent (1%) Expanded Withholding Tax (EWT) imposed under Section 2.57.2(E) of RR No. 2-98 implementing Section 57(B) of the Tax Code of 1997

5/3/99

 



Codal Reference

Sections 105 to 115 of the National Internal Revenue Code of 1997, as amended



Frequently Asked Questions

I. General VAT Queries

Who are liable to register as VAT taxpayers?

When is a new VAT taxpayer required to apply for registration and pay the registration fee?

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?

How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities?

What is the liability of a taxpayer becoming liable to VAT and did not register as such?

Who may opt to register as VAT and what will be his liability?

What are the instances when a VAT-registered person may cancel his VAT registration?

When will the cancellation for registration be effective?

What is the invoicing/ receipt requirement of a VAT-registered person?

May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions?

May a VAT-registered person issue separate invoices/ receipts involving VAT and Non-VAT transaction?

How is the Value-Added Tax presented in the receipt/ invoice?

What is the information that must be contained in the VAT invoice or VAT official receipt?

What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt?

What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT0 exempt transactions?

What is "output tax"?

What is "input tax"?

What comprises "goods or properties"?

What comprises "sale or exchange of services"?

What is a zero-rated sale?

What transactions are considered as zero-rated sales?

Where will taxpayers file their application for VAT zero-rating?

What is a Contractor's Final Payment Release Certificate and where should taxpayers file their application for this?

What transactions are considered as deemed sales?

What is VAT-exempt sale?

What are the VAT-exempt transactions?

What are the previously exempt transactions that are now subject to VAT?

II. Relief-Related Queries

What is "RELIEF" ?

Who are required to submit Summary List of Sales?

Who are required to submit Summary List of Purchases?

What are the Summary Lists required to be submitted?

When is the deadline for submission of the above Summary Lists?

What are the penalties for failure to submit the Summary Lists?

III. What  is the treatment for Withholding of VAT on Government Money Payments?

IV. In what  grounds can the Commissioner of Internal Revenue suspend the business operations of a taxpayer?

 

I. General VAT Queries

Who are liable to register as VAT taxpayers?
Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if:
  1. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos (P1,500,000.00): or
  2. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).
When is a new VAT taxpayer required to apply for registration and pay the registration fee?

New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding registration fee of five hundred pesos (P500.00) using BIR Form No. 0605 for every separate or distinct establishment or place of business before the start of their business following existing issuances on registration.

Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos (P500.00) not later than January 31, every year.

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?
The following compliance activities must be performed by a VAT-registered taxpayer:
  1. Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales;
  2. Register the books of accounts of the business/occupation/calling, including practice of profession, before using the same;
  3. Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use on transactions subject to VAT. (If there are other transaction not subject to VAT, a separate set of non-VAT invoices or non-VAT official receipts need to be registered for use on transactions not subject to VAT);
  4. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable month (for manual filers)/on or before the prescribed due dates enunciated in RR No. 16-2005 (for e-filers) using BIR Form No. 2550M and of the Quarterly VAT Return on or before the 25th day following the end of the taxable quarter using BIR Form No. 2550Q, reflecting therein gross receipts (for seller of service)/ gross sales (for seller of goods) and output tax (VAT on sales); purchases of goods and services made in the course of trade or business/exercise of profession and input tax (VAT on purchases), other allowable tax credits as in the case of advance VAT payment and VAT withheld by government payors, and VAT payable or excess input VAT, whichever is applicable, with the accredited agent banks (AABs) of the BIR or Revenue Collection Officers (RCOs) of the BIR (in areas without AAB), for returns with payment, or with the RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns without payment. (The monthly VAT Declaration and the Quarterly VAT Return shall reflect the consolidated total for all the taxable lines of activity and all the establishments - head office and branches);
  5. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax (if the quarterly sales exceed P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic Purchases and Input Tax/ the soft copy of the Schedule of Transactional/Individual Importation ( if the quarterly total purchases exceed P1,000,000.00), reflecting therein the required data prescribed under existing revenue issuances.
How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities?

In determining the main or principal business of a taxpayer, we apply the predominance test. Under this test, if more than fifty (50%) of its gross sales and/or gross receipts comes from its business/es subject to VAT, its main/principal business falls within the VAT system making its status as a VAT person. Otherwise, he can not be considered as a VAT person eligible for the election provided for under Section 109(2) of the Tax Code.

What is the liability of a taxpayer becoming liable to VAT and did not register as such?

Any person who becomes liable to VAT and fails to register as such shall be liable to pay the output tax as if he is a VAT-registered person, but without the benefit of input tax credits for the period in which he was not properly registered.

Who may opt to register as VAT and what will be his liability?
  1. Any person who is VAT-exempt under Sec. 4.109-1 (B) (1) (V) not required to register for VAT may, in relation to Sec. 4.109-2, elect to be VAT-registered by registering with the RDO that has jurisdiction over the head office of that person, and pay the annual registration fee of P500.00 for every separate and distinct establishment.
  2. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed transactions) may opt that the VAT apply to his transactions which would have been exempt under Section 109(1) of the Tax Code, as amended [Sec. 109(2)].
  3. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed ten million pesos (P10,000,000.00) derived from the business covered by the law granting the franchise may opt for VAT registration. This option, once exercised, shall be irrevocable. (Sec. 119, Tax Code).
  4. Any person who elects to register under optional registration shall not be allowed to cancel his registration for the next three (3) years.

The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the calendar quarter and shall pay the registration fee unless they have already paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. Once registered as a VAT person, the taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day of the month following registration.

What are the instances when a VAT-registered person may cancel his VAT registration?
  1. If he makes a written application and can demonstrate to the commissioner's satisfaction that his gross sales or receipts for the following twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will not exceed one million five hundred thousand pesos (P1,500,000.00); or
  2. If he has ceased to carry on his trade or business, and does not expect to recommence any trade or business within the next twelve (12) months.

When will the cancellation for registration be effective?

The cancellation for registration will be effective from the first day of the following month the cancellation was approved.

What is the invoicing/ receipt requirement of a VAT-registered person?

A VAT registered person shall issue :

  1. A VAT invoice for every sale, barter or exchange of goods or properties; and
  2. A VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services.

May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions?

Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided that the invoice or receipt shall clearly indicate the break-down of the sales price between its taxable, exempt and zero-rated components and the calculation of the Value-Added Tax on each portion of the sale shall be shown on the invoice or receipt.

May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-VAT transactions?

Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and zero-rated component of its sales provided that if the sales is exempt from value-added tax, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt and if the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice or receipt.

How is the Value-Added Tax presented in the receipt/ invoice?
The amount of the tax shall be shown as a separate item in the invoice or receipt.
Sample:

Sales Price
P100,000.00
VAT
12,000.00
Invoice Amount
P112,000.00

What is the information that must be contained in the VAT invoice or VAT official receipt?

  1. Name of Seller
  2. Business Style of the Seller
  3. Business Address of the Seller
  4. Statement that the seller is a VAT-registered person, followed by his TIN
  5. Name of Buyer
  6. Business Style of Buyer
  7. Address of Buyer
  8. TIN of buyer, if VAT- registered and amount exceed P1,000.00
  9. Date of transaction
  10. Quantity
  11. Unit cost
  12. Description of the goods or properties or nature of the service
  13. Purchase price plus the VAT, provided that:
    • The amount of tax shall be shown as a separate item in the invoice or receipt;
    • If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt;
    • If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice receipt; and
    • If the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate the breakdown of the sales price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt.
  14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt.

What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt?

The non-VAT registered person shall, in addition to paying the percentage tax applicable to his transactions, be liable to VAT imposed in Section 106 or 108 of the Tax Code without the benefit of any input tax credit plus 50% surcharge on the VAT payable (output tax). If the invoice/ receipts contain the required information, purchaser shall be allowed to recognize an input tax credit.

What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT-exempt transactions?

If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction but fails to display prominently on the invoice or receipt the words "VAT-EXEMPT SALE", the transaction shall become taxable and the issuer shall be liable to pay the VAT thereon. The purchaser shall be entitled to claim an input tax credit on his purchase.

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.

What is "input tax"?

Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods, properties or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period.

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, among others:

  1. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
  2. 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;
  3. The right or privilege to use in the Philippines of any industrial, commercial or scientific equipment;
  4. The right or the privilege to use motion picture films, films, tapes and discs; and
  5. Radio, television, satellite transmission and cable television time.

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, whether in kind or in cash, including those performed or rendered by the following:
  1. Construction and service contractors;
  2. Stock, real estate, commercial, customs and immigration brokers;
  3. Lessors of property, whether personal or real;
  4. Persons engaged in warehousing services;
  5. Lessors or distributors of cinematographic films;
  6. Persons engaged in milling, processing, manufacturing or repacking goods for others;
  7. Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts, theatres, and movie houses;
  8. Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places, including clubs and caterers;
  9. Dealers in securities;
  10. Lending investors;
  11. 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 relative to their transport of goods or cargoes;
  12. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines;
  13. Sales of electricity by generation, transmission, and/or distribution companies;
  14. Franchise grantees of electric utilities, telephone and telegraph, radio and/or television broadcasting and all other franchise grantees, except franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed Ten Million Pesos (P10,000,000.00), and franchise grantees of gas and water utilities;
  15. Non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and
  16. Similar services regardless of whether or not the performance thereof calls for the exercise of use of the physical or mental faculties.
The phrase "sale or exchange of services" shall likewise include:
  1. The lease of 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;
  2. The lease or the use of, or the right to use of any industrial, commercial or scientific equipment;
  3. The supply of scientific, technical, industrial or commercial knowledge or information;
  4. 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;
  5. 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;
  6. 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;
  7. The lease of motion picture films, films, tapes and discs; and
  8. The lease or the use of or the right to use radio, television, satellite transmission and cable television time.

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. It is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sales, shall be available as tax credit or refund in accordance with RR No. 16-2005.

What transactions are considered as zero-rated sales?

The following services performed in the Philippines by VAT-registered person shall be subject to zero percent (0%) rate:

  1. 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);
  2. Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person engaged in business who is outside the Philippines when the services are performed, 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);
  3. 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;
  4. Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting Feb. 1, 2006;
  5. 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;
  6. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. Gross receipts of international air carriers doing business in the Philippines and international sea carriers doing business in the Philippines are still liable to a percentage tax of three percent (3%) based on their gross receipts as provided for in Sec. 118 of the Tax Code but shall not be liable to VAT; and
  7. Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other shipping sources using technologies such as fuel cells and hydrogen fuels; Provided, however that zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power .

The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

  1. Export sales
    • The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, paid in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
    • The sale of raw materials or packaging materials to a non-resident buyer for delivery to as resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods, paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP;
    • The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production;
    • Sale of gold to the BSP;
    • Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws; and
    • The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations; Provided, that the same is limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port, or vice-versa without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than the mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to twelve percent (12%) output VAT.
  1. Foreign Currency Denominated Sales

The sale to a non-resident of goods, except those mentioned in Sections 149 and 150 of the Tax Code, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.

  1. Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement

Sale of goods or property to persons or entities who are tax-exempt under special laws or international agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc.

Where will taxpayers file their applications for VAT zero-rating?

Taxpayers shall file their application directly with the Audit Information, Tax Exemption and Incentives Division (AITEID) under the Assessment Service, or with the LTAID I and II, BIR National Office, as the case may be.

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)

What transactions are considered deemed sales?
The following transactions are considered as deemed sales:
  1. 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. Transfer of goods or properties not in the course of business can take place when VAT-registered person withdraws goods from his business for his personal use;
  2. Distribution or transfer to:
    • Shareholders or investors as share in the profits of the VAT-registered person; or
    • Creditors in payment of debt or obligation
  1. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period are not deemed sold;
  2. Retirement from or cessation of business, with respect to all goods on hand, whether capital goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or successor. The following circumstances shall, among others, give rise to transactions "deemed sale";
    • Change of ownership of the business. There is a change in the ownership of the business when a single proprietorship incorporated; or the proprietor of a single proprietorship sells his entire business.
    • Dissolution of a partnership and creation of a new partnership which takes over the business.

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.

What are the VAT-exempt transactions?
  1. 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 genetic materials therefore;
  2. 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 considered as pets);
  3. Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-resident citizens coming to resettle in the Philippines; Provided, that such goods are exempt from custom duties under the Tariff and Customs Code of the Philippines;
  4. Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery and 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 bonafide;
  5. Services subject to percentage tax under Title V of the Code, as amended;
  6. Services by agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw sugar;
  7. Medical, dental, hospital and veterinary services except those rendered by professionals;
  8. Educational services rendered by private educational institutions duly accredited by the Department of Education (DepED), the Commission on Higher Education (CHED) and the Technical Education and Skills Development Authority (TESDA) and those rendered by the government educational institutions;
  9. Services rendered by individuals pursuant to an employer-employee relationship;
  10. 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;
  11. Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws except those granted under P.D. No. 529 - Petroleum Exploration Concessionaires under the Petroleum Act of 1949;
  12. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA) to their members, as well as 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;
  13. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good standing with the Cooperative Development Authority;
  14. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in good standing with CDA; Provided, that the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P15,000.00) and regardless of the aggregate capital and net surplus ratably distributed among the members;
  15. Export sales by persons who are not VAT-registered;
  16. The following sales of real properties are exempt from VAT, namely:
    1. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business;
    2. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the "Urban Development and Housing Act of 1992" and other related laws, such as RA No. 7835 and RA No. 8763;
    3. Sale of real properties utilized for specialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws;
    4. Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or house and lot and other residential dwellings valued at Two Million Five Hundred Thousand Pesos (P2,500,000.00) and below where the instrument of sale/ transfer/ disposition was executed on or after July 1, 2005; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year.
  17. Lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos (P10,000.00), regardless of the amount of aggregate rentals received by the lessor during the year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO;
  18. 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;
  19. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine equipment and spare parts thereof for domestic or international transport operations; Provided, that the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be limited to those of one hundred fifty (150) tons and above, including engine and spare parts of said vessels; Provided, further, that the vessels to be imported shall comply with the age limit requirement, at the time of acquisition counted from the date of the vessel's original commissioning, as follows: (a) for passenger and/or cargo vessel, the age limit is fifteen (15) years old, (b) for tankers, the age limit is ten (10) year old, and (c) for high-speed passengers crafts, the age limit is five (5) years old; Provided, finally, that exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping Development Act of 2004";
  20. Importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates, used for shipping transport operations; Provided, that the exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as "The Domestic Shipping Development Act of 2004".
  21. Importation of capital equipment, machinery, spare parts, life-saving and navigational equipment, steel plates and other metal plates including marine-grade aluminum plates to be used in the construction, repair, renovation or alteration of any merchant marine vessel operated or to be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions of Section 19 of Republic Act No. 9295, otherwise known as the "The Domestic Shipping Development Act of 2004".
  22. Importation of fuel, goods and supplies engaged in international shipping or air transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice-versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated form abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other that the mentioned in the paragraph, such portion of fuel, goods and supplies shall be subject to 12% VAT;
  23. Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Sections 121 and 122, respectively of the Tax Code; and
  24. 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 do not exceed the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00). Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shall be adjusted to its present value after using the Consumer Price Index, as published by the NSO.

What are the previously exempt transactions that are now subject to VAT?
  • Medical services such as dental & veterinary services rendered by professionals;
  • Legal services;
  • Non-food agricultural products;
  • Marine and forest products;
  • Cotton and cotton seeds;
  • Coal and natural gas;
  • Petroleum products;
  • Passenger cargo vessels of more than 5,000 tons;
  • Work of art, literary works, musical composition;
  • Generation, transmission and distribution of electricity including that of electric cooperatives;
  • Sale of residential lot valued at more than P1,500,000.00;
  • Sale of residential house & lot/dwellings valued at more than P2,500,000.00;
  • Lease of residential unit with a monthly rental of more than P10,000;

II. RELIEF-Related Queries

What is "RELIEF"?

RELIEF means Reconciliation of Listing 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.

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 (P2,500,000.00) are required to submit a Summary List of Sales.

Who are required to submit Summary List of Purchases?

VAT taxpayers with quarterly total purchases (net of VAT) of goods and services, including importation exceeding One Million Pesos (P1,000,000.00) are required to submit Summary List of Purchases.

What are the Summary Lists required to be submitted?
  • Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/ Customers and Output Tax
  • Quarterly Summary of List of Local Purchases and Input tax; and
  • Quarterly Summary List of Importation.
When is the deadline for submission of the above Summary Lists?

The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or before the twney-fifth (25th) day of the month following the close of the taxable quarter -- calendar quarter or fiscal quarter.

What are the penalties for failure to submit the Summary Lists?

  • For failure to file, keep or supply a statement, list or information required on the date prescribed shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for each such failure, unless it is shown that such failure is due to reasonable cause and not to willful neglect; and
  • An aggregate amount to be imposed for all such failures during a taxable year shall not exceed Twenty-Five Thousand Pesos (P25,000.00).

 III. What is the treatment for Withholding of VAT on Government Money Payments?

  • The goverment or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or services taxed at twelve percent (12%) VAT pursuant to Sections 106 and 108 of the Tax Code, deduct and withhold a Final VAT due at the rate of five percent (5%) of the gross payment.

The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller.  The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably apportioned to such sales.  Should actual input VAT attributable to sales to government exceeds seven percent (7%) of gross payments, the excess may form part of the sellers' expense or cost.  On the other hand, if actual input VAT attributable to sale to government is less than seven percent (7%) of gross payment, the difference must be closed to expense or cost.

  • The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall withhold twelve percent (12%) VAT with respect to the following payments:
    1. Lease or use of properties or property rights owned by non-residents; and
    2. Other services rendered in the Philippines by non-residents.

IV. In what grounds can the Commissioner of Internal Revenue suspend the business operations of a taxpayer?

The Commissioner or his authorized representative is empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations:

(a) In the case of a VAT-registered Person:

  • Failure to issue receipts or invoices;
  • Failure to file a value-added-tax return as required under Section 114; or
  • Understatement of taxable sales or receipts by thirty percent (30%)  or more of his correct taxable sales or receipts for the taxable quarter.

(b) Failure to any Person to Register as Required under Section 236

  • The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.

 




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