Tax can be confusing. At the basic, there is Percentage Tax or Value Added Tax; VAT registered and a Non-VAT registered tax payer. In the Philippines, managing tax matters can be really complicated. Several individuals and companies even hire Consultants/Accounting Firms to manage compliance reporting.

3. Learn Now.

4. Tax can be confusing.

5. Tax can be confusing.

6. Tax can be confusing.
VAT registered and a
Non-VAT registered tax payer

7. In the Philippines, managing tax matters can be
really complicated. Several individuals and
companies even hire Consultants/Accounting
Firms to manage compliance reporting.

8. In the Philippines, managing tax matters can be
really complicated. Several individuals and
companies even hire Consultants/Accounting
Firms to manage compliance reporting.
aim to educate our Clients
and website visitors about Business and
Finance including tax issues.

10. Any person or entity who is engaged in trade,
business or in the practice of profession may
be liable to business taxes (VALUE ADDED TAX (VAT) RA
9337 as implemented by RR 16-2005 as amended by RR 2-
2007 and 4-2007).
Business tax can be either a Percentage tax or a Value
Added Tax. Likewise, a taxpayer can be a VAT registered
entity or a Non-VAT registered taxpayer.
In this deck, we will discuss the meaning of VAT, its
background, objectives, how to compute VAT Payable and
file the monthly and quarterly VAT returns in the
Philippines.

11. What is a Value Added
Tax?
VAT (Value Added Tax) is simply a form of “Sales
Tax” and “Tax on Consumption” levied on:
1. Sale of goods, properties and services
2. Importation of goods (An indirect tax imposed
on sellers but actually shouldered by the buyers.
Sellers act merely as tax collectors)

12. Background of Value Added Tax
Value-Added Tax (VAT) is a business
tax levied on sale of certain
goods, properties and services.

14. Objectives of VAT
•To broaden the tax base
•To provide an audit trail
•To simplify business taxation
•To increase revenue

15. Who Are Liable for VAT?

16. Who Are Liable for VAT?
The following persons or entities are required to file VAT
returns:
•Any person who in the course of trade / business / practice
of profession sells goods, properties, renders service or
lease properties
•Whose Gross Sales / Gross Receipts for 12 months exceeds
P1,919,500 (RR 16-2011, RR 3 -2012), as amended.
•A person required to register as VAT taxpayer but failed to
register
•Importers

18. •Sale or Exchange of Goods or Properties
•Importation
•Leasing of Properties (Real / Personal)
•Sale of Services
•Transactions Deemed Sales

19. Who may elect to register as VAT and what
will be his liability?
•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.
•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)].

20. •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).
•Any person who elects to register under optional
registration for the next three (3) years. shall not be allowed
to cancel his registration

21. 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.

22. What are the BIR forms used in filing
VAT Returns?
VAT returns are filed monthly and
quarterly using the Monthly Value Added
Tax Declaration Return BIR Form 2550M
and
the Quarterly Value Added Tax Declaration
Return BIR Form 2550Q.

23. How to compute Value Added Tax Payable?

24. How to compute Value Added Tax Payable?
Before I show you how to compute VAT here are the definitions of
terms:

25. How to compute Value Added Tax Payable?
Before I show you how to compute VAT here are the definitions of
terms:
•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.

26. How to compute Value Added Tax Payable?
Before I show you how to compute VAT here are the definitions of
terms:
•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.
•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.

27. Total Vatable Purchases are your total
purchases from VAT registered
suppliers and should be supported with
VAT receipts.

28. Value Added Tax Payable is normally computed as follows:
Sample Computation of VAT Payable:
Assuming that, (figures are in Philippine peso)
1. Computing VAT payable on VAT exclusive Sales/Receipts:
Total Output Tax Due or Total Vatable Sales/Receipts x 12%
Less: Total Allowable Input Tax or Total Vatable Purchases x 12%
Equals: VAT Payable/ (Excess Input)
2. Computing Net VAT Payable on VAT “inclusive” Sales/Receipts:
Total Output Tax Due or Total Vatable Sales / 1.12 x 12%
Less: Total Allowable Input Tax or Total Vatable Purchases / 1.12 x 12%
Equals: VAT Payable

29. Assuming that, (figures are in Philippine peso)
Total Vatable Sales (VAT exclusive) 100,000.00
Total Vatable Purchases (VAT exclusive) 60,000.00
1. Computing VAT payable on VAT exclusive Sales/Receipts
Total Output Tax Due or Total Vatable Sales/Receipts x 12%
Less: Total Allowable Input Tax or Total Vatable Purchases x 12%
Equals: VAT Payable/(Excess Input)
VAT Payable Computation:
Output (100,000 x 12%) 12,000.00
Input (60,000 x 12%) 7,200.00
VAT Payable 4,800.00

30. 2. Computing Net VAT Payable on VAT “inclusive” Sales/Receipts
Total Output Tax Due or Total Vatable Sales / 1.12 x 12%
Less: Total Allowable Input Tax or Total Vatable Purchases / 1.12 x 12%
Equals: VAT Payable
VAT Payable Computation:
Output (100,000/1.12 x 12%) 10,714.29
Input (60,000/1.12 x 12%) 6,428.57
VAT Payable 4,285.72

31. VAT exempt sales, zero rated sales, purchases not
qualified for input tax, and other input taxes (if
any) should also be shown in the VAT returns. See
BIR Forms for reference.

32. How, when and where to File VAT Returns?
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

33. Procedures
If there is Payment:
•Fill-up BIR Form No. 2550M (for monthly VAT declaration)
or 2550Q (for quarterly VAT declaration) in triplicate copies
(two copies for the BIR and one copy for the taxpayer)
•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.

34. •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.

35. 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.

36. DEADLINE For Manual Filing:
•Monthly VAT returns BIR Form 2550M – Not
later than the 20th day following the end of
each month
•Quarterly VAT returns BIR Form 2550Q –
Within twenty five (25) days following the
close of taxable quarter
For EFPS Filing:
Visit the BIR website for detailed and
updated dates of deadlines.

37. References:
www.bir.gov.ph
BIR Tax information on Value Added Tax
Sections 105 to 115 of the National Internal
Revenue Code of 1997, as amended
Disclaimer: New and subsequent BIR rulings,
issuances and/or laws may render the whole or
part of the article obsolete or inaccurate. For more
information, please inquire or consult with the BIR.

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