VALUE ADDED
TAX
( VAT )
Group 1
By: Luz Lozano and
Glo Zamora
HISTORY OF PHILIPPINE VAT LAW
The Old Sales Tax Law on manufacturers, producers, and importers of certain goods and the
percentages taxes on certain sellers of services had been in effect since the early 1936’s , but due to the
numerous problems in the tax administration of the previous business tax system, resulting in the noncollection of business tax goals by the BIR due to inefficiencies in the tax system, said taxes were all
replaced on January 01, 1988 by the VALUE ADDED TAX ( VAT ) UNDER Executive Order 273.
The Original Value Added Tax Law , 10% VAT on a quarterly basis was enacted in July, 1987, to take
effect beginning January 1, 1988. Congress subsequently enacted nine (9) amendatory laws, namely:
Republic Act ( RA)
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Date
1992
1996
RA #
7643
7716
1997
8241
1998
2000
2001
2004
2005
2006
8424
8761
9010
9238
9337
9361
Original 10% Monthly VAT Law
Expanded Vat Law to include Real Properties, print media
Improved Vat Law amending certain provisions
To defer VAT on brokers , books, magazines,
Tax Reform Act to defer VAT to include bank and finance
companies
VAT extension to exempt Brokers 2000
Further Extended VAT exemption up to 2003
Exemption of Lawyers and doctors from paying VAT
Reformed Vat Law - Increase of VAT from 10% - 12%
Removal of 70% CAP on input Tax.
Republic Act No. 7643 (1992)
This law empowered the Commissioner of Internal Revenue to require the Payment of the 10%
Value Added Tax every month so as to improve the liquidity of government and to remove the
temptation from taxpayers in using in the meantime VAT collections for their business operations.
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Republic Act No. 7716 (1996)
During the administration of former President Fidel V. Ramos, R.A. 7716, expanded the
coverage of the value added tax by the inclusion of the sale, barter, exchange or lease of
real properties and intangible personal properties as well as services in the Philippines of
non-resident persons.
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Republic Act No.8241 (1997)
The effectivity of the imposition of the value-added tax on services as prescribed in Section 17(a)
and (b) of Republic Act No. 7616, as amended by Republic Act. 8241, is hereby further deferred
until December 31, 1999.: Provided, That the said services shall continue to pay the applicable
tax prescribed under the present provisions of the National Internal Revenue Code, as amended.
For example is the law which restored operators of taxicabs, utility cars for rent or hire,
driven by the lessees, and tourist buses under the coverage of common carrier’s tax,
among others. Also exempted from the imposition of VAT are books, magazines and
newspapers.
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Republic Act No.8424 (1998)
Deferment of the Effectivity of the Imposition of VAT on Certain Services. – The effectivity of the
imposition of the value-added tax on services as prescribed in Section 17(a) and (b) of Republic
Act No. 7616, as amended by Republic Act. 8241, is hereby further deferred until December 31,
1999, This includes services rendered by professionals, banks, and other non-bank financial
companies, and lease or use of sports facilities and equipment by amateur players.
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Republic Act No.8761 (2000)
The imposition of the value-added tax on the following services shall take effect on
January 1, 2001:
Services rendered by stock, real estate, commercial, customs and immigration brokers:
Provided, That, for the year beginning January 1 up to December 31, 2000, the
aforementioned brokers shall, in lieu of the value-added tax prescribed under Title IV of
the National Internal Revenue Code of 1997, be subject to a tax equivalent to seven
percent (7%) based on gross receipts from brokering services which shall be paid in the
manner and in accordance with the provisions of Title V of the said Code: Provided,
further, That beginning January 1, 2001, the aforementioned brokers shall be subject to
the value-added tax.
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Republic Act No.9010 (2001)
The imposition of the value-added tax on the following services shall take effect on
January 1,2003:
a. Services performed in the exercise of profession or calling subject to the professional
tax as provided for under Republic Act No. 7160, otherwise known as the Local
Government Code of 1991, and professional services performed by registered general
professional partnerships; actors, actresses, talents, singers and emcees; radio and
television broadcasters, choreographers; musical, radio, movie, television and stage
directors; and professional athletes;
b. Services rendered by banks, nonbank financial intermediaries, finance companies and
other financial intermediaries not performing quasi-banking functions; and
c. Services rendered by stock, real estate, commercial, customs and immigration
brokers: Provided, That for the years beginning January 1, 2001 up to December 31,
2002, the aforementioned brokers shall, in lieu of the value-added tax prescribed
under Title IV of the National Internal Revenue Code of 1997, be subject to a tax
equivalent to seven percent (7%) based on gross receipts from brokering services
which shall be paid in the manner and in accordance with the provisions of Title V of
the said Code: Provided, further, That beginning January 1, 2003, the aforementioned
brokers shall be subject to the value-added tax .
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Republic Act No.9238 (2004)
AN ACT AMENDING CERTAIN SECTIONS 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 01, 2004.
This law further exempts banks, finance companies, doctors of medicine and lawyers
from the value added tax beginning January 01, 2004.
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Republic Act No. 9337 (2005)
Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter
or exchange of goods or properties and services, a value-added tax equivalent to ten
percent (10%) of the gross selling price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to be paid by the seller or transferor:
Provided, That the President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%)
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Republic Act No. 9361 (2006)
Excess Output or Input Tax - If at the end of any taxable quarter the output tax exceeds the input
tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output
tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, however,
that any input tax attributable to zero-rated sales by a VAT-registered person may at his option
be refunded or credited against other internal revenue taxes, subject to the provisions of
Section 112."
WHAT IS VALUE ADDED TAX (VAT), OUT PUT TAX, INPUT TAX
Value Added tax (VAT) is a tax on the value added of a taxpayer arising from taxable sales of goods,
properties or services .
WHO ARE REQUIRED TO FILE VAT RETURNS
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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 Nine Hundred Nineteen Thousand
Five Hundred Pesos (P1,919,500.00).
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.
Transactions of Special VAT persons:
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Husband and Wife – For VAT purposes, the husband and the wife shall be considered as
separate taxpayers. Each spouse engaged in taxable sale of goods, properties or services
must comply with the administrative requirements prescribed for VAT taxpayers.
Joint Venture – an unincorporated joint venture is created when two or more
corporations or organizations, while registered and operating separately, are placed under
one sole management, which operated the business affairs of said companies as though
constituted as a single entity, thereby obtaining substantial economy and profits in the
operation. An unincorporated joint venture undertaking construction activity or engaged
in energy-related activities with operating contract with the government, although exempt
from income tax, is liable to value added tax. Hence, it must :
 Register as a VAT person
 Secure its own Taxpayer Identification Number (TIN)
 Keep its registered books of accounts
 Issue registered VAT sales invoices or official receipts
 File VAT declarations or returns and pay value added tax.
General Professional Partnership – An individual may practice his profession in his
personal capacity or through general professional partnership. The individual is subject
to VAT, if his gross receipts for the next twelve months exceed P1,919,500.00; otherwise
he shall be liable to 3% percentage tax under Section 116 of the Tax Code. General
Professional Partnerships whose gross receipts for the next twelve months exceed
P1,919,500.00 are the ones liable to VAT and must therefore, comply with the
administrative requirements prescribed for VAT taxpayer. These rules on GPP do not
apply to business partnerships which are considered as separate taxable entities.
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Beginning January 1, 2003, general professional partnerships, professionals, brokers and
other persons enumerated under Section 1 hereof shall be governed by the provisions of
Revenue Regulations No. 7-95, as amended, otherwise known as the“ Consolidated
Value-Added Tax Regulations”. Provided, however, that for purposes of these
Regulations, a professional partnership shall be treated as a separate and distinct taxable
persons from the individual partners composing the partnership. Provided, further, that all
gross receipts from sales of services rendered by the partners for and in the name of the
partnership shall entirely be taxable against the partnership. Provided, further, that sales
of services made by any partners thereof in his personal and individual capacity shall not
be attributed to the partnership but shall rather be taxable against such partner in his
individual capacity. Provided, finally, that beginning January 1, 2004, medical services
rendered by doctors of medicine duly registered with the Professional Regulatory
Commission (PRC) and legal services rendered by lawyers duly registered with the
Integrated Bar of the Philippines (IBP) shall no longer be subject to value added tax
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Government – The government is generally exempted from Value Added Tax on its
performance of essential government functions. However, government entities,including
government owned or controlled corporations are subject to VAT, if they sell taxable
goods, properties or services in the course if trade or business such as Local Water
districts and other similar public utilities selling services.
Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the
Philippines by VAT-registered persons 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 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);
(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 vessels engaged exclusively in international shipping; and
(5) Services performed by subcontractors and/or contractors in processing converting, or
manufacturing goods for an enterprises whose export sales exceed seventy percent (70%)
of total annual production.
VAT TRANSACTIONS
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Sale of Goods or Properties – VAT is imposed and collected on every sale, barter or exchange,
or transactions “deemed sale” of taxable goods or properties at the rate per 12% of the gross
selling price or gross value in money.
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Transactions Deemed Sales
 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;
 Distribution or transfer to: • Shareholders or investors share in the profits of
VAT-registered person;
 Creditors in payment of debt or obligation.
 Consignment of goods if actual sale is not made within 60 days following date
such goods were consigned.
 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.
 Change or ownership of the business. • Dissolution of a partnership and
creation of a new partnership which takes over the business.
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Real Properties - In case of sale of real properties on the installment plan, the real estate
dealer shall be subject to VAT on the installment payments, including interest
and penalties,
actually and/or constructively received by the seller. In case of sale of real properties on the
deferred-payment basis (Initial payments of which in the year of sale exceed twenty-five percent
(25%) of gross selling price, not the installment plan, the transaction shall be treated as cash sale
which makes the entire selling price taxable in the month of sale.
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Sale or Exchange of Services – means performance of all kind of services in the Philippines for
others for a fee, remuneration or consideration, whether in kind or in cash.
Importation of goods – the importer, whether an individual or corporation and whether or not
made in the course of his trade or business, shall be liable to VAT. The tax shall be based on the
total value used by the BOC in determining tariff and custom duties, plus customs duties, excise
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tax, if any, and other changers, such as postage, commission, and similar changes, prior to the
release of the goods form customs custody.
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Sale of nonfood agricultural products; marine and forest products in their original state by
primary producer or owner of the land; 2. Sale of cotton and cotton seeds in their original state;
Sale or importation of coal and natural gas, in whatever form or state;
Sale or importation or petroleum products, including raw materials for their production;
Sale by the artist of his works of art, literary works, musical compositions and similar creations,
or his services performed for the
production of such works; 6. Services rendered by
doctors of medicine duly registered with the PRC; 7. Services rendered by lawyers duly
registered with IBP;
Sale of electricity by generation, transmission and distribution companies (except sale of
power/fuel generated through renewable
sources of energy which is 0%);
Toll road operations
PAGCOR and its licensees and franchisees;
Sale of goods, supplies, equipment and fuel (including leases of property) and services to
persons engaged in international
shipping or international air transport operations.
(However, services and goods pertaining to transport form one place in the
Philippines to
another place in the Philippines is subject to 10% VAT) 12. Transport of passengers and cargo by
domestic air or sea vessels with international operations from the Philippines to a foreign
country of carrier. 13. Sale of power or fuel generated through renewable sources of energy
such as biomass, solar, wind hydropower, geothermal,
ocean energy and other emerging
energy sources using technologies such as fuel cells and hydrogen fuels.
Sale of services paid for in acceptable foreign currency and accounted for in accordance with
BSP rules provided that services
should be preformed in the Phils. For the following:
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Persons engaged in business conducted outside the Philippines;
> Non-resident persons not
engaged in business who is outside the Philippines when the services are performed.
Zero-Rated Transactions
A zero-rated sale of goods or properties (by a VAT-registered person) 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 sale, shall be available as tax credit or refund in a
accordance with these Regulations. Sales by VAT-registered persons shall be subject to zero (0%) rate:
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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 for in acceptable foreign currency or its
equivalent if goods or services, and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
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The sale of raw materials or packaging materials to non- resident buyer for delivery to a 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 rules and regulations of hte 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
The sale of goods, supplies, equipment and fuel (including leases of property) and services to
persons engage 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 ort in the Philippines directly to a foreign port
without docking or stopping at any other port in the Philippines;
Transport of passengers and cargo by domestic air or sea vessels with international operations
from the Philippines to a foreign country of carrier.
Sale of power or fuel generated through renewable sources of energy such as biomass, solar,
wind hydropower, geothermal, ocean energy and other emerging energy sources using
technologies such as fuel cells and hydrogen fuels. b. Foreign Currency Denominated Sale means the sale to a non-resident of goods, except those mentioned in Sec. 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. Sale of services paid for in acceptable foreign currency and
accounted for in accordance with BSP rules provided that services should be performed in the
Phils.
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Effectively Zero-rated Sale of Goods and Properties - shall refer to the local sale of goods and
properties by a VAT- registered person to a person or entity who was granted indirect tax
exemption under special laws or international agreement. Although not involving actual export
are considered as "constructive export" shall be entitled the benefit of zero-rating.
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Registered by PEZA or SBMA as "Export Enterprise," or "Export Producer," etc., or whose
registered activity is the exportation of goods. > Engaged in manufacturing, assembling or
processing activity resulting in the exportation exceeding 70% of its annual production, unless a
higher or lower percentage of its production for exportation is prescribe by the PEZA or SBMA.
VAT-Exempt Transactions
VAT-Exempt Transactions – refer to the sale of goods or properties and/or services and the use or lease
of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit on
VAT(input tax) previously paid.
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Sale of nonfood agricultural products; marine and forest products in their original state by the
primary producer or the owner of the land where the same are produced;
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Sale of cotton seeds in their original state; and copra;
Sale or importations 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 an genetic materials therefore.
. 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;
Sale or importation of coal and natural gas, in whatever form or state, and petroleum products
(except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise tax imposed
under Title VI;
Sale or importation of coal and natural gas, in whatever form or state, and petroleum products
(except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise tax imposed
under Title VI;
Importation of passenger and/or cargo vessels of more than five thousand tons (5,000) whether
coastwise or ocean-going, including engine and spare parts of said vessel to be used by the
importer himself as operator thereof;
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 form customs duties under the Tariff and Customs Code of the
Philippines;
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;
Services subject to percentage tax under Title V of the Tax Code e. (1.) Sale of goods or
properties or the performance of services of non-VAT registered persons other than the
transactions mentioned in paragraphs (A) to (U) of Sec. 109(1) of the Tax Code, the gross annual
sales and/or receipts of which does not exceed the amount of One Million Nine Hundred
Nineteen Thousand Five Hundred Pesos (P1,919,500.00
Services rendered by domestic common carriers by land, for the transport of passengers and
keepers of garages (Sec. 117).
Services rendered by franchise grantees of radio and/or television broadcasting whose annual
gross receipts of the preceding year do not exceed Ten Million Pesos (P 10,000,000.00), and by
franchise grantees of gas and water utilities (Sec. 190);
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Services rendered by any person, company or corporation (except purely cooperative
companies or associations) doing life insurance business of any sort in the Philippines (Sec. 123);
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Services rendered by fire, marine or miscellaneous insurance agents of foreign insurance
companies (Sec. 124);
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Services of proprietors, lessees or operators of cockpits, cabarets, night of day clubs, boxing
exhibitions, professional basketball games, Jai-Alai and race tracks (Sec. 125); and
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Receipts on sale, barter or exchange of shares of stock listed and traded through the local stock
exchange or through initial public offering (Sec. 127)
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Services by agricultural contract growers and milling for other of palay into rice, corn intro grits,
and sugar cane into raw sugar;
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Medical, dental, hospital and veterinary services, except those rendered by professionals. g.
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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
government education institutions;
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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;
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Services rendered by individuals pursuant to an employer-employee relationship;
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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; j.
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Transactions which are exempt under international agreements to which the Philippines is a
signatory or under special laws except those granted under PD No. 529- Petroleum Exploration
Concessionaires under the Petroleum Act of 1949; and
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Sales by agricultural cooperatives duly registered and in good standing 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;
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Sales by electric cooperatives duly registered with the Cooperative Development authority or
National Electrification Administration, 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;
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Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered
and in good standing with the Cooperative Development Authority,
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Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in
good standing with the 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.
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Export sales by persons who are not VAT-registered.
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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 dwellings valued at One
million pesos (P1,000,000) and below:
The following sales of real properties are exempt from VAT, namely:
 Sale of real properties not primarily held for sale to customers or held for lease
in the ordinary course of trade or business.
 Sale of real properties utilized for low-cost housing as defined by RA No. 7279,
otherwise known as the "Urban and Development Housing Act of 1992" and
other related laws, such as RA No. 7835 and RA No. 8763.
 Sale of real properties utilized for socialized housing as defined under RA No.
7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein
the price and the NEDA and other related laws.
 Sale of residential lot valued at One Million Five Hundred Thousand Pesos
(P1,500,000.00) and below, or house & 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;
 revenue regulations to be issued not later than March 31 of each year;
 Lease of a residential unit with a monthly rental not exceeding Eight thousand
pesos(P8,000);
 Lease of residential units with 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;
 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;
 . 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 form 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 the acquisition
counted from the date of the vessel's original commissioning, as follows;
Passenger and/or cargo vessels - 15yrs. Old
Tankers - 10 yrs. Old
High-speed passenger crafts - 5 yrs. Old
 Importation of fuels, goods and supplies by persons engaged in international
shipping or air transport operations; Provided that the 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 without
stopping at any other port in the Philippines .If fuel, goods or supplies is used for
purposes other than that mentioned in this paragraph, such portion of fuel,
goods and supplies shall be subject to 12% Vat.
 Services of banks, non-bank financial intermediaries performing quasi-banking
functions, and other non-bank financial intermediaries subject to percentage tax
under Sec. 121 and 122 of the Tax Code;
 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 Nine Hundred
Nineteen Thousand Five Hundred Pesos (P1,919,500.00)
INPUT TAX – means the VAT due on or paid by a VAT-registered person on importation of goods or
local purchases of goods, properties, or service, including lease or use of properties, in the course of his
trade or business.
SOURCES OF INPUT TAX
 Purchase or importation of goods – upon payment of VAT prior to the release of goods from
customs.
 Purchase of real properties for which a VAT has actually been paid – upon consummation of
the sale.
 Purchase of services in which a VAT has actually been paid – upon payment of the fee,
compensation.
 Transactions “deemed sale” •
 Transitional input tax
• Presumptive input tax
 Persons or firms engaged in the processing of sardines, mackerel, and milk, and in
manufacturing refined sugar, cooking oil and packed noodle-based instant meals, shall
be allowed a presumptive input tax, creditable against the output tax, equivalent to
four (4%) of the gross value in money of their purchases of primary agricultural
products which are used as inputs to their production. As used in this Subsection, the
term 'processing' shall mean pasteurization, canning and activities which through
physical or chemical process alter the exterior texture or form or inner substance of a
product in such manner as to prepare it for special use to which it could not have been
put in its original form or condition.
 Public works contractors shall be allowed a presumptive input tax equivalent to one
and one-half percent (1 1/2%) of the contract price with respect to government
contracts only in lieu of actual input taxes there from. none
• Transitional input tax credits under transitory
 Where a VAT registered person purchases or imports capital goods, which are
depreciable assets for income tax purposes, the aggregate acquisition cost of which
(exclusive of VAT) in a calendar month exceeds One Million (P1,000,000.00), regardless
of the acquisition cost of each capital good, shall be claimed as credit against output tax
in the following manner:
(a.) If the estimated useful life of a capital good is five (5) years or more – The input
tax shall be spread evenly over a period of sixty (60) months and the claim for input tax
credit will commence in the calendar month when the capital good is acquired. The total
input taxes on purchases or importations of this type of capital goods shall be divided by
60 and the quotient will be the amount to be claimed monthly. (b.) If the estimated
useful life of a capital good is less than five (5) years – The input tax shall be spread
evenly on a monthly basis by dividing the input tax by the actual number of months
comprising the estimated useful life of the capital good. Shall commence in the calendar
month that the capital goods were acquired.
Claims for Refund/Tax Credit Certificate of Input Tax
(a.) Zero-rated and Effectively Zero-rated sales of Goods, Properties or Services – The input tax that
may be subject of the claim shall exclude the portion of input tax that has been applied against
the output tax. The application should be filed within two (2) years after the close of the taxable
quarter when such sales were made. Tax Credit Certificates issued hereunder are not
transferable, and shall be used only the taxpayer entitled to the refund hereunder and only for
payment of taxes he is directly liable for.
(b.) A VAT – registered person whose registration has been cancelled due to retirement from or
cessation of business, or due to changes in or cessation of status may, within two (2) years from
the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax
which he may use in payment of his other internal revenue taxes; Provided, however that he
shall be entitled to a refund if he has no pending internal revenue tax liabilities.
(c.) Claims for refunds/tax credit certificate shall be filed with appropriate BIR office (Large
taxpayers Services (LTS) or Revenue District Office (RDO)) having jurisdiction over the principal
place of business of the taxpayers; In proper cases, the Commissioner of Internal Revenue shall
grant a tax credit certificate/refund for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents.
INVOICING REQUIREMENTS
A VAT-registered person shall issue:
 Vat Invoice - For every sale, barter or exchange of goods or properties
 Vat Official Receipts - For every sale barter or exchange of services or lease
of goods or properties
Information needed in the VAT Invoice or VAT Official Receipt:





Name and business address of seller/taxpayer;
TIN of taxpayer followed by the word “VAT”;
Name, business address and TIN of buyer; if sale P1,000.00 or more.
The amount of VAT shown as a separate item;
Date of transaction, quantity, unit cost and description of the goods properties or the
nature of the service;
 Authority to Print details and serial number of booklets at the lower left corner of
receipt.
 The word “VAT EXEMPT SALE” written or printed prominently if sale is VAT-exempt;
 The words “ZERO-RATED SALE” written or printed prominently is sale is subject to zero
percent.
CONSEQUENCES OF ISSUING ERRONEOUS VAT INVOICE OR VAT OFFICIAL RECEIPT
(a) Issuance of a Vat Invoice or VAT Receipt by a non-VAT person – If a person who is not VAT-registered
issues an Invoice or receipt showing his TIN, followed by the word “VAT” shall be liable to • the
percentage taxes applicable to his transactions • VAT due on the transactions under Sec. 106 or 108 of
the Tax Code without the benefit of any input tax credit • A 50 % surcharge under 248 (B) of the Tax
Code
(b.) Issuance of a VAT Invoice of VAT Receipt on an Exempt Transaction by a VAT-registered Person – If a
VAT- registered person issues a VAT invoice of VAT official receipt for a VAT-exempt transaction, but
fails to display prominently of the invoice or receipt the words “VAT-exempt sale”, the transaction shall
become taxable and the issuer shall be liable to pay VAT thereon. The purchaser shall be entitled to
claim an input tax credit on his purchase.
Apportionment of Input Tax on Mixed Transactions
A VAT-registered person who is also engaged in transactions who is also engaged in
transactions not subject to VAT shall be allowed to recognize input tax credit on transactions
subject to VAT as follows:
 All the input taxes that can be directly attributed to transactions subject to VAT may be
recognized for input tax credit; Provided, that input taxes that can be directly
attributable to VAT taxable sales of goods and services to the Government or any of its
political subdivisions, instrumentalities or agencies, including government-owned or
controlled corporations (GOCCs) shall not be credited against output taxes arising from
sales to non- Government entities;
 If any input tax cannot be directly attributed to either a VAT taxable or VAT-exempt
transaction, the input tax shall be pro-rated to the VAT taxable and VAT-exempt
transactions and only the ratable portion pertaining to transactions subject to VAT may
be recognized for input tax credit.