Question & AnswerQ&A (EXECUTIVE ORDER NO. 273)
The Value-Added Tax rate on the sale of goods is 10% of the gross selling price or gross value in money of the goods sold, bartered, or exchanged, to be paid by the seller or transferor.
Any person who, in the course of trade or business, sells, barters or exchanges goods, renders services, or imports goods shall be subject to the Value-Added Tax imposed by the law.
Export sales and sales to persons or entities exempt under special laws or international agreements to which the Philippines is a signatory are subject to 0% VAT.
Export sales mean the sale and shipment or exportation of goods from the Philippines to a foreign country, irrespective of shipping arrangements, or foreign currency denominated sales to nonresidents paid in convertible foreign currency remitted through the Philippine banking system.
VAT on importation is levied at 10% based on the total value used by the Bureau of Customs plus duties and excise taxes and must be paid by the importer prior to the release of goods from customs custody.
Transactions deemed as sale include transfer, use or consumption of goods originally intended for sale but not in the course of business; distribution or transfer to shareholders or creditors; consignment if not sold within 60 days; and retirement from or cessation of business regarding existing inventories.
Services performed in the Philippines by VAT-registered persons for processing, manufacturing or repacking goods for export paid in foreign currency; services paid in foreign currency remitted inwardly; and services to persons exempt by special laws or international agreements.
Exempt transactions include sales of nonfood agricultural products in original state by the primary producer, importation of certain agricultural and marine products, printing and sale of books and newspapers, medical and educational services, leasing of real property, and sales by persons with gross sales under prescribed thresholds.
Input tax paid on purchases or importation of goods for sale, conversion, or use in business; and on services performed by VAT-registered persons, is creditable against the output VAT payable.
The Commissioner can examine returns, make assessments, order inventory-taking and surveillance, prescribe presumptive gross sales, suspend business operations for violations such as failure to issue receipts or under-declaration, and prescribe additional procedural or documentary requirements.
VAT returns must be filed quarterly and taxes paid within 20 days following the end of each taxable quarter.
The Commissioner may suspend business operations and temporarily close the business establishment for at least five days for failure to issue receipts/invoices, failure to file VAT returns, understatement of taxable sales by 30% or more, or failure to register as required.
Persons exempt from VAT who are not VAT-registered are required to pay a 2% tax on their gross quarterly sales or receipts.
Exporters and persons with zero-rated sales may apply for refund or issuance of tax credit certificates within two years from the date of export or the close of the taxable quarter; input taxes on capital goods may also be refunded subject to conditions; refunds shall be made within 60 days of application.
VAT-registered persons must issue an invoice or receipt for every sale, indicating their VAT registration number and the VAT amount either separately billed or included in the total amount charged to the buyer, complying with prescribed details in the invoice.