QuestionsQuestions (EXECUTIVE ORDER NO. 273)
Any person who, in the course of trade or business, sells, barters or exchanges goods, renders services, or engages in similar transactions, and any person who imports goods, is subject to VAT.
VAT is equivalent to 10% of the gross selling price (or gross value in money) of the goods sold, bartered or exchanged, paid by the seller or transferor.
(1) Export sales; and (2) sales to persons/entities whose exemption under special laws or international agreements effectively subjects the sales to zero rate.
“Export sales” means sale and shipment/exportation of goods from the Philippines to a foreign country regardless of shipping arrangements that influence transfer of ownership. “Foreign currency denominated sales” means sales to nonresidents of goods assembled/manufactured in the Philippines for delivery to residents in the Philippines, paid for in convertible foreign currency remitted through banking system in the Philippines.
Among others: transfer/use/consumption not in the course of business; distribution/transfer to shareholders/investors as share in profits or to creditors in payment of debt; consignment if actual sale not made within 60 days; retirement/cessation of business with respect to taxable inventories existing as of such retirement/cessation.
Tax is based on gross selling price excluding VAT. Gross selling price is total amount paid or obligated by purchaser excluding VAT; excise tax, if any, forms part of gross selling price.
Multiply the gross selling price (including the amount intended to cover the tax or the tax billed erroneously) by factor 1/11 (or other factor prescribed by regulations for partially exempt persons).
Value of goods sold and subsequently returned/for which allowances granted may be deducted from gross sales for the quarter when refund is made or credit memorandum/refund is issued. Sales discounts indicated in the invoice at the time of sale may be excluded from gross sales within the same quarter.
10% VAT 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. It is paid by the importer prior to release from customs custody.
The purchaser/transferee/recipient is considered the importer and is liable for internal revenue tax on the importation; the tax due constitutes a lien on the goods superior to all charges or liens regardless of possessor.
VAT covers performance of all kinds of services for others for a fee/consideration, including those by contractors, brokers, lessors of personal property, cinematographic film distributors/lessors, persons processing/manufacturing for others, and similar services regardless of use of physical or mental faculties. General rate is 10% of gross receipts.
Key zero-rated categories include: (1) services performed in the Philippines for persons doing business outside the Philippines where goods are subsequently exported and paid with acceptable foreign currency remitted inward and accounted for under Central Bank rules; (2) certain other services where consideration is paid in acceptable foreign currency remitted inward and accounted for; and (3) services rendered to persons/entities whose exemption under special laws or international agreements effectively subjects the supply to zero rate.
Examples include: sale of certain nonfood agricultural/marine/forest products in their original state by the primary producer/owner where produced; sale or importation in their original state of agricultural/marine food products; fertilizers/pesticides/herbicides and seeds/fingerlings; and certain services such as those rendered by persons subject to percentage tax under Title V.
Input tax is the VAT paid by a VAT-registered person on importation and local purchases of goods or services from VAT-registered persons, and transitional input taxes. Creditable input tax generally applies to goods and services purchased for use in the course of trade or business for taxable output (including goods for sale, conversion into finished products, supplies in business, materials supplied with service, etc.).
If output tax exceeds input tax in a quarter, the excess is paid. If input tax exceeds output tax, the excess is carried over to succeeding quarters. Input tax attributable to purchase of capital goods or zero-rated sales may be refunded or credited against other internal revenue taxes, subject to Section 106.
On filing of an inventory, a person is allowed input tax on beginning inventory equivalent to 8% of the value of inventory or the actual VAT paid on those goods/materials/supplies, whichever is higher, creditable against output tax.
Registration: Persons expecting taxable gross sales/receipts in excess of the threshold must register within 30 days before start of business; persons whose gross sales/receipts exceed the exemption threshold in any 12-month period must register within 30 days after end of the last month of that period (VAT liability begins from first day of following month). Quarterly returns/payments: within 20 days following the end of each quarter.