Question & AnswerQ&A (Republic Act No. 8241)
The value-added tax rate imposed is ten percent (10%) of gross receipts derived from the sale or exchange of services.
It means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including services rendered by contractors, brokers, lessors, hotels, restaurants, banks, insurance companies, and similar services, whether or not requiring physical or mental faculties.
Services performed in the Philippines by VAT-registered persons paid in acceptable foreign currency and accounted for under BSP regulations, services rendered to exempt persons under special laws or agreements, services to vessels engaged exclusively in international shipping, and certain services performed by subcontractors and contractors for enterprises with export sales exceeding 70%.
Examples include sales of nonfood agricultural products by primary producers, sale of cotton and copra, sale/importation of agricultural food products in original state, fertilizers, coal and petroleum products (except some), importation of passenger/cargo vessels, personal/household effects under certain conditions, medical services, educational services by accredited institutions, sales by cooperatives, lease of residential units with monthly rental not exceeding P8,000, and sales with gross receipts not exceeding P550,000.
Any person subject to VAT must register with the appropriate Revenue District Officer, pay an annual registration fee of P1,000 for each establishment, and register before engaging in VAT-subject business or within 30 days after becoming liable to VAT due to sales exceeding the exemption threshold.
Yes. Persons with transactions exempt from VAT under certain sections regarding export sales and franchise services may apply for optional registration as VAT-registered persons no later than ten days before the start of the taxable quarter and pay the annual registration fee.
Government entities must withhold VAT at rates of 3% on gross payments for goods, 6% on services by contractors, and 8.5% on government public works contractors before payment, remitting the withheld VAT within ten days following the withholding month.
Public works contractors are allowed a presumptive input tax credit equivalent to 1.5% of the contract price with respect to government contracts instead of actual input taxes.
International air and shipping carriers doing business in the Philippines shall pay a percentage tax of 3% of their quarterly gross receipts.
The Act took effect on January 1, 1997, although certain provisions such as VAT on professionals and banks started on January 1, 1998.