Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 23-2003)
These services first became subject to VAT in 1988 under Executive Order No. 273, which repealed the 7% broker's tax previously imposed under the National Internal Revenue Code.
VAT on these services was suspended by Republic Act No. 8761, which replaced VAT with a 7% broker's tax during the year 2000. This suspension was extended to cover 2001 and 2002 by Republic Act No. 9010.
Revenue Regulations No. 1-2003 as amended by RR No. 3-2003, implementing Section 5 of RA No. 8424 as amended by RA No. 9010, and RR No. 7-95, known as The Consolidated VAT Regulations, govern the VAT imposition starting January 1, 2003.
Gross receipts refer to the total amount of money or its equivalent representing contract price, service fees, rental or royalties, including charges for materials supplied with the services, deposits, and advance payments received for services, excluding VAT.
Deposits or advance payments are included in the gross receipts for the taxable period when received and subject to VAT. However, advances for expenses directly billed to the client by third parties are excluded if not in the broker's VAT invoice.
Brokers in the mentioned categories with gross receipts exceeding P550,000 in the preceding year or expected to exceed this in any 12-month period must register as VAT taxpayers and comply with associated VAT filing and payment requirements.
They remain liable for the payment of VAT plus applicable penalties, but cannot claim input VAT credits and their clients cannot claim input VAT on non-VAT official receipts issued by them.
Brokers with gross receipts exceeding P100,000 but not over P550,000 who do not opt for VAT registration must register as Non-VAT taxpayers, paying a 3% percentage tax based on gross receipts as per Section 116 of the Tax Code.
They must pay the annual registration fee, register books of accounts and VAT invoices, file monthly VAT Declarations and quarterly VAT Returns timely, and submit required soft copies of sales and purchase schedules if thresholds are met.
No, brokers who were subject to VAT prior to suspension in 2000 cannot claim the 8% transitional input tax. New brokers covered by VAT in 2003 can claim a presumptive input tax of 8% or actual VAT on inventory if an inventory list is filed by March 19, 2003.