Law Summary
Persons Subject to VAT
- Applicable to persons in trade/business selling goods, rendering services, or importing goods.
VAT on Sale of Goods
- 10% tax on gross selling price or gross value.
- Zero-percent rate on export sales and sales exempted by special laws or international agreements.
- Transactions deemed sales include transfers for non-business use, distribution to shareholders/creditors, consignments un-sold after 60 days, and business cessation inventories.
- Tax calculations depend on invoicing method (separate billing or inclusive).
- Sales returns, allowances, and discounts are deductible.
- Commissioner of Internal Revenue (CIR) may determine appropriate tax base in special cases.
VAT on Importation of Goods
- 10% VAT on total customs value plus duties and excise taxes, payable before release from customs.
- Purchasers of tax-exempt imports who sell/transfer to non-exempt persons are deemed importers liable for VAT.
VAT on Sale of Services
- 10% VAT on gross receipts from sale of services.
- Zero percent rate applies to services paid by foreign currency for export-related activities and sales exempted by law or agreements.
- Gross receipts include contract price, compensation, fees, and deposits excluding VAT.
- Tax computed based on invoicing method as for goods.
Exempt Transactions from VAT
- Sale of primary products (non-food agricultural, marine, forest) in original state by producers.
- Importation or sale of basic agricultural/marine food products, fertilizers, petroleum (except specific items), books, vessels, personal effects under conditions, professional and educational services, and specified exempted service providers.
- Services subject to percentage tax and sales/services by persons whose gross sales/receipts do not exceed prescribed thresholds.
Input Tax Credit and Excess Tax
- Input tax credit allowed for VAT paid on goods/services used in business.
- Excess input tax over output tax can be carried over or refunded under certain conditions.
Transitional Provisions on Input Tax Credit
- Persons newly VAT liable or registered may claim input tax credit on beginning inventory at 8% value or actual VAT paid.
Refunds and Tax Credits for Input Tax
- Exporters and persons with zero-rated sales may apply for tax credit certificates or refunds within 2 years with required documentation.
- Refunds for input tax on capital goods may be applied after specified periods.
- Refunds processed within 60 days on valid application.
Registration of VAT Taxpayers
- VAT-liable persons must register with the appropriate Revenue District Officer.
- Threshold for compulsory registration prescribed by Secretary of Finance.
- Optional registration for exempt persons.
- Cancellation of registration upon cessation of VAT liability.
Invoicing and Accounting by VAT Registered Persons
- VAT registration number must appear on invoices/receipts.
- Details of tax billing (separate or inclusive) indicated.
- Maintenance of subsidiary sales and purchase journals required.
Notification Obligations
- Changes in principal place of business or branches must be reported within 15 days.
- Changes or termination of VAT status must be notified.
Filing of VAT Returns and Payment
- Quarterly VAT returns filed and taxes paid at designated banks or offices.
- Returns due within 20 days after quarter ends.
- Initial taxable period may be prescribed by the Commissioner.
Power to Suspend Business Operations
- Commissioner empowered to suspend businesses for failure to issue receipts, file returns, understate sales by 30% or more, or failure to register.
- Suspension period minimum 5 days until compliance.
Imposition of Percentage Tax on Exempt Non-VAT Persons
- Persons exempt from VAT who are not VAT registered pay 2% tax on gross quarterly sales.
Agents and Deputies for Tax Collection
- Customs officers, heads of government offices, and accredited banks act as agents for collecting national internal revenue taxes.
- Bank employees collecting taxes are subject to tax sanctions.
Authority of Commissioner to Assess and Enforce Taxes
- Post-filing examination and assessment of tax returns.
- Authority to estimate tax on failure to file or false returns using best evidence.
- Power to conduct inventory, surveillance, and prescribe minimum gross sales.
- Power to terminate taxable periods in cases of tax evasion or obstruction.
- Authority to determine real property values for tax.
- Can inquire into bank deposits for tax purposes.
- Authority to accredit and register tax agents.
- Can prescribe procedural requirements for tax administration.
Excise Taxes on Goods
- Excise taxes imposed on manufactured, produced, or imported goods, in addition to VAT.
- Taxes classified as specific (per unit) or ad valorem (percentage of price).
Special Excise Tax Provisions
- Payment responsibilities and schedules outlined for domestic products.
- Specific rates prescribed for distilled spirits, wines, fermented liquors, cigars, cigarettes, manufactured oils, saccharine, automobiles, non-essential goods (jewelry, perfumes, yachts), mineral products.
Mineral Products
- Excise taxes on coal, non-metallic minerals, metallic minerals, and indigenous petroleum.
- Tax bases defined including market value and actual output.
- Payment and filing procedures detailed, including bond filing options.
Registration and Issuance of Receipts
- Business registration required prior to commencement.
- Issuance of receipts/invoices for sales or services with prescribed details.
- Records must be preserved for 3 years.
Repeal and Renumbering of Provisions
- Repeals obsolete sections.
- Renumbering of sections for clarity and organization.
- Reorganization of tax law titles and chapters.
Transitory and Implementation Provisions
- Transitional input tax credits allowed for VAT-registered persons from deferred sales tax credits and inventory valuations.
- Replacement of old tax credit certificates.
- Mandatory registration for persons exceeding sales threshholds by specified date.
- Funding for implementation from existing appropriations.
- Secretary of Finance empowered to promulgate implementing rules.
- Commissioner to consolidate internal revenue laws.
- Inconsistent laws, rules, and regulations repealed or amended.
- Effective date set for January 1, 1988, with immediate effect for registration provisions.