VAT on Sale of Goods or Properties
- VAT rate fixed at 10% of gross selling price or gross value of goods or properties sold, bartered, or exchanged.
- "Goods or properties" include tangible/intangible objects like real properties held for sale or lease, rights to use patents, trademarks, equipment, films, and broadcast time.
- Gross selling price excludes VAT but includes any excise tax.
- Zero-rated sales include export sales, foreign currency-denominated sales, and sales to exempt persons/entities under special laws or international agreements.
- Certain transactions such as use or consumption outside business, distribution to shareholders, consignment without sale after 60 days, or business cessation inventories are deemed sales.
- Tax is computed by multiplying the invoice amount by 1/11.
- Sales returns, allowances, and discounts can reduce the gross sales for tax purposes.
VAT on Sale of Services and Use or Lease of Properties
- A 10% VAT imposed on gross receipts from sales or exchanges of services and leases.
- "Sale or exchange of services" covers a broad range including construction, brokerage, leasing, hospitality, finance, insurance, and other professional and commercial services.
- Gross receipts exclude VAT and include fees, rentals, royalties, and advances received.
- Zero-rated services include processing/manufacturing for export, services paid in foreign currency, services to exempt persons/entities, services to international vessels, and subcontracted services relating to high-export enterprises.
- Tax computation similarly uses the 1/11 multiplier on official receipts.
VAT-Exempt Transactions
- Exemptions include sales of nonfood agricultural, marine, and forest products in original state by primary producers.
- Exempt also include sale/import of cotton, copra, fertilizers, seeds, animal feeds, and certain petroleum products.
- Importation exemptions for certain vessels, personal effects of returning residents/nonresident citizens, and professional instruments.
- Services subject to percentage tax, certain agricultural processing, medical, educational, employee services, artists' sales, and services by multinational headquarters are exempt.
- Real properties not held primarily for sale or lease and low-cost housing sales also exempt.
- Small business with gross sales below prescribed thresholds pay percentage tax instead.
- Issuing VAT invoices or receipts on exempt transactions triggers VAT liability without credit.
Tax Credits
- Input tax (VAT on purchases/imports) creditable against output VAT includes:
- Goods for sale or as materials/supplies in business or services;
- Services with VAT paid.
- Input tax is creditable upon sale consummation or payment.
- VAT-registered persons conducting exempt and non-exempt transactions allocate input tax based on usage.
- Excess input tax carried over, with option to claim refund or apply credit for capital goods or zero-rated sales input taxes.
Refunds or Tax Credits of Creditable Input Tax
- VAT-registered persons with zero-rated or effectively zero-rated sales may apply for tax credit or refunds within two years.
- Requirements include foreign currency proceeds accounting compliance.
- Input taxes on capital goods also refundable or creditable within two years.
- Cancellation of VAT registration allows claiming unused input tax within two years.
- Commissioner to grant refunds or credits within 60 days; denial or inaction appealable to Court of Tax Appeals.
- Refunds issued without need for Commission on Audit countersignature but subject to post audit.
Registration of Value-Added Taxpayers
- Persons liable for VAT must register with Revenue District Officer, paying P1,000 annual fee per establishment.
- New businesses expecting taxable sales over exemption threshold must register 30 days prior.
- Persons exceeding exemption threshold register within 30 days after period end and liable for VAT starting next month.
- Optional registration available for exempt persons wishing to be VAT-registered.
- Commissioner can deny registration for administrative reasons.
- One TIN per VAT-registered person.
- Registration cancellation upon cessation or status change.
Invoicing and Accounting Requirements for VAT-Registered Persons
- Must issue invoice or receipt for every sale.
- Invoice must state VAT registration and taxpayer identification number (TIN).
- Invoice to specify total amount including VAT.
- Maintain subsidiary sales and purchase journals with daily recordings.
- Additional accounting details as prescribed by the Secretary of Finance.
Withholding of Creditable VAT by Government Entities
- Government and its agencies to withhold 3% VAT on gross purchases of goods and 6% on services rendered by contractors.
- Withholding on lease or use payments to nonresident owners is 10%.
- Withheld VAT creditable against seller or contractor's VAT liability.
Tax on Persons Exempt from VAT
- Non-VAT-registered persons exempt from VAT pay percentage tax: 3% on gross quarterly sales initially, increasing to 4% after two years.
Percentage Tax on Carriers and Keepers of Garages
- Keepers of garages and common carriers (except bancas and animal-drawn two-wheelers) pay 3% quarterly tax on gross receipts.
- Minimum quarterly gross receipts thresholds set by vehicle type and locale.
- Income from freight services exempt from local taxes under the Local Government Code.
Tax on Franchises for Electric, Gas, and Water Utilities
- 2% tax on gross receipts from businesses under franchise granted by law.
- Returns filed with and taxes paid to the Commissioner of Internal Revenue.
- Returns subject to BIR audit.
Tax on Life Insurance Premiums
- 5% tax on total premiums collected by life insurance businesses (excluding cooperatives).
- Exemptions for refunded premiums, reinsurance already taxed, and foreign insurance with reciprocal tax.
- Variable contract premiums taxed only on amounts necessary to insure lives.
Taxpayer Identification Number (TIN) Requirements
- TIN must be assigned and indicated on tax returns, statements, or documents.
- Criminal liability for securing multiple TINs or failure to indicate correct TIN.
Registration of Business Name or Style
- Persons not required to register under VAT must register name or style within 10 days of business start or transfer.
- Annual fee P1,000 per business location.
- Commissioner may require guarantee or security based on financial condition and sales volume.
Issuance of Receipts or Sales/Commercial Invoices
- Receipts/invoices required for sales or services valued at P25 or more.
- For sales P100 or more or VAT transactions, invoices must include buyer info and TIN if applicable.
- Original receipt given to buyer; duplicate retained by issuer for 3 years.
- Commissioner may exempt persons in meritorious cases.
Effectivity of VAT on Certain Services
- VAT coverage extended after two years from enactment to include professional services, certain entertainers, broadcasters, financial intermediaries, international cargo freight, and lease/use of sports facilities.
- President may exclude services for public interest with Secretary of Finance recommendation.
Tax Administration Development Fund
- Created from 5% of increase in VAT collections over preceding year for four years.
- Funds retained by BIR, automatically appropriated for first year.
- Use restricted; not for vehicles, salaries, regular positions, or building construction.
Promulgation of Rules and Regulations
- Secretary of Finance, upon BIR recommendation, must promulgate implementing rules within 90 days of the Act's effectivity.
Repealing Clauses
- Repeals special laws on franchise tax rates and specific sections in the National Internal Revenue Code.
- Amendments to Executive Order No. 226 provisions.
- Partial repeal of VAT application on freight services after two years.
- Supersedes inconsistent laws, rules, and regulations.
Effectivity
- The Act takes effect 15 days after complete publication in Official Gazette or newspapers of general circulation, whichever is earlier.