Term Paper On Value Added Tax In The Philippines

Index for Value-Added Tax:

•  Description
•  Who Are Required To File VAT Returns
•  Monthly VAT Declarations
•  Quarterly Value-Added Tax Return
•  Tax Rates
•  Related Revenue Issuances
•  Codal Reference
•  Frequently Asked Questions


Description

Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

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Who are required to file vat returns?

  • Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties and renders services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00).

  • A person required to register as VAT taxpayer but failed to register

  • Any person, whether or not made in the course of his trade or business, who imports goods

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Monthly VAT Declarations

Tax Form

BIR Form 2550M - Monthly Value-Added Tax Declaration (February 2007 ENCS)

Documentary Requirements

1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No. 2307), if applicable

2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable

3. Duly approved Tax Debit Memo, if applicable

4. Duly approved Tax Credit Certificate, if applicable

5. Authorization letter, if return is filed by authorized representative.

Procedures

1. Fill-up BIR Form No. 2550M in triplicate copies (two copies for the BIR and one copy for the taxpayer)

2. If there is payment:

    • File the Monthly VAT declaration, together with the required attachments, and pay the VAT due thereon with any Authorized Agent Bank (AAB) under the jurisdiction of the Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) where the taxpayer (head office of the business establishment) is registered or required to be registered.

    • The taxpayer must accomplish and submit BIR-prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word "Received" on the return and machine validate the return as proof of filing the return and payment of the tax.

    • In places where there are no duly accredited agent banks, file the Monthly VAT declaration, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered.

    • The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.

3. If there is no payment:

    • File the Monthly VAT Declaration, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/ City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.

Deadline

Not later than the 20th day following the end of each month

    • Through Electronic Filing and Payment System (eFPS):

Business Industry

Period for filing Monthly VAT Declarations

Group A

 

Insurance and Pension Funding                                                  

25 days following the end of the month

Activities Auxiliary to Financial Intermediation

Construction

Water Transport

Hotels and Restaurants

Land Transport

 

 

Group B

 

Manufacture and Repair of Furniture

24 days following the end of the month

Manufacture of Basic Metals

Manufacture of Chemicals and Chemical Products

Manufacture of Coke, Refined Petroleum & Fuel Products

Manufacture of Electrical Machinery & Apparatus N.E.C.

Manufacture of Fabricated Metal Products

Manufacture of Food, Products & Beverages

Manufacture of Machinery & Equipment NEC

Manufacture of Medical, Precision, Optical Instruments

Manufacture of Motor Vehicles, Trailer & Semi-Trailers

Manufacture of Office, Accounting & Computing Machinery

Manufacture of Other Non-Metallic Mineral Products

Manufacture of Other Transport Equipment

Manufacture of Other Wearing Apparel

Manufacture of Paper and Paper Products

Manufacture of Radio, TV & Communication Equipment/ Apparatus

Manufacture of Rubber & Plastic Products

Manufacture of Textiles

Manufacture of Tobacco Products

Manufacture of Wood & Wood Products

Manufacturing N.E.C.

Metallic Ore Mining

Non-Metallic Mining & Quarrying

 

 

Group C

 

Retail Sale

23 days following the end of the month

Wholesale Trade and Commission Trade

Sale, Maintenance, Repair of Motor Vehicle, Sale of Automotive Fuel

Collection, Purification and Distribution of Water

Computer and Related Activities

Real Estate Activities

 

 

Group D

 

Air Transport

22 days following the end of the month

Electricity, Gas, Steam & Hot Water Supply

Postal & Telecommunications

Publishing, Printing & Reproduction of Recorded Media

Recreational, Cultural & Sporting Activities

Recycling

Renting of Goods & Equipment

Supporting & Auxiliary Transport Services

 

 

Group E

 

Activities of Membership Organizations, Inc.

21 days following the end of the month

Health and Social Work

Public Admin & Defense Compulsory Social Security

Research and Development

Agricultural, Hunting, and Forestry

Farming of Animals

Fishing

Other Service Activities

Miscellaneous Business Activities

Unclassified

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Quarterly Value-Added Tax Return

Tax Form

BIR Form No. 2550Q - Quarterly Value-Added Tax Return (February 2007 ENCS)

Attachments to the Return

1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable

2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax At Source (SAWT), if applicable

3. Duly approved Tax Debit Memo, if applicable

4. Duly approved Tax Credit Certificate, if applicable

5. Previously filed return and proof of payment, for amended return

6. Authorization letter, if return is filed by authorized representative

Procedures

1. Fill-up BIR Form 2550Q in triplicate copies (two copies for the BIR and one copy for the taxpayer)

2. If there is payment:

    • File the Quarterly VAT Return, together with the required attachments, and pay the VAT due thereon with any AAB under the jurisdiction of the RDO/LTDO where the taxpayer (head office of the business establishment) is registered or required to be registered.

    • The taxpayer must accomplish and submit BIR- prescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word "Received" on the return and machine validate that return as proof of filing the return and payment of the tax.

    • In places where there are no duly accredited agent banks, file the Quarterly VAT Return, together with the required attachments and pay the VAT due with the Revenue Collection Officer (RCO) or duly authorized Treasurer of the Municipality where such taxpayer (head office of the business establishment) is registered or required to be registered.

The RCO or duly authorized Municipal/City Treasurer shall issue a Revenue Official Receipt upon payment of the tax.

3. If there is no payment:

    • File the Quarterly VAT Return, together with the required attachments with the RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent or duly authorized Municipal/City Treasurer of Municipality/City where the taxpayer (head office of the business establishment) is registered or required to be registered.

Reminders:

1. Only one consolidated Monthly VAT Declaration/Quarterly VAT Return shall be filed covering the results of operation of the head office as well as the branches for all lines of business subject to VAT.

2. The Quarterly List of Sales and Purchases shall be submitted in magnetic form using 3.5-inch floppy diskette following the format provided under Section 4.114-3(g) of RR No. 16-2005.

3. The Quarterly List of Sales and Purchases shall be submitted through electronic filing facility for taxpayers under the jurisdiction of the Large Taxpayers Service (LTS) and those enrolled under the eFPS.

Deadline

Within twenty five (25) days following the close of taxable quarter.

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Tax Rates 

  • On sale of goods and properties - twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged
  • On sale of services and use or lease of properties - twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties
  • On importation of goods - twelve percent (12%) 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, such as tax to be paid by the importer prior to the release of such goods from customs custody; provided, that where the customs duties are determined on the basis of quantity or volume of the goods, the VAT shall be based on the landed cost plus excise taxes, if any.
  • On export sales and other zero-rated sales - 0%

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Related Revenue Issuances

REVENUE REGULATIONS (RRs)

Issuance No.

Subject Matter

Date of Issue

RR No. 13-2008

Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar; Amending and/or Revoking All Revenue Issuances Issued to this Effect, and for Other Related Purposed
(published in Philippine Star on October 7, 2008)

Digest | Full Text | Annex A-B, E-J | Annex C | Annex D

September 9,
2008

RR No. 13-2007

Prescribing the Rules on the Advance Payment of Value-Added Tax/Percentage Tax on the Transport of Naturally Grown Planted Timber Products
(published in Philippine Daily Inquirer on December 7, 2007) 
Digest | Full Text | Annex A

December 5,
2007

RR No. 11-2007

Suspension of the Implementation of Revenue Regulations No. 6-2007 
(published in Manila Bulletin on August 29, 2007)
Digest | Full Text

August 28, 
2007

RR No. 6-2007

Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking all Revenue Issuances Issued to this Effect, and for Other Related Purposes
(published in Manila Bulletin on May 11, 2007)
Digest | Full Text | Annex A-E | Annex F-J

May 9, 2007

RR No. 4-2007

Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005
(published in Manila Bulletin on March 22, 2007)
Digest | Full Text

March 20,
2007

RR No. 2-2007

Amending Certain Provisions of RR No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005
(published in Manila Bulletin on January 12, 2007)
Digest | Full Text

January 11,
2007

RR No. 16-2005

Consolidated Value-Added Tax Regulations of 2005
(published in Manila Times on October 21, 2005)
Digest | Full Text 

October 19,
2005

RR No. 7-2004

Implementing Sec. 109(bb) and (cc) of the National Internal Revenue Code, as Amended by RA 9238, Excluding Services Rendered by Doctors of Medicine duly Registered with the Professional Regulatory Commission (PRC), and Services Rendered by Lawyers Duly Registered with the Integrated Bar of the Philippines (IBP) from the Coverage of Value-Added Tax
(published in Philippine Star on May 28, 2004)
Digest | Full Text

May 21, 2004

RR No. 4-2004

Supplementing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar as Provided for in RR 2-2004
(published in Taliba on March 31, 2004)
Digest | Full Text

March 26,
2004

RR No. 2-2004

Further Enhancing the Rules on the Advance Payment of Value-Added Tax on Sale of Refined Sugar, Amending RR 7-89 and 29-2002
(published in Manila Standard on February 28, 2004)
Digest | Full Text

February 26,
2004

RR No. 29-2003

Advance Payment of VAT on the Sale of Flour
(published in Manila Times on December 2, 2003)
Digest | Full Text

December 1,
2003

RR No. 28-2003

Amending Further Pertinent Provisions of RR 2-98 as Amended, Relative to the Issuance of Certificate of Value-Added Tax Withheld at Source, Thereby Amending RR 4-2002; and For the Purpose
(published in Manila Times on November 25, 2003)
Digest | Full Text

November 20,
2003

RR No. 27-2003

Regulations Further Amending the Transitory Provisions of RR 18-99 as Amended by RR 12-2003, Pertaining to the Deadline for the Usage of Properly Stamped Unused Non-VAT Invoices or Receipts
(published in Manila Times  on October 10, 2003)
Digest | Full Text

October 9,
2003

 

RR No. 5-2003

Rules and Regulations To Implement The Remittance of the Following: (a) 70% Share of the ARMM in the Withholding Tax Payments of National Government Agencies (NGAs) and in the National Collections from Taxpayers Other Than NGAs Provided for Under Section 9, Article IX of RA 9054, Amending Therein Certain Sections of RR 4-98; (b)Allotment to the Regional Government (RG) of the 30% Share of the National Government (NG) of all Current Year Collections of Internal Revenue Taxes Within ARMM for a Period of Five (5) Years as may be Provided in the Annual Appropriations Act as Provided for Under Section 15, Article IX of RA 9054; and c) 50% of the 80% Share of the NG from the Yearly Incremental Revenue From VAT Collections Within ARMM Received by the Central Government as Provided for Under Section 15, in Relation to Section 9, both of Article IX of RA 9054 As Well As in Relation to Section 283 of the National Internal Revenue Code (NIRC) of 1997
Digest | Full Text

February 4,
2003

RR No. 29-2002

Enhancing the Rules on the Advance Payment of Value- Added Tax on the Sale of Refined Sugar, thereby Amending RR 7-89, and Other Purposes
(published in Philippine Star on December  22, 2002)
Digest | Full Text

December 20,
2002

RR No. 8-2002

Amending Further Pertinent Provisions of RR 7-95, as Amended , With Respect to the Time of Filing of Quarterly VAT Returns; Contents and Submission of Quarterly Total of Monthly Sales and Purchases Per Supplier or Customer, and Providing for the Penalties and Effect of Non-Submission Thereof; and Clarifying Further the Mode of Remittance of VAT Due From Non-Residents
(published in Philippine Daily Inquirer on June 27, 2002)
Digest | Full Text | Attachment 2550 (front) | Attachment 2550 (back)

June 24,
2002

RR No. 2-98

Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue Code (NIRC) as Amended" relative to the Withholding on Income Subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable VAT and other Percentage Taxes
Digest 

May 17, 1998

REVENUE MEMORANDUM ORDERS (RMOs)

Issuance No.

Subject Matter

Date of Issue

RMO No. 3-2009

Amendment and Consolidation of the Guidelines in the Conduct of Surveillance and Stock-Taking Activities, and the Implementation of the Administrative Sanction of Suspension and Temporary Closure of Business
Digest | Full Text | Annex A | Annex B | Annex D | Annex E | Annex F | Excel File Annexes

January 23,
2009

RMO No. 6-2008

Prescribing the Guidelines and Procedures in the Printing, Requisition, Reporting, Issuance and Distribution of Certificate of Advance Payment of Value-Added Tax/ Percentage Tax on the Transport of Naturally Grown and Planted Timber Products as Prescribed in RR No. 13-2007 Dated October 15, 2007
Digest | Full Text | Annex A | Annex B-F

February 20,
2008

RMO No. 16-2007

Prescribing Additional Procedures in the Audit of Input Taxes Claimed in the VAT Returns by Revenue Officers and Amending "Annex B" of RMO No. 53-98 With Respect to the Checklist of Documents to be Submitted by a Taxpayer Upon Audit of his/its VAT Liabilities as well as the Mandatory Reporting Requirements to be Prepared by the Assigned Revenue Officer/s Relative Thereto, All of Which Shall Form an Integral Part of the Docket
Digest | Full Text

July 23, 
2007

RMO No. 7-2006

Prescribing the guidelines and procedures in the processing of applications for zero-rating of effectively zero-rated transactions for Value-Added Tax purposes
Digest | Full Text | Annex A | Annex B-B2 | Annex C-D

February 28,
2006

RMO No. 26-2005

Suspension of issuance of assessments for deficiency Value-Added Tax against cinema/theater operators/owners
Digest | Full Text

October 21,
2005

RMO No. 22-2004

Value-Added Tax (VAT) Exemption Certificate/ Identification Card Issued to qualified foreign embassies and their qualified personnel Amending/ Modifying RMO No. 81-99
Digest | Full Text 

May 24, 2004

RMO No. 5-2004

Prescribing the guidelines and procedures in the implementation of RR No. 29-2003 on the advance payment of Value-Added Tax on the sale of flour
Digest | Full Text | Annex A

February 4,
2004

RMO No. 35-2002

Prescribing the guidelines and procedures in the processing and issuance of Authority to Release Imported Goods (ATRIG) for Excise and Value-Added Tax Purposes
Digest | Full Text | Annex A | Annex B | Annex C | Annex D | Flowchart

December 11,
2002

RMO No. 9-2000

Tax treatment of sales of goods, properties and services made by VAT- registered suppliers to BOI-registered manufacturers-exporters with 100% export sales
Digest 

March 29,
2000

RMO No. 81-99

Issuance of Value-Added Tax (VAT) Exemption Certificate to all qualified embassies and their personnel
Digest 

November 5,
1999

RMO No. 40-94

Prescribing the Modified Procedures on the Processing of Claims for VAT Credit/ Refund

 

REVENUE MEMORANDUM CIRCULARS (RMCs)

Issuance No.

Subject Matter

Date of Issue

RMC No. 77-2008

Taxability of Director’s Fees Received By Directors Who are not Employees of the Corporation for VAT or Percentage Tax Purposes as Espoused Under Revenue Memorandum Circular No. 34-2008
Digest | Full Text

December 3,
2008

RMC No. 46-2008

Clarification of Issues Concerning Common Carriers by Air and Their Agents Relative to the Revenue and Receipt from Transport of Passengers, Goods/Cargoes and Mail, and from Excess Baggage
Digest | Full Text

June 20, 
2008

RMC No. 34-2008

Tax Treatment of Director’s Fees for Income Tax and Business Tax Purposes
Digest | Full Text

April 18,
2008

RMC No. 59-2007

Clarifying the Effect of Suspension of RR No. 6-2007, Otherwise Known As the "Consolidated Regulations on Advance Value-Added Tax on the Sale of Refined Sugar, Amending and/or Revoking All Revenue Issuances Issued to this Effect and for Other Related Purposes"
Digest | Full Text

September 14,
2007

RMC No. 53-2007

Reiteration of the Amendment Made by RA No. 9337 Imposing VAT on the Sale of Non-Food Agricultural Products, Marine and Forest Products and on the Sale of Cotton and Cotton Seeds in their Original State
Digest | Full Text

August 7,
2007

RMC No. 39-2007

Clarifying the Income Tax and VAT Treatment of Agency Fees/Gross Receipts of Security Agencies Including the Withholding of Taxes Due Thereon
Digest | Full Text | Annex A

June 13,
2007

RMC No. 35-2006

Clarifying the Proper VAT and EWT Treatment of Freight and Other Incidental Charges Billed by Freight Forwarders
Digest | Full Text

June 30,
2006

RMC No. 31-2006

Value Added Tax (VAT) on the Construction or Renovation of Official Buildings or Properties of the United States of America Embassy
Digest | Full Text | Annex A

May 30,
2006

RMC No. 30-2006

Prescribing the Submission of a Narrative Memorandum Report to Accompany the VAT Credit Evaluation Report and Requiring the Attachment of Certain Documents Prior to Approval of the Tax Credit Certificate (TCC) Recommended by the Tax and Revenue Group (TRG), Department of Finance One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOF-OSS)
Digest | Full Text

May 22, 
2006

RMC No. 22-2006

Clarifying certain issues relating to the implementation of the increase in the Value-Added Tax rate from 10% to 12% on the sale of goods pursuant to Republic Act No. 9337
Digest | Full Text

April 6, 2006

RMC No. 21-2006

Clarification of Issues on How to Fill-up the new Version of VAT Forms (September, 2005 Version) and other Related Issues
Digest | Full Text

April 6, 2006

RMC No. 8-2006

Clarifying certain issues relating to the implementation of the increase in the VAT rate from 10% to 12% pursuant to Republic Act No. 9337
Digest | Full Text

February 1,
2006

RMC No. 5-2006

Prescribing the use of the Government Money Payment Chart Implementing Sections 2.57.2, 4.114 and 5.116 of Revenue Regulations No. 2-98 as amended by Revenue Regulations No. 16-2005 in relation to Sections 57 (B), 114 (C) and 116 to 123 of Republic Act No. 8424 as amended by Republic Act No. 9337
Digest | Full Text | Annex A

January 20,
2006

RMC No. 72-2005

Transition procedures for all Electronic Filing and Payment System filers (Large Taxpayers/Top 10,000 Corporations) in filing tax returns affected by the new VAT Law (R.A. 9337)
Digest | Full Text

December 22,
2005

RMC No. 68-2005

Enhanced VAT forms – BIR Form No. 2550M (Monthly Value-Added Tax Declaration) and BIR Form No. 2550Q (Quarterly Value-Added Tax Return) – September 2005 version
Digest | Full Text | Annex A-1 | Annex A-2 | Annex B-1 | Annex B-2

December 8,
2005

RMC No. 62-2005

Revised guidelines in the registration and invoicing requirements including clarification on common issues affecting Value-Added Tax (VAT) taxpayers Pursuant to RA No. 9337 (An Act Amending Sections 27, 28, 34, 106, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, as Amended, and for other Purposes)
Digest | Full Text

November 3,
2005

RMC No. 57-2005

Attachments to the quarterly VAT return to be filed starting October 25, 2005
Digest | Full Text

October 20,
2005

RMC No. 52-2005

Value-Added Tax (VAT) Liability of the Tollway Industry
Digest | Full Text

October 3,
2005

RMC No. 29-2005

Clarifying the provisions of Republic Act No. 9337 (VAT Law of 2005) applicable to the petroleum industry
Digest | Full Text

July 1,
2005

RMC No. 70-2004

Clarification on proper determination of amount of Value-Added Tax on VAT invoices or VAT official receipts
Digest | Full Text

November 23,
2004

RMC No. 60-2004

Clarification regarding the withholding of creditable Value-Added Tax by government offices for purchases of P1,000.00 and below
Digest | Full Text

September 23,
2004

RMC No. 37-2004

Settlement of the Value-Added Tax liabilities of pawnshops for taxable years 1996 to 2002
Digest | Full Text | Annex A | Annex 1 | Annex 2

June 16,
2004

RMC No. 9-2004

Guidelines and Policies Applicable to the Business Tax Applicable to Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions and other Non-Bank Financial Intermediaries As A Result of the Enactment and Effectivity of Republic Act No. 9238, An Act Amending Certain Provisions of the National Internal Revenue Code of 1997, As Amended, byExcluding Several Services from the Coverage of the Value-Added Tax and Re-Imposing the Gross Receipts Tax on Banks and Non-Bank Financial IntermediariesPerforming Quasi-Banking Functions and Other Non-Bank Financial Intermediaries Beginning January 1, 2004
Digest | Full Text | RA No. 9238

February 20,
2004

RMC No. 2-2004

Clarifying the Issues on VAT Taxable Transactions of Philippine Ports Authority Amending Revenue Memorandum Circular No. 20-88, Pursuant to Republic Act No. 7716 as Implemented by Revenue Regulations No. 7-95
Digest | Full Text

January 7,
2004

RMC No. 6-2003

Clarifying Certain Issues Relative to the Services Rendered by Individual Professional Practitioners, General Professional Partnerships, Entertainers, and Professional Athletes Who Are Subject to the Value-Added Tax or Percentage Tax, Whichever is Applicable, Beginning January 1, 2003
Digest | Full Text | Annex A

January 22,
2003

RMC No. 61-2003

Issuance of VAT Invoices/Receipt for Non-VAT/Exempt Sale of Goods, Properties or Services
Digest | Full Text

October 8,
2003

RMC No. 49-2003

Amending Answer to Question Number 17 of Revenue Memorandum Circular No. 42-2003 and Providing Additional Guidelines on Issues Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters
Digest | Full Text

August 27,
2003

RMC No. 42-2003

Clarifying certain issues raised relative to the processing of claims for Value-Added Tax (VAT) credit/refund, including those filed with the Tax and Revenue Group, One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS-DOF) by Direct Exporters
Digest | Full Text

July 23,
2003

RMC No. 30-2003

Clarification of Paragraph 1-Q of Revenue Memorandum Circular No. 28-2003
Digest | Full Text

May 21,
2003

RMC No. 56-2002

Taxability of Health Maintenance Organizations (HMOs) for VAT purposes
Digest

December 18,
2002

RMC No. 45-2001

Taxability of Pawnshop Operators for VAT Purposes

October 12,
2001

RMC No. 28-2001

Taxability of Movie/Cinema House Operators for VAT Purposes

July 2,
2001

RMC No. 25-99

Disseminating the Ruling of the Commissioner of Internal Revenue on the Non-eligibility for VAT Zero-Rating of Automobile Sales to Entities Registered with PEZA, SBMA and Clark Development Authority

March 18,
1999

RMC No. 32-99

Japanese Contractors undertaking Overseas Economic Cooperation Fund of Japan (OECF) Funded Project are Exempt from the eight and one half percent (8.5%) creditable VAT imposed under Section 114(C) of the Tax Code of 1997 and to the One Percent (1%) Expanded Withholding Tax (EWT) imposed under Section 2.57.2(E) of RR No. 2-98 implementing Section 57(B) of the Tax Code of 1997

May 3,
1999

 

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Codal Reference

Title IV, Sections 105 to 115 of the National Internal Revenue Code of 1997, as amended

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FREQUENTLY ASKED QUESTIONS

I. General VAT Queries

Who are liable to register as VAT taxpayers?

Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if:

a.  His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos (P1,500,000.00): or

b.  There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).

When is a new VAT taxpayer required to apply for registration and pay the registration fee?

New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding registration fee of five hundred pesos (P500.00) using BIR Form No. 0605 for every separate or distinct establishment or place of business before the start of their business following existing issuances on registration.

Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos (P500.00) not later than January 31, every year.

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?

The following compliance activities must be performed by a VAT-registered taxpayer:

a. Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales;

b. Register the books of accounts of the business/occupation/calling, including practice of profession, before using the same;

c. Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use on transactions subject to VAT. (If there are other transaction not subject to VAT, a separate set of non-VAT invoices or non-VAT official receipts need to be registered for use on transactions not subject to VAT);

d. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable month (for manual filers)/on or before the prescribed due dates enunciated in RR No. 16-2005 (for e-filers) using BIR Form No. 2550M and of the Quarterly VAT Return on or before the 25th day following the end of the taxable quarter using BIR Form No. 2550Q, reflecting therein gross receipts (for seller of service)/ gross sales (for seller of goods) and output tax (VAT on sales); purchases of goods and services made in the course of trade or business/exercise of profession and input tax (VAT on purchases), other allowable tax credits as in the case of advance VAT payment and VAT withheld by government payors, and VAT payable or excess input VAT, whichever is applicable, with the accredited agent banks (AABs) of the BIR or Revenue Collection Officers (RCOs) of the BIR (in areas without AAB), for returns with payment, or with the RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns without payment. (The monthly VAT Declaration and the Quarterly VAT Return shall reflect the consolidated total for all the taxable lines of activity and all the establishments - head office and branches);

e. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax (if the quarterly sales exceed P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic Purchases and Input Tax/ the soft copy of the Schedule of Transactional/Individual Importation ( if the quarterly total purchases exceed P1,000,000.00), reflecting therein the required data prescribed under existing revenue issuances.

How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities?

In determining the main or principal business of a taxpayer, we apply the predominance test. Under this test, if more than fifty (50%) of its gross sales and/or gross receipts comes from its business/es subject to VAT, its main/principal business falls within the VAT system making its status as a VAT person. Otherwise, he can not be considered as a VAT person eligible for the election provided for under Section 109(2) of the Tax Code.

What is the liability of a taxpayer becoming liable to VAT and did not register as such?

Any person who becomes liable to VAT and fails to register as such shall be liable to pay the output tax as if he is a VAT-registered person, but without the benefit of input tax credits for the period in which he was not properly registered.

Taxation as a whole

Taxes are one way of how the government raises its revenue for public purposes. Public purposes which include building of public schools, hospitals, libraries, bridges and highways. Taxes are enforced to each person because each time a person pays tax, he or she is supporting the government in a way. Taxes are solely based on one’s ability to pay. The nature of taxing power is to not remove the tax because it is an attribute of sovereignty. The main purpose of taxation is for the government to raise revenues for public needs and for non-revenue purposes which include the reduction of social inequality and encouragement of growth of local industries. The extent of the taxing power us comprehensive because it covers everything and unlimited because a tax does not cease to exist just because it regulates, discourages or even definitely deters the activities that are being taxed. It also is plenary because it ensures that the Bureau of Internal Revenue (BIR) will have no trouble in collecting the taxes and lastly, it is supreme because even though taxes are sometimes referred to as the strongest of all the government powers, it is not to be interpreted as superior to other powers of the government (Dimaampao, 2008).

According to Dimaampao (2008), the theories of taxation include the Necessity Theory and the Benefits-Protection Theory. The Necessity Theory is a necessary burden to preserve the State’s sovereignty and a means to give the citizenry an army to resist aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvements for the enjoyment of the citizenry and those which come within the State’s territory and facilities and protection which a government is supposed to provide. The Benefits-Protection Theory, on the other hand, bases the power of the state to demand and receive taxes on the reciprocal duties of support and protection. The citizen supports the State by paying the portion from his property that is demanded in order that he may, by means thereof, be secured in the enjoyment of the benefits of an organized society.”

There are two kinds of tax namely the Direct Tax and Indirect Tax. Direct Tax is where the seller pays the tax directly and the seller does not transfer the tax to the consumers. Indirect Tax, on the other hand, is commonly used in expenditures. Indirect Tax is a tax that are being passed to buyers when they sell goods and services. One notable example of the Indirect Tax is the Value-Added Tax. The Value-Added Tax (VAT) is a tax intended for spending and consumption. It is being imposed on everytime there is a sale, barter, exchange or lease of goods and services inside the Philippine Area of Responsibility and also includes goods that are imported from the Philippines (Dizon, 2006).

One notable example of an Indirect Tax is the VAT. The Value-Added Tax (VAT) is a consumption tax and it affects almost everyone, be it a student or not. Also, if the VAT were to increase, people would still consume as much as they have consumed before because the VAT is present in every necessity or good being sold in the economy, even if they do not want to.

The Value Added-Tax (VAT)

The Value-Added Tax (VAT) is a type of consumption tax that is put on a product whenever the value of a certain product is added at a certain stage of production and at final sale. The VAT affects consumers. Aside from consumers, it also greatly affects business transactions in the sense that in goods or services bought and sold that contain VAT, it maximizes the business entity’s profits. According to the tax law, any person who is in the course of trade or business, selling, bartering, exchanging, leasing of good and properties, rendering services, and any person who is in the course of importing goods shall be authorized to the Value-Added Tax (VAT). (Ong, 2006). The VAT now raises about 20% of the world’s tax revenue and affects mainly about 4 million people. Indeed, the rise of the VAT has been the most significant development in tax policy and administration in the past decades (Keen & Lockwood, 2007).

In the Philippines, taxation is being administered by the Bureau of Internal Revenue (BIR). Taxes in the Philippines range from 5% to 35%. The main motive of advocates of VAT is that, if it will be well-designed, it will make a particularly efficient tax. The government today presumes that the adoption of VAT in their respective countries makes it easier for them to earn revenue and in a sense, it improves the overall tax system’s efficiency (Ong, 2006).

The Value-Added Tax (VAT) is a type of indirect tax focusing on consumption and sale of goods (Keen & Lockwood, 2007). When there is a need to increase investment, create more opportunities for employment, and increase other productive activities, the VAT is bound to increase. In the Philippine structure, tax revenue rise and fall due to altering economic conditions. It increases during economics booms and decreases during recessions. If there is a recession, revenue falls, which would pave way for the government not having enough available use for government consumption and economic recovery to hold back, but because there is VAT, it would help in stabilizing financial and revenue flow. If there is a need to increase investment, the government would increase the VAT in order for them to be able to make ends meet and provide for the needs of people through public service (Ong, 2006). Increasing the VAT would yield to increasing prices which, in turn would yield to inflation. In the perspective of an economist, if the VAT were to increase, the inflation rate would increase as well.  Inflation, on the other hand, would make consumers feel poor. If the government does not want to maintain a high inflation rate, they would be obliged to draw back the VAT (Keen & Lockwood, 2007).

Last February 1, 2006, the VAT rate increased from 10% to 12% under the approval of the President of the recommendation of the Secretary of Finance to increase the VAT rate to 12%. The Memorandum was issued by Executive Secretary Eduardo R. Ermita dated January 31, 2006. VAT-registered persons who perform services in the Philippines are under the control of zero percent rate if they perform services which include processing, manufacturing or repacking of goods for other people who do business outside the Philippine Area of Responsibility.  The sale of goods may also be under the control of zero percent rate if they are to be delivered to another person outside the Philippines, but is a VAT-registered resident. Good and properties that were sold, bartered or exchanged are required to have a 12% added amount on the gross selling price. This amount is considered as the Value-Added Tax. At the rate of 12%, the VAT is acceptable because it is what the National Internal Revenue Code of 1997 has stated. On the other hand, on export sales, the rate of the VAT is at zero percent (Ong, 2006).

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