VALUE ADDED TAX

PART 1
REF. NIRC AS AMENDED BY RA10963 (TRAIN) AND RA11976 (EOPT)
VALUE ADDED TAX
• Any person who, in the course of trade or business,
sells barters, exchanges, leases goods or properties, renders
services, and any person who imports goods shall be subject
to the value-added tax (VAT) imposed in Sections 106 to 108
of this Code. (Section 105)

• VAT 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.
IN THE COURSE OF TRADE OR
BUSINESS
• The regular conduct or pursuit of a commercial
or an economic activity including transactions
incidental thereto, by any person regardless of
whether or not the person engaged therein in a
non-stock, non-profit private organization
(irrespective of the disposition of its net income
and whether or not it sells exclusively to members
or their guests), or government entity.
NATURE AND CHARACTERISTICS OF
VAT
• General rule: The seller is the one statutorily liable
for the payment of the tax but the amount of the tax
may be shifted* or passed on* to the buyer,
transferee or lessee of goods, properties or services.
• Exception: In the case of importation, the
importer is the one liable for the VAT.
*As to incidence of taxation, VAT is an indirect tax.
 PERSONS LIABLE TO VAT
1. Any person who, in the course of trade or business,
a. sells, barters, or exchanges goods or properties (seller
or transferor)
b. leases goods or properties (lessor)
c. renders services (service provider)
d. Imports goods (importer)
 REGISTRATION
1. VAT Registration, in General – Any person who, in
the course of trade or business, sells, barters,
exchanges goods or properties or engages in the sale or
exchange of services subject to VAT, shall register the
VAT tax type with the BIR District Office having
jurisdiction over the Head Office.
REGISTRATION
2. Mandatory VAT Registration - 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 the VAT tax type if:
a. His gross sales or receipts for the past twelve
(12) months, other than those that are exempt
under Section 109 of the Code, as amended,
have exceeded Three Million Pesos (Php
REGISTRATION
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 of the Code, as amended, will
exceed Three Million Pesos (Php 3,000,000.00).
Moreover, franchise grantees of radio and television
broadcasting, whose gross annual receipt for the
preceding calendar year exceeded Php
10,000,000.00, shall register as VAT taxpayer within
REGISTRATION
3. Optional Registration of VAT for VAT-Exempt
Persons –
a. Any person who is VAT-exempt and whose sale or
lease of goods or properties or the performance of
services other than the transactions mentioned in
Section 109, the gross annual sales and/or receipts do
not exceed the amount of Three Million Pesos
(P3,000,000.00) not otherwise required to register for
VAT may elect to be VAT-registered by registering with
REGISTRATION
b. Any person who is VAT-registered but enters into
transactions which are exempt from VAT (mixed
transactions) may opt that the VAT apply to his
transactions which would have been exempt under
Section 109 (1) of the Code, as amended.
c. Franchise grantees of radio and/or television
broadcasting whose annual gross receipts of the
preceding year do not exceed Ten Million Pesos
(P10,000,000.00) derived from the business covered by
the law granting the franchise may opt for VAT
REGISTRATION
Any person who elects to register under a and b above
shall not be allowed to cancel his VAT registration for the
next three (3) years. Once registered as a VAT person, the
taxpayer shall be liable to output tax and be entitled to
input tax credit beginning on the first day of the month
following registration.
 PLACE OF REGISTRATION AND
TIN
1. Head Office – RDO which has jurisdiction over the place of
Head Office
2. Branch - RDO which has jurisdiction over the place of
Branch

3. Head Office TIN: 123-456-789-00000

4. Branch TIN: 123-456-789-0001
ANNUAL REGISTRATION FEE
• A Registration Fee or Annual Registration Fee in the
amount of Five Hundred Pesos (Php 500.00)* for
every Head Office and/or branch shall be paid upon
registration and every year thereafter on or before
January 31.
EFFECT OF FAILURE TO REGISTER

• Every person who becomes liable to VAT mandatorily

shall register with the BIR district office which has
jurisdiction over his Head Office. If he fails to
register, he shall be liable to pay the output tax
under Sections. 106 and/or 108 of the Code, as
amended, as if he were a VAT-registered person, but
without the benefit of input tax credits for the period
in which he was not properly registered.
TYPES OF SALES
1. Sales subject to VAT or VATable sales:
a. 12% of gross selling price or gross receipts
• Regular sales
• Sale to government
• Deemed
b. Zero-rated (0%) sale (to be discussed next
meeting)
2. VAT-exempt Sales (to be discussed next meeting)
REGULAR SALES (12%)
• Domestic sale, transfer, barter or exchange of goods
or services. Stated otherwise, VATable sales subject
to 12% are sales not otherwise subject to 0% nor
exempt from VAT.
 DEEMED SALES OR
CONSTRUCTIVE SALES (12%)
1. Transfer, use or consumption not in the ordinary course of
business of goods or properties originally intended for sale or
for use in the ordinary course of business (e.g. withdrawal of
goods for personal use)
EXCEPTIONS:
Bayanihan to Heal as One Act (R.A. 11494), donations of the
following are not deemed sale:
• Donations of all critical or needed healthcare
equipment or supplies in combatting COVID-19
DEEMED SALES OR
CONSTRUCTIVE SALES (12%)
• Relief Goods
• Donations of personal computers, laptops, tablets,
or similar equipment (i.e. mobile phone, printer) for
use in teaching and learning in public schools (based
on actual cost or carrying value). However, input tax
is creditable against output tax.
DEEMED SALES OR
CONSTRUCTIVE SALES (12%)
2. Distribution or transfer to:
i. Shareholders or investors share in the profits of VAT-
registered person (e.g. property dividends based on
zonal or assessed value whichever is higher)
ii. Creditors in payment of debt or obligation
3. Consignment of goods if actual sale is not made within
60 days following the date such goods were consigned.
DEEMED SALES OR
CONSTRUCTIVE SALES (12%)
4. Retirement from or cessation of business with respect to
all goods on hand, whether capital goods, stock in trade,
supplies or materials as of the date of such retirement or
cessation, whether or not the business is continued by
the new owner or successor.
SALE TO GOVERNMENT
• The government or any of its political subdivisions,
instrumentalities or agencies, including GOCCs shall,
before making payment on account of each purchase
of goods and/or services taxed at 12% VAT, deduct
and withhold a Creditable VAT at the rate of 5% of
the gross payment thereof.
SALE TO GOVERNMENT
PAYMENTS TO NON-RESIDENTS

• Withholding of 12% VAT shall be made with respect to the

following payments to non-residents:
1.Lease or use of properties or property rights owned
by non-residents
2. Services rendered to local insurance companies with
respect to reinsurance premiums payable to non-
residents
3. Other services rendered in the Philippines by non-
residents
PAYMENTS TO NON-RESIDENTS
Notes:
1. The payor/withholding agent shall withhold the passed-
on VAT and remit the same on behalf of the non-
resident
2. The payor/withholding agent can claim the input tax if
payor is VAT-registered. If payor is Non-VAT, the input
tax is treated as an asset or expense whichever is
applicable
3. The VAT withheld is remitted within 10 days following
VAT ON SALE OF GOODS OR
PROPERTIES
SALE OF REAL PROPERTY ON INSTALLMENT
PLAN (INSTALLMENT BASIS)

• Sale of real property by a real estate dealer, the initial

payments of which in the year of sale do not exceed
twenty-five (25%) of the gross selling price.
Summary:
1. Output tax is based on whichever is highest of GSP,
FMV or ZV.
2. If total payments do not exceed 25% in the YEAR OF
SALE, output tax is based on every payments/collections
including succeeding periods.
SALE OF REAL PROPERTY ON DEFERRED-
PAYMENT (DEFERRED BASIS)
• Sale of real property by a real estate dealer, the initial
payments of which in the year of sale exceeds twenty-
five (25%) of the gross selling price.
• The transaction shall be treated as cash sale which
makes the entire selling price taxable in the month of
sale. Output tax shall be recognized by the seller and
input tax shall accrue to the buyer at the time of the
execution of the instrument of sale.
SALE OF REAL PROPERTY ON DEFERRED-
PAYMENT (DEFERRED BASIS)
• Payments subsequent to “initial payments” shall no
longer be subject to output VAT, in the case of sale on a
deferred payment basis.

• Summary:
1. Output tax is based on whichever is highest of GSP, FMV
or ZV.
2. 2. If total payments exceed 25% in the YEAR OF SALE,
PROFORMA COMPUTATION
FOR VAT PAYABLE