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Frequently Asked Questions

Value-Added Tax
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:
  1. 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 Three Million Pesos (P3,000,000.00): or
  2. 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 Three Million Pesos (P3,000,000.00).
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 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.
Who may opt to register as VAT and what will be his liability?
  1. Any person who is VAT-exempt under Sec. 109 of the Tax Code, as amended, may, in relation to Sec. 109 (2) of the same Code, elect to be VAT-registered by registering with the RDO that has jurisdiction over the head office of that person, and pay the annual registration fee of P500.00 for every separate and distinct establishment.
  2. 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 of the Tax Code, as amended.
  3. 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. This option, once exercised, shall be irrevocable. (Sec. 119, Tax Code).
  4. Any person who elects to register under optional registration shall not be allowed to cancel his registration for the next three (3) years.
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the calendar quarter and shall pay the registration fee unless they have already paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. 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.
What are the instances when a VAT-registered person may cancel his VAT registration?
  1. If he makes a written application and can demonstrate to the commissioner's satisfaction that his gross sales or receipts for the following twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will not exceed Three Million Pesos (P3,000,000.00); or
  2. If he has ceased to carry on his trade or business, and does not expect to recommence any trade or business within the next twelve (12) months.
When will the cancellation for registration be effective?
The cancellation for registration will be effective from the first day of the following month the cancellation was approved.
What is the invoicing/receipt requirement of a VAT-registered person?
A VAT registered person shall issue:
  1. A VAT invoice for every sale, barter or exchange of goods or properties; and
  2. A VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services.
May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions?
Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided that the invoice or receipt shall clearly indicate the break-down of the sales price between its taxable, exempt and zero-rated components and the calculation of the Value-Added Tax on each portion of the sale shall be shown on the invoice or receipt.
May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-VAT transactions?
Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and zero-rated component of its sales provided that if the sales is exempt from value-added tax, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt and if the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice or receipt.
What is the information that must be contained in the VAT invoice or VAT official receipt?
  1. Name of Seller
  2. Description of the goods or properties or nature of the service
  3. Unit cost
  4. Quantity
  5. Date of transaction
  6. TIN of buyer, if VAT- registered and amount exceeds P1,000.00
  7. Address of Buyer
  8. Business Style of Buyer
  9. Name of Buyer
  10. Statement that the seller is a VAT-registered person, followed by his TIN
  11. Business Address of the Seller
  12. Business Style of the Seller
  13. Purchase price plus the VAT, provided that
    • The amount of tax shall be shown as a separate item in the invoice or receipt;
    • If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the invoice or receipt;
    • If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the invoice receipt; and
    • If the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate the breakdown of the sales price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt.
  14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt.
What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT-exempt transactions?
If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction but fails to display prominently on the invoice or receipt the words "VAT-EXEMPT SALE", the transaction shall become taxable and the issuer shall be liable to pay the VAT thereon. The purchaser shall be entitled to claim an input tax credit on his purchase.
What is "output tax"?
Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or services by any person registered or required to register under Section 236 of the Tax Code.
What is "input tax"?
Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods, properties or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period.
Does amortization of input VAT still allowable?
Yes , but is only allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized: Provided, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee.
What will be the basis of the date of cancellation of registration?
It is the date of issuance of tax clearance by the BIR, after full settlement of all tax liabilities relative to cessation of business or change of status of concerned taxpayer
What is a zero-rated sale?
It is a sale, barter or exchange of goods, properties and/or services subject to 0% VAT pursuant to Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sales, shall be available as tax credit or refund in accordance with existing regulations.
What is VAT-exempt sale?
It is a sale of goods, properties or service and the use or lease of properties which is not subject to output tax and whereby the buyer is not allowed any tax credit or input tax related to such exempt sale.
What is "RELIEF"?
RELIEF means Reconciliation of Listing for Enforcement. It supports the third party information program of the Bureau through the cross referencing of third party information from the taxpayers' Summary Lists of Sales and Purchases prescribed to be submitted on a quarterly basis.
Who are required to submit Summary List of Sales?
VAT taxpayers with quarterly total sales/receipts (net of VAT), exceeding Two Million Five Hundred Thousand Pesos (P2,500,000.00) are required to submit a Summary List of Sales.
Who are required to submit Summary List of Purchases?
VAT taxpayers with quarterly total purchases (net of VAT) of goods and services, including importation exceeding One Million Pesos (P1,000,000.00) are required to submit Summary List of Purchases.
What are the Summary Lists required to be submitted?
  • Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/ Customers and Output Tax
  • Quarterly Summary of List of Local Purchases and Input tax; and
  • Quarterly Summary List of Importation.
When is the deadline for submission of the above Summary Lists?
The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or before the twenty-fifth (25th) day of the month following the close of the taxable quarter -- calendar quarter or fiscal quarter.
What are the penalties for failure to submit the Summary Lists?
  • For failure to file, keep or supply a statement, list or information required on the date prescribed shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for each such failure, unless it is shown that such failure is due to reasonable cause and not to willful neglect; and
  • An aggregate amount to be imposed for all such failures during a taxable year shall not exceed Twenty-Five Thousand Pesos (P25,000.00).