How to Compute VAT Payable in the Philippines

Feb 16, 2011 by at Law & Government, Taxation

How to Compute VAT Payable in the Philippines

How to compute Value Added Tax (VAT) payable in the Philippines? Any person or entity who is engaged in trade, business or in the practice of profession may be liable to business taxes. Business taxes can be either a Percentage tax or a Value Added Tax. Furthermore, a taxpayer can be a VAT registered or a Non-VAT registered taxpayer. In this article, we will tackle how to compute VAT Payable and file the monthly and quarterly VAT returns.

 

What is a Value Added Tax?

Value-Added Tax is a business tax in the 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.

 

Who Are Required To File VAT Returns

The following persons or entities are required to file VAT returns:

1. 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 P1,919,500 (RR 16-2011, RR 3 -2012), as amended.
2. A person required to register as VAT taxpayer but failed to register
3. Any person, whether or not made in the course of his trade or business, who imports goods

 

Who may opt to register as VAT and what will be his liability?

1. Any person who is VAT-exempt under Sec. 4.109-1 (B) (1) (V) not required to register for VAT may, in relation to Sec. 4.109-2, 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(1) of the Tax Code, as amended [Sec. 109(2)].
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 BIR forms used in filing VAT Returns?

VAT returns are filed monthly using the Monthly Value Added Tax Declaration Return BIR Form 2550M and quarterly using the Quarterly Value Added Tax Declaration Return BIR Form 2550Q. To download forms, please click here to go to the BIR forms download page.

 

How to compute Value Added Tax Payable

Value Added Tax Payable is normally computed as follows:

1. Computing Net VAT Payable on VAT “exclusive” Sales/Receipts

Total Output Tax Due or Total Vatable Sales/Receipts x 12%
Less: Total Allowable Input Tax or Total Vatable Purchases x 12%
Equals: VAT Payable

 

Sample Computation of VAT Payable:

Let’s assume that,
Total Vatable Sales (VAT exclusive) = P100,000
Total purchases with VAT receipts (VAT exclusive) = P70,000

P100,000 x 12% or P12,000
- P70,000 x 12% or P8,400
VAT Payable = P3,600

2. Computing Net VAT Payable on VAT “inclusive” Sales/Receipts

Total Output Tax Due or Total Vatable Sales / 1.12 x 12%
Less: Total Allowable Input Tax or Total Vatable Purchases / 1.12 x 12%
Equals: VAT Payable

Sample Computation of VAT Payable:

Example based on the above assumption:
Total Vatable Sales (VAT inclusive) = P112,000
Total purchases with VAT receipts (VAT inclusive) = P78,400

P112,000 /1.12 x 12% or P12,000
- P78,400 /1.12 x 12% or P8,400
VAT Payable = P3,600

Or an alternative computation:

P112,000 /9.333 or P12,000
- P78,400 /9.333 or P8,400
VAT Payable = P3,600

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.

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.

Total Vatable Purchases are your total purchases from VAT registered suppliers. This should be supported with VAT receipts.

Note:
VAT exempt sales, zero rated sales, purchases not qualified for input tax, and other input taxes (if any)  should also be shown in the VAT returns. See BIR Forms.

 

How, when and where to File VAT Returns?

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 (for monthly VAT declaration) or 2550Q (for quarterly VAT declaration) 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

Monthly VAT returns BIR Form 2550M:
Not later than the 20th day following the end of each month (manual filing)

Quarterly VAT returns BIR Form 2550Q:
Within twenty five (25) days following the close of taxable quarter (manual filing)

For EFPS filing, please visit the BIR website for detailed and updated dates of deadlines.

Reference:
BIR Tax information on Value Added Tax
Sections 105 to 115 of the National Internal Revenue Code of 1997, as amended

Disclaimer: New and subsequent BIR rulings, issuances and or laws may render the whole or part of the article obsolete or inaccurate. For more information, please inquire or consult with the BIR.

Victorino Abrugar is a retired CPA practitioner, a blogger, speaker, and an entrepreneur. He's the CEO of Optixor, Inc., a digital marketing company based in the Philippines. Follow him on Twitter at @viclogic.

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206 Comments

  1. 120000/1.12×12%=12,857.14 why the sample computation the answer is 12,000?why?

    • Vic

      Hi Arbil, thanks for pointing out. I’m sorry for that, it was a typo error. It should be 112,000 instead of 120,000. Now corrected, thanks again.

  2. Michael John

    Hi Sir Vic,

    I would like to inquire regarding my business, i have 3 units of apartment for leased i contacted accountant and told me that organize/form 1 management company that consolidated receipts from my 3 apartment which results my business to became VATABLE, pls give me advice. which is more efficient? Because my monthly rental per unit (3 units)is less than 10,000 which is subject to percentage tax.

    thanks a lot.

    • Vic

      Hi, according to the BIR website http://www.bir.gov.ph/taxinfo/tax_vat.htm#1350 :

      The lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos (P10,000.00), regardless of the amount of aggregate rentals received by the lessor during the year… is not subject to VAT. (as amended)”

      For more details, updates and confirmation, please inquire with the RDO in your jurisdiction.
      Thank you.

  3. Brembot

    How to compute VAT exclusive amount with discounts and how to present it? Thanks

    Example:

    Total Vatable Sales (VAT exclusive) : 100,000
    Less 10% discount : ???
    VAT Payable (12%) : 12,000
    ———
    Total Payable : ??? (it should be 112,000 if not discounted)

    • michael

      100,000 – 10, 000 = 90,000 X 12% = 10,080

      ganyan pre

      • Brembot

        bro, clarification lang. hindi kasi ako accountant. yung 10,080 is a discount amount? at saka yung VAT payable ko ay 12,000 den walang changes.

        thanks

        • michael

          di din me accountant you know. ur VAT payable supposed to be ay 10,080 based on your selling price of 90,000.

          • von

            Bakit doon sa isang clinic na pinuntahan namin, before they deducted the discount, they applied the VAT first. Is that legal and that the company (clinic) has the right when to impose the discount? Here’s the computation:
            Service fee WITH VAT * Discount Rate = Discount value

            Amt to pay = Service fee WITH VAT – Discount value

            EXAMPLE:
            Service fee = 1000
            Discount Rate = 20%
            Service fee WITH VAT = 1120
            Discount value = 112
            Amt to pay = 1120 – 224 = “896”

            If I will recompute that based on michael’s computation, it should have been:
            1000 – 100 = 900 * 12% = “792”

            It is smaller computed that way!

          • Vic

            @Michael, Von and Brembot.

            VAT is based on the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged.

            “The term ‘gross selling price’ means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax.

            Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not depend upon the happening of a future event may be excluded from the gross sales within the same quarter it was given.

            — from Sec. 4. of the Republic Act No. 9337, as amended—

  4. michael

    Hi Sir Vic,

    Isa po akong magsasaka. Yung binebentahan ko po ng tubo ay isang VAT registered na tao. Maaari nya po bang magamit as input vat ung halaga ng pinamili nya.

    Thanks in advance for your usual support.

    Michael

    • Vic

      Hi Michael, we can only claim input VAT from purchases we made from VAT registered person. This is why you need to make sure that the purchases you have claimed for input taxes are supported with VAT registered receipts or invoices from your suppliers. But though you cannot claim input tax on purchases from NonVAT registered persons, these purchases can be claimed as allowable expenses or cost of sales, subject to the provision of the Tax Code.

  5. hi sir vic, just want to ask about the 1702Q. what will be needed to that filing? what should i need to compute to report my quarterly income tax?

    thank you!

    • James Jr.

      HI Glyzel,

      1702Q composed of income less cost of sales and deductions for the current qtr plus previous qtr w/in the year, It also comprises previous qtr/year excess of MCIT payment, previous qtr payments and creditable w/holding tax which should be supported by 2307. Ok na?

      Yebui

  6. von

    Hi Vic,

    There’s no reply button on your reply to my question, so I’ll create another comment. ” may be excluded from the gross sales”, so does that mean the discount should have not been taxed? Based on the computation I gave the discount granted to us was taxed. And if the discount is only 10% we will have to pay more than the original price.

    • Vic

      It means discount may be excluded from the gross selling Price, which your VAT is computed.

      SP (VAT exclusive): 100,000
      Discount:10%

      Discount = 100,000 x 10% = 10,000
      GSP (VAT exclusive) = 100,000 – 10,000 = 90,000
      VAT = 90,000 * .12 = 10,800
      GSP (VAT inclusive) = 90,000 + 10,800 = 100,800

      This is only my own computation. The law only says it may exclude. There may be other new rules that may render this computation incorrect, so I suggest that you call and confirm this with the BIR RDO.
      Thanks.

      • Dr. AC

        Hi Vic,
        I am dealing with a retail business.
        Assuming that we have a Gross SP of P112.00 (including vat)
        now if i Give 10%Disc, How can I get my Vat output?.
        Should it be:
        Vat Output = Gross SP less discount amount divided by 1.12? = (112.00 – 11.20)/1.12
        OR
        Vat Output = (Gross SP/1.12) less discount amount? (112.00/1.12) – 11.2?
        please Help.. many Thanks…

    • hi von,

      im jonathan from enigma technologies, im responsible for POS system and accounting system that we developed and we are also selling this systems..

      mali po von ung computation nu po, tama ung computation nila kaso nga lang mali ung pagkakapresent nila sa customer kung magkano ung service fee nila.. ung discount ay inaapply lang sa retail price/service fee na my vat na..kasi malilito ung customer pag inaapply na ung discount na hindi pa na calculate ung service fee with vat… so ung tama na dpat nilang epresent na service fee is P1120 hindi P1000 para hindi malito ung customer na vatable pala cla..

      it should be presented by clinic like this…

      service fee with vat = P1120
      offering 20% discount

      para mas madali ung computation dba para sa customer..

      1120 x 20% = 224 discount
      1120 – 224 = 896 total payment — dpat ganyan..pinalilito lng kayo
      para dun kayo magpapacheck.up
      kasi akala nu 1000 lng tpos my
      20% .. e vatable pala cla
      kaya un ang ginawa nila..

  7. Charo

    Hi Sir,

    I just want to ask computation ng VAT and w/tax sa manpower agency. Sa po ba based yung computation ng agency? Sa total amount (gross pay+statutory benefits+admin/service fee) or sa admin/service fee lang? Please reply, I want confirmation. Thanks.

    • Vic

      Hi. I am not from BIR, I recommend that you call your RDO in your jurisdiction to get confirmation. Thanks.

  8. mich

    hi, gusto ko po sana itanong wala po kasi ako idea regarding sa vat at non-vat we just start a new business 100,000 po un nilagay nmin na capital sa bir, magkano po ba ang dapat namin i target na monthly sale? pero sa 4% po kami nka vat!

    • James Jr.

      nope VAT should be 12%, i’m wondering why you used 4%? bka youre referring to input VAT of 4% for presumptive input vat. Yearly sales should not exceed to 1.5M and at the same time the company should not VAT registered.

      Yahoo

  9. James Jr.

    Hi Charo,

    Based on RMC 39-2007 w/holding tax on security agency ONLY shall based on admin fee only not on gross income. Understand?

    Hurray

  10. Gordon

    Hi James Jr.,

    Are you sure on what ur talking about? We receive bill from our agency and theres no breakdown of it. Thats why I withheld 2% of the total price and not the agency fee only.

  11. John Michael Gordon

    Hi Sir James Jr.,

    I have very poor eyesight is that mean I am exempt from VAT? If yes what are documents i need, like PEZA certificate if PEZA registered.

    • James Jr.

      Hi John Michael Gordon,

      Go to Executive Optical first.

      Regards

  12. James Jr.

    Hi Gordon,

    Pls nxt time, compel your incompetent agency to give details or breakdown of their billings,

    THnx.

  13. Danny

    Hi Sir Vic,

    I was confuse with my Monthly Vat payment kasi our we are an agricultural business, then our supplier is Non Vat. But our client is VAT Registered,that is why we are VAT registered also. So my question is base on our sales invoice our Vatable sales is 1,202,647.00 so wala akong Domestic Purchase of Goods. so can i include my vatable expenses as Purchase of Goods? Pero i have new equipment purchase can i includes this as Purchase of Goods. Please help me.

  14. James Jr.

    Hi Danny,

    Supposed to be you are VAT exempt entity, please see your Cert. of Registration kung meron VAT registration. You cannot claim your vatable expenses as purchase of goods since the VAT payable is different. Regarding to your new equipment you can include this in your balance sheet (net of VAT) meaning the VAT (INPUT VAT) in this purchased is deductable to your OUTPUT VAT.

    Sample computation

    Output VAT:
    Vatable Sales (1,202,647 / 1.12 x 12%) 128,855

    Input VAT:
    Purchased of equipt. (500,000 / 1.12 x 12%) 53,571

    VAT Payable: 75,284

    Regards,

    James Jr.

    • Danny

      @ James, yes were supposed to VAT exempt but since our client want us to be VAT registered. Sir the 1,202,674.00 is exclusive VAT so i think i should used computation # 1. Its goes like this on sales invoice:

      VATABALE SALES 1,202,674.00 so my computation is base on this amount.
      VAT 12 % 144,320.88
      TOTAL 1,346,994.88

      Like this ba? 1,202,674.00 X12%= 144,320.88 in getting out vat.
      Thank you,
      Danny.

  15. Vic

    @Danny,
    You can claim the input on your Vatable expenses as follows:
    a. Domestic Purchases of Goods Other than Capital Goods – for purchase of goods (ex. supplies)
    b. Domestic Purchase of Services – for purchase of services (ex. telephone, accounting, legal, etc)

    BTW, what kind of equipment did you purchase? How much? Is it a capital goods or not? Just refer to your BIR form 2550Q for reference. Thanks.

    @ James
    Please be careful in replying comments. Is this really you? I observe that you are using different emails.

    • Danny

      Wow thanks i really understand,. Only Office Equipment like PC worth 15,500.00 so can i put this on the Purchase of Capital Goods? and for the domestic purchase of Goods other than capital is all our supplies, meals and lodging,Transporatation/Travel and etc basta they are vat registered and base on OR.

      I also have question? my Vatable sales is 1,202,674 but this sales we issued sales invoice but this is not yet paid by the client? some other suggest that i will base on the Official receipt only if they get paid? What can i do i really need help.

      • James Jun-nyur

        Hi Danny,

        Regarding your inquiry, your Output VAT is based on Sales Invoice not on Official Receipts since your selling goods, O.R. or Cash receipts is applicable only to supplier of services, For more clarification please call to RDO in your jurisdiction

        Regards,

        James III

  16. Jayson Casula

    Hi Sir Vic,

    Can you give me step by step procedures in claiming VAT refund? I already search the net and found out that this is covered by RMO 40-94, but i just cant find the content of this Revenue Memorandum Order. Please give me a link for this. Thanks in advance.

    • Vic

      Hi, the BIR website doesn’t already have an archive of their 1994 RMOs. I suggest that you call or visit the BIR office in your jurisdiction to clarify your concern.

  17. Kate

    Hi Sir Vic,

    Good day!

    ask lang po regarding sa VAT RETURNS dun po sa not qualified for input tax lahat po ba na non-vat ay ideclared po dun maservices or goods?

  18. marissa

    Hi Sir Vic,

    I am engaged in e-commerce business. There is a merchant, the end-customer and me. It is on commission basis (say 10% per transaction). Logically, our service revenue is only the commission. However, I am confused with VAT. Usually, the end-customer pays directly to us, and then we just remit the amount less our commission to the merchant. Which one is the basis for our gross revenues? Should it be the whole amount paid by customer or our commission only? Thanks! Please help me.

  19. Hi Marissa. Since you do not own the goods sold, but only receives a commission for selling them, you are taxable on the commission and not on the gross amount received directly from customers. You receipt of them is only for and in behalf of the merchant so OR should be that of the merchant thru you. However, if you issue your own VAT OR for such amount received directly, then, you shall be subject to VAT based on the whole amount.

  20. Pico

    Hi, i’m pico and i’m doing retail. We sell clotes and other things in the province. I’d like to know if utilities, gas and other expenses with VAT can be used as part of Input Tax? and in computing the corporate tax, are they included (vat deducted or still included)? thanks!

    • Hi Pico. Yes, all purchases with VAT passed on to you forms part of input taxes deductible from VAT. As a VAT-registered, you cannot use the input VAT as allowable deductions. If you are a non-VAT registered, then, percentage taxes paid are allowable deductions for VAT purposes.

  21. Rica

    Hi Vic/Ghar,

    Good Day!

    Can you help me about the acctg standards on prior period adjustments?

    Thanks a lot

    • Vic

      Hello Rica, we can discuss accounting thoroughly on our newly created Business Forum. Just visit http://BusinessForum.ph , join and post your questions on the accounting section of the Forum. Thanks and see you there.

    • Hi Rica. I am not much exposed on PFRS but I found a seminar speaker on Accounting for SMEs based on new standards who may help. I invite you to the seminar program, please click on my name for the schedules. Thanks

  22. theodoro padlan

    Hi! I just want to ask why is it that when I add 4% on a gross amount:

    Gross amount: P2378 4% – to be added

    VAT 2378 x .03 =71.34 2378 + 95.12 = 2473.12
    EWT 2378 x .01 =23.78
    95.12

    but when I do a computation for a 4% deduction on 2473.12

    Gross amount: P2473.12 4% – to be deducted

    VAT 2473.12 x .03 =74.1936 2473.12 – 98.9248 = 2374.195
    EWT 2473.12 x .01 =24.7312
    98.9248

    why is it that it will not return to the same amount of 2378?

  23. Hi Theodoro! For what purpose is the computations above? What is the 4% there, mark-up?

    • Theodoro

      It is what we deduct from suppliers for non-vat government transaction.
      It is Divided into Vat (3%) and EWT (1%). I was just curious though. Kindly fill me in.

      • Teodoro. I was just thinking where your computation is leading and the nearest that comes in is pricing or just a simple mathematical exercise.

        In simple mathematics, you are dealing with the impossible if you multiply 104% by 2473.12 to get 2378 because 2473.12 is the 104% of 2378. Instead, you divide 2473.12 by 104% to arrive back 2378. Hope this satisfies your curiosity. By the way, VAT is not 3%, its 13% and it is OPT that is 3%.

  24. Noel

    Hi I just want to know if it is possible for our company to make VAT inclusive and VAT exclusive at the same time.

  25. Noel

    a company we charge for 12% excluded VAT, sample gross amount 100k + 12% excluded VAT =12000 total Payable is 112,000 now the customer get from us an excise VAT of 1% now we have to pay the 12% VAT exclusive plus the 1% excise VAT now I have to PAY 13% VAT to BIR. My question is this 1% excise is part of the 12% VAT?

  26. Vic

    Hi Noel,
    Excise tax is different from VAT. You can be taxed with VAT and Excise tax at the same time. VAT uses BIR forms 2550M (monthly) and 2550Q (quarterly). Excise tax filing used BIR form 2200 dependng on the product taxed. Are you really into production of goods that are subject to excise tax. What is your line of business?

  27. Jon

    Hi Vic, I have several questions about VAT:

    1) These days, almost everything is VAT inclusive. Since I’m a VAT-registered person, may I apply those as input tax when I file the 2550M/Q as long as I have the receipt, or should it correspond and apply only to my business?

    2) Regarding the attachments, you mentioned BIR form 2307, if applicable. As a real estate broker, developers usually withhold 10% of the amount of the commission before paying it out to us. So do we base the VAT on the commission less the withheld amount or the total amount based on form 2307?

    3) As a VAT-registered person selling services (real estate broker), once I get paid commission, I should issue an O.R., correct? Should the receipt be based on the total commission or the commission less the withheld amount?

    I hope you can help with these questions, I would appreciate it very much! Thanks!

    • JAO

      Hi Sir Vic,
      May I ask if the VAT or PT be deducted to income tax at the end of the year?

      • VAT is not deductible to income tax.
        Percentage tax is deductible as taxes to income tax, excluding penalties (surcharge and compromise).

  28. Jon, here are my views:

    1) These days, almost everything is VAT inclusive. Since I’m a VAT-registered person, may I apply those as input tax when I file the 2550M/Q as long as I have the receipt, or should it correspond and apply only to my business?

    Ans. Yes, they are deductible to the extent substantiated by VAT-registered OR/Invoice. OR/Invoice should be under the name of your entity with TIN, address, and VAT sales figures.

    2) Regarding the attachments, you mentioned BIR form 2307, if applicable. As a real estate broker, developers usually withhold 10% of the amount of the commission before paying it out to us. So do we base the VAT on the commission less the withheld amount or the total amount based on form 2307?

    Ans. 2307 is a withholding tax certificate and not applicable for VAT, in general. VAT is based on the gross and not on net amount after deducting 2307.

    3) As a VAT-registered person selling services (real estate broker), once I get paid commission, I should issue an O.R., correct? Should the receipt be based on the total commission or the commission less the withheld amount?

    Ans. The receipt you issue should be based on actual cash receipts, net of commission, with an indication of 10% EWT for 2307.

    • Jon

      Hi Ghar,

      Thanks for your reply. Regarding #3, you said “based on actual cash receipts, net of commission, with an indication of 10% EWT for 2307.” In other words, I should issue a receipt based on the cash received, which is my net commission, but indicate the 10% withheld? How would that look? An O.R. that I should issue will include the vat exclusive amount + vat = vat inclusive amount, right? So therefore, it will be (net commission – vat amount) + vat amount = total amount i received, correct? Where does the 10% withheld amount come in? Sorry, this is really confusing. Any help is much appreciated.

      • Example: Your commission is P10,000.00, plus 12% (P1,200) VAT equals P11,200.00 the amount you should receive in total. With the P10% (P1,000) withholding tax to be deducted, you will only receive P10,200 so your OR would say Received P10,200. On the left side of the OR details, you indicate the 10% withholding tax so you will not be misled in recording income.

        You report P1,200 on VAT return then you claim P1,000 as tax credit on ITR based on the 2307 provided.

        I suggest you enroll with our tutorials to clarify your confusions.

  29. April

    Question po.. If there is an overpayment of VAT say…

    Total Vatable Sales (VAT inclusive) = P112,000
    Total purchases with VAT receipts (VAT inclusive) = P120,000

    P112,000 /1.12 x 12% or P12,000
    – P120,000 /1.12 x 12% or P8,400
    VAT Overpayment = P857.14

    Can you use the overpayment as deduction in next period? Say…

    Total Vatable Sales (VAT inclusive) = P112,000
    Total purchases with VAT receipts (VAT inclusive) = P78,400

    P112,000 /1.12 x 12% or P12,000
    – P78,400 /1.12 x 12% or P8,400
    less overpayment P857.14
    VAT Payable = P2742.86

    Would that be the correct computation of the next period’s VAT payable?

    • Hi April! It is called excess input tax credits and not overpayment. That simply means you have more vatable purchases than sales resulting to more input taxes than output taxes. Yes, they can be carried-over to the next month/quarter.

  30. BENJ

    Good day, Sir Vic!

    I am planning to purchase (under bank financing) a service van for our business. Will I be able to declare the input VAT based on the full SRP of the van at one time, or will the input VAT be credited according to the actual amount I pay, i.e., downpaymen first, and then the monthly amortization?

    • Hi BenJ! If the van would cost more than 1M, then, you cannot claim it one time because you have to allocate over the useful life of the van, if less than 5 years or over five (5) years, if useful life more than five (5) years. This is the rule on input tax of capital goods.

      • Marlo

        Hi, how can i declare my acquisition of service vehicle for my business as part of my expences on 2550M/Q? first I will declare the downpayment i made. Then monthly ammortization would be declared monthly (is this vat inclusive). My service is bank financed. Also, how about the receipt? would bir look for it or i can just show my bank financing terms. thanks.

  31. Jemjem

    Hi Vic/ Ghar,

    Good Day,

    Pls help me regarding this matter if the allowance listed below are taxable or not:

    1. Xmas/ emergency cash benefit – staff 5k, supervisor 10k

    2. Optical allowance – 2k

    3. Additional medicine/ dental reimbursement

    4. Maternity/ Paternity assistance from 10k to 30k

    5. Premium for medical benefit of dependents of single employee

    6. Tuition reimbursement

    7. Gadget/ Appliance allowance

    8. Additional retirement in service benefit

    Thanks in advance for your answer

    More power,

    Jemjem

  32. Hi Jemjem,

    As a rule, allowances are taxable unless expressly provided by law or regulations to be not taxable such as those de minimis benefits. Hereunder are my views:

    1. Xmas/ emergency cash benefit – staff 5k, supervisor 10k – P5k to both is not taxable on annual basis as de minimis benefit. The other 5k for supervisory is subject to FBT;

    2. Optical allowance – 2k – Taxable

    3. Additional medicine/ dental reimbursement – This could fall under P10k de minimis benefits on actual medical benefits.

    4. Maternity/ Paternity assistance from 10k to 30k – Under SSS rules, this may not be taxable.

    5. Premium for medical benefit of dependents of single employee – To a minimal amount, this could fall also as de minimis benefits, otherwise taxable as compensation for rank-and-file and FBT for managerial supervisory employees.

    6. Tuition reimbursement – taxable.

    7. Gadget/ Appliance allowance – taxable

    8. Additional retirement in service benefit – Could not be taxable under the CBA or BIR-registered private retirement benefit plan, otherwise, taxable.

  33. Dear Sir,

    1.Is rendering services such as photo and video coverage vatable or not? How do we compute this? Let say, I charge my client for the services for Php10,000.00 and I my expenses is PHP2,000.00 for the hard copy with receipts, how much is the VAT for this?

    2.for travel and Tours: I have a tie-up in the province that offers PHP8,000.00 for travel then I marked it up for Php2,000.00 and this is my commision, how much is the vat here, 8k had no receipt. I issue a receipt to my client for 10k, do i need to pay the whole vat for 10k eventhough i only have 2k commision. Sorry for the long question, doent have an accounting background.

    • Hi Allsy,

      Hereunder are my views:
      a. Yes, 10k is vatable as a rule and VAT due will be computed as follows on the premise that you are VAT registered and the 2k was sourced from a VAT entities:

      Output VAT (10k x 12%) P1.2k
      Input VAT (2k x 12%) .24k
      VAT due P960.00

      b. Yes, 10k is subject to VAT and since there is no VAT receipt for 8k, then, there is no input tax and the VAT due will be P1.2k.

      Thanks.

  34. Eryl Llaguna

    Dear Sir,

    Please help me on this para di na ako nakikipagtalo sa sa mga kinakainan kong restaurant..
    Example:
    My total bill was P1,500.
    what is their total VAT?
    Based on my understanding… P1,500 x 12% VAT = P180 .. pero di yun ang lumalabas sa receipt nila..
    May isang resto manager ang sabi eh ang computation daw nila is P1,500 less (P1,500 / 1.12) which is P160.71..
    Alin ang mas tama? yung alam kong computation o yung sinabi ng resto manager? I want to understand this because i’m planning to put up my own resto and pay the right taxes.. thanks in advance..

    • Vic

      Hi Eryl,
      Please refer to the sample computation in the article.
      Computation of VAT depends whether the amount is inclusive of VAT (with VAT already) or exclusive of VAT (without VAT yet).
      Usually, total bill or invoice amount is already inclusive of VAT, thus it is computed as total bill/1.12 x 12%.

      • Yes, agree. VAT is required to be shown separately on the invoice or receipt for transparency purposes so buyers will simply lift the VAT figure. Sad to say, many does not know – either actually or simply making it appear, this simple and plain invoicing rule.

  35. ian

    dear sir:

    I have a small pastry business. I have a main/manufacturing branch and several other smaller retail branches under one DTI business name with different business permits. I am planning to VAT-register my business since annual gross sales is reaching 1.5M. Do I need to VAT-register each of my branches? Do I have to pay the VAT payable for each branch or for the main branch only? Is there any input tax for the smaller retail branches (finished products are delivered from the main branch)?
    thanks.

    • Upon your VAT registration, all of your sales will be subject to VAT. This includes all small retail branches. You can have them consolidated with the main office so all your output and input taxes from all branches will properly be accounted for.

  36. Hi,

    Ask lang po regarding of filling 2550Q,every quarter po ba magbbayad kmi ng 2 forms like 2550m and 2550Q? example : JULY, AUGUST,SEPTEMBER = 2550Q AND MAGFFILE PA AKO NG 2550M FOR THE MONTH OF OCTOBER?

    THANKS PO NANG MARAMI…MORE POWER!!!

  37. sir,

    ask lang din po na kung magcompute po ba ako ng quarterly 2550Q like for ex. JULY,AUGUST,SEPTember ay pagssamahin ko yung 3 months vatable sales na bbayaran for October?

    Salamat po ng marami…God Bless!

    • Vic

      Hi Maribel,
      July = file 2550M
      August = file 2550M
      September = file 2550Q instead of 2550M – Your 2550Q consolidates your months of July, August and September. Consolidate your computation for the 3 months in 2550Q, then deduct your VAT payments for the 1st and 2nd month. Please refer to the 2550Q BIR return.
      Thanks

    • Hi Maribel, I suggest you enroll with our basic BIR compliance program for more information about BIR compliance for VAT registered.

  38. Hi Sir,

    Thank You very much for your reply…It helps me a lot…
    More Power and God Bless you always!

    Maribel

  39. Rosel Avancena

    Hi Sir,

    Just want to confirm if the 70% cap for input tax is still applicable or nde sya implemented? Ilang years po ba or certain period pde gamitin ung excess vat input?

    Thanks,
    Rosel

  40. Hi Rose! 70% cap has long been abandoned and is no longer applicable. Excess input VAT can be carried over indefinitely until it is fully consumed. If there still exists after liquidation, it will be refunded or issued tax credit certificates within 2 years from closure.

  41. My pleasure.

  42. Mars Cesario

    Hi Sir,

    We are engaged in renting out heavy equipment (e.g. backhoe, road roller, etc) to our clients. However, there are certain clients who provide fuels/oil and materials needed in the operation. And such fuels and other materials will be deducted from our billings. Therefore, our issued receipts are net of the said deductions. In this case, please advise us on how to compute VAT and withholding tax (5%). To further illustrate:

    Total billings/receivables – P1,000,000
    Fuels/Mat. provided by client 400,000
    Collection 600,000

    Thanks.

  43. BENJ

    Hi everyone,

    We have a small engineering firm. One of our biggest clients is VAT exempt. Since our sub-contractors charge us for VAT, that leaves us with zero output VAT and some amount for input VAT, which means a negative amount when we declare our 2550. Is this ok? will the amount be carried over to the succeeding years?

    Thanks in advance.

    • BENJ

      i guess my query has already been answered through some of the posts above. Thanks.

  44. BENJ

    Sir,

    We purchased a new vehicle under bank financing. However, the OR for the downpayment is stamped by the car dealer with “NOT VALID FOR VAT INPUT” (or words to that effect). Is this correct? How can we declare then the amount for input VAT when we submit 2550?

    Thanks.

    • Hi Benj. Yes, it is correct. Car is a good so claim of input is supported by the invoice and not an O.R.

  45. Hi Sir,

    Good Day!I have a hard to time to understand the withholding vat on government and how to treat it. Is the Final Vat is an asset?
    Please enlighten me regarding this “The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller. The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Should actual input VAT attributable to sales to government exceeds seven percent (7%) of gross payments, the excess may form part of the sellers’ expense or cost. On the other hand, if actual input VAT attributable to sale to government is less than seven percent (7%) of gross payment, the difference must be closed to expense or cost.”

    Thank you so much in advance.

    • Hi Rosel. I wish to discuss the above but will take a very long answer to illustrate the entire process. We offer tutorials on how it is applied and you may contact us at taxacctg.tutorials@yahoo.com. We only charge a minimal fee.

  46. Christie

    Hi po…regarding the output vat the needs to be presented in the VAT return, the collected amount lang ba yung ilalagay mo as sales or dapat yung na invoice or na recognise mo na as revenue for that period?

    • Hi Cristie. In VAT returns, column for sales without VAT and the amount of output VAT needs to be presented.

  47. jean

    Hello! I just wanna ask if this is possible. We are paying rent to our lessor’s who is subject to Vat, He is insisting that instead of paying them the additional 12% vat, he want’s us to directly remit the 12% Vat to BIR. Please enlighten us.

    Thanks

    • Hi Jean. Lessor shall bill you the full amount with VAT and you pay the entire amount less 5% EWT based on amount excluding VAT. VAT they pass on to you is your input VAT. It is their obligation to remit to the BIR the 12% VAT you paid to them. If they should insist, tell them we offer tutorials on BIR Compliance or may visit our website at TaxAcctgCenter.Org.

  48. Katherine Aguilos

    I just want to ask if the sale of real property (capital asset) not used in business vatable? What is the tax liability of the seller? Capital gains tax or income tax?
    Thanks!

    • Real property classified as capital asset is not subject to 12% VAT and 30% income tax. It is subject to 6% capital gains tax and 1.5% documentary stamp tax. To transfer the title, you need to secure a Certificate Authorizing Registration (CAR) with the BIR after paying said taxes. CAR will then be presented with the Registry of Deeds for the issuance of the new title after paying transfer tax, real property tax and registration fees. Please send me mail at taxacctg.tutorials@yahoo.com should you need further assistance.

  49. Bhong Daniels

    Hi Sir Ghar,

    Just wanna ask Sir, how does one treat VAT payable. One of our clients believes that it cannot remit or pay us the vat portion we included in our billing to their customers who are registered as non-vat or zero-rated. According to them, they charged no vat to those non-vat customers hence, no vat to remit to us for their sales to said customers. In my opinion, they (our client) should pay/remit said vat because in turn, it is our company’s obligation to remit to BIR the vat we charged to our customers (whether vat or non-vat). What do you think Sir? Your opinion will be much appreciated. I hope that you include the specific legal basis that you may have. By the way, our company and the client I pointed out were both vat-registered. Thanks in advance.

  50. Jeremy Pascual

    Hi, ask ko lang po kung paano ko maco-compute yung Total purchases with VAT receipts (VAT inclusive)kung sa labas ng bansa ko po binili yung mga parts na kailangan ko sa repair shop ko. Ano po bang magandang gawin? Sa ngayon po, naka non-VAT pa po kami kaya lang po gustong pabago ng client namin na mag VAT na daw po kami. Pede po ba kaming tanggalin ng client namin sa list ng subcon nila? Salamat po.