Summary of VAT-Related Information

Reminders
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.
The Quarterly Summary Lists of Sales and Purchases shall be submitted in Compact Disk-Recordable
(CDR) following the format provided under Section 4.114-3(g) of RR No. 16-2005, as amended by RR
No. 1-2012.

Quarterly Summary Lists

The sale is specifically reported in the Summary List of Sales covering the period when the sale was
made and not reported as part of “various” sales.
The seller declared in the BIR Form No. 2550 Q or the quarterly VAT Return (QVR) the corresponding
output VAT indicated in the invoice within the period prescribed under existing rules.
The period agreed upon, whether extended or not, has lapsed.
The VAT component of the uncollected receivable was not claimed as a deduction from gross
income (i.e., bad debt).

Warehousing Services
Engaging in the business of receiving and storing goods of others for compensation or profit.
Receiving goods and merchandise to be stored in his/her warehouse for hire.
Keeping and storing goods for others, as a business and for use.

RELIEF System
Supports third-party information program and voluntary assessment program of the BIR through the
cross-referencing of third-party information with the taxpayer’s quarterly summary list of sales and
purchases.

Regularity
Involves more than one isolated transaction and involves repetition and continuity of action, except:
Non-resident aliens who perform services in the Philippines are deemed to be making sales in the
ordinary course of trade or business, even if the performance of service is not regular.
 Importations are subject to VAT whether in the course of trade or business or not.

Original State
Products considered in their original state even if they have undergone simple processes of
preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting,
smoking, or stripping.
Polished and/or husked rice, corn grits, raw sugar or raw cane sugar, molasses, ordinary salt, and
copra shall be considered in their original state.

Goods or Properties
All tangible and intangible objects capable of pecuniary estimation, including:
Real properties held primarily for sale to customers or held for lease in the ordinary course of
trade or business.
The right or the privilege to use patent, copyright, design or model, plan, secret formula or
process, goodwill, trademark, trade brand, or other like property or right.

Health Maintenance Organizations

For determining the VAT liability of an HMO, the amounts earmarked and actually spent for medical
utilization of its members should not be included in the computation of its gross receipts.

Quarterly Value-Added Tax Return

BIR Form 2550Q

The Lapse of the Agreed Upon Period to Pay

Means that the buyer, to whom goods or properties were sold, bartered, or exchanged, or to whom
a property has been leased, or to whom service has been rendered upon written promise to pay the
money owed and the passed-on VAT at a certain period, and where such period or extended date, as
the case may be, has lapsed without the buyer having fulfilled the promise.

Books, Newspapers, Magazines

Local Bookstore (LBS) sold the following goods:
Novel: Exempt
Textbooks: Exempt
School supplies and notebooks: 12% VAT
Office supplies: 12% VAT
 Advertising magazines: 12% VAT

Gross Sales Derived from the Sale or Exchange of Services

V Corporation constructed plant facilities for CC Company. In June, he billed CC Company for
P3,500,000. V Corporation received the payment in July amounting to P3,500,000. No billing was
made in July. Determine the amount of tax liability in June and July.

Gross Sales of Real Property

In the case of sale, barter, or exchange of real property subject to VAT, gross sales shall mean the
higher of the:
1. Consideration stated in the sales document (exclusive of VAT)

2. Fair market value

Fair market value shall mean:

1. Fair market value as determined by the Commissioner (zonal value)

2. Fair market value as shown in the schedule of values in the Provincial and City Assessors (real
property tax declaration)

VAT Exempt Transactions

Sale, importation, printing, or publication of books and any newspaper, magazine, review, or bulletin,
or any such educational reading materials covered by the United Nations Educational, Scientific and
Cultural Organization (UNESCO) Agreement on the importation of educational scientific and cultural
materials, including the digital or electronic format thereof. Provided, that the materials enumerated
herein are not devoted principally to the publication of paid advertisements.

Transactions Deemed Sales

Retirement from or cessation of business, with respect to inventories of taxable goods existing as of
such retirement or cessation.

Compliance Activities
The following compliance activities must be performed by a VAT-registered taxpayer:
Apply for registration as VAT Taxpayers
Register the books of accounts of the business/occupation/calling
Register VAT-invoices for use on transactions subject to VAT
File Quarterly VAT Returns on or before the 25th day after the end of the taxable quarter
 Submit the Summary List of Purchases and Sales (SLSP)

Kinds of Books
Kinds of Books VAT Non-VAT/OPT
Journal ✓ ✓
Ledger ✓ ✓
Cash Receipt ✓ ✓
Cash Disbursement ✓ ✓
Subsidiary Sales Journal ✓
Subsidiary Purchase Journal ✓

Revised Rules on Tax Refund

VAT Refund Claims will be classified into low, medium, and high-risk claims.
Low Risk:
Submission of Complete Documents: Yes
Scope of Verification of Sales: No Verification
Scope of Verification of Purchases: No Verification

Medium Risk:
Submission of Complete Documents: Yes
Scope of Verification of Sales: At least 50% of the amount of sales and 50% of the total
invoices/receipts issued including inward remittance and proof of VAT zero-rating
Scope of Verification of Purchases: At least 50% of the total amount of purchases with input tax
claimed and 50% of suppliers with priority on Big

Gross Sales Derived from the Sale or Exchange of Services

For the sale or exchange of services, Gross Sales shall refer to the total amount of money or its
equivalent representing the:
1. Contract price

2. Compensation

3. Service fee
4. Rental

5. Royalty
Effectively Zero-Rated Sales
Constructive Export
Sales to persons or entities whose exemption under special laws or international agreements to
which the Philippines is a signatory effectively subjects such sales to zero rate.
Sales to Asian Development Bank (ADB)
Sales to International Rice Research Institute (IRRI)
United Nations (UN) and its various organizations, (WHO, UNICEF)
United States Agency for International Development (USAID)
Philippine National Red Cross (Sec. 5(c), RA

Lease of a Residential Unit

Not Exceeding P15,000 Per Unit
Using the same example, assuming he has 20 residential units with the same monthly rent per unit
and his accumulated gross receipts during the taxable year amounted to P3,480,000.
He is still not subject to VAT even if the accumulated earnings exceeded P3,000,000 since the
monthly rent per unit does not exceed P15,000. He is also not subject to 3% Percentage Tax.

Change of Status or Cessation of Business

Subject to Output Tax
ALTOGO ceased business operation. Its properties upon termination consist of the following. How
much is the output VAT?
Cash: P50,000
Accounts Receivable: P120,000
Investments: P180,000
Inventories: P200,000
Property, Plant, and Equipment: P800,000

Gross Sales
All references to “gross selling price”, “gross value in money”, and “gross receipts” shall now be
referred to as the GROSS SALES, regardless of whether the sale is for goods or services.
“gross selling price”, “gross value in money”, and “gross receipts” = GROSS SALES

Documentary Requirements
 For Initial Application:
BIR form 1906
Final clear sample of OWN Invoices/Supplementary Invoices

For Subsequent Application:

Last issued ATP (1 photocopy) or Printer Certificate of Delivery (PCD) (1 photocopy)
Any booklet from the last issued ATP (Booklet to be presented)

Consumption-Based
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 the end-user or consumer of goods or services which ultimately shoulders the tax as a liability
therefrom is passed on to the end-users.

Miller
A person engaged in milling for others and is subject to VAT on the sale of services, except milling of
palay into rice, corn into corn grits, and sugarcane into raw sugar.

Zero Rated Sales of Services

Sale of services, including provision of basic infrastructure, utilities, and maintenance, repair, and
overhaul of equipment, to a registered export enterprise, to be used directly and exclusively in its
registered project or activity for a maximum period of 17 years from the date of registration.

VAT Exempt Transactions

Services subject to percentage tax under Title V;
For Example:
Services rendered by domestic common carriers by land for the transport of passengers and
keepers of garages [Sec. 117, NIRC]
Services rendered by international air/shipping carriers [Sec. 118, NIRC]
Services rendered by franchise grantees of radio and/or television broadcasting whose annual
gross receipts of the preceding year do not exceed P10,000,000 and by franchise grantees of gas
and water

Computation of Monthly and Quarterly VAT

July:
 Output Tax: P240,000
Less:
Input Tax: P168,000
Carry Over: P50,000

Total: P218,000
August:
Output Tax: P300,000
Less:
Input Tax: P228,000
Carry Over: P50,000

Total: P228,000
Q3:
Output Tax: P900,000
Less:
Input Tax: P684,000
Carry Over: P50,000

Total: P734,000

Outsourcing (BPO)
Resulting in the direct exportation, and/or sale of its manufactured, assembled or processed product
or IT/BPO services to another registered export enterprise that will form part of the final export
product or export service of the latter, of at least seventy (70%) of its total production or output.

Sale and Actual Shipment (Direct Export)

The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may influence or determine the transfer of
ownership of the goods so exported, paid for in acceptable foreign currency or its equivalent in
goods or services, and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).