VALUE ADDED TAX IN

THE PHILIPPINES
DR. MARK D. DUBLIN

LY C E U M O F T H E P H I L I P P I N E S U N I V E R S I T Y – M A N I L A

S E N I O R H I G H S C H O O L D E PA R T M E N T
 What is VAT?
1. VAT is a type of sales tax which is levied/imposed on consumption
on the sale of goods, services or properties, as well as
importation, in the Philippines.

2. To simplify, it means that a certain tax rate (0% to 12%) is added

up to the selling price of a goods or services sold.

3. It is also imposed on imported goods from abroad.

 Who are required to be VAT Registered?
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 One Million
Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00).

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
What are the Types of VAT and Tax Rate?

1. VATable -12%
2. VAT Zero-Rated – 0%
3. VAT Exempt – 0%
VATable- 12%
1. 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
2. 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
3. On importation of goods – twelve percent (12%) based on the
total value used by the Bureau of Customs in determining tariff
and customs duties
VAT Zero-Rated – 0%
1. Zero-rated 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.

2. Zero-rated is usually pertaining to export sale of service or those

zero-rated as approved by special laws such as PEZA or Economic
Zone registered companies.
VAT Exempt – 0%
1. A sale of goods or transactions is considered VAT Exempt if it falls
under SEC 109 – Exempt Transactions.

2. Normally VAT Exempt transactions are basic necessities such as

agricultural products, tuition fees, lending activities, real
properties, books, transportation, etc.
What is the BIR Form for VAT?
There’s two types of VAT Return

Monthly – BIR Form 2550M is used to filed monthly

VAT. Example: For the month of August

Quarterly – BIR Form 2550Q is used to file quarterly VAT.

Example: For second quarter (April to June)
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.

Sales of an entity
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.

Purchase of an entity
VAT EXCLUSIVE OR VAT NOT YET
INCLUDED
VAT EXCLUSIVE or VAT not yet Included when describing a price to
which tax is yet to be added to arrive at the final cost.

VAT EXCLUSIVE PRICE = SALES or PURCHASE PRICE

VAT INCLUSIVE OR VAT INCLUDED
VAT INCLUSIVE or VAT Included must be used when describing a price that
already includes the tax.

Cash Invoices or Invoice Amount are a promise to pay at some point in the
future, the company records them in either the accounts payable or accounts
receivable section of the general ledger.

VAT INCLUSIVE PRICE = INVOICE AMOUNT

 VAT Formula

VAT (Exclusive) = Sales Price or Purchase Price x .12

VAT (Inclusive) = Invoice Amount x .12
1.12

Invoice Amount = Sales Price or Purchase Price + VAT

Sales Price or Purchase Price = Invoice Amount - VAT
Calculate for the VAT
SALES PRICE = PHP 100,000.00
X 0.12
VAT = PHP 12,000.00

INVOICE AMOUNT = PHP 112,000.00

X 0.12
13,440.00
/ 1.12
VAT = PHP 12,000.00