Frequently Asked Questions

I. General VAT Queries

Who are liable to register as VAT taxpayers?

When is a new VAT taxpayer required to apply for registration and pay the registration fee?

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?

How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities?

What is the liability of a taxpayer becoming liable to VAT and did not register as such?

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

What are the instances when a VAT-registered person may cancel his VAT registration?

When will the cancellation for registration be effective?

What is the invoicing/ receipt requirement of a VAT-registered person?

May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions?

May a VAT-registered person issue separate invoices/ receipts involving VAT and Non-VAT transaction?

How is the Value-Added Tax presented in the receipt/ invoice?

What is the information that must be contained in the VAT invoice or VAT official receipt?

What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt?

What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT0 exempt transactions?

What is "output tax"?

What is "input tax"?

What comprises "goods or properties"?

What comprises "sale or exchange of services"?

What is a zero-rated sale?

What transactions are considered as zero-rated sales?

Where will taxpayers file their application for VAT zero-rating?

What is a Contractor's Final Payment Release Certificate and where should taxpayers file their application for this?

What transactions are considered as deemed sales?

What is VAT-exempt sale?

What are the VAT-exempt transactions?

What are the previously exempt transactions that are now subject to VAT?
II. Relief-Related Queries

What is "RELIEF" ?

Who are required to submit Summary List of Sales?

Who are required to submit Summary List of Purchases?

What are the Summary Lists required to be submitted?

When is the deadline for submission of the above Summary Lists?

What are the penalties for failure to submit the Summary Lists?

III. What  is the treatment for Withholding of VAT on Government Money Payments?

IV. In what  grounds can the Commissioner of Internal Revenue suspend the business operations of a taxpayer?

I. General VAT Queries

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:
a. 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 One Million Five Hundred Thousand Pesos (P1,500,000.00): or
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 (A) to (U), will exceed One Million Five Hundred
Thousand Pesos (P1,500,000.00).

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 compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?
The following compliance activities must be performed by a VAT-registered taxpayer:
a. Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales;
b. Register the books of accounts of the business/occupation/calling, including practice of profession, before
using the same;
c. Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use on transactions
subject to VAT. (If there are other transaction not subject to VAT, a separate set of non-VAT invoices or non-
VAT official receipts need to be registered for use on transactions not subject to VAT);
d. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable
month (for manual filers)/on or before the prescribed due dates enunciated in RR No. 16-2005 (for e-filers)
using BIR Form No. 2550M and of the Quarterly VAT Return on or before the 25th day following the end of
the taxable quarter using BIR Form No. 2550Q, reflecting therein gross receipts (for seller of service)/ gross
sales (for seller of goods) and output tax (VAT on sales); purchases of goods and services made in the
course of trade or business/exercise of profession and input tax (VAT on purchases), other allowable tax
credits as in the case of advance VAT payment and VAT withheld by government payors, and VAT payable or
excess input VAT, whichever is applicable, with the accredited agent banks (AABs) of the BIR or Revenue
Collection Officers (RCOs) of the BIR (in areas without AAB), for returns with payment, or with the
RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns without payment. (The
monthly VAT Declaration and the Quarterly VAT Return shall reflect the consolidated total for all the taxable
lines of activity and all the establishments - head office and branches);
e. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of
the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax (if the
quarterly sales exceed P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic
Purchases and Input Tax/ the soft copy of the Schedule of Transactional/Individual Importation ( if the
quarterly total purchases exceed P1,000,000.00), reflecting therein the required data prescribed under
 existing revenue issuances.

How do we determine the main or principal business of a taxpayer who is engaged in mixed business
activities?
In determining the main or principal business of a taxpayer, we apply the predominance test. Under this test, if more
than fifty (50%) of its gross sales and/or gross receipts comes from its business/es subject to VAT, its main/principal
business falls within the VAT system making its status as a VAT person. Otherwise, he can not be considered as a VAT
person eligible for the election provided for under Section 109(2) of the Tax Code.
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. 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 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 one million five hundred thousand pesos (P1,500,000.00); 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.
How is the Value-Added Tax presented in the receipt/ invoice?
The amount of the tax shall be shown as a separate item in the invoice or receipt.
Sample:

Sales Price P100,000.00

VAT 12,000.00
Invoice Amount P112,000.00
What is the information that must be contained in the VAT invoice or VAT official receipt?
1. Name of Seller
2. Business Style of the Seller