Philippine VAT

1. Goods & Services
Tax
or
Value Added Tax

2. What are Goods & Services
• Goods and services are tangible and
intangible goods that are produced and
purchased in order to fulfill the needs and
desires of consumers

3. What are Goods?
• Goods are simply any physical or tangible
products that can be seen and touched
• Some goods are quickly consumed ex.
food, goods that are quickly consumed and
must be acquired repeatedly
• Other forms of goods are long-term in nature,
and may last for years or even decades ex.
furniture, houses, durable goods

4. What are Services?
• Services are intangible support that is
provided to the consumer ex. a physician
provides healthcare support or services,
telephone companies provide
communications services, banks provide a
range financial services to customers

5. What is Goods & Services
Tax (GST)?
• Goods and Service Tax or Value Added
Tax (VAT) in the Philippines is a form of
sales tax. Collected on all sales of goods
and services in the ordinary course of trade
or business and on the importation of
goods.
• It is an indirect tax, the cost of which can be
passed on by the seller to the buyer.

6. R.A. No. 9337, also known as
the Expanded Value-Added
Tax Act of 2005
• Passed in May 2005, and implemented on
September 1, 2005
• RA 9337 is a consolidation of 3 bills,
namely House Bill No. 3555, House Bill No.
3705, and Senate Bill No. 1950. The
Senate version was primarily authored by
Sen. Ralph Recto.

7. R.A. No. 9337, also known as
the Expanded Value-Added
Tax Act of 2005
• Said law was enacted to restructure the
present VAT system and to provide additional
revenue for the government through the
increased tax rates, lifting of exemptions, and
subjecting to tax transactions not previously
covered by tax, in order to balance the
government’s budget and to curb the existing
fiscal deficit

8. • The VAT is equivalent to 12% of the gross selling
price or gross value in money of goods or
properties sold, bartered or exchanged.
• Obligation to collect and remit rests with the seller,
the cost of the tax may be passed on to the buyer,
transferee or lessee of the goods, properties or
services.

9. VAT Registered
Entities
• A VAT registered entity may credit the VAT paid on
purchases of other goods and services against the tax
on its current period sales of goods or services.
• VAT registered entities are required to issue an invoice
or receipt for every sale and, in addition to regularly
required accounting records, they must maintain
subsidiary sales and purchase journals exclusively for
VAT purposes.
• VAT reports must be submitted on a quarterly basis
• VAT payments must be made on a monthly basis.

10. 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 (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 (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).

11. What compliance activities should a VAT
taxpayer, after registration as such, do
promptly or periodically?
• Pay the annual registration fee of P500.00 for
every place of business or establishment that
generates sales;
• Register the books of accounts of the
business/occupation/calling, including practice
of profession, before using the same;
• Register the sales invoices and official receipts
as VAT-invoices or VAT official receipts for use
on transactions subject to VAT.

12. What compliance activities should a VAT
taxpayer, after registration as such, do
promptly or periodically?
• Filing of the Monthly Value-added Tax Declaration
on or before the 20th day following the end of the
taxable month
• 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

13. According to the E-Vat primer,
through RA 9337 the E-Vat cover the
following goods & services
previously not subject to VAT:
• Petroleum products and other indigenous fuels
• Power and electric cooperatives
• Services rendered by doctors, lawyers and other
professionals who earn more than P1.5 million
annually
• Domestic carriage of passengers by air and sea
• Non-food agricultural products
• Works of art, including literary works and musical
compositions

14. Because the E-Vat's coverage was
expanded, several measures were
instituted to reduce its impact:
• Reduction of excise tax on gasoline, diesel, kerosene
and bunker fuel
• Removal of franchise tax on domestic airlines and
common carriers tax on domestic shipping
• Increase in presumptive input VAT of agro
processors from 1.5% to 4%
• VAT marginal threshold increase from P550,000 to
P1.5 million per year
• Rental threshold increase from P8,000/mo. to
P10,000/mo.
• Real property threshold increase from P1 million to
P2.5 million

15. Tax Exempt
Commodities
• Agricultural and marine products in their original state (ex. vegetables,
meat, fish, fruits, eggs, rice, etc.)
• Sale of low-cost houses and lots not exceeding P2.5 million
• Lease of residential spaces not exceeding P10,000 monthly
• Sales of persons and establishments earning not more than P1.5 million
annually, which may include sari-sari stores, carinderias, street vendors
• Educational services rendered by both public and private educational
institutions
• Books, newspapers, and magazines
• Services rendered by doctors and lawyers who do not earn more than
P1.5 million annually
• Importation of personal and household effects belonging to those who
are going to resettle in the country

16. E-Vat has come under fire from
many sectors and from the
political spectrum:
• It still became an additional burden for the poor
• Lawmakers have already filed bills to repeal or
amend RA 9337:
– Senators Manuel Roxas III and Francis Escudero
filed separate bills seeking the removal of the
12% E-Vat on oil,
– Ana Consuelo "Jamby" Madrigal filed Senate Bill
24 which sought to repeal the entire law
– Gabriela Party-list Representatives Liza Maza and
Luz Ilagan seek complete repeal of the said law

17. Cost-Benefit
Analysis of E-Vat
Costs:
a.) VATable items
Some of the items which were not taxed before are now
subject to VAT ex. power and electric cooperatives, Medical
and Legal services
b.) Macroeconomic Perspective
E-VAT will also have an effect in both the GDP growth rate
and in the inflation rate.
c.) Tax rate increase
Corporate tax rate increased to 35%, this would have an
effect in corporations and businesses and might translate to
higher prices for the consumers

18. Cost-Benefit
Analysis of E-Vat
Costs:
d.) Effect in the Business Sector
Due to the higher tax rates and higher costs of input,
E-VAT made the cost of doing business rise. It may
encourage previous honest local businessmen to
evade taxes. Investments might slow down because
other countries might become more attractive.

19. Cost-Benefit
Analysis of E-Vat
Benefits:
a.) Incremental revenues for infrastructure
Benefits of this legislation will bring lasting rewards to
the Filipinos. Additional tax collection will add up to the
country’s budget for reforms and infrastructure
development, public education, health premiums,
environmental conservation and agricultural
modernization.

20. Cost-Benefit
Analysis of E-Vat
Benefits:
b.) Equitable tax collection
Implementation of RA 9337 also promotes an equitable
system of tax collection.
The E-vat law recognizes the economic poverty of the
poor by making most commodities that the poor consume
exempted ex. agricultural and marine products,
educational services.
Most of the goods in the poor’s consumption basket are
VAT-free

21. Cost-Benefit
Analysis of E-Vat
Benefits:
c.) Improved tax collection system
In order to effectively implement RA 9337, the Bureau of
Internal Revenue has developed a new, more organized
system of tax collection and account registration, that will
help facilitate a more transparent tax system
d.) Increase in GDP and government services
With the implementation of the E-VAT law additional
revenues for the government have been coming in. That
results in bigger budget allocations for social services such
as education and health

22. Thank you