Chapter 22

COMPLIANCE
REQUIREMENTS
Business Taxes

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 PERSONS REQUIRED TO
REGISTER FOR VAT
1. 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 for VAT if:
a. His gross sales or receipts for the past twelve
(12) months, other than those that are exempt
under Section 109(A) to (V), have exceeded
P1,919,500; 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 (V), will exceed P1,919,500.
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 PERSONS REQUIRED TO
REGISTER FOR VAT
2. Every person who becomes liable to be
registered under paragraph (1) shall register
with the Revenue District Office which has
jurisdiction over the head office or branch of
that person, and shall pay the annual
registration fee prescribed. If he fails to register,
he shall be liable to pay the tax under Title IV
as if he were a VAT-registered person, but
without the benefit of input tax credits for the
period in which he was not properly registered.
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 OPTIONAL REGISTRATION FOR
VAT OF EXEMPT PERSON
1. Any person who is not required to register
for value-added tax may elect to register for
VAT by registering with the Revenue District
Office that has jurisdiction over the head
office of that person, and paying the annual
registration fee.
2. Any person who elects to register under the
optional registration shall not be entitled to
cancel his registration for the next three (3)
years.
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 CANCELLATION OF VAT
REGISTRATION
• A VAT-registered person may cancel his registration
for VAT if:
a. He makes written application and can
demonstrate to the Commissioner’s satisfaction
that his gross sales or receipts for the following
12 months, other than those that are exempt
under Section 109(A) to (V), will not exceed
P1,919,500, or
b. He has ceased to carry on his trade or business,
and does not expect to recommence any trade
or business within the next 12 months.
 The cancellation of registration will be effective
from the first day of the following month. 5
 INVOICING REQUIREMENTS FOR
VAT-REGISTERED PERSONS
• 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.

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 INFORMATION CONTAINED IN THE
VAT INVOICE OR VAT OFFICIAL
RECEIPT
• The ff. information shall be indicated in the
VAT-invoice or VAT Official Receipt:
1. A statement that the seller is a VAT-
registered person, followed by his
Taxpayer’s Identification Number (TIN);
2. The total amount which the purchaser
pays or is obligated to pay to the seller
with the indication that such amount
includes the value-added tax: Provided,
that:
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 INFORMATION CONTAINED IN THE
VAT INVOICE OR VAT OFFICIAL RECEIPT
a. The amount of the tax shall be shown as a
separate item in the invoice or receipt;
b. If the sale is exempt from value-added tax,
the term “VAT-exempt sale” shall be written
or printed prominently in the invoice or
receipt;
c. If the sale is subject to zero percent (0%)
value-added tax, the term “zero-rated sale”
shall be written or printed prominently on
the invoice or receipt. 8
INFORMATION CONTAINED IN THE
VAT INVOICE OR VAT OFFICIAL
RECEIPT
d. If the sale involves goods, properties or
services some of which are subject to and some
of which are VAT zero-rated or VAT-exempt,
the invoice or receipt shall clearly indicate the
breakdown of the sale 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: Provided, that the seller
may issue separate invoices or receipts for the
taxable, exempt, and zero-rated components
of the sale.
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 INFORMATION CONTAINED IN THE
VAT INVOICE OR VAT OFFICIAL
RECEIPT
3. The date of transactions, quantity, unit cost and
description of the goods or properties or nature
of the service; and
4. In the case of sales of P1,000 or more where the
sale or transfer is made to a VAT-registered
person, the name, business style, if any, address
and Taxpayer Identification Number (TIN) of the
purchaser, customer or client.

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 CONSEQUENCE OF ISSUING
ERRONEOUS VAT INVOICE OR VAT
OFFICIAL RECEIPT
1. If a person who is not a VAT-registered person
issues an invoice or receipt showing his TIN,
followed by the word “VAT”:
a. The issuer shall, in addition to any liability to
other percentage taxes, be liable to:
i. the tax imposed in Sec. 106 or 108 without
the benefit of any input tax credit; and
ii. a 50% surcharge under Section 248(B) of
this Code;

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CONSEQUENCE OF ISSUING ERRONEOUS
VAT INVOICE OR VAT OFFICIAL RECEIPT
b. The VAT shall, if other requisite information
required is shown on the invoice or receipt, be
recognized as an input tax credit to the purchaser
under Section 110 of this Code.
2. If a VAT-registered person issues a VAT invoice or
VAT official receipt for a “VAT-exempt sale”, the
issuer shall be liable to account for the tax imposed
in Section 106 or 108 as if Section 109 did not apply.

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 ACCOUNTING REQUIREMENTS
• Regular accounting records
• Subsidiary sales journal
• Subsidiary purchases journal
• Quarterly summary list of sales (SLS)
• Quarterly summary list of purchases (SLP)
* The subsidiary journals shall contain such
information as may be required by the
Secretary of Finance.
* SLS and SLP are mandatory per BIR.
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 RETURN AND PAYMENT OF
VALUE-ADDED TAX
• In general, every person liable to pay the VAT
shall file a quarterly return of the amount of his
gross sales or receipts within 25 days following
the close of each taxable quarter.
• The VAT shall be paid not later than the 20th
day of the month following the end of each
month.

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RETURN AND PAYMENT OF VAT
(Illustration)
Madame Beth, a VAT-registered wholesaler of RTW
shirts and pants purchases her merchandise from
VAT-registered persons. She has the following sales
and purchases for the months of April, May and June
2015.

April May June Quarter

Sales P700,000 P800,000 P900,00 P2,400,00

0 0
Purchases 420,000 480,000 540,000 1,440,000

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 RETURN AND PAYMENT OF
VAT (Illustration)
• The VAT payable is computed as follows:
April May 2nd Quarter

Output Taxes P84,000 P96,000 P288,000

Less: Input Taxes 50,400 57,600 172,800
Vat Payable P33,600 P38,400 P115,200
Less: VAT paid, April and May 72,000
Net Vat Payable for the Quarter P43,200

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 RETURN AND PAYMENT OF
VALUE-ADDED TAX
• Any person whose registration has been cancelled in
accordance with Section 236, shall file a return and
pay the tax due thereon within 25 days from the
date of cancellation of registration.
• Except as the Commissioner otherwise permits, the
return shall be filed with and the tax paid to an
authorized agent bank, RDO, RCO, or duly
authorized city or municipal Treasurer in the
Philippines located within the revenue district where
the taxpayer is registered or required to register.
• Use of eBIR Forms is mandatory starting on Sept.
24, 2014. (Revenue Regulations 6-2014) 17
Refunds or tax credits of input
tax
A. Zero-Rated or Effectively Zero-Rated Sales
 Any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may,
within two (2) years after the close of the
taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate
or refund of creditable input tax due or paid
attributable to such sales, except transitional
input tax, to the extent that such input tax has
not been applied against output tax.

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Refunds or tax credits of input
tax
B. Cancellation of VAT Registration
 A person whose registration has been
cancelled due to retirement from or cessation
from business, or due to changes in or
cessation of status under Section 106(C) of this
Code may, within two (2) years from the date
of cancellation, apply for the issuance of a tax
credit certificate for any unused input tax
which may be used in payment of his other
internal revenue taxes.

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 Period and manner of refund
• In proper cases, the Commissioner shall grant a refund or
issue the tax credit certificate for creditable input taxes
within 120 days from the date of submission of complete
documents in support of the application filed.
 VAT TCC MONETIZATION PROGRAM
The monetization program will cover all TCCs issued for
input VAT from zero-rated sales and outstanding VAT
component of drawback TCCs on imported materials
issued pursuant to Sec. 106 (e) of the Tariff and Customs
Code of the Philippines.
 RULES ON FILING & PROCESSING OF
ADMINISTRATIVE CLAIMS
The BIR issued Revenue Memorandum Circular 54-2014
dated June 17, 2014 to clarify the application for VAT 20
refund/tax credit in light of the Supreme Court decisions.
 Period and manner of refund
 PRESCRIPTIVE PERIOD
Any VAT-registered person whose sales are
zero-rated or effectively zero-rated may, within
2 years after the close of te taxable quarter
when sales were made, apply for the issuance of
tax credit certificates (TCC) or refund or
creditable input tax due or attributable to such
sales, except transitional input tax, to the extent
that such input tax has not been applied against
output tax.

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Period and manner of refund
 FILING AND PROCESSING OF
ADMINISTRATIVE CLAIMS
The application for VAT refund/tax credit must
be accompanied by:
 complete supporting documents.
 statement under oath attesting to the
completeness of the submitted documents
 sworn statement that the officer signing the
affidavit has been authorized by the board of
directors of the company.
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 Period and manner of refund
 MANDATORY 120+30 DAY PERIOD
In case of full or partial denial of the claim for
tax refund or tax credit, or the failure on the
part of the Commissioner to act on the
application within the prescribed period, the
taxpayer affected may, within 30 days from
receipt of the decision denying the claim or
after the expiration of the 120-day period,
appeal the decision or the unacted claim with
the Court of Tax Appeals (CTA).

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Period and manner of refund
PENDING ADMINISTRATIVE CLAIMS
In case a VAT-registered taxpayer has filed a
“petition for review” with the CTA, the
Commissioner loses jurisdiction over the
administrative claim. However, the processing
office of the administrative agency shall still
evaluate internally the administrative claim for
purposes of intelligently opposing the
taxpayer’s judicial claim.

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-END OF
REPORT-
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