On March 15, 2018, Bureau of Internal Revenue in the Philippines issued the RR NO. 13, 2018. This regulation issued is to implement the Value Added Tax provisions under the Tax Reform for Acceleration and Inclusion (TRAIN). What are the updates about VAT under train tax law 2018? Let’s discuss it.
Here are some updates about this regulation for VAT 2018 in the Philippines.
What is Value Added Tax (VAT)?
VAT is an indirect tax. Indirect tax means that the payment of the taxes can be passed on to the buyer, user or consumer of the goods, products or services received.
In VAT, any person whether a franchise grantee, who in the course of trade or business, sells, barters, exchange, leases, goods or properties, render services shall impose a percentage tax. However, the tax base should be limited only to the value added to such goods, properties or service by the seller, transferor or lessor.
Why to Pay VAT if Paying Individual Tax?
Value added tax is classified as business tax. Business taxes are taxes imposed to any transactions related to the transfer of goods or properties and services to another with or without considerations.
While, individual tax is an income tax. It means that any person who earned or generate income must be subject to tax. Income taxes include doctors, lawyers, accountant and common people who are earning incomes. You may read also about 7 Things Every Taxpayer Must Know About Income Tax for Practice of Profession.
Therefore, Value Added Tax is imposed on the sale of services or goods, properties while individual tax is a tax on the income received by the owner from his business.
What is the Tax Base and Rate?
VAT 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.
Valued added tax is imposed and collected on every service, sales, barter of exchange, or transactions “deemed sale” of a taxable goods or properties at the rate of twelve percent (12%) of the gross receipt or gross selling price in the money of the goods or properties sold, bartered, or exchanged or deemed sold in the Philippine.
The tax base of the VAT is limited only to the value added to such goods, properties, or services by the seller, transferor or lessor.
Who are Subject to Value Added Tax under TRAIN Law?
In General rule, any person is a VAT-registered and who are in the course of business or trade, sells, barters, exchange, leases goods or properties, renders services, and any person who imports goods shall be subject to the Value Added Tax (VAT).
Any person whose gross receipts or gross sales exceeds the threshold of Three Million Pesos (3,000,000) in one year shall be subject to VAT.
In the case of importation of taxable goods, the importer, whether an individual or corporation and whether or not made in the course of his trade or business, shall be liable to VAT.
How To File and Pay Valued Added Tax in the Philippines?
Every Person shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer.
VAT registered person shall pay the value added tax on a monthly basis.
UPDATE: On January 1, 20123, the filing and payment required under the Tax Code shall be done within twenty-five days (25) following the close of each taxable quarter.
Is a VAT Exempt Person not Subject to Other Tax?
The person who is not a VAT-registered the sales or receipts are exempt from payment of value added tax but are required to pay a tax equivalent of Three percent (3%) of his gross quarterly sales or receipts.
However, any person engaged in cooperatives and who are self-employed individuals and professionals availing of the 8% tax on gross sales or receipts and other non-operating income shall be exempted from the payment of three percent (3%) other percentage tax.
You may be read also about the rulings regarding person who is engaged in sari-sari store in the Philippines.
UPDATE: On January 1, 2019, cooperatives and self-employed and professionals with total annual gross sales or gross receipts not exceeding Five Hundred Thousands pesos (500,000) shall be exempt from Value added tax and three percent(3%) of percentage tax.
After reading this updates about the Value Added Tax (VAT) under the TRAIN tax law 2018, it will help you to understand more the concept about VAT. You may be interested to read about the transitory provisions: Can You Still Use the Invoices/Receipts (VAT Registered) as a Non-VAT?