GST, or more formally known as Goods and Services Tax, is a kind of value-added tax that is levied on the supply of goods and services in the country. Mostly paid by consumers, the tax received by the consumers is returned to the government and acts as a form of revenue to the government. GST is also known as VAT (Value-added Tax) in some countries, and are the same in every manner.
The primary purpose of introducing GST in the Philippines is to replace all the existing indirect taxes to create a standard taxation system. This would benefit consumers from paying unnecessary taxes to the government.
In any given tax structure, there are three stakeholders
- The Government
The government gets the revenue indirectly from the consumers, for proper running and maintenance of the country.
- The Citizen/Consumer
The Citizen gets benefitted of the tax paid to the government, in the form of defence, law and order, health, education public services and many more functions like that. However, he/she is the final burden taker of the tax.
Businesses are responsible for collecting the taxes and giving it to the government treasury. This is a far more complicated process than mentioned above.
Structure and Framework of VAT in the Philippines
Tax is an essential aspect of revenue that is received to the government by the consumers. The government of the Philippines usually generate most of its revenue income via personal and income taxes, whereas a small portion of non-tax revenue is also made via licences and fee.
In the Philippines, the taxation system is divided into the following sections:
- Income Tax: Income tax is a type of tax that is levied on a person’s income, professional practice, trade conduct or any other business mentioned in the National Internal Revenue Code of 1997. Tax in the Philippines is progressive, i.e. there is a different percentage that you have to pay for different income slabs. They are:
Annual Taxable Income
Income Tax Rate
|Less than ₱10,000
|Over ₱10,000 but not over ₱30,000
|₱500+ 10% of the excess over ₱10,000
|Over ₱30,000 but not over ₱70,000
|₱2,500+ 15% of the excess over ₱30,000
|Over ₱70,000 but not over ₱140,000
|₱8,500+ 20% of the excess over ₱70,000
|Over ₱140,000 but not over ₱250,000
|₱22,500+ 25% of the excess over ₱140,000
|Over ₱250,000 but not over ₱500,000
|₱50,000+ 30% of the excess over ₱250,000
|₱125,000+ 32% of the excess over ₱500,000
- Value Added Tax (VAT): VAT is a form of tax that is levied on the usage of the goods and services in the country. It is a type of indirect tax, in which the people who consume more are taxed more. The general VAT levied on the consumer is 12%, with many exceptional cases, in which the tax levied is reduced. They are:
- Sale of goods and services to senior citizens
- Sale of Gold to BSP (Bangko Sentral ng Pilipinas)
- Dues, Membership fees and other fees collected by the concerning corporations
Division of VAT in the Philippines
GST in the country is generally divided into the following classes
Which Goods or services
|Sale or import of agricultural goods, Transport of passengers, Domestic services like gas and water, Financial Services, Insurance, Medically related supplies, real estate
|Exports, International Shipping, Passenger Transport, Renewable Energy
|All other Taxable Goods and Services in the Philippines
|“Amusement Tax” on nightclubs, bars, cabarets etc.
How to File for VAT Returns in the Philippines?
Filing for a VAT returns is comparatively easy in the Philippines. You have to first register your company in the Bureau of Internal Revenue (BIR), the revenue authority in the Philippines. And then have to follow the procedures accordingly. Before that, let's see what the documents required for filing VAT Returns in the Philippines are
- Certificate of Creditable VAT, issued at the BIR (Form no. 2307)
- Summary Alpha list of Withholding Agents of Income Payments Subjected to Withholding Tax at Source (SAWT), if applicable
- Approved Tax Debit Memo, if applicable
- Approved Tax Credit Certificate, if applicable
- Authorisation letter, if an authorised representative file the tax.
After the requirements are fulfilled, the procedure to follow is mentioned below.
- Fill up Form No. 2550M of the BIR in triplicate copies, one for the taxpayer and two for the BIR
- If you’ve received income,
- File the Monthly VAT Declaration along with the attachments, and pay the VAT to an Authorised Agent Bank (AAB), which is located in the jurisdiction of the RDO (Revenue District Office)/ LTDO (Large Taxpayers District Office), where the business is registered.
- Submit the BIR prescribed Deposit slip, received by AAB. The slip provided is used as evidence of received payment
- In some places, there isn't a local office of the AAB. In that case, file the VAT Declaration, along with the required attachments and pay the VAT to the Revenue Collection Officer (RCO)
- The officer shall issue a Revenue Official Report upon tax payment.
- If you’ve not received income, file the Monthly VAT Declaration, together with the required attachments, to the Revenue Collection Officer.
So, these are some things you need to know about filing VAT in the Philippines. We at Business Setup Worldwide do assist our customers in filing taxes. Our team of expert accountants do take care of managing your taxes and benefit the company. Contact us - we are happy to help you out!