VAT Registration in Philippines

Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services in a country. 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 value-added Tax (VAT) in some countries.

The primary purpose of introducing value-added Tax in the Philippines is to replace all existing indirect taxes and 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

1. The Government

The government gets the revenue indirectly from the consumers for the proper running and maintenance of the country.

2. The Citizen/Consumer

The Citizen benefits from the tax paid to the government in the form of defence, law and order, health, education public services and many more functions. However, they are the ones who ultimately shoulder the weight of the tax.

3. Businesses

Businesses are responsible for collecting these taxes and giving them 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 generated by the government through consumers. The government of the Philippines generates most of its revenue income via personal and income taxes and makes a small portion of non-tax revenue via licences and fees.

In the Philippines, the taxation system is divided into the following sections:

Income Tax: Income tax is levied on a person’s income, professional practice, trade conduct or any other business mentioned in the National Internal Revenue Code of 1997. Income Tax in the Philippines is progressive, i.e. there is a different percentage that you have to pay for different income slabs. They are:

Value-Added Tax (VAT): VAT is a form of tax levied on the usage of goods and services in the country. It is an indirect tax where the people who consume more are taxed more. The general VAT levied on the consumer is 12%, with certain exceptions where the tax is reduced. These exceptions are:

1. Sale of agricultural and marine goods in original condition
2. Services provided by medical professionals, educational institutions, and so on. 

Division of VAT in the Philippines

VAT in the country is divided into the following classes

VAT Registration in The Philippines

In order to be compliant with the country’s VAT taxes and related policies, you must file your VAT registration. Here are the mandatory documents you require:

• Your duly filled out BIR Form 1903 or BIR Form 1905, depending on the nature of your company.
• Tax Identification Number 
• Certificate of Registration from the Bureau of Internal Revenue
• Articles of Incorporation
• Business Permit from the local government
• Proof of Annual Fee Payment
• Lease Agreement in case of rented property

How to File for VAT Returns in The Philippines

Once you have completed your registration process, you can file for VAT returns. However, you need to prepare several documents to be able to file for these returns. Here is how you can do so:

1. Monthly VAT Returns: You must file BIR Form 2550M by the 20th of the coming month. So, if you have paid VAT in January, you must file the monthly return by 20th February.
2. Quarterly VAT Returns: You must file BIR Form 2550Q by the 25th of the month after the end of a quarter. So, say the first quarter ends in March, you must submit the quarterly returns by 25th April.

You can use the eBIRForms system to submit your VAT returns online.

How Can Business Setup Worldwide Help

We at Business Setup Worldwide assist our customers in filing taxes. Our team of expert accountants take care of managing your taxes. Contact us - we are happy to help you out.