Value added tax Philippines
The Philippines implemented a value added tax (VAT) regime in 1988 to replace a range of sales and turnover taxes. This VAT system follows the OECD model, with tax due and reclaimable throughout the production chain until the final consumer. VAT is administered by the Bureau of Internal Revenue.
The VAT rate is currently set at 12% for most goods and services. This was extended in 2024 to cover overseas suppliers of digital services, which include: streaming services, online marketplaces, digital advertising, and the sale of most digital goods. Certain educational services such as online courses and training are exempt. Some subscription-based services, and financial services delivered through digital platforms, are also exempt.
Certain sales are classified as zero-rated or 0% VAT sales. These include processing, manufacturing, or repacking goods for business outside the Philippines and that are subsequently exported; and the exportation of commodities and services sold outside the Philippines.
VAT liability and obligation to register
VAT is due on the sale, exchange, or lease of goods, property, or services by a taxable person. This includes the use or other transfer of intangible assets.
Businesses must register for VAT if their gross sales over a 12 month period total up to PHP 3 million, or if they import goods into the country.
Foreign (non-resident) businesses cannot register for VAT. Instead, any VAT owed is withheld and accounted for by the buyer.
It is generally the responsibility of the vendor to determine, collect, and remit the correct VAT to the Bureau of Internal Revenue.
VAT returns are filed monthly or quarterly. Monthly returns include output VAT for the month, input VAT for the month, and any carry-over input VAT from the previous period. These returns are due no later than the 20th day of the following month preceding the applicable month.
Quarterly returns include output VAT on sales for the entire quarter, input VAT for purchases for the entire quarter, and any input VAT carried over from the previous quarter. These returns are due no later than the 25th day of the month after the end of the quarter.
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