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Required Documents for VAT Zero Rating in the Philippines

All VAT registered entities are mandated to add the value added tax in their sales to customers. Clients or customers who claim that their VAT should be zero rated should provide the seller documents as required by the Bureau of Internal Revenue to serve as proof that indeed their business is value added tax, zero rated.

Value added tax is that kind of tax which is also considered as a sales tax.  As per description of thePhilippines' Bureau of Internal Revenue or BIR, it is a tax on consumption on the sale of goods and services and on the imports of goods into thePhilippines.  It is an indirect tax which means that sellers can pass the said tax to the buyers or customers. 

The rate of value added tax being levied on the sales transaction is 0% and 12% based on the gross selling price.  Since the 12% value added tax can be shifted to the buyers, it is the end users who will bear the brunt of the value added tax in the goods or services that they will avail.  Most are affected by the imposition of the value added tax however there are some who are exempt from paying the value added tax and there are those whose sales are multiplied by the zero rate which in effect has no additional imposed amount on the goods or service.

All VAT registered entities are mandated to add the value added tax in their sales to customers.  Clients or customers who claim that their VAT should be zero rated should provide the seller documents as required by the Bureau of Internal Revenue to serve as proof that indeed their business is value added tax, zero rated.

These documents are as follows:

1)      BIR Form 2303- This is the certificate of registration of a business.

2)      If zero rating is due to the authority given by the Philippine Economic Zone Authority or PEZA, then the client shall submit their PEZA 03-01 Form, this is the certificate where the client’s incentives, including it’s being a VAT zero rated entity are itemized.

3)      PEZA form 97-01 shall also be submitted- this form specifically states that the client named in the certificate is VAT zero rated.

4)      If zero rating is due to the authority given by the Philippine Board of Investments or BOI then a corresponding certificate from the authorizing agency should also be presented.

5)      Official letter issued by BIR stating that the business entity is subject to zero rated VAT.

The above documentations are required to be submitted to the seller since the seller is also required to submit these forms together with their sales invoices to the Bureau of Internal Revenue for further verification and checking that the client or customer should really be subject to zero rating.

Should the BIR find no documentation or if the documents are incomplete, the BIR will declare the sales to be subject to the 12% value added tax and the seller will have to shoulder the said VAT.

It is thus important for the seller and the client to be clear prior to the sales transaction on their VAT classification and the required documentations should also be provided in order to avoid penalties and charges imposed by thePhilippines’ Bureau of Internal Revenue due to non-compliance with the value added tax requirements.

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Comments (4)

Thank you for this Phillippines information.

Very well explained!

The tax system in the Philippines is really very complicated. I hope we would have a much simpler tax system soon.

Lotto Schedule in the Philippines

Hi,

What\'s your basis on the required docoments mentioned above? Kindly email me at darylldon9888@gmail.com

Hi,

Can you please provide your basis (e.g., RR, RMC) on the required documentation mentioned above? Thanks!

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