VAT registration in Philippines takes place once the business exceeds a certain threshold or any company that imports goods.
The Philippines VAT rate varies according to the types of goods or services and has a standard rate and a reduced rate, the zero rate.
Local and foreign companies are subject to VAT registration in Philippines in three instances, as listed below by our team.
Company formation in Philippines is subject to a set of requirements, among which taxation and reporting are also necessary.
Do foreign companies need to register for VAT in Philippines?
Yes, there are three instances in which a company is required to proceed with VAT registration in Philippines:
- companies which, during the course of their business for which they engage in VAT-taxable activities, exceed the threshold of Php 3 million (the aggregate amount of receipts or actual gross sales);
- the company imports goods, whether or not these are made in the course of the business activities in the country;
- the company was required to register for VAT purposes, but failed to do so.
VAT registration for foreign companies in the Philippines is performed by filling in a form and paying a tax (see below).
What are the Philippines VAT registration requirements for local companies?
A company which, in the course of its business, sells, exchanges or barters goods or properties or is involved n the sale of exchange of VAT-taxable services registers if:
- the gross sales of the receipts issued in the last 12 months (other than those for services that are exempt) exceed 3 million pesos;
- when there is reasonable proof that the gross sales of the receipts will exceed 3 million pesos.
VAT registration in Philippines is done by filling in a special form (Form No. 0605 for each place of business). The registration fee is 500 pesos.
The registration fee is payable each year the company remains a VAT taxpayer no later than the end of January.
Companies that fail to register for VAT purposes when they were required by law to do so will be liable for the payment of the due output tax, in the same amount that would have applied if the company had been registered for value-added tax.
When companies fail to register, they are subject to the output tax, however, they cannot access input tax credits for the period during which they should have been registered but failed to do so.
What is the rate of the Philippines VAT?
The standard VAT rate applies to most types of goods and services and has a 12% rate. A 0% rate also applies in some cases and certain types of services are exempt from this tax altogether.
Investors who wish to open a company in Philippines and need to know more about the applicable tax rates can reach out to our local team of experts.
We also assist companies that are interested in accessing a virtual office service.
What are the compliance requirements after VAT registration in Philippines?
Companies subject to value-added tax in the Philippines are subject to the following compliance requirements:
- observe the VAT statements filing deadlines, fill in the needed forms, make the payments and provide additional documents, upon request; the filing deadline depends on how the company chooses to perform the filing (manually or electronically);
- pay the annual VAT registration fee for every place of business engaged in activities in the country;
- register the books of accounts and comply with other documentation submission requirements;
- register the sales invoices and the official receipts for transactions subject to VAT; use a separate registration for non-VAT invoices;
- submit a copy of the Quarterly Schedule of Monthly Sales and Output Tax (when the quarterly sales exceed P2,500,000.00) to the tax authorities with jurisdiction over the area where the taxpayer is registered.
Other compliance requirements apply. Companies can choose to cancel their VAT registration when they can prove that the value of their gross sales for the following 12 months will not exceed the threshold or when they cease their business in the country and do not expect to do business again in the following 12 months.
Contact us for assistance during VAT registration in Philippines or if you have questions about voluntary VAT registration and general VAT compliance.
Our team can also answer questions concerning immigration to Philippines.