VAT 12% Philippines — threshold, TRAIN and CREATE MORE
How VAT applies in the Philippines: the 12% rate, the PHP 3,000,000 threshold, zero-rated exports and what CREATE MORE changed for refunds.
The Philippines applies Value-Added Tax at 12% on the sale, barter, exchange or lease of goods and properties and on the sale of services, under Sections 106 and 108 of the National Internal Revenue Code (NIRC of 1997, as amended). VAT registration is required when annual gross sales or receipts exceed PHP 3,000,000, a threshold set by the TRAIN Act (RA 10963). Businesses below it who are not VAT-registered generally pay percentage tax instead. The CREATE MORE Act (RA 12066) amended Section 112 so that the BIR must act on documented VAT refund claims within 90 days.
- Standard rate: 12% (Sections 106 and 108 NIRC).
- Registration threshold: PHP 3,000,000 annual gross sales or receipts.
- Non-VAT businesses below the threshold: percentage tax (see the dedicated page).
- VAT refunds under Section 112: 90 days from submission of complete documents, per CREATE MORE.
How it works
Check the threshold. If your annual gross sales or receipts exceed PHP 3,000,000, you must register as a VAT taxpayer. You may also register voluntarily. Confirm the exact rules in Section 236 NIRC or with the BIR.
Decide the VAT treatment of each sale. Most domestic sales carry 12%. Direct exports and some other sales are zero-rated (0%). Some sales are VAT-exempt. Each treatment has documentary conditions, so check the NIRC and BIR issuances.
Show the VAT on the invoice. State the price, the VAT amount and the total so the buyer can see the tax. Invoice format rules follow RR 7-2024.
File the quarterly VAT return, BIR Form 2550Q, within 25 days after the end of each taxable quarter. The monthly Form 2550M is no longer used.
Net your output VAT against creditable input VAT. Unused input VAT can usually be carried over to later quarters. Zero-rated sellers may claim a refund under Section 112, which CREATE MORE requires the BIR to process within 90 days from submission of the required documents.
Legal framework
- National Internal Revenue Code of 1997 (RA 8424), Title IV, Sections 105 to 115 and Section 236.
- TRAIN Act (RA 10963).
- Ease of Paying Taxes Act (RA 11976) and RR 3-2024 (VAT amendments).
- CREATE MORE Act (RA 12066), amending Section 112.
Frequently asked questions
When must a business register for VAT?
When annual gross sales or receipts exceed PHP 3,000,000. Registration is also possible below the threshold if you choose it. Details and deadlines are in Section 236 NIRC and BIR issuances, so confirm them with your RDO.
What is the difference between zero-rated and exempt sales?
A zero-rated sale carries 0% output VAT and the seller can still claim input VAT credit or refund. An exempt sale carries no output VAT and generally gives no input VAT credit. Which applies depends on the NIRC and the documents you hold.
What does CREATE MORE change for VAT refunds?
It amended Section 112 so that a refund of creditable input VAT is to be granted within 90 days from submission of the required documents. If the BIR denies a claim it must state the legal and factual basis within that period.
Is percentage tax the same as VAT?
No. Percentage tax is a separate tax on gross quarterly sales of non-VAT businesses, filed on BIR Form 2551Q. VAT is filed on Form 2550Q.
Does 4invoices file VAT returns or choose the VAT rate for me?
No. 4invoices does not file returns, does not connect to the BIR and does not pick the rate. You enter the VAT rate on each invoice line, for example 12% or 0%, choose the currency and exchange rate, and download the PDF. The trial is free for 6 months without a card.