If you are a seller or buyer of goods or properties, what document/s must you issue (for sellers) / receive (for buyers)?
The answer depends on what business tax type the seller is registered.
If the seller is VAT-Registered, he/she must issue a VAT Sales Invoice
Reference: Section 2, Number 2, Subnumber 2.1 of RR 18-2012
2.1 VAT SALES INVOICE - for purposes of Value Added Tax (VAT) pursuant to Section 106
of the NIRC, as amended, it is a written account evidencing the sale of goods and/or
properties issued to customers in an ordinary course of business, whether cash sales
or on account (credit) which shall be the basis of the output tax liability of the seller
and the input tax claim of the buyer. Cash Sales Invoices and Charge Sales Invoices
falls under this definition.
If the seller is not a VAT-Registered (Percentage Tax), he/she must issue a Non-VAT Sales Invoice
Reference: Section 2, Number 2, Subnumber 2.3 of RR 18-2012
2.3 NON-VAT SALES INVOICES - for purposes of Percentage Tax pursuant to Section 116
of the NIRC, as amended, it is a written account evidencing the sale of goods and/or
properties issued to customers in an ordinary course of business, whether cash sales
or on account (credit) which shall be the basis of the Percentage Tax liability of the
seller.
Source: RR 18-2012
Related topics:
What to issue if your business is selling services or use of properties? Sales Invoice or Official Receipt
Issuance of Sales Invoices, Official Receipts or Commercial Invoices
The Business Tax either the Percentage Tax or Value Added Tax is payable on or before the 20th of the following month.
Definition:
An Income Tax is imposed based on the net income of the business.
A Net Income is determined by deducting the Cost of Sales or Services and Allowable Operating Expenses from Gross Sales or Gross Receipts of the business during a taxable period.
Illustrative Formula:
Gross Sales / Gross Receipts
Less: Cost of Sales / Cost of Services
Equals: Gross Margin or Gross Income
Less: Operating Expenses (Allowable)
Equals: Net Income
Net Income
Multiply by: tax rate
Equals: Income Tax
Less: Quarterly Income Tax Paid
Equals: Income Tax still due and payable
Definition:
Percentage Tax is the tax imposed on the gross receipts of non-vat registered business owner and is usually subject to 3% tax rate.
Definition:
A VAT business transaction is subject to 12% tax rate.
Output VAT vs Input VAT
Output VAT is the 12% tax from the VATable sales or gross receipts of the VAT Registered business owner.
Input VAT is the 12% tax from the VATable purchases, disbursements or expenses made by the business owner.
The Input VAT is deducted from the Output VAT to get the net VAT payable.
Illustrative Formula:
Output VAT
Less: Input VAT
Equals Net VAT Payable
Definition:
It is the tax that are imposed on the gross receipts or sales in the ordinary course of business transactions during a taxable period.
Classification:
- VAT or Value Added Tax
- Percentage Tax
