How to Register as a VAT Taxpayer and Issue VAT Official Receipts: BIR Forms and Requirements in the Philippines

Introduction

In the Philippine tax system, the Value-Added Tax (VAT) is a consumption tax levied on the sale of goods and services, as well as on the importation of goods into the country. Governed primarily by Republic Act No. 8424, as amended by subsequent laws such as Republic Act No. 10963 (TRAIN Law), Republic Act No. 11534 (CREATE Law), and various Bureau of Internal Revenue (BIR) regulations, VAT is imposed at a rate of 12% on the gross selling price or gross receipts derived from the sale or exchange of property or services. Registration as a VAT taxpayer is a critical compliance requirement for businesses and professionals whose operations meet certain thresholds, ensuring proper tax collection and remittance to the government.

This article provides a comprehensive overview of the process for registering as a VAT taxpayer, the necessary BIR forms and documentary requirements, and the procedures for issuing VAT official receipts (ORs) or invoices. It draws from the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, and relevant BIR Revenue Regulations (RR), Revenue Memorandum Orders (RMO), and Revenue Memorandum Circulars (RMC). Compliance with these rules is essential to avoid penalties, which can include fines, surcharges, and even criminal liabilities.

Who Must Register as a VAT Taxpayer?

Under Section 106 and 108 of the NIRC, as amended, VAT registration is mandatory for any person or entity engaged in the sale of goods, properties, or services in the course of trade or business, provided their annual gross sales or receipts exceed PHP 3,000,000 (as adjusted by the TRAIN Law effective January 1, 2018). This threshold applies to a 12-month period, and once exceeded, the taxpayer must register within 30 days from the date the threshold is met.

Mandatory Registration

Businesses and Professionals: Sellers of goods (e.g., manufacturers, wholesalers, retailers) or services (e.g., contractors, lessors, professionals like lawyers and accountants) whose actual or expected gross sales/receipts surpass PHP 3,000,000.
Importers: Regardless of sales volume, importers of goods are subject to VAT on importation.
Mixed Transactions: Taxpayers with both VATable and non-VATable transactions must register if the VATable portion meets the threshold.
Special Cases: Government agencies or instrumentalities engaged in commercial activities, and foreign entities doing business in the Philippines, may also be required to register.

If a taxpayer's gross sales/receipts do not exceed PHP 3,000,000, they are generally subject to Percentage Tax under Section 109 of the NIRC (at 3% rate) instead of VAT, unless they opt for voluntary VAT registration.

Voluntary Registration

Taxpayers below the threshold may voluntarily register as VAT taxpayers under Section 236(G) of the NIRC if they anticipate exceeding the threshold or wish to avail of input tax credits. Once registered voluntarily, the taxpayer cannot revert to non-VAT status for three years. Voluntary registration is beneficial for businesses that purchase VATable inputs, as it allows claiming input VAT credits against output VAT.

Exemptions from VAT Registration

Certain transactions are exempt from VAT under Section 109, including:

Sales by agricultural cooperatives.
Sales of residential lots valued at PHP 1,500,000 or less, or house and lot packages at PHP 2,500,000 or less.
Lease of residential units with monthly rental not exceeding PHP 15,000.
Sales by non-stock, non-profit organizations where no part of the income inures to private individuals.
Export sales by VAT-registered persons (zero-rated).

Exempt entities must still register as non-VAT taxpayers and may be subject to other taxes.

Registration Process for VAT Taxpayers

Registration is handled by the BIR through its Revenue District Offices (RDOs) or via the online eRegistration System (eREG) for certain applicants. The process involves submitting an application for Taxpayer Identification Number (TIN) if not yet obtained, followed by VAT-specific registration.

Steps for Registration

Determine the Appropriate RDO: Registration must be filed at the RDO having jurisdiction over the principal place of business or residence.
Secure TIN (if needed): New registrants apply for a TIN simultaneously with business registration.
Submit Application: File the appropriate BIR form with required documents.
Pay Registration Fee: An annual registration fee of PHP 500 is required under Section 236(B) of the NIRC, payable upon registration and annually thereafter by January 31.
Receive Certificate of Registration (COR): Upon approval, the BIR issues BIR Form 2303 (Certificate of Registration), which indicates the taxpayer's VAT status.
Update Registration if Necessary: Any change in status (e.g., from non-VAT to VAT) requires filing BIR Form 1905 for update.

For online registration, eligible taxpayers (e.g., sole proprietors) can use the BIR's Online Registration and Update System (ORUS) launched under RMC No. 57-2020.

BIR Forms for Registration

BIR Form 1901: Application for Registration for Self-Employed and Mixed Income Individuals, Estates, and Trusts. Used by professionals, sole proprietors, and freelancers.
BIR Form 1903: Application for Registration for Corporations, Partnerships, and Cooperatives.
BIR Form 1905: Application for Registration Information Update/Correction/Cancellation. Used for updating from non-VAT to VAT status or other changes.
BIR Form 0605: Payment Form for the annual registration fee.

Documentary Requirements

Requirements vary by taxpayer type but generally include:

For Individuals/Sole Proprietors:
- Completed BIR Form 1901.
- Birth certificate or valid ID (e.g., passport, driver's license).
- Marriage contract (if applicable).
- DTI Certificate of Business Name Registration.
- Mayor's Permit/Barangay Certification.
- Proof of address (e.g., lease contract if renting).
- Books of accounts (to be stamped by BIR).
For Corporations/Partnerships:
- Completed BIR Form 1903.
- SEC Articles of Incorporation/Partnership and By-Laws.
- SEC Certificate of Incorporation/Registration.
- Board Resolution authorizing the signatory.
- Mayor's Permit.
- Audited Financial Statements (if applicable).
- Proof of payment of Documentary Stamp Tax (DST) on subscribed capital.
Additional for VAT-Specific:
- Inventory list of goods (if transitioning from non-VAT).
- Deed of sale or lease contracts for properties.
- For voluntary registration: A sworn statement of intent.

All documents must be submitted in original or certified true copies. The BIR may require additional documents based on RMO No. 7-2013 or subsequent issuances.

Timeline and Fees

Application must be filed before commencing business or within 30 days of exceeding the threshold.
Processing time: Typically 3-5 working days, but may vary.
Fees: PHP 500 annual registration fee; no separate fee for VAT registration itself.

Issuing VAT Official Receipts and Invoices

Once registered, VAT taxpayers must issue VAT invoices for sales of goods or properties and VAT official receipts for services, leases, or other transactions, as mandated by Section 113 of the NIRC and RR No. 16-2005 (as amended by RR No. 7-2023).

Requirements for Issuing ORs/Invoices

Authority to Print (ATP): Before printing, taxpayers must secure an ATP from the BIR using BIR Form 1906 (Application for Authority to Print Receipts and Invoices). This is valid for five years.
Content of ORs/Invoices: Must include:
- Serial number.
- Name, business style, address, and TIN of the seller.
- Date of transaction.
- Quantity, unit cost, and description of goods/services.
- Amount of sale (VAT-exclusive), VAT amount (12%), and total (VAT-inclusive).
- The phrase "VAT-Registered Seller" or similar.
- For sales PHP 1,000 or more: Buyer's name, address, and TIN (if business purchaser).
Types of Invoicing Systems:
- Manual: Traditional printed receipts/invoices.
- Computerized Accounting System (CAS): Requires BIR permit under RR No. 9-2009.
- e-Invoicing: Under the Ease of Paying Taxes (EOPT) Act (RA 11976), mandatory electronic invoicing is being phased in for large taxpayers.
Loose-Leaf vs. Bound: Loose-leaf requires BIR stamping; bound books are for manual systems.

BIR Forms Related to VAT Compliance

BIR Form 2550M: Monthly VAT Declaration (filed by the 20th of the following month; phased out for some under EOPT).
BIR Form 2550Q: Quarterly VAT Return (filed by the 25th day after quarter-end).
BIR Form 2307: Certificate of Creditable Tax Withheld at Source (for input tax claims).
BIR Form 0619E: Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded), if applicable.

Record-Keeping

Taxpayers must maintain books of accounts (e.g., journals, ledgers) registered with the BIR, and retain invoices/receipts for five years (or 10 years if under audit) per Section 235 of the NIRC.

Compliance Obligations and Reporting

Filing and Payment: VAT returns must be filed electronically via eFPS (for large taxpayers) or eBIRForms. Payment is due simultaneously with filing.
Input-Output Mechanism: Output VAT (on sales) minus Input VAT (on purchases) equals VAT payable. Excess input can be carried over or refunded.
Zero-Rated and Exempt Sales: Must be separately reported; zero-rated allows input credit refunds.
Transitional Input Tax: Allowed at 2% on beginning inventory when transitioning to VAT.

Penalties for Non-Compliance

Violations under Sections 254-272 of the NIRC include:

Failure to Register: 25% surcharge, interest at 12% per annum, and compromise penalties up to PHP 50,000.
Failure to Issue ORs/Invoices: Fine of PHP 1,000 to PHP 50,000 per violation, plus surcharges.
Underdeclaration: 50% surcharge if willful.
Criminal Penalties: Imprisonment for evasion or fraud.

The BIR conducts audits and assessments; taxpayers can appeal via protest or to the Court of Tax Appeals.

Conclusion

Registering as a VAT taxpayer and properly issuing VAT official receipts are foundational to tax compliance in the Philippines, promoting transparency and revenue collection. Businesses should consult BIR issuances or seek professional advice for updates, as tax laws evolve. Adherence not only avoids penalties but also enables efficient tax credit utilization, fostering sustainable operations.