Everyday, people spend money on goods and services in the Philippines. It may be buying a new luggage for travel. Or having a hair treatment done at a salon. And oftentimes, we see “VAT” included in the receipt. Some people are aware of what it is while some think it’s just part of the entire cost of a good or service. A deeper understanding of what VAT is, marks its importance to people who file for the BIR form 2550m. That is why we have experts who can make things easier for tax filing. So why do we have to go through all of this?
The essence of VAT
For most people who may have heard about it in school or in the news, it actually means Value Added Tax (VAT). This is a type of sales tax. It is imposed on the sale of services, goods or properties in the country. Simply put, it is a form of indirect tax that requires the buyer to pay for the products and services consumed. So for every good or service sold by a customer, there is a particular tax rate added on the selling price. Imported goods from other countries are also VAT-inclusive.
Individuals who should be concerned about VAT are those who have a business, trade or property lease. This also includes individuals who imports goods abroad. As a citizen of the country, it is only right to know which VAT Return to file and accomplish.
BIR Form 2550m
The Monthly Value-Added Tax Declaration or BIR Form 2550m is used simply to file monthly VAT. Individuals who may get their hands on this form are those who are VAT-registered in selling or leasing goods or services. These individuals must have an actual gross sales/receipts exceeding up to P3,000,000.
When to file this form?
Just like how any citizen pays his or her taxes in the Philippines, Form 2550m also has a deadline which is not later than the 20th day following the end of the month. Electronically sent tax forms will only be entertained until 9pm. After that, it will be processed the next business day. So knowing this information is essential in filing for this specific VAT Return.
Filing at the right place
All taxpayers must only file at authorized banks or agents. For form 2550m, it must also be filed with any AAB (Authorized Agent Bank) within the jurisdiction of the RDO (Revenue District Office). If by chance that there is no Authorized Agent Bank in the vicinity, returns should be filed with the Revenue Collection Officer or Authorized Municipal/City Treasurer located within the district.
Types of VAT and tax rates
Upon filling up the BIR form 2550m, you will come across some terms such as VAT exclusion, input tax and more. That is why it is important to know the VAT types and rates before filing the return.
Twelve percent is imposed on the sales of properties and goods, as well as on services and lease of properties. This also includes the importation of goods in which the Bureau of Customs holds responsible in determining excise taxes, customs duties and other charges.
VAT Zero-Rated (0%)
Based on the Tax Code of the Philippines, under Sections 106 (A)(2) and 108 (B), any sale or exchange of goods, services or properties are subject to 0% VAT. This covers export sales of services as approved by the Economic Zone registered companies.
VAT Exempt (0%)
This pertains to a particular sale of transactions or goods that falls under SEC 109 (Exempt Transactions). These are tuition fees, agricultural products, books, transportation and more.
Payments are also accepted within these Authorized Agent Banks after accomplishing the form. If there are no AABs, submission and payment may be made possible to the Revenue Collection Officer. Another option is going to a duly Authorized City or Municipal Treasurer who will then issue a ROR (Revenue Official Receipt) afterwards.
What if I am late in filing?
Following instructions and deadlines is vital in any activity related in life. Therefore, in tax return filing, meeting deadlines helps lessen expenses more importantly. If it is really impossible to make it to the deadline, there are penalties imposed on such tax payers:
This is imposed on individuals who fail to file and pay the actual amount of tax or installment before or on the due date. Aside from that, this is also for those who file a return with an individual other than the one required unless otherwise advised by the Commissioner. Individuals will also be given a 25% surcharge if they don’t pay the full or partial amount of the tax return on or before the due date. Lastly, those who don’t pay the deficiency tax within a prescribed period of time will also be subject for the surcharge.
Individuals who willingly neglect to file the return within the period of time as written by the rules and regulations, are subject to a 50% surcharge. This also goes to those who incur fraudulent activities regarding tax return filing.
20% Interest Rate per Annum
This interest will be imposed on any unpaid amount of tax from the date prescribed for its payment, until fully paid by the individual.
If an individual does not follow any of the rules and regulations as prescribed by the Code, he or she will be subject to a criminal penalty such as paying a fine or imprisonment.
Documents to bring
To make things easier, listing down the papers or documents to bring upon filing is a must. Here are the important ones to note:
- Duly issued Certificate of Creditable VAT Withheld at Source (if applicable only)
- Tax Debit Memo
- Tax Compliance Certificate
- Proof of payment and the return if previously filed
- Authorization letter if not filed personally
So there you have it! Being involved in any business or trade does not excuse you of paying taxes as well. Though it may seem mundane and complicated, going through this blog helps widen your knowledge about tax returns.
For forms and assistance on filing the 2550m, we have professionals who will guide you in every step for convenience. Let’s all be responsible and do our duties – let’s pay our taxes on time.