What is exact and what is an estimate
- Exact: the 12% rate and the add (× 1.12) and remove (÷ 1.12) formulas, rounded to the centavo.
- Exact: the ₱3,000,000 VAT registration threshold and the 3% percentage tax rate.
- Estimate: the VAT-versus-percentage-tax comparison assumes all purchases are VATable and fully creditable; real input VAT depends on your invoices.
- Not captured: special VAT regimes (e.g. registered enterprises under CREATE MORE), withholding VAT by government, and transitional input tax.
Results are planning estimates. The official BIR return, your employer's payroll and the BIR's own computation govern; rounding and inputs not captured here (for example mid-year rate changes or unusual benefits) can change the figure.
Quick answer
To add 12% VAT, multiply the net price by 1.12; to remove VAT from a VAT-inclusive price, divide by 1.12, so the VAT is 12/112 of the price. A ₱1,120 price is ₱1,000 plus ₱120 VAT. Businesses with gross sales over ₱3,000,000 a year must register for VAT (NIRC Sec. 109); smaller ones pay 3% percentage tax unless they register voluntarily. VAT is filed quarterly on Form 2550Q.
Key points
- VAT is 12% of the net price: never take 12% of a VAT-inclusive price.
- VAT payable = output VAT on your sales − input VAT on your purchases, filed quarterly on Form 2550Q.
- Zero-rated sales carry 0% VAT but let you claim input VAT; exempt sales carry no VAT and no input VAT credit.
- Monthly Form 2550M is no longer required from 2023; only the quarterly return is filed.
- Since the Ease of Paying Taxes Act, VAT on services follows billing, not collection, and a VAT-registered seller must issue an invoice for every sale, whatever the amount (Sec. 237).
Data used in this calculator
In force 2026Planning estimate- VAT rate
- 12% (NIRC Secs. 106 and 108)
- Registration threshold
- ₱3,000,000 gross sales a year (Sec. 109(1)(CC) as amended by RA 11976)
- Percentage tax
- 3% of gross sales, Sec. 116 (back to 3% from 1 July 2023)
- Return
- BIR Form 2550Q, within 25 days after each quarter (Sec. 114 as amended)
- Services
- Billing basis for VAT on services (RR 3-2024)
- Digital services
- Foreign digital service providers subject to VAT from 2 June 2025 (RA 12023)
Last verified against the issuances on November 11, 2026. Report an error on this page.
How to compute VAT: the formulas
| Task | Formula | Example |
|---|---|---|
| Add VAT to a net price | Net × 1.12 | ₱10,000 × 1.12 = ₱11,200.00 |
| VAT on a net price | Net × 12% | ₱10,000 × 12% = ₱1,200.00 |
| Remove VAT from a VAT-inclusive price | Gross ÷ 1.12 | ₱1,120 ÷ 1.12 = ₱1,000.00 |
| VAT inside a VAT-inclusive price | Gross × 12/112 | ₱1,120 × 12/112 = ₱120.00 |
| VAT payable for a quarter | Output VAT − input VAT | See the worked example |
Rate: NIRC Secs. 106 and 108. As of November 2026.
Worked example: VAT payable for a quarter
- 1
VAT-inclusive sales ₱560,000 ÷ 1.12 = net ₱500,000.00; output VAT ₱60,000.00
The VAT you charged customers.
- 2
VAT-inclusive purchases ₱336,000 ÷ 1.12 = net ₱300,000.00; input VAT ₱36,000.00
From suppliers' VAT invoices.
- 3
VAT payable: ₱60,000.00 − ₱36,000.00
Report on Form 2550Q within 25 days after the quarter.
VAT payable for the quarter
₱24,000.00
If input VAT exceeds output VAT, the excess is carried over to the next quarter.
| Gross sales a year | VAT payable (purchases 40% of sales) | 3% percentage tax | VAT on purchases a non-VAT seller absorbs |
|---|---|---|---|
| ₱1,000,000 | ₱72,000 | ₱30,000 | ₱48,000 |
| ₱2,000,000 | ₱144,000 | ₱60,000 | ₱96,000 |
| ₱3,000,000 | ₱216,000 | ₱90,000 | ₱144,000 |
| ₱5,000,000 | ₱360,000 | ₱150,000 | ₱240,000 |
Assumes VATable purchases equal 40% of sales. Under VAT the 12% is added to your prices; under percentage tax the 3% is paid out of your sales. Above ₱3,000,000, VAT registration is mandatory.
VAT payable vs 3% percentage tax at four sales levels
- VAT payable (output − input)
- 3% percentage tax
| Row | VAT payable (output − input) | 3% percentage tax |
|---|---|---|
| ₱1,000,000 | ₱72,000 | ₱30,000 |
| ₱2,000,000 | ₱144,000 | ₱60,000 |
| ₱3,000,000 | ₱216,000 | ₱90,000 |
| ₱5,000,000 | ₱360,000 | ₱150,000 |
Zero-rated vs VAT-exempt sales
| Zero-rated | VAT-exempt | |
|---|---|---|
| VAT on the sale | 0% | None |
| Input VAT on related purchases | Creditable or refundable (Secs. 110, 112) | Not creditable; becomes a cost |
| Examples | Export sales (Sec. 106(A)(2)), certain services to non-residents (Sec. 108(B)) | Basic food in its original state, lease of a residential unit up to ₱15,000 a month, sales to senior citizens and PWDs (Sec. 109(1)) |
Sources: NIRC Secs. 106, 108, 109 as amended by RA 10963, RA 11534 and RA 11976. The full exempt list is on our percentage tax vs VAT page.
Common mistakes
| Mistake | What happens | Do this instead |
|---|---|---|
| 12% of a VAT-inclusive price | VAT overstated: ₱134.40 instead of ₱120 on ₱1,120 | Use 12/112, or divide by 1.12 |
| Charging VAT when not VAT-registered | VAT collected must still be remitted, with penalties | Register first, or invoice without VAT |
| Filing Form 2550M | Unnecessary since 2023 | File the quarterly 2550Q only |
| Withholding tax computed on the VAT-inclusive amount | Over-withholding | Compute withholding on the amount net of VAT |
| No invoice for a sale | Penalties under RA 11976 | Issue an invoice for every sale of goods or services |
Buod sa Tagalog
Para magdagdag ng 12% VAT, i-multiply ang presyo sa 1.12; para alisin ang VAT sa presyong may VAT na, i-divide sa 1.12. Ang ₱1,120 ay ₱1,000 na presyo at ₱120 na VAT. Kailangang magparehistro sa VAT ang negosyong lalampas sa ₱3,000,000 ang benta kada taon; ang mas maliit ay nagbabayad ng 3% percentage tax. Ang VAT ay ifinafile kada quarter gamit ang Form 2550Q.
Frequently asked questions
+How do I compute 12% VAT in the Philippines?
Multiply the net price (before VAT) by 12% to get the VAT, or by 1.12 to get the VAT-inclusive price. A ₱10,000 net price carries ₱1,200 VAT and sells for ₱11,200. Use the 'Add 12% VAT' mode of the calculator above.
+How do I remove VAT from a VAT-inclusive price?
Divide the VAT-inclusive price by 1.12 to get the net price; the difference is the VAT. ₱11,200 ÷ 1.12 = ₱10,000 net and ₱1,200 VAT. Taking 12% of ₱11,200 (₱1,344) would overstate the VAT.
+What does 12/112 mean in VAT computation?
It is the share of a VAT-inclusive price that is VAT. Because the price is 112% of the net amount, the VAT is 12/112 of it, about 10.71%. Multiply the gross price by 12/112 to get the VAT directly.
+Who must register for VAT?
Anyone whose gross sales or receipts exceed ₱3,000,000 in any 12-month period, under NIRC Sec. 109 as amended. Below the threshold you may register voluntarily; otherwise you pay 3% percentage tax on gross sales under Sec. 116, filed quarterly on Form 2551Q.
+Do I still need to file BIR Form 2550M every month?
No. Since 1 January 2023, VAT-registered taxpayers file only the quarterly VAT return, Form 2550Q, within 25 days after the end of each quarter, under Sec. 114 as amended by the TRAIN Law and RA 11976.
+Is it better to be VAT-registered or non-VAT?
It depends on your buyers and costs. VAT-registered sellers add 12% to prices but recover VAT on purchases; non-VAT sellers pay 3% of sales and cannot claim VAT on purchases. Business buyers prefer VAT invoices. Use the comparison mode to test your figures.
+Are digital services like Netflix and Spotify subject to VAT?
Yes. RA 12023 made digital services consumed in the Philippines, including those of foreign providers, subject to 12% VAT. Foreign digital service providers have been subject to VAT since 2 June 2025 under its implementing rules.
+Is withholding tax computed on the VAT-inclusive amount?
No. Expanded withholding tax is computed on the income payment net of VAT, so a client paying a VAT-registered supplier withholds on the amount before VAT. See our expanded withholding tax rates page for the rates.
Sources and references
- RA 10963 (TRAIN Law) — VAT rate, exempt transactions, quarterly VAT return (checked November 12, 2026)
- RA 11976 (Ease of Paying Taxes Act) — invoicing, VAT threshold section, billing basis for services (checked November 12, 2026)
- RR 3-2024 — VAT amendments under the Ease of Paying Taxes Act (checked November 12, 2026)
- RA 12023 (VAT on digital services) — VAT on digital services, including foreign providers (checked November 12, 2026)
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Author and editorial review
Deepak Middha, Chartered Accountant
Chartered Accountant with 18 years in hedge funds; writes and maintains sulat.ph. Every rate, ceiling, deadline and fee on this page is taken from the National Internal Revenue Code or a BIR issuance and was checked against that source on November 12, 2026. Where a figure could not be confirmed officially, the page says so.
Spotted an error or an outdated rule? Send a correction.