Value-Added Tax (VAT) is a 12% consumption tax on goods + services in PHL.
Coverage:
- Most goods + services sold in PHL
- Imports (collected by Customs)
- Some services (rental, professional services, etc.)
Exemptions:
- Basic food (rice, fresh meat/produce)
- Health services
- Education
- Senior citizens + PWDs (limited)
Business obligation:
- Annual gross sales > ₱3M = mandatory VAT registration
- Below ₱3M = optional (may choose 3% percentage tax instead)
What it means for you:
- Most consumer purchases include 12% VAT
- Compute prices VAT-inclusive (often shown as "VAT-incl" on receipts)
- Self-employed: choose VAT registration carefully (impacts pricing)
- Some businesses prefer non-VAT registered for simplicity below ₱3M