Net VAT payable: output less input VAT.
VAT payable
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Output VAT
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Input VAT
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VAT is a tax you collect, not a tax you bear
The single idea that makes VAT click is that a VAT-registered business is a collector standing between its customers and the BIR. You add 12 percent to what you sell, that is output VAT, and your customers hand it to you. You also pay 12 percent on what you buy from other VAT-registered suppliers, that is input VAT, which you are allowed to claim back. What you actually remit each quarter is the difference: output VAT collected, less input VAT paid. The 12 percent is not meant to come out of your own margin; it flows through you. This calculator does that subtraction so you can see your real cash liability rather than the gross VAT on sales, which is the number people wrongly brace for.
From sales and purchases to the cheque you write
You enter VATable sales and VATable purchases, both on a VAT-exclusive basis, meaning the figures before VAT is added. The tool computes output VAT as 12 percent of sales and input VAT as 12 percent of purchases, then nets them. The rate this calculator applies is the standard 12 percent, and the result is floored at zero: if your input VAT for the period is larger than your output VAT, you do not get a refund cheque that quarter, the excess instead carries forward as a credit against future VAT. That floor matters for businesses in a heavy buying phase. The 12 percent rate and the quarterly filing mechanics follow the BIR's VAT rules, but confirm the current rate and any sector-specific zero-rating or exemptions with the Bureau of Internal Revenue, since these are periodically amended.
A quarter with PHP 1,000,000 sales and PHP 600,000 purchases
Picture a quarter with PHP 1,000,000 in VATable sales and PHP 600,000 in VATable purchases. Output VAT is 12 percent of PHP 1,000,000, so PHP 120,000. Input VAT is 12 percent of PHP 600,000, so PHP 72,000. VAT payable is PHP 120,000 less PHP 72,000, which is PHP 48,000. You collected PHP 120,000 from customers but already paid PHP 72,000 to suppliers, so only PHP 48,000 leaves your hands for the BIR.
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The chart shows how the output VAT you collected is offset by input credit, leaving the net amount to remit.
The mistakes that cost real money
Two errors recur. First, claiming input VAT on purchases that do not carry a valid VAT invoice or official receipt in your business name. The BIR is strict here; an input VAT credit without proper supporting documentation can be disallowed on audit, and you end up paying the VAT you thought you had offset, plus penalties. Keep clean invoices. Second, confusing VAT-exclusive and VAT-inclusive figures. If your records show gross amounts that already include VAT, you cannot just take 12 percent of them, you have to extract the VAT first; feeding inclusive numbers into this exclusive-basis tool overstates your liability. The calculator assumes everything you sell and buy is fully VATable, so it does not separate out zero-rated sales, exempt sales, or purchases with no input VAT, which a real return on BIR Form 2550Q must do. Treat the output as a planning estimate of your cash position, then reconcile against your books.
What happens if my input VAT is bigger than my output VAT?
You owe nothing for that period and the calculator shows PHP 0 payable. The surplus input VAT becomes an excess credit you carry forward to offset VAT in later quarters. Cash refunds of excess input VAT are possible only in specific situations, mainly zero-rated sales or business closure, and they involve a separate claim process with the BIR rather than an automatic payout, so most businesses simply roll the credit forward.
Do I charge VAT on sales to customers who are not VAT-registered?
Yes. As a VAT-registered seller you charge the 12 percent output VAT on your VATable sales regardless of whether the buyer is VAT-registered. The difference is on their side: a VAT-registered buyer can claim the VAT you charged as their input credit, while a final consumer or a non-VAT buyer simply absorbs it as part of the price. Your VAT payable in this tool is unaffected by who your customers are.