RMC No. 85-2017: Prescribes the Value-Added Tax rate to be used in the preparation of the Approved Budget for the Contract for government projects

Key points

1. Rate for the ABC. The appropriate VAT rate for the ABC is 12%. This lets sellers of goods or services to the government keep the 7% as their standard input VAT.
2. How the 12% is split. Government purchases bear 12% VAT, but the procuring entity only deducts and withholds a five percent (5%) final VAT on gross payment. This 5% is the net VAT payable by the seller, and the remaining seven percent (7%) is the standard input VAT in lieu of actual input VAT attributable or ratably apportioned to the sale.
3. Treatment of the difference. The difference between the 7% and the actual input tax incurred may form part of the seller’s expense or cost, or be closed to expense or cost, as the case may be.
4. No other input VAT claims. Sellers to the government may not deduct actual input VAT on these sales against output VAT on regular sales. It also cannot be claimed for refund or tax credit, since Section 4.114-2(a) of Revenue Regulations No. 16-2005 already provides how sellers recoup it.

Who is affected

• Sellers of goods and services to the government
• Procuring government entities