VAT Exempt in the Philippines


I don’t know If it is only me who notice the computation on VAT Exempt. Normally in the Philippines, we included the VAT on the selling price because majority of the customer are paying the VAT, but there is exemption to the rule e.g.(Senior Citizen who are Exempted from VAT. I’ll show you the illustration.

It will correct only If I remove that VAT directly on the selling price, but it is a lot of work to do, every time we have a VAT exempt transaction.

Correct me sir If I am wrong.

Would not it be more efficient for you to enter the tax exclusive price, apply the tax code and allow Manager to calculate the tax inclusive price.

You’re saying then, that I should remove the VAT on the selling price of all my inventory and non-inventory items?

Also set the form default to prices are tax exclusive (at least on the sales forms).
Changing the tax code will then change the amount the customer is billed but you will retain a constant amount.

The key to understanding this, @Aries_Gonzales_Carag, is to realize that VAT Exempt is a 0% tax code. When invoices are tax-inclusive, Manager calculates the tax to be backed out of the unit price and credits the remaining amount to the income account. When invoices are tax-exclusive, Manager calculates the tax and adds it to the unit price.

So, for your VAT Exempt situation, Manager backs 0% out of 10,000 and is left with the starting unit price of 10,000. The program does not determine what the tax would be under some other percentage tax code and remove that from the unit price.

If you are using non-inventory items to define your services, there is a way around this, while still marking the invoice as tax-inclusive. Define two non-inventory items:

  • HOTEL ACCOMODATION with a selling price of 10,000
  • HOTEL ACCOMODATION (VAT EXEMPT) with a selling price of 8,928.57

Then, when selling the second non-inventory item, applying the VAT Exempt tax code, and marking the sales invoice as tax-inclusive, the Total will be what you want. Staff members entering the transactions could follow exactly the same procedures for both taxable and tax-exempt customers. They would simply be selling them different products with different prices.

In fact, having non-inventory items for all your different room rates (single, double, family, government, corporate, or whatever) in taxable and tax-exempt versions is probably a good idea. You can then also discount any particular rate if you have promotions, etc.

Thank you Tut. Noted.

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