VAT (Value-Added Tax) businesses, usually with annual sales over 3 million, charge a 12% tax, list a VAT number on receipts, and allow input tax credits. Non-VAT (Percentage Tax) businesses have lower sales, charge 3% or no tax, and cannot pass on input tax. Look for a "TIN-VAT" number on receipts.
Eligibility: Typically, businesses with annual gross sales or receipts below the VAT threshold—set at PHP 3 million as of 2025—are classified as non-VAT. Tax Obligation: These entities remit a 3% percentage tax to the Bureau of Internal Revenue (BIR) rather than the 12% VAT, streamlining their compliance process.
Some examples of VAT-exempt sectors include:
If something is exempt from VAT, it's usually because the product is considered to be an essential good or service. HMRC has a full list of VAT-exempt products, but some of the main goods and services that are exempt from VAT include: Sporting activities and physical education. Education and training.
Total price including VAT - Standard Rate
The standard rate applies to most goods and services. To work out the total price at the standard rate of VAT (20%), multiply the original price by 1.2. To calculate the reduced VAT rate (5%), multiply the original price by 1.05.
In adverts, catalogues and price lists
If they're for: the general public only, they'll show you a price including VAT. businesses as well as consumers, they might show the price with VAT and without. businesses only they do not usually include VAT , which is charged on top of the price shown.
Zero-rated goods, in countries that use value-added tax (VAT), are products that are taxed at a 0% VAT rate, meaning no tax is charged on their sale. These goods are often essential items, such as basic food staples, books, or children's clothing, designated as zero-rated to make them more affordable for consumers.
You do not include sales of exempt goods or services in your taxable turnover for VAT purposes. And if you buy exempt items, there is no VAT to reclaim. Exempt items are different from zero-rated supplies. In both cases VAT is not added to the selling price, but zero-rated goods or services are taxable for VAT — at 0%.
In other words, a VAT receipt is issued to a customer by a VAT-registered business. These receipts are primarily required by VAT-registered businesses as it allows them to claim back VAT on goods and services. A VAT receipt vs a normal receipt has a few extra details.
To get the product VAT free your disability has to qualify. For VAT purposes, you're disabled or have a long-term illness if: you have a physical or mental impairment that affects your ability to carry out everyday activities, for example blindness. you have a condition that's treated as chronic sickness, like diabetes.
Common Types of VAT Exempted Supplies
In principle, the tax base of a value-added tax (VAT) is all consumption. Most VAT systems, however, exclude certain items from taxation. Some items typically ex(e.g., food and prescription drugs) are excluded to reduce the impact of the tax on low-income households.
Using HMRC Online VAT Number checker.
The HMRC provides a search tool which allows anyone to check if a UK VAT registration number is valid. This tool is free to use and you can also use it to find the name and address of the business the number is registered to.
: What is the invoicing requirement for a Non-VAT registered person? : A Non-VAT-registered person shall issue a duly registered Non-VAT Invoice for every sale, barter, exchange or lease of goods or properties, and for every sale, barter or exchange of services valued at Five Hundred Pesos (Php 500.00) or more.
Examples of VAT exempt goods and services
VAT stands for 'Value Added Tax'. It is classed as a 'consumption tax' and placed on almost all sales of goods and services. This amount is then passed to HMRC as part of the business' VAT returns.
Many goods and services are exempt from VAT. But there are often items within a goods or services category for which VAT is chargeable. For example, food and drink is generally zero-rated for VAT. Exceptions to this include hot food, crisps, alcoholic drinks, confectionery and soft drinks.
Another way to determine if an entity should be VAT or NON-VAT is the Annual Gross Sales or Receipts. As such, if the taxpayer exceeds the gross annual sales or receipt threshold, they will automatically be classified as VAT registered.
Frequently asked questions
Most goods and services are charged at the standard rate of 20%. You should charge this rate unless the goods or services are classed as reduced or zero-rated. Get a list of reduced or zero-rated goods and services.
VAT (Value Added Tax) and GST (Goods and Services Tax) are fundamentally the same type of consumption tax, levied on goods and services at each stage of the supply chain, but the terms are used in different countries and can have structural differences, with GST often being a unified, simpler system replacing multiple taxes (like VAT, sales tax, excise duty) into one, as seen in India and Canada. Both ensure the final consumer pays the tax, while businesses get credits for tax paid on inputs, but specific implementation, rates, and administration vary by country (e.g., EU uses VAT, India uses GST).
VAT is a tax which is ultimately paid by the consumer, and is not a tax on individual businesses. VAT is typically included on business invoices.