Philippine exports of goods and qualifying services are zero-rated: you charge 0% VAT yet keep your input VAT credit. Imports are the opposite, with 12% VAT collected by the Bureau of Customs before release. Zero-rating holds only if your records prove the export and, for services, payment in acceptable foreign currency.
A VAT-registered exporter that charged 12 percent on its sales would price itself out of foreign markets. Zero-rating solves that: the export sale carries 0 percent output VAT, but the exporter keeps the right to claim input VAT on materials, services and equipment used in making it.
For a firm that buys PHP 5,000,000 of VAT-exclusive inputs a year, input VAT is PHP 600,000. If all its sales are exports, there is no output VAT to set against it, so the input VAT builds up as a credit that can be carried over or, under the Tax Code conditions, claimed as a credit or refund.
Under the National Internal Revenue Code, qualifying export sales of goods are zero-rated. Certain services supplied to non-residents are also zero-rated when the conditions are met, including that the service is performed in the Philippines and the consideration is paid in acceptable foreign currency accounted for under Bangko Sentral rules. Details and exclusions are technical, and the BIR interprets them closely.
A flat invoice that says only "export" is not enough. Zero-rated invoices must carry the wording that identifies the sale as zero-rated, and your contract and payment records must tie the sale to the foreign buyer.
For goods, build a file per shipment with the commercial invoice, packing list, export declaration, bill of lading or airway bill and proof of payment from the foreign buyer. For services, keep the contract, the work orders, the invoice and the bank record of inward remittance showing the foreign currency received.
Store the file under a single reference number and cross-check the amounts. A refund claim lives or dies on whether the BIR can follow a sale from the invoice to the shipment to the payment without asking you to explain.
Input VAT directly attributable to zero-rated sales can be applied against output VAT on domestic sales, carried over, or claimed for a refund or tax credit within the periods the Tax Code allows. If you have both zero-rated and domestic sales, you must allocate input VAT that relates to both.
The BIR reviews refund claims closely and asks for supporting invoices of suppliers, who must themselves be VAT-registered and properly invoiced. Check supplier invoices for name, TIN, VAT statement and address before you book them, since a defect found a year later can reduce the amount of the claim.
Imports work the other way. Before release, the Bureau of Customs collects customs duty and 12 percent VAT on the landed cost of the goods, which includes the value, freight, insurance and duty. A VAT-registered importer treats that VAT as input VAT, supported by the customs entry and the payment record.
Licensed customs brokers prepare the entry, while the importer provides the invoice, packing list and transport document. Check that the customs value on the entry agrees with the invoice and any adjustments, because the value drives both duty and VAT.
Suppose a garment exporter sells PHP 18,000,000 of goods abroad in a quarter and buys PHP 9,000,000 of VAT-exclusive fabric, services and equipment from VAT-registered suppliers. Output VAT on the export sales is nil. Input VAT on the purchases is PHP 1,080,000. The exporter cannot offset that amount against output VAT, so the input VAT sits as an unused credit.
The firm can carry the credit over, apply for a refund or tax credit of the part attributable to zero-rated sales, or, if it has domestic sales too, use some of it against output VAT. The choice depends on the sales mix, the time allowed and the evidence assembled.
Refund claims are slowed by supplier invoices with the wrong name or no TIN, sales that cannot be tied to a shipment, bank records in pesos where foreign currency was required, and quarterly returns that disagree with the schedule submitted with the claim.
Prepare the claim as an organised file. Include the VAT returns for the periods covered, summary lists of sales and purchases, the supporting documents behind each line, and a reconciliation to the general ledger. A claim that the BIR can verify in one reading is processed faster than one that raises questions.
An importer who budgets only for the supplier's invoice is surprised at the border. Duty and import VAT are based on the customs value, and 12 percent VAT is then charged on the total of value, freight, insurance and duty, among other elements. On a shipment with a customs value of PHP 1,000,000 and PHP 100,000 of duty, VAT is 12 percent of PHP 1,100,000, which is PHP 132,000.
Even though the VAT can be claimed back as input VAT, it ties up cash until the quarterly return is filed, so build it into the working-capital plan.
4invoices.net can issue PDF export invoices and keep an archive of them. You choose the VAT treatment and enter the wording yourself, since the product does not decide VAT rates by customer country and produces no BIR transmissions. 4hosting.net provides web hosting and VPS in EU data centres, which some exporters use for their own online catalogues.
Customs documents, bank remittance records and shipping papers are not linked to invoices in the products, so keep them in one folder per shipment and name the folder with the invoice number.
Export invoices are being issued with 12 % VAT in error — the foreign client queries the overcharge, and BIR has to process a credit memo that disrupts the EIS ledger.
Apply zero-rating to qualifying exports yourself after checking the NIRC conditions, and keep the evidence. 4invoices does not decide VAT rates by customer country and does not produce EIS records.
Export evidence — BL/airway bill, customs export declaration, proof of receipt of foreign currency payment — is held in three separate systems and cannot be produced at short notice for a BIR audit.
Keep the bill of lading or airway bill, export declaration and proof of foreign-currency receipt together with the matching PDF invoice. The products do not link customs documents to invoices.
An exporter charges 12% VAT on an invoice to a foreign buyer because the template defaults to the domestic rate.
Create a separate export invoice template that shows the zero-rated statement, and block the VAT default when the customer country is outside the Philippines.
A zero-rated sale is a taxable sale at 0 percent, so the seller can claim input VAT on related purchases and may seek a credit or refund of unused amounts. An exempt sale is outside VAT altogether, and the seller generally cannot claim input VAT on costs linked to it. Exporters want zero-rating, which means preserving the evidence that the conditions were met.
Typical evidence includes the export declaration cleared by the Bureau of Customs, the bill of lading or airway bill, the commercial invoice, packing list and proof of payment from the foreign buyer. Keep them together by shipment number. If your goods pass through a forwarder, request copies of its documents as well, since you may not otherwise receive them.
VAT paid at importation is generally allowed as input VAT for a VAT-registered importer who uses the goods in business, provided the import documents and proof of payment are kept and match the VAT return. Keep the customs entry, the official payment record and the supplier invoice, and record the VAT in the quarter the law allows. Ask your accountant about the supporting-document rules.
For input VAT attributable to zero-rated sales, the claim is generally filed within two years after the close of the taxable quarter when the sales were made, subject to the conditions in the Tax Code. Processing periods are set by law and regulation, and the BIR can ask for extensive documentation. Start collecting evidence at the time of the sale, not when you file.
Importers generally need to be registered or accredited with the Bureau of Customs to lodge entries, and most use a licensed customs broker. Requirements depend on the type of importer and goods. Some goods need permits from other agencies, such as food, drugs or agricultural products, so start with the regulator for your product before you place an order.
PDF invoices and an invoice archive. Zero-rating is applied and evidenced by you.
