How VAT works: collect, subtract, pay

3 quick questions. Pick an answer to see why.

1. A customer pays ₱560 for an order, VAT included. How much of it is output VAT?

₱67.20 ₱60.00 ₱56.00

Divide by 1.12 to find the sale: ₱560 ÷ 1.12 = ₱500. The other ₱60 is VAT. ₱67.20 is 12% of a price that already includes VAT.

2. Kuting Kitchen's Q3 output VAT is ₱144,000 and its input VAT is ₱93,600. What does it pay BIR for the quarter?

₱144,000 ₱50,400 ₱237,600

Collect, subtract, pay: ₱144,000 − ₱93,600 = ₱50,400, reported on the 2550Q.

3. One quarter, a seller's input VAT is bigger than its output VAT. What happens to the excess?

BIR pays it back in cash It carries over to the next quarter's return It's lost

The excess input VAT carries over and is subtracted next quarter (item 38 of the 2550Q).