An In-Depth Review of Quarterly VAT

The National Internal Revenue Code (Tax Code) of 1997 made multiple significant amendments as a result of Republic Act (RA) No. 10963, also known as the TRAIN Law. Even though the law took effect on January 1, 2018, some adjustments were implemented gradually.

The elimination of the requirement to file Value-Added Tax (VAT) returns on a monthly basis is one of the notable adjustments that will be made this year. Section 37 of the TRAIN Law, amending Section 114(A) of the Tax Code of 1997, as amended, and as implemented under Section 4-114-1(A) of Revenue Regulations (RR) No. 13-2018, states that "beginning January 1, 2023, the filing and payment required under this subsection shall be done within twenty-five (25) days following the close of each taxable quarter". Thus, VAT-registered taxpayers are no longer required to file the Monthly VAT Declaration (BIR Form No. 2550M) for transactions starting January 1, 2023. Instead, they will file the corresponding Quarterly VAT Return (BIR Form No. 2550Q) within twenty-five (25) days following the close of each taxable quarter.

TRANSITORY PROVISION FOR THE YEAR 2023

Given that they were no longer had to file and pay their VAT payable on a monthly basis, VAT-registered taxpayers felt relieved when the year 2022 comes to an end. However, there was some uncertainty when the previous clause was first put into effect, particularly for taxpayers who are in a fiscal period of accounting. The Revenue Memorandum Circular (RMC) No. 5-2023, which provides temporary regulations for the implementation of the quarterly filing of VAT returns, was issued by the BIR to clarify the requirements.

The RMC provides that for taxpayers with quarter ending January 31, 2023, they are still required to file BIR Form No. 2550M for the month ending December 31, 2022 and BIR Form No. 2550Q for the quarter ending January 31, 2023.

For taxpayers with quarter ending February 28, 2023, they are still required to file BIR Form No. 2550M for the month ending December 31, 2022 and BIR Form No. 2550Q for the quarter ending February 28, 2023.

For taxpayers with quarter ending March 31, 2023, they are required to file BIR Form No. 2550Q for the quarters ending December 31, 2022 and March 31, 2023.

With the revised rules, beginning April 2023, all taxpayers who are required to file VAT return shall file the BIR Form No. 2550Q on a quarterly basis.

Moving forward, taxpayers will benefit from the elimination of the monthly reporting and payment of VAT in two ways. As they will be permitted to keep their cash for the first two months of each quarter, it immediately affects the taxpayers' financial flow. This will give them access to the money while they wait and, hopefully, cut down on short-term borrowing. Additionally, it makes their VAT compliance needs simpler. The government's action significantly improves the business climate in the Philippines and frees up taxpayers' time to focus on their main companies.

Although it is a good thing that the monthly filing and payment of VAT returns has been eliminated, taxpayers shouldn't lay back when it comes to preparing the quarterly VAT returns. To save time and prevent having to handle and file three months' worth of transactions all at once, it is nevertheless advised to create the schedules and computations on a monthly basis.

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