Tax Notes: How to fill in VAT returns from final to creditable VAT withheld on sales to gov’t

Effective Jan. 1, 2021, the five percent final withholding Value-Added Tax (VAT) from sales to the government or any of its political subdivisions, instrumentalities, or agencies, including all government-owned or -controlled corporations (GOCCs) shall be treated as creditable withholding tax.

This is in line with the provisions of Section 4-114-2 of Revenue Regulation (RR) 13-2018, and in reference to Republic Act 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (Train) Act.

In this regard, the Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular (RMC) 36-2021 to inform taxpayers of the guidelines on how to fill in their VAT returns until a new version thereof is made available.

The government or any of its political subdivisions, instrumentalities, or agencies, including GOCCs that are required to withhold creditable VAT, are recommended to use the Monthly Remittance Return of Value Added Tax Withheld (BIR Form 1600-VT) in filing and remitting the amount withheld, except for eFPS filers who shall still use BIR Form 1600 due to the unavailability of the suggested form.

Given that VAT withheld on sales to government is treated as creditable tax, a Certificate of Creditable Tax Withheld at Source (BIR Form 2307) using Alphanumeric Tax Code (ATC) WV010 for purchases of goods or WV020 for purchases of services shall be used instead of the Certificate of Final Tax Withheld at Source (BIR Form 2306). Hence, VAT taxpayers shall now use BIR Form 2307 in claiming their VAT credit in their monthly and quarterly VAT declarations. Failure to comply shall result in strict disallowance of the withheld amount and forfeiture of the same in favor of the government.

Please be guided accordingly.


P&A Grant Thornton

Certified Public Accountants


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