Switching from VAT to Non-VAT as your Business Tax

Switching from VAT to Non-VAT as your Business Tax

Taxes| Accounting| Licensing
November 17, 2024•2 min read

Published Date: November 17, 2024

Published By: Jac Cantos, Upcloud Accounting

In the Philippines, businesses can switch from being Value-Added Tax (VAT) registered to Non-VAT registered if their annual gross sales or receipts are below the PHP 3 million threshold. This change is a direct consequence of the TRAIN law's adjustments to the VAT structure.

Here are the requirements for switching from VAT to Non-VAT:

Eligibility:

  • Taxpayers whose gross sales or receipts are less than or equal to PHP 3 million in the previous year are eligible to switch from VAT to Non-VAT. [2]

  • This refers to earnings before any deductions. [2]

Procedure:

  1. Download BIR Form 1905: Obtain the latest version of this form from the BIR website. [2]

  2. Fill out Form 1905:

    1. Part I: Enter your TIN, RDO code, and taxpayer name. [2]

    2. Part II: Tick box "g" for "Value-Added Tax" under cancelled tax types. [2]

    3. Part II, Field 5: Complete and sign this section. [2]

  3. Submit Form 1905: File the completed form with your designated Revenue District Office (RDO). [3]

Additional Considerations:

  • Change in Books of Accounts: You might need to adjust your books of accounts to reflect the change in tax status. [2]

  • Change in Receipts: You may need to update your official sales invoices or official receipts. [1] This might require filing Form 1906 - Authority to Print Receipts. [2]

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Upcloud Accounting offers accounting, bookkeeping, tax compliance, and business licensing services specializing with startups and SMEs in the Philippines.

Our goal is to increase efficiency, automation, and transparency across the accounting and finance functions of our clients with our cutting-edge technology. If you want to move your company’s finance function online, contact our Team of Expert Accountants and Bookkeepers directly via [email protected] or visit www.upcloudaccounting.com to learn more about how Upcloud Accounting accounting services can support your PH business!

Disclaimer: This article or blog is only for general knowledge and guidance and is not a substitute for an expert opinion. For technical advice, please consult your tax / legal advisor for your specific business concerns. For comments, suggestions, and feedback, feel free to email us at [email protected].

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