Penalty for failure to segreggate VAT

Under Revenue Regulations No. 18-2011 dated September 21, 2011, VAT-registered taxpayers who shall fail to separate the value-added tax (VAT) component in the sales invoice (for goods), or official receipts (for services) shall be penalized upon conviction as follows:

a. Fine of not less than P1,000 but not more than P50,000, and,
b. Suffer imprisonment of not less than two (2) years but not more than ten (10) years.


Comment:

This is not actually a new requirement to separate the VAT component in the invoice or receipt for transparency purposes, but only to penalize those who do not comply the same. Problem may arise if the seller does not indicate the VAT passed on because if a VAT receipt/invoice is issued, it presupposes that a VAT is imposed so the tendency of the business buyer is to divide by 112% and multiply to get the 12% VAT. As such, in mixed transactions where there are non-VATable sales, the buyer would claim VAT where there is none and the government will be deprived.

With the VAT specifically indicated in the VAT-registered invoice/receipt, the business buyer could easily determine how much input VAT was passed on and will rightfully claim what is allowed.

I encourage VAT-registered taxpayers to simply comply and separate the VAT component. Why waste your hard-earned money in penalties? Notably, the penalty imposed in the regulation is on every invoice/receipt issued.



"Taxes affect lives, care for taxes and save lives"

Posted in: BIR penalties,RR No. 18-11,VAT regulations,VAT shown separately