Formal Requirements for Supplier Invoices and Expense Claims to Recover VAT and Allow Deduction in the Income Statement
Context
In the Philippines, proper documentation is essential to benefit from the tax deductibility of expenses and the recovery of Value-Added Tax (VAT).
Supplier invoices
To be valid, basic invoicing requirement (“VAT Invoice”) must contain:
– Supplier’s name, address, and TIN (with “VAT” suffix),
– Buyer’s name, address, and TIN (above a certain threshold),
– Detailed description of goods or services, quantities, and price,
– Net amount, VAT amount (shown as a separate item), and gross amount,
– Date of transaction
– BIR-authorized serial numbering (with the information printed at the bottom portion either ATP, Permit Number or AC Number).
Without these, VAT input cannot be claimed, and the expense is non-deductible.
Expense claims and reimbursements
Business expenses (travel, meals, accommodation, transportation) are deductible if:
– A valid invoices are provided,
– Supporting documents exist (tickets, hotel invoices, etc.),
– The expense is properly recorded in the accounts.
Per diems are deductible only if they comply with BIR rules and are sufficiently documented.
✅ Key takeaways
– Ensure your suppliers are VAT-registered,
– Require compliant invoices,
– Implement strict internal controls on expense claims,
– Prepare for possible BIR audits.
In summary
Complying with documentation requirements is essential to secure tax deductions and claimable VAT input.
VAT on Digital Services
– A 12% withholding VAT shall be imposed on the gross sales derived by DSPs (Digital Service Providers) from the supply or delivery of digital services consumed in the Philippines.
– The VAT should be withheld and remitted every 10th day of the following month.
– The VAT withheld and remitted will become a creditable input VAT.
– NRDSPs must enroll via the VDS Portal. The enrollment of the NRDSPs may also be done through their resident third party service provider. Enrollment in the VDS Portal requires prior registration with the BIR.
– NRDSPs are required to file their VAT returns and pay the VAT due thereon, on or before the twenty-fifth (25th) day of the month following the close of each taxable quarter.
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