Freelance Broker and VAT Payment

QUESTION: Sir John, I am an independent freelancer Real Estate Broker. I have no Business Entity (Sole Proprietorship, Partnership, Corporation). I do charge (1) Professional Fee for documentation workload and (2) Percentage Commission when I successfully make a sale. I have Official Receipts. Without Official Receipts, how will I go about the BIR Rule that I have to charge VAT or Percentage Tax for my professional services and commissions?

ANSWER: You are the service provider. The entity (person or individual) who availed your service (for a fee) is called customer. VAT and Percentage Tax is always on the burden of the customer. You don't pay VAT for those services, it is the customer who pays VAT.

The term "VAT Remittance" and "VAT Payment" are two different things. Government captures VAT via Input Tax or Output Tax -- it cannot be both. Input Tax means the customer pays VAT (because you charge him VAT over and above your service fee) and you remit the tax directly to Government. Output Tax means customer pays VAT (because you charge him VAT over and above your service fee), but take note that he will not actually give you the VAT money because he will withhold it and he remits it directly to Government. Whether Input Tax or Output Tax, its the customer who pays the VAT. If Input Tax, you have the burden to remit the VAT to BIR. If Output Tax, the customer has burden to remit the VAT to BIR.

In your case as a freelance Broker who have no Official Receipt, you do the Output Tax procedure. When a customer pays you P10,000 (for example), you issue an Acknowledgement Receipt (AR). The contents of your AR must be clear so that it would show that you did not receive the VAT money, meaning the VAT money is not with you but is in the hands of the customer. If the BIR will run after the VAT money, there is record that the VAT money is in the hands of the customer because this is an Output Tax procedure.

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