8box Solutions Inc.


Contact Number: 09369340340
Email: sales@8box.solutions

REVENUE REGULATIONS NO. 20-2003 issued on June 27, 2003 amends certain provisions of RR No. 18-99, as amended by RR No. 12-2003, which governs the imposition of Value-Added Tax (VAT) on services of banks, non-bank financial intermediaries and finance companies. Regarding the computation of output tax, particularly with respect to income, including net trading gains on government securities where the financial institutionlender/investor primarily liable for paying the VAT does not pass on to the governmentborrower part or whole of the output VAT due, the recognizable income of the said financial institution-lender/investor shall be net of the output VAT assumed, which will be remitted by the financial institution-lender/investor to the BIR. On the other hand, any output VAT passed on to the government-borrower shall be remitted directly by the government-borrower to the BIR as withholding tax creditable against the VAT liability of the financial institution-lender/investor. If the output VAT on the income of the financial institution is wholly or partly assumed by the said financial institution, the amount of its recognizable income is always net of the output VAT assumed and not passed-on to customers/clients. The payor of the income/fee who is a VAT-registered person shall be entitled to claim as input tax credit the output tax paid and passed on by the financial institution. However, if the payor is not a VAT-registered person, the VAT passed on by the payee shall form part of his cost. Provided, that a VAT receipt/invoice showing separately the passed on VAT shall be issued by the payee for all the received compensation for services rendered, or goods sold in certain cases, which shall be used as the evidence by the payor for the claim of input tax. Relative to the invoicing and receipt requirements, the following additional information should be shown in duly registered invoices/receipts to be issued by financial institutions: a) business style, if any; b) description of the nature of transaction; c) the invoice value or consideration showing the VAT separately; d) total amount billed or received; and e) such other information as required in Sections 237 and 113 of the Tax Code For income/fees/charges received by the financial institution, the invoice/receipt must show the details of the transaction and the total amount charged/paid and the VATregistered payor shall be entitled to an input tax for the VAT reflected separately in the receipt/invoice. With respect to financial lease, the treatment shall be similar to that of the gross receipts of banks on financial intermediation services.