The 12% VAT in the Philippines
Sales of goods and services by VAT-registered businesses carry 12% VAT. Businesses must register for VAT when their gross sales exceed ₱3,000,000 a year; smaller non-VAT businesses pay 3% percentage tax instead (or the 8% income tax option).
| You want to… | Formula |
|---|---|
| Add VAT to a net price | Price × 1.12 |
| Find the VAT in a VAT-inclusive price | Price × 12 ÷ 112 |
| Find the price without VAT | Price ÷ 1.12 |
| Senior / PWD price (VAT-exempt + 20% off) | Price ÷ 1.12 × 0.80 |
Senior citizen and PWD discount
Under RA 9994 (seniors, 60 and over) and RA 10754 (persons with disability), qualified purchases are exempt from VAT and get a 20% discount. The VAT is removed first, then 20% is taken off the VAT-exempt price. This covers medicines, restaurant meals, hotels, recreation, transport fares, funeral services and medical and dental services, among others.
So on a ₱1,000 meal: ₱1,000 ÷ 1.12 = ₱892.86; 20% of that is ₱178.57; the senior pays ₱714.29, a saving of 28.57%. The VAT exemption and 20% discount do not stack with other promos unless the store allows it — you choose whichever is higher.
Digital services
Since June 2025 (RA 12023), foreign digital service providers such as streaming and app platforms also charge 12% VAT to Philippine consumers.
FAQ
How do I compute 12% VAT?
Multiply the price before VAT by 12%. On ₱10,000 the VAT is ₱1,200.00 and the total is ₱11,200.00.
How do I remove VAT from a price?
Divide by 1.12. A ₱1,120 VAT-inclusive price is ₱1,000.00 without VAT, and the VAT is ₱120.00.
How is the senior citizen discount computed?
Remove VAT (÷ 1.12), then deduct 20%. On a ₱1,000 bill the senior pays ₱714.29 and saves ₱285.71.
How does the discount work for a group meal?
Only the senior’s share is discounted. A ₱3,000 bill shared by 4 people, one of them a senior: total to pay ₱2,785.71, a saving of ₱214.29.
Sources (checked 5 November 2026): NIRC Secs. 106–109 as amended (12% VAT; VAT registration threshold ₱3,000,000 under RA 10963); RA 9994 (Expanded Senior Citizens Act) and RA 10754 (PWD) — 20% discount and VAT exemption on qualified purchases; BIR Revenue Regulations No. 7-2010 (senior citizen discount computation, group meals) and RR No. 5-2017 (PWD); RA 12023 (VAT on digital services, effective June 2025); bir.gov.ph.