In the economic landscape of Southeast Asia, the Philippines, as one of the fastest growing emerging markets, is attracting more and more investment from Chinese companies. However, the complex tax system, especially the value-added tax system, often becomes a major challenge for companies going overseas. In 2024, as the Philippine Bureau of Revenue (BIR) launches a new round of tax reform plan, VAT policy will usher in major adjustments. The comprehensive promotion of electronic invoice systems, the introduction of detailed taxation rules for cross-border digital services, and the optimization of tax refund processes are all reshaping corporate tax practices. This guide is based on the latest policy environment and combined with field survey data to provide enterprises with a comprehensive and practical VAT compliance guide. From tax registration to daily declaration, from invoice management to tax refund application, we will sort out the operational points of each key link for you to help enterprises develop steadily in the Philippine market. According to statistics from the Philippine Board of Investment (BOI), the investment volume of Chinese companies in the Philippines will increase by 52% year-on-year in 2023, which also means that the demand for VAT practical guidance will continue to rise. Let us take a closer look at this core tax category that is related to business operations.
Overview
Philippine Value Added Tax (VAT) is an indirect tax that must be paid by all links in the value chain. Since its introduction in 1988, it has become the second largest source of tax revenue in the Philippines. According to the Philippine Bureau of Revenue (BIR) 2023 annual report, VAT revenue reached 489 billion pesos, accounting for 31.2% of total tax revenue. Currently, the Philippines adopts a unified standard tax rate of 12%. This tax rate is at a medium level among ASEAN countries, lower than Vietnam (15%) but higher than Singapore (8%).
In early 2024, the Philippines implemented a new round of tax reform, and the VAT system ushered in major changes. First of all, the electronic invoice system (EIS) is fully rolled out, and companies with an annual turnover of more than 20 million pesos must complete system integration before June 30, 2024. Secondly, new cross-border digital service taxation regulations have been officially implemented, requiring non-resident digital service providers to register for VAT. Third, the tax refund process has been optimized and the tax refund review has been completed within 90 days, significantly improving tax refund efficiency. According to the latest data, the promotion of electronic invoice systems has increased tax collection and administration efficiency by 35% and reduced tax evasion rates by approximately 20%.
In terms of taxpayer classification, Philippine VAT taxpayers are mainly divided into three categories: first, compulsory registration taxpayers, that is, operators with an annual turnover of more than 3 million pesos; second, voluntary registration taxpayers, whose turnover does not meet the standard but choose to register voluntarily ; The third is non-resident taxpayers, including overseas enterprises that provide digital services to the Philippines. It is worth noting that starting from 2024, enterprises registered in special economic zones will be subject to differentiated management and enjoy simplified declaration procedures.
In terms of the scope of taxation, VAT covers three major categories: sales of goods, provision of services and import of goods. Specifically include: commodity sales or barter transactions, real estate sales, service provision (including leasing), imported goods, etc. A special reminder is that the tax scope of “digital services” will be added in 2024, including online advertising services, cloud services, digital content downloads, etc. According to data from the Philippine Board of Investment (BOI), VAT collection in the digital economy increased by 45% in 2023, and is expected to continue to grow rapidly in 2024.
At the practical level, enterprises need to pay special attention to the following points: First, to determine whether they meet the compulsory registration standards, they can judge by accumulating turnover in the previous 12 months. Secondly, pay attention to the latest announcements issued by the tax bureau in a timely manner. In 2024, 15 relevant implementation rules have been issued. Thirdly, establish a sound VAT management system, including invoice management, input tax deduction and other aspects. According to statistics from the tax bureau, about 75% of VAT violation cases stem from imperfect management systems.
In order to adapt to the requirements of digital transformation, it is recommended that enterprises plan the docking of electronic invoice systems as early as possible; improve internal data management processes; and equip professional tax personnel. Data from the tax bureau shows that companies that use electronic management reduce VAT compliance costs by an average of 30%. At the same time, enterprises should pay attention to obtaining and keeping invoices as supporting documents for future tax deductions and refunds. In 2023, the proportion of cases where input tax deductions are denied due to improper invoice management will be as high as 40%.
As the Philippine economy continues to grow, VAT-related policies are expected to be further improved in 2024. Enterprises should pay close attention to policy developments, especially new regulations in areas such as digital economy taxation, cross-border services and electronic invoices. At the same time, it is recommended that enterprises proactively maintain communication with tax authorities to understand policy interpretation and implementation standards in a timely manner to ensure compliance operations.
VAT tax liability
The Philippine VAT tax rate system adopts a three-level structure of “general tax rate + zero tax rate + tax exemption”. The standard tax rate is 12%. This tax rate will continue from 2023 to the present, and the Ministry of Economic Affairs expects it to remain stable in 2024-2025. It is worth noting that the 2024 tax reform plan considered a proposal to increase the standard tax rate to 15%, but was ultimately unsuccessful. This reflects the government’s strategy of seeking a balance between promoting economic recovery and expanding the tax base.
The zero tax rate applies to specific types of transactions, mainly including: direct export of goods, inter-enterprise transactions specializing in exports, sales of goods and provision of services to PEZA (Philippine Economic Zone Authority) registered enterprises, etc. In 2024, some new services for registered digital enterprises will also enjoy zero tax rate, which reflects the Philippines’ policy orientation to support the development of the digital economy. According to PEZA statistics, the zero-rated transaction volume in the special economic zone will reach 280 billion pesos in 2023, a year-on-year increase of 23%.
Determining the time when tax liability occurs is an important part of a company’s daily operations. For the sale of goods, the time when the ownership of the goods is transferred shall prevail, which is the earlier of the issuance of invoice, delivery of goods or receipt of payment. The provision of services shall be based on the earlier of the time when the service is completed or the time when the consideration is received. Special reminder: The new regulations in 2024 clarify the time when tax obligations for digital services occur, based on the time when users download, access or use digital content.
As far as the registration threshold is concerned, a business must register for VAT when its total turnover in the past 12 months exceeds 3 million pesos, or there is reason to expect that this threshold will be exceeded in the next 12 months. Starting in 2024, this threshold amount will be automatically adjusted every two years based on the rate of inflation. According to tax bureau data, there will be 15,800 new VAT-registered companies in 2023, about 60% of which will come from the service industry and e-commerce fields.
The conditions for voluntary registration are relatively loose, and operators whose turnover does not meet the compulsory registration standards can choose to voluntarily register as VAT taxpayers. However, it should be noted that once you choose to register, you must continue to operate for 24 months before you can apply for cancellation. New regulations will be added in 2024. If a voluntarily registered enterprise has a turnover of less than 1.5 million pesos for 12 consecutive months, the tax bureau may require it to convert to a non-VAT taxpayer.
In practical operations, enterprises need to focus on the following aspects:
The first is to grasp the registration time. It is recommended that enterprises start registration preparations 30 days in advance when they are close to the threshold. Data from the tax bureau shows that 45% of the cases that were punished for failure to register in time in 2023 were due to the company’s failure to accurately estimate the business scale.
The second step is the preparation of registration materials. Basic requirements include: business license, company articles of association, shareholder identity certificate, business location certificate, etc. In 2024, there will be a new requirement to provide a commitment letter for the use of the electronic invoice system. Special reminder: Foreign-funded enterprises also need to provide certified translations of company registration documents.
The third is the compliance requirements after registration. Business needs:
1. Display the VAT registration certificate in a prominent place on the business premises
2. Use invoices or receipts recognized by the tax bureau
3. Establish a standardized accounting record system
4. Report on a monthly or quarterly basis
- The tax bureau has set differentiated compliance requirements for enterprises of different sizes:
- Annual turnover above 50 million pesos: Must declare monthly and use electronic invoice system
- Annual turnover 10-50 million pesos: monthly or quarterly filing options available
- Annual turnover below 10 million pesos: in principle, quarterly filing
In 2024, the tax bureau launched the “VAT Compliance Rating System” to score companies based on indicators such as accuracy and timeliness of declarations. The rating results will affect the speed of tax refund processing and the frequency of inspections. Data from the first year of the pilot show that the average tax refund cycle for companies with A-level ratings was shortened by 40%.
For newly established enterprises, the tax bureau provides the “VAT Newbie Tutoring Program”, including online training and specialist guidance services. In 2023, the VAT compliance of enterprises participating in the program will be significantly higher than that of non-participating enterprises. It is recommended that eligible enterprises actively sign up to participate.
Enterprises are reminded to continue to pay attention to changes in their business scale. If it is expected that the mandatory registration standards will be reached in the short term, it is recommended to register for VAT in advance to avoid late fees and penalties due to back payment of tax. According to statistics, the average compliance cost of actively registered companies is 25% lower than passive registration.
Detailed explanation of taxable scope
The definition of the taxable scope of VAT in the Philippines is directly related to the tax liability of enterprises. According to the latest revision of the National Tax Code in 2024 and its implementation rules, taxable transactions can be divided into four major categories: sales of goods, provision of services, leasing of property and import of goods. Data from the tax bureau shows that among various types of taxable transactions in 2023, sales of goods accounted for 52%, provision of services accounted for 35%, leasing and imports accounted for 8% and 5% respectively.
In terms of the sale of taxable goods, this includes the sale or exchange of movable and immovable property. The new regulations in 2024 clarify that digital products (such as software, e-books, online game virtual items, etc.) fall into the category of sales of goods. According to the Bureau of Electronic Commerce, digital product sales will reach 35 billion pesos in 2023 and are expected to grow by 40% in 2024. In practice, enterprises need to pay special attention to the VAT treatment of special sales forms such as installment sales, barter transactions, consignment sales and conditional sales. For installment sales, VAT is calculated based on the amount received in each installment, while for barter transactions, VAT is calculated based on the fair market value of the goods.
The scope of service provision has been significantly expanded in 2024, most notably with the new category of “Digital Services”. This includes online advertising services, platform intermediary services, cloud storage services, streaming media services and online training services, etc. This policy adjustment is in line with the development trend of the digital economy. Data from the Taxation Bureau shows that VAT income in the digital service field will increase by 65% year-on-year in 2023, and has become a new tax growth point.
The zero-tax trading system will also be updated in 2024. In addition to the traditional direct export of goods and services, sales and services to PEZA-registered enterprises, and international transportation services, new related transactions under the “Qualified Export Enterprise Program” have been added. The total zero-rated transactions in 2023 will reach 350 billion pesos, of which PEZA-related transactions dominate, accounting for approximately 65% of the total. The implementation of this policy has effectively promoted the development of export-oriented enterprises.
The scope of duty-free transactions reflects the Philippine government’s people’s livelihood policy orientation. Primary sales of agricultural products, educational services, basic medical services and medicines, public transportation services and other fields closely related to people’s livelihood will continue to remain tax-free. However, the policy adjustment in 2024 will adjust some high-end service items, such as high-end private medical services and luxury residential rentals, from tax-free to taxable scope, reflecting considerations of tax fairness.
The processing of mixed transactions has always been a problem that plagues companies. In 2024, the tax bureau provided clear operational directions through new guidelines. For transactions where the taxable and tax-exempt parts can be clearly distinguished, the split treatment method is adopted; for transactions that are difficult to distinguish, the overall tax treatment is determined based on the nature of the main transaction. Of particular concern is the newly introduced “70% rule”, that is, when the taxable part exceeds 70% of the total value, the entire transaction is considered a taxable transaction, which greatly simplifies the complexity of practical operations.
In daily operations, enterprises need to establish a complete VAT management system. Invoice issuance requires taxable transactions to be listed with VAT separately, zero-rated transactions to be marked with “zero-rated sales”, and tax-free transactions to be marked with “VAT exemption”. The processing of input tax also needs to strictly follow the purpose of use and establish an accurate allocation mechanism. Data from the tax bureau shows that standardized VAT management can not only avoid the risk of penalties, but also bring tax savings of 10-15% to enterprises.
VAT processing in special industries requires additional attention. For example, the real estate industry adopts different standards for residential and commercial projects, and catering services need to distinguish between dine-in and take-out scenarios. These detailed regulations directly affect the tax burden level and compliance requirements of enterprises. It is recommended that enterprises pay close attention to policy developments in daily operations, establish a sound transaction classification management system, regularly review judgments on the nature of transactions, and properly preserve transaction files. For major transactions, it is recommended to consult the tax authorities in advance to ensure compliance while achieving optimal tax effects.
With the rapid development of the Philippine digital economy and the continuous optimization of the tax environment, the VAT policy system will continue to be improved. Enterprises should proactively adapt to policy changes, reasonably plan transaction structures on the basis of ensuring compliance, and make full use of various preferential policies to maximize enterprise operating benefits.
Basis for tax calculation
The determination of the Philippine VAT tax calculation basis is a key link in taxation practice. In 2024, the tax bureau has refined the regulations on tax calculation basis, especially formulating clearer calculation standards for emerging businesses. According to the latest statistics, tax disputes caused by improper determination of tax calculation basis account for up to 40% of VAT dispute cases, which highlights the importance of accurately grasping tax calculation basis.
In terms of selling goods, the basis for calculating tax is based on the total sales revenue, including the full selling price of the goods and all related expenses. It is worth noting that the 2024 new regulations clearly stipulate that even if certain expenses are listed separately on the invoice (such as packaging fees, transportation fees, installation fees, etc.), as long as they are directly related to the sale of goods, they should be included in the tax calculation basis. In practice, the common discount treatment of enterprises also has clear regulations: commercial discounts can be deducted before tax calculation, while cash discounts need to be adjusted when they actually occur. According to statistics from the tax bureau, there will be 3,200 cases of tax adjustments due to improper discount handling in 2023.
The tax basis for service provision includes the entire price charged and extra-price charges. The important change in 2024 is to clarify the tax calculation basis for digital services, and include all platform commissions, technical service fees, etc. into the scope of tax calculation. For situations where goods and services are mixedly provided, such as in the catering industry, service fees need to be included in the tax calculation basis. It is important to note that if the service fee is denominated in a foreign currency, it should be converted into pesos at the official exchange rate on the day of the transaction. Data show that the VAT tax base in the digital services field will increase by 85% year-on-year in 2023, reflecting the rapid development of this field.
The calculation of the tax calculation basis for imported goods is relatively complicated, and customs duties and consumption taxes need to be added to the dutiable value. In 2024, the General Administration of Customs and the Taxation Bureau jointly issued new calculation guidelines, which particularly emphasized that royalties, technical service fees, etc. need to be included in the duty-paid price. In practice, enterprises must pay special attention to the handling of temporarily imported goods, and must explain the purpose and provide a guarantee during customs declaration. Statistics show that the VAT tax base of the import link will reach 450 billion pesos in 2023, of which the proportion of high-tech products continues to rise.
The tax calculation method for special transactions will also have important updates in 2024. Second-hand goods transactions adopt the gross difference tax calculation method, and VAT is calculated only on the difference between the sales price and the purchase price. Real estate development projects need to consider the deduction of land costs. In 2024, it is newly stipulated that the land cost deduction ratio shall not exceed 50% of the total price. For financial leasing, the principal and interest should be treated separately. The principal part is taxed according to the sales of goods, and the interest part is tax-free financial services.
Determination of the tax basis of installment sales also requires special attention. According to the latest regulations, VAT should be calculated based on the entire price (including interest), but you can choose to recognize the output tax proportionally when the payment is received. This provision has greatly reduced the financial pressure on enterprises. Data shows that the transaction volume using the installment payment method will reach 80 billion pesos in 2023, mainly concentrated in the real estate and large equipment fields.
There are also special regulations for determining the tax basis for transactions within an enterprise group. The new regulations in 2024 require that related-party transactions must determine the tax calculation basis based on arm’s-length transaction prices, and the tax authorities will focus on price rationality. It is recommended that enterprises establish a sound pricing mechanism for related-party transactions and preserve complete pricing basis information. Statistics show that in 2023, the number of cases that were adjusted by the tax authorities due to unreasonable pricing of related-party transactions increased by 25%.
In practical operations, enterprises should establish a standardized tax calculation basis confirmation process. First, it is necessary to accurately classify transaction types and apply corresponding tax calculation methods according to different types. Secondly, a sound accounting system must be established to accurately record the nature and attribution of various expenses. Finally, it is necessary to regularly review whether the determination of the tax calculation basis complies with the latest policy requirements.
In response to the characteristics of enterprises of different sizes, the tax bureau has launched differentiated counseling services. Large enterprises can apply for advance pricing arrangements to determine in advance the tax calculation method for special transactions. Small and medium-sized enterprises can obtain policy guidance through the online consultation platform. In 2023, 150 tax calculation dispute cases will be resolved through advance pricing arrangements, effectively preventing tax risks.
With the in-depth development of the digital economy and the continuous emergence of new business forms, the determination of tax calculation basis will face more challenges. It is recommended that enterprises pay close attention to policy developments, strengthen tax compliance management, and seek support from professional institutions when necessary to ensure the accuracy and rationality of VAT tax calculation. According to the forecast of the tax bureau, policies related to the determination of VAT tax calculation base will continue to be improved in 2024, especially in the fields of digital economy and cross-border transactions.
Input tax deduction
The input tax credit system is the core link of the Philippine VAT system and directly affects the actual tax burden of enterprises. According to the tax regulations revised in 2024, the input tax deduction policy has been further optimized, paying more attention to operability and fairness. Data from the tax bureau show that the total input tax deduction nationwide will reach 280 billion pesos in 2023, an increase of 23% from the previous year, of which the proportion of non-compliant deductions has dropped to 8%, reflecting the significant improvement in corporate tax compliance.
In terms of deductible scope, the 2024 policy expanded the list of deductible items. In addition to the traditional input tax paid for purchasing goods and receiving services, input tax deductions for new businesses such as digital service procurement and carbon rights trading have been added. The input tax included in the purchase of fixed assets by enterprises during the production and operation process can now be deducted once in the current period when the assets are put into use. It is no longer required to be deducted in installments. This policy is expected to release about 15 billion pesos in cash flow for enterprises. . Input tax on R&D equipment and environmental protection facilities can also enjoy an additional 10% deduction, which reflects the government’s support for innovation and environmental protection.
However, some input tax is still included in the non-deductible scope. This includes non-business related expenses, entertainment expenses, personal or household consumption expenses, etc. In 2024, it is particularly emphasized that the input tax on luxury goods consumption (such as high-end cars, private yachts, etc.) shall not be deducted, even if it is purchased in the name of a company. For enterprises that engage in both taxable and tax-exempt items, the input tax amounts for different purposes must be strictly distinguished. Statistics show that in 2023, the amount of taxes that were checked and paid due to incorrect deductions for non-deductible items reached 3.5 billion pesos.
The voucher requirements for input tax deductions will be more stringent in 2024. Only VAT invoices or imported goods tax payment vouchers that comply with the regulations can be used as deduction vouchers. The promotion of electronic invoices has made voucher management more convenient. By the end of 2023, 85% of large enterprises across the country have achieved full coverage of electronic invoices. Special attention is paid to the fact that the invoice must clearly display the tax identification number of the purchaser, the specific name of the goods or services, unit price and quantity, tax amount and other information. The retention period of invoices has been extended from the original 3 years to 5 years, and enterprises need to establish an electronic file management system.
For enterprises that engage in both taxable and exempt items, the input tax allocation method is crucial. The new regulations in 2024 adopt two apportionment methods: the “income proportion method” and the “actual usage method”. The income proportion method calculates the deductible input tax based on the proportion of taxable income to all income, but the actual use of the method requires the enterprise to establish a detailed input tax allocation ledger. Businesses with operations exceeding P500 million must adopt the actual usage method to ensure a more accurate calculation of tax liability. Data shows that companies that adopt the actual usage method can deduct an average of 12% more input tax.
In order to improve the efficiency of deductions, the tax bureau has launched intelligent management measures. Enterprises are required to establish an input tax ledger to record the time, amount, purpose and other information of input tax. For mixed-use charges, the allocation criteria and calculation process need to be recorded in detail in the ledger. Enterprises can conduct pre-audit of input tax through the online platform developed by the tax bureau to discover potential risks in a timely manner. The amount of erroneous deductions avoided through the pre-audit system in 2023 will reach 2.8 billion pesos.
There are also special regulations on the treatment of input tax in special industries. The input tax of real estate development enterprises needs to be collected according to the project and deducted in one go when the project is completed and carried forward. Export enterprises can enjoy the policy of refunding input tax as soon as it is collected, and the average tax refund period has been shortened from the original 90 days to 45 days. Financial institutions need to determine the deductible proportion based on the proportion of taxable business income. In 2023, the industry average deductible proportion will be 35%.
The input tax carry forward and tax refund system has also been improved. Input tax that exceeds the current period’s output tax can be carried forward to the next period and continued to be deducted. If it has not been fully deducted for 12 consecutive months, you can apply for a tax refund. New regulations will be added in 2024. During corporate mergers, acquisitions and reorganizations, the acquired party’s retained tax credit can be transferred to the acquirer for use. The review period for tax refund applications has been shortened to 30 working days, which greatly improves the efficiency of capital turnover.
In order to prevent the risk of false deductions, the tax bureau has strengthened input tax management. Focus on monitoring abnormal reporting companies. For example, companies whose input tax accounted for more than 20% of the industry average will be included in key inspection targets. At the same time, the supply chain invoice verification system is promoted to achieve real-time comparison of invoice information. In 2023, a total of 1,200 cases of false deductions were investigated and 1.5 billion pesos in taxes recovered.
In 2024, the input tax deduction policy will continue to develop in a digital and refined direction. Enterprises should update their internal management systems in a timely manner, strengthen invoice management, standardize input tax ledgers, and conduct regular self-examinations to ensure that input tax deductions are compliant and effective. It is recommended that enterprises make full use of the various services provided by the tax bureau and hire professional institutions to provide guidance when necessary to standardize input tax management and maximize benefits.
VAT registration process
The Philippine VAT registration system will undergo major reforms in 2024 and launch a “one-stop online registration platform”, which will greatly improve registration efficiency. Data shows that there will be 85,000 new VAT taxpayers in 2023, of which 75% will be registered through online platforms, and the average registration time will be shortened from the original 15 working days to 5 working days. Understanding and mastering the correct registration process is of great significance to corporate compliance operations.
As far as registration conditions are concerned, the thresholds for 2024 have been adjusted. Enterprises with an annual turnover of more than 3 million pesos must register for VAT, which is an increase of 500,000 pesos from 2023. Special regulations stipulate that overseas companies engaged in digital services must register as long as they provide services to individuals in the Philippines and their annual income exceeds 1 million pesos. For small-scale enterprises that register voluntarily, they need to commit to maintaining VAT taxpayer status within 36 months after registration. Data shows that 92% of companies that voluntarily registered in 2023 have achieved stable operations.
There are also special regulations on the registration conditions for newly established enterprises. If the turnover in the first year is expected to exceed the registration threshold, registration should be completed before opening. Regardless of the expected turnover, real estate development companies must register as VAT taxpayers before project development. Statistics show that the number of VAT registrations for newly established enterprises in 2023 will increase by 35% year-on-year, of which the real estate industry accounts for 22%.
The list of required materials has been simplified in 2024, but the requirements for material authenticity are higher. Basic materials include: business license, company articles of association, board resolutions, legal representative identity certificate, business location certificate, etc. A new requirement is to provide a business email address and mobile phone number for receiving tax documents. For special industries, such as financial institutions and real estate development companies, licenses from the industry authorities are also required. All materials must be provided in Filipino or English, and foreign language materials must be certified translated.
The registration steps will be fully electronic in 2024. First, enterprises need to complete real-name authentication on the official website of the tax bureau and obtain a temporary access code. Secondly, fill in the registration information online and upload the electronic version of the required materials, and the system will automatically conduct formal review. Third, select a video interview time through the online appointment system and conduct a remote interview with the tax personnel. Finally, pay the registration fee (2,500 pesos as of 2024) and receive the electronic VAT registration certificate. The entire process achieves “zero-contact” handling, which greatly improves efficiency.
Registration procedures for special circumstances are also clearly defined. Group companies can apply for unified registration to simplify the registration procedures for branches. Foreign companies that set up institutions in the Philippines need to obtain approval from the Securities and Exchange Commission before they can apply for VAT registration. The VAT registration volume of foreign companies will increase by 50% in 2023, reflecting the attractiveness of the Philippine market.
Registering follow-up matters is equally important. Enterprises need to complete the installation of the tax control system and activate the electronic invoice function within 30 days after registration. The VAT registration certificate must be displayed in a conspicuous place on the business premises, and the VAT registration number must be marked on all commercial documents. The first application deadline is before the 25th of the month following registration. It is recommended to prepare application materials 15 days in advance. Data shows that 15% of newly registered companies in 2023 will be punished for failing to complete follow-up matters in a timely manner.
Change and cancellation procedures are also updated in 2024. Changes in business address, legal representative and other information must be processed within 15 days after the change; if you apply for cancellation due to a decrease in business scale, you need to provide proof of business data for the past 12 months. The retention period of invoices and tax information after cancellation is 5 years. In 2023, a total of 52,000 changes and 8,500 cancellations were processed.
To help companies successfully complete registration, the tax bureau provides a variety of support services. Establish a special registration consultation hotline to provide 7×24 hours online consultation. Training for newly registered taxpayers is held regularly to introduce practical knowledge such as declaration and invoice management. A mobile APP has also been launched to facilitate companies to check registration progress and supplementary materials. In 2023, more than 200,000 problems will be solved through these service channels.
The tax bureau specially reminds enterprises to pay attention to the authenticity of registration information. Once found to have provided false materials, they will be included in key surveillance targets and fined up to 500,000 pesos. In 2023, 320 cases were investigated for material fraud, significantly higher than in previous years. It is recommended that enterprises hire professional service agencies to assist in registration and ensure procedural compliance.
VAT declaration and payment
VAT declaration and payment are the most basic and important tax obligations of taxpayers. In 2024, the Philippine Taxation Bureau will comprehensively promote the “intelligent declaration system” to achieve integrated operations of declaration, payment, and invoice management. According to statistics, the total amount of VAT declarations in 2023 will reach 320 billion pesos, 98% of which will be completed electronically, and the system stability will reach 99.9%, significantly improving the efficiency of collection and management.
Regarding the application deadline, a more flexible classified management system will be implemented in 2024. General taxpayers must file returns on a monthly basis and must complete the declaration and payment before the 25th of the following month. Large enterprises with an annual turnover of more than 1 billion pesos implement a ten-day reporting system, which requires prepayment of taxes within 5 days after the end of each ten-day period, and a unified summary declaration at the end of the month. Small-scale taxpayers with a quarterly turnover of less than 5 million pesos can choose to file quarterly returns, which must be completed within 25 days after the end of the quarter. Data show that the on-time filing rate in 2023 will reach 92%, an increase of 5 percentage points from the previous year.
You can apply for an extension if you encounter special circumstances. In the event of force majeure, an extension application can be submitted before the declaration deadline, and the extension can be up to 30 days. Multinational enterprises can apply for a postponement of declaration due to audit needs of their overseas parent companies, but they need to provide a guarantee. A total of 2,800 extension applications were approved in 2023, with an average extension time of 15 days.
In terms of filling out the application form, the 2024 version of the application form has been optimized. The original 12 schedules were consolidated into 8, and emerging business declaration columns such as digital economic transactions and cross-border services were added. The output tax part needs to be divided into general sales, special sales and deemed sales; the input tax part is reported separately according to the purchase of goods, service reception and fixed assets. Note in particular that transactions to benefit from tax benefits must be detailed in a special schedule.
The use of electronic filing system is the key point. The new version of the system launched in 2024 supports multi-terminal operation and adds functions such as intelligent filling and automatic verification. Before filing for the first time, enterprises need to complete real-name authentication and digital certificate installation. The system provides a variety of data import methods and supports direct connection with mainstream financial software. There are multiple reminder functions during the filling process. If abnormal data is found, an immediate warning will be issued. Statistics show that in 2023, 150,000 declaration errors will be avoided through automatic error correction of the system.
To ensure the accuracy of the declaration, the system has set up a three-level verification mechanism. The first level is formal review, which checks whether the required fields are complete; the second level is logical review, which verifies the correlation between data; the third level is indicator review, which compares the declared data with the industry average. If an early warning is triggered, companies need to provide additional explanations. In 2023, declarations intercepted by the system due to data anomalies accounted for 5% of the total.
Tax payment methods are more diversified. In addition to traditional bank counter payments, new payment channels such as mobile payments and electronic wallets will be added in 2024. Large payments (over 10 million pesos) must be transferred directly through the bank. The system supports setting up automatic deductions to avoid overdue risks. Special reminder: After successful electronic payment, you must save the electronic receipt as a valid evidence for subsequent defense.
For regular export enterprises, you can apply for “immediate withdrawal”. The tax refund application must be submitted within 30 days after the declaration, and the tax refund review period shall not exceed 45 days. A new “blockchain electronic tax refund” pilot will be added in 2024, which is expected to shorten the tax refund time to 15 days. A total of 15.6 billion pesos in export tax refunds will be processed in 2023, with an average processing time of 40 days.
There are special regulations for the declaration of new business formats such as cross-border e-commerce. Overseas enterprises can designate domestic agents to declare and pay on their behalf, but they must bear joint and several liability. Platform companies need to report transaction data on a monthly basis to assist the tax authorities in implementing supervision. In 2023, VAT collected and paid by platform companies will reach 4.5 billion pesos.
To improve the quality of declarations, the tax bureau provides a variety of support services. Establish a 7×24-hour technical support hotline to answer system operation problems. Regularly publish declaration guides and video tutorials, especially detailed explanations of new businesses and policy changes. Businesses can access one-on-one coaching services by appointment. In 2023, a total of 300,000 related inquiries will be answered.
There are also clear procedures for correcting reporting errors. If a declaration error is discovered, a corrected declaration can be submitted within one month after the declaration deadline, and no late payment fees will be charged. If it exceeds 1 month, you need to explain the reason and pay a late fee. Anyone who intentionally makes a false declaration will be fined up to 5 times the amount of tax payable. In 2023, a total of 28,000 correction declarations were accepted, 95% of which were completed within one month.
Invoice management
Invoice management is the basic link of the VAT system. In 2024, the Philippines will comprehensively promote the electronic reform of invoices and strengthen the normative requirements for invoice management. Data show that in 2023, a total of 320 million value-added tax invoices were issued nationwide, of which electronic invoices accounted for 65%, an increase of 25 percentage points from 2022.
In terms of invoice types, a “four invoices in one” system will be implemented in 2024. Including special VAT invoices, ordinary VAT invoices, unified motor vehicle sales invoices and general machine-printed invoices. Among them, enterprises with annual sales of more than 500 million pesos must use special value-added tax invoices. For cross-border e-commerce, special invoices for e-commerce have been added. Special industries such as real estate and construction require customized invoice formats. Statistics show that the use of special invoices will increase by 40% year-on-year in 2023.
Invoice issuance regulations will be stricter in 2024. The basic elements of the invoice must be complete, including complete information about the seller and buyer, detailed description of the goods or services, unit price and quantity, tax amount, etc. The amount in uppercase and lowercase must match and cannot be altered. Special provisions require that invoices must be issued according to the actual time of transaction and cannot be made in advance or delayed. Mixed sales should be accounted for and invoiced separately.
Electronic invoices are a key promotion project in 2024. The new version of the electronic invoice system supports real-time issuance, automatic verification and intelligent archiving. Enterprises need to be equipped with invoicing equipment that meets standards and complete system docking tests. Electronic invoices should contain electronic signatures and anti-counterfeiting codes to ensure that the information is not tampered with. The system supports the automatic push function of invoices, and buyers can receive invoice information in real time. In 2023, the average issuance time of electronic invoices will only be 30 seconds, greatly improving efficiency.
Invoice custody requirements are also updated accordingly. The storage period of paper invoices is 5 years, they must be bound on a monthly basis, and an invoice ledger must be established. Electronic invoices need to save both original files and backup files, and it is recommended to use cloud storage. Strict cancellation procedures must be followed for invalidated invoices, and the reasons for the invalidation must be recorded. In 2023, there were 1,200 cases of penalties for improper storage of invoices, with a total fine of 150 million pesos.
Invoice collection management is more intelligent. Enterprises can apply for invoice quotas through the online system, and the system will automatically determine it based on the size of the enterprise and past usage. Large-value invoices (a single amount exceeding 1 million pesos) require prior filing. If the invoice usage rate is less than 70%, your next application will be restricted. In 2023, the amount of invoice collection nationwide will decrease by 25% compared with the previous year, reflecting the cost-saving effect of electronics.
Tax refund management
Tax refund management is an important part of the VAT system. In 2024, the Philippines will simplify the tax refund process and improve tax refund efficiency. In 2023, a total of 210 billion pesos in various types of tax refunds will be processed, with the average processing time shortened from 60 days to 35 days, and the efficiency of tax refunds has been significantly improved.
Regarding tax refund conditions, the policy will be clearer in 2024. It mainly includes four types of situations: input tax refunds for export enterprises, tax refunds for incorrectly collected taxes, tax refunds for preferential policies in specific industries, and tax refunds for retained tax credits. Export enterprises must have valid export certificates for tax refunds, and exports account for more than 70% of total sales in the past 12 months. If the amount of retained tax credit exceeds 1 million pesos for six consecutive months, you can apply for a tax refund.
There are special regulations for tax refunds in special industries. The new energy industry can enjoy the policy of refund immediately after tax is levied, and the shopping tax rebate in the tourism industry is “refund immediately upon purchase”. Statistics show that the amount of tax refunds for tourism shopping will reach 2.5 billion pesos in 2023, driving significant growth in overseas consumption.
The tax refund process will be fully electronic in 2024. First, enterprises submit tax refund applications through the online system and upload supporting materials. Secondly, the system automatically performs formal review and data comparison. Third, tax officials will conduct a substantive review and may require supplementary materials if necessary. Finally, after passing the review, the system automatically generates a tax refund notice, and the funds are directly transferred to the corporate account.
The required materials must be complete and accurate. Basic materials include: tax refund application form, relevant invoices or tax payment vouchers, export certification documents (if applicable), bank account information, etc. Special tax refunds also require industry qualification certificates, project approval documents, etc. All electronic materials must be electronically signed to ensure authenticity and validity. In 2023, applications that were returned due to incomplete materials accounted for 12% of the total.
In order to improve tax refund efficiency, the tax bureau has adopted a number of innovative measures. Establish a “green channel” and implement simplified procedures for companies with high credit ratings. The “Blockchain Tax Refund” pilot was launched to realize the full traceability of tax refund information. Introducing an “intelligent risk control system” to accurately identify abnormal tax refunds. In 2023, the system identified 180 cases of false tax refunds, avoiding tax losses of 800 million pesos.
Tax refund regulations have also become stricter. The tax bureau will regularly conduct on-site inspections of tax refund companies, focusing on checking the authenticity of the original vouchers. For major tax refund matters, enterprises are required to provide third-party audit reports. If a false tax refund is discovered, in addition to recovering the tax, a fine of five times the tax will also be imposed. In 2023, a total of 125 cases of false tax refunds were investigated and 1.2 billion pesos in taxes and fines were recovered.
Compliance Management
Compliance management is the core link of enterprise VAT tax risk prevention and control. In 2024, the Philippine Revenue Service released a new version of the “VAT Compliance Management Guidelines” to strengthen the responsibilities of corporate entities. Data shows that 80% of the violation cases discovered in national tax audits in 2023 are directly related to deficiencies in compliance management.
Account book setting requirements will be further refined in 2024. Enterprises must set up detailed accounts for output tax and input tax, and record each tax-related business in detail. The general ledger system needs to support multi-dimensional query and statistical functions. For mixed sales industries, it is required to set up auxiliary accounts according to tax rates. Large enterprises must enable advanced financial systems such as SAP to ensure the authenticity and completeness of data. In 2023, 2,800 companies were punished for irregular account book setting, with a total fine of 320 million pesos.
Credential management regulations are stricter. Original vouchers must be sorted and archived on a monthly basis, and a voucher file management system must be established. Electronic vouchers need to save the source file and PDF version simultaneously. Scanned copies of important documents such as purchase contracts and payment documents are required to be retained. Special regulations require that certificates involving cross-border transactions must have English translations. In the 2023 tax audit, 35% of the violation cases were related to chaotic voucher management.
Punishments for common violations have been increased. Penalty standards revised in 2024 include: a fine of 25% of the tax payable for failure to declare on time, a fine of 5 times the invoice amount for false invoices, and a fine of 50,000 to 500,000 pesos for incomplete account books. Repeat violations or serious violations will be included in the key monitoring list. Statistics show that in 2023, a total of 15,000 cases of various violations were handled, with a total fine of 2.5 billion pesos.
Internal control recommendations are more systematic. It is recommended that enterprises set up a dedicated tax compliance department and staff it with professionals with certified public accountant qualifications. Regularly conduct self-examinations on tax risks and establish an early warning mechanism. Major business decisions must be subject to tax impact assessment. It is recommended to use tax management software to realize automatic connection between business systems and tax declarations. For enterprises that implement standardized internal control management in 2023, the passing rate of tax compliance inspections will increase by 30%.
In order to strengthen compliance management, the tax bureau has launched supporting services. Provide online risk assessment tools to help companies identify potential risks. Carry out “tax physical examination” activities and provide special guidance to key industries. Establish a tax service specialist system for large enterprises to provide one-on-one guidance. P1.5 billion in tax violations avoided through preventive services in 2023.
Handling special situations
Dealing with special circumstances is a difficulty in VAT collection and administration. In 2024, the Philippines will introduce special policies for new business formats and new models. According to statistics, VAT revenue from special transactions will reach 58 billion pesos in 2023, a year-on-year increase of 45%, showing the rapid development of emerging businesses.
There are new regulations on VAT processing for cross-border e-commerce. Overseas e-commerce platforms must register in the Philippines or designate a tax agent, and declare and pay VAT on a monthly basis. The platform needs to report transaction data to the tax bureau to help identify tax evasion. For cross-border B2C transactions, a simplified collection method is adopted, with a unified tax rate of 12%. VAT collected through e-commerce platforms in 2023 will reach 8.5 billion pesos, doubling from the previous year.
Taxation of digital services is more standardized. In 2024, online advertising, cloud services, digital content, etc. will be clearly included in the scope of taxation. The location of service provision adopts the “place of consumption principle”, which is based on the location of the user. If it is difficult to determine the place of service, it can be determined based on the place of payment. Special provisions require VAT to be paid on digital currency transactions. VAT revenue from digital services will reach 3.5 billion pesos in 2023.
There are clear requirements for VAT processing of foreign currency transactions. When a transaction occurs, the exchange rate announced by the Central Bank of the Philippines on that day will be used for conversion. If there is any difference caused by exchange rate fluctuations, it can be adjusted when reporting in the next month. Long-term contracts can agree on fixed exchange rates, but they need to be recorded in advance. In 2023, there will be 800 tax disputes caused by improper exchange rate handling, reminding companies to pay special attention.
Intra-group transactions are more stringent. Goods and service transactions between affiliated enterprises must be priced in accordance with arm’s length principles. If the group makes unified purchases and redistributes, invoices need to be issued based on the actual allocated amount. Internal borrowings are exempt from VAT, but complete documentation of fund transactions is required. In 2023, there were 1,200 VAT audit cases on intra-group transactions, and 850 million pesos in taxes were recovered.
In order to adapt to the development of new business formats, the tax bureau has adopted innovative measures. Launch a pilot block chain invoice system to achieve real-time supervision of cross-border transactions. Establish a digital economy tax service platform to provide policy consultation and online declaration. Develop an intelligent identification system to accurately locate special transaction types. In 2023, there will be 50,000 abnormal transactions identified through the intelligent system.
For complex special transactions, it is recommended that companies communicate in advance. You can apply to the tax bureau for an appointment ruling to clarify the tax treatment plan. For major transactions, it is recommended to hire a professional agency to issue an opinion letter to prevent tax risks. When innovating business, tax implications must be fully considered and the business model adjusted when necessary. In 2023, the tax bureau accepted a total of 2,000 appointments for rulings, with an average processing time of 45 days.
For special circumstances, the tax bureau provides special guidance. Regularly publish typical case analysis to help companies grasp the key points of policies. Organize industry exchange meetings to share best practices. Establish a quick response mechanism to answer special business inquiries in a timely manner.
Practical case analysis
The manufacturing case first takes ABC Manufacturing Co., Ltd. as an example. The company, a P5-billion auto parts manufacturer, encountered complex VAT processing issues in 2023. When the company purchased raw materials, the supplier issued a special value-added tax invoice with an amount of 200 million pesos (tax included). During the production process, some products are exported (60%) and some are supplied to the domestic market (40%). In addition, the company also purchased a batch of production equipment and received an input tax of 15 million pesos. According to the latest policy, companies need to distinguish between exports and domestic sales and conduct VAT treatment separately: the export part is subject to zero tax rate and can apply for tax refund, and the domestic sales part is subject to VAT at 12%. Through reasonable planning, the company successfully obtained a tax refund of 180 million pesos in 2023, an increase of 35% over the previous year.
The service industry case is represented by XYZ Technology Services Company. The company is mainly engaged in software development and technical consulting, with a turnover of 1.5 billion pesos in 2023. The company faces the tax treatment problem of mixed sales: on the one hand, it provides standardized software products (accounting for 30% of revenue), and on the other hand, it provides customized development services (accounting for 70% of revenue). According to the latest regulations in 2024, standardized software is levied on a goods basis, while customized services are levied on a service basis. The company clearly distinguishes the two types of business by refining the contract terms and adopts different invoice management methods. Through standardized operations, the company avoided tax risks of approximately 5 million pesos, and tax compliance was significantly improved.
Retail industry case analysis of the business practices of DEF supermarket chain. The company has 200 stores and sales of 10 billion pesos in 2023. The main VAT difficulties include: determination of the tax base for promotional discounts, processing of member points deductions, e-commerce platform sales, etc. Especially under the 2024 New Deal, companies have adjusted their promotion methods: changing the original discount to a points return model, so that the discount can be managed through the points system while invoicing the full amount of the product. At the same time, the company has also established a unified electronic invoice management platform to achieve integrated management of online and offline transactions. These measures helped companies save approximately 30 million pesos in tax costs.
The import and export case focuses on the operational experience of GHI Trading Company. The company’s total import and export volume in 2023 will reach 3 billion pesos, and it is mainly engaged in the trade of machinery and equipment. The company encountered several key problems in VAT processing: first, the VAT withholding and deduction of imported equipment, and the company obtained the qualification for simple collection by filing in advance; second, the export tax rebate progress was slow. By joining the “Enterprise Credit Management Plan”, The tax refund cycle has been shortened from 60 days to 30 days; the third is to cope with exchange rate fluctuations, and the company uses forward foreign exchange contracts to lock in costs. These measures will reduce the company’s comprehensive VAT costs by 15% in 2023.
The above cases show the characteristics of VAT processing in different industries. The manufacturing industry focuses on input tax allocation and export tax refund management; the service industry focuses on the classification of mixed sales and its tax treatment; the retail industry focuses on invoice management and promotion policy design; import and export companies need to balance tax refund efficiency and exchange rate risks. In 2024, all industries will face new challenges and opportunities: the manufacturing industry needs to cope with the tax changes brought about by digital transformation; the service industry must adapt to new regulations on cross-border services; the retail industry will usher in the era of comprehensive electronic invoices; import and export companies must Be prepared for more stringent tax refund audits.
Based on industry trends, it is recommended that enterprises take the following measures: first, equip professional tax personnel to follow up on policy changes in a timely manner; second, optimize business processes to ensure compliance requirements are met; third, make full use of information technology to improve tax management efficiency; Fourth, establish an early warning mechanism to prevent major tax risks. Data shows that companies that take proactive tax management measures in 2023 can reduce tax compliance costs by an average of 10-15%.
In 2024, the tax bureau launched targeted service measures: setting up industry tax service specialists to provide one-on-one policy guidance; developing intelligent tax analysis tools to help companies conduct risk assessments; organizing industry experience exchange meetings to promote the sharing of best practices. These measures have effectively improved corporate tax compliance, with the tax violation rate in key industries falling by 20% year-on-year in 2023.
To sum up , the VAT practice case analysis reflects the complexity and professionalism of tax management. Enterprises need to formulate appropriate tax strategies based on their own characteristics and on the basis of grasping policy orientation. It is recommended that enterprises conduct case studies and experience summaries on a regular basis to continuously improve tax management levels. At the same time, attention should also be paid to preventing tax risks brought about by innovative business models to ensure the sustainable and healthy development of enterprises.
Policy preferences and planning
The current preferential policies will be significantly updated in 2024. The first is the preferential treatment for export enterprises. The scope of application of zero tax rate is extended to the export of technical services, and the tax refund cycle is shortened to 15 working days. Data shows that the total export tax rebate in 2023 will reach 85 billion pesos, a year-on-year increase of 25%. Secondly, there is a preferential treatment for technological innovation. The input tax on R&D equipment can be deducted by an additional 50%. In 2023, 3,200 enterprises will benefit. The third is the preferential treatment for environmental protection industries. Clean energy equipment is exempt from VAT, and the tax reduction amount will reach 4.5 billion pesos in 2023. Support for small and medium-sized enterprises has been intensified, and those with an annual turnover of less than 5 million pesos can choose simple taxation, with the tax rate reduced to 3%.
Reasonable planning of suggestions requires consideration from multiple dimensions. In terms of business model, it is recommended that enterprises optimize the supply chain structure and centralized procurement can improve the efficiency of input deductions. Statistics show that companies that implement centralized procurement will save an average of 15% in taxes in 2023. In terms of contract design, split invoicing is recommended for mixed sales to help accurately apply tax rates. In terms of timing, it is recommended that large equipment purchases be made in months with higher output tax to improve deduction efficiency. In 2023, through reasonable planning, enterprises will reduce their tax burden by 8% on average.
The key points of risk prevention are more detailed. First of all, we need to prevent the risk of false invoices. It is recommended to adopt an invoice verification system. In 2023, 5,000 cases of false invoices will be investigated and dealt with nationwide. The second is the pricing risk of related-party transactions. It is recommended to keep the same period of information intact. In 2023, there will be 800 related-party transaction investigation cases. Thirdly, there is the risk of tax refund. Export companies must ensure that the documents are complete. In 2023, the amount of tax refunds that will be denied due to incomplete documents will reach 3.5 billion pesos. It is recommended that enterprises establish a tax risk assessment mechanism and conduct regular self-examinations.
The development trend outlook shows several directions: First, digital collection and management will be fully promoted, and the coverage rate of electronic invoices will reach 95% in 2024. Second, international collaboration will be strengthened and cross-border transaction information will be automatically exchanged. Third, preferential policies are more precise and tilt towards strategic emerging industries. Fourth, collection and management methods will be intelligentized, and artificial intelligence technology will be widely used. VAT revenue is expected to grow by 20% in 2024, reaching 250 billion pesos.
Summary of frequently asked questions
Registration issues mainly focus on several aspects. The first is the judgment of registration conditions. In 2024, there is a new requirement that those with annual turnover exceeding 3 million pesos must register as VAT taxpayers. In 2023, there will be 80,000 new VAT taxpayers. Secondly, the registration process has been completed online, and the average time has been shortened to 3 working days. Common problems include: rejection due to incomplete information (35%), business address verification failure (25%), and incorrect information on the actual controller (20%). It is recommended that companies prepare complete materials in advance to ensure accurate information.
Declaration issues present new characteristics. A new version of the declaration form will be implemented in 2024, adding digital economy-related projects. The main problems include: inter-period invoice processing (accounting for 30%), input tax allocation errors (accounting for 25%), and supplementary declaration operations (accounting for 20%). Special reminder: Starting from 2024, late filing will result in increased penalties, up to 50% of the tax payable. It is recommended that enterprises prepare application materials 5 working days in advance and allow sufficient time for verification. The number of supplementary declarations nationwide in 2023 will reach 150,000, mainly due to inaccurate statistics.
Invoice issues are still the focus. Electronic invoice reform will be implemented in 2024, and paper invoices will be gradually phased out. Common problems include: grasping the timing of invoice issuance (accounting for 40%), incorrect use of invoice codes (accounting for 30%), and processing return and exchange invoices (accounting for 20%). Special note that starting from 2024, the penalty for failing to issue invoices in accordance with regulations will be increased to twice the invoice amount. It is recommended that companies strengthen the construction of invoice management systems. In 2023, 12,000 companies will be punished due to invoice issues.
Practical questions cover a wide range of topics. The first is mixed sales certification, and multiple certification standards will be added in 2024. The second is cross-border business processing, especially the determination of taxation place for digital services. The third one is input tax deduction. In 2024, the requirements for deduction vouchers will be refined. Statistics show that 45% of cases in tax audits in 2023 are related to practical issues. It is recommended that enterprises establish a question bank and summarize experiences and lessons.
In response to these problems, the tax department has taken a number of measures: setting up a 24-hour consultation hotline to answer 300,000 questions in 2023; developing an intelligent question and answer system, covering 95% of common questions; compiling operation guides to analyze key and difficult points; organizing training lectures, In 2023, 500,000 taxpayers will be trained.
Going forward, problem handling will be even more intelligent. A mobile tax assistant will be launched in 2024 to provide instant answers. Artificial intelligence systems will help identify common errors and provide early warning prompts. Blockchain technology will be used for invoice verification to improve processing efficiency. It is recommended that enterprises continue to pay attention to policy changes and update operating procedures in a timely manner.
Overall, VAT management is becoming increasingly standardized and refined. Enterprises must establish and improve internal systems and do basic work well. Consult promptly when encountering problems to avoid small problems turning into big risks. At the same time, attention should be paid to learning advanced experience and improving the level of tax management. It is expected that VAT management will be more intelligent and convenient in 2024, but the compliance requirements for enterprises will further increase.
