Published: Feb 19, 2025 | Last updated: Feb 19, 2025
In the Philippines, the Value-Added Tax (VAT) system plays a pivotal role in the nation's taxation framework, particularly influencing business-to-business (B2B) transactions. Wholesale Dito Store, a B2B wholesaler, adopts a VAT-exclusive pricing model to ensure cost transparency, tax efficiency, and business-friendly transactions. This pricing structure separates the 12% Value-Added Tax (VAT) from the base price, providing buyers with a clearer breakdown of costs and tax deductibility advantages.
For businesses, resellers, and distributors, understanding VAT-exclusive pricing is crucial for financial planning, tax compliance, and maximizing profitability. This article explains why Wholesale Dito Store uses VAT-exclusive pricing and how it benefits its business buyers.
What Is VAT-Exclusive Pricing?
In VAT-exclusive pricing, the price displayed does not yet include the 12% VAT, which is added separately upon invoicing. For example:
✅ VAT-Exclusive Pricing: PHP 1,000 (Base Price) + PHP 120 (VAT) = PHP 1,120 (Total Price)
❌ VAT-Inclusive Pricing: PHP 1,120 (Total Price) → VAT is already included, making it harder to separate.
This pricing method ensures business buyers see the true cost of goods before VAT application, which is standard practice in wholesale and B2B transactions.
VAT-exclusive pricing means that the displayed price does not include the 12% VAT, which is added separately upon invoicing. This pricing method is standard practice for wholesalers dealing with VAT-registered businesses, allowing them to claim input VAT credits and comply with Bureau of Internal Revenue (BIR) regulations.
Legal Basis for VAT-Exclusive Pricing
1. Compliance with the National Internal Revenue Code (NIRC) of 1997
Under Section 106(A) of the NIRC, VAT is imposed on the sale of goods and services, and VAT-registered businesses must issue service or sales invoices that clearly show the VAT component.
Clickerwayne Zelle Solutions Inc, the company behind Wholesale Dito Store, as a VAT-registered entity, is required to:
- Collect 12% VAT from buyers.
- Issue VAT-compliant invoices reflecting VAT separately.
- Remit VAT collections to the BIR.
By using VAT-exclusive pricing, the store ensures accurate tax reporting and full compliance with Philippine tax laws.
2. B2B Standard Practice Under BIR Regulations
The BIR mandates VAT-registered businesses to indicate whether their prices are VAT-inclusive or VAT-exclusive. For wholesalers, distributors, and suppliers, VAT-exclusive pricing is industry standard because:
✅ Business clients prefer to see the pre-tax price for cost analysis.
✅ It facilitates proper VAT input tax deductions for VAT-registered buyers.
✅ It prevents double taxation by ensuring that only the net taxable amount is recorded for financial and tax reporting purposes.
3. Compliance with the Consumer Act of the Philippines (RA 7394)
While RA 7394 (Consumer Act of the Philippines) requires businesses to display final prices inclusive of all taxes for retail consumers (B2C transactions), this rule does not apply to B2B wholesale transactions. Wholesale Dito Store operates exclusively as a B2B wholesaler, selling to businesses, not end consumers.
Thus, VAT-exclusive pricing remains fully compliant with consumer protection laws while aligning with wholesale trade practices.
Benefits of VAT-Exclusive Pricing for Business Clients
1. Full Input VAT Deductibility
VAT-registered businesses purchasing from Wholesale Dito Store can claim input VAT credits under Section 110 of the NIRC. Since the VAT is separately stated on the invoice, buyers can:
- Offset input VAT from output VAT on their sales.
- Reduce their net VAT payable to the BIR.
- Ensure accurate financial reporting and tax compliance.
2. Transparent and Competitive Wholesale Pricing
VAT-exclusive pricing provides clarity in cost analysis, allowing businesses to:
- Compare base prices without tax distortions.
- Accurately calculate profit margins when reselling.
- Negotiate bulk pricing based on net costs before tax application.
This enhances transparency, making it easier for business buyers to evaluate costs and profitability.
3. Standard B2B Pricing Model in Wholesale Trade
Wholesale transactions typically involve large volumes and varying tax treatments depending on the buyer’s tax status (VAT-registered or non-VAT). By using VAT-exclusive pricing, Wholesale Dito Store:
- Ensures consistency with industry standards.
- Avoids confusion between retail and wholesale pricing.
- Makes transactions efficient and tax-compliant for business customers.
4. Simplifies Financial and Accounting Processes
For businesses managing accounting and tax reporting, VAT-exclusive pricing:
- Separates taxable sales from VAT for accurate record-keeping.
- Reduces errors in financial statements and tax computations.
- Aligns with BIR invoice and tax documentation requirements.
Comparison: VAT-Exclusive vs. VAT-Inclusive Pricing in Wholesale Trade
| Criteria | VAT-Exclusive Pricing | VAT-Inclusive Pricing |
|---|---|---|
| Legal Compliance | Fully compliant for B2B transactions | Required for B2C (retail) transactions |
| Transparency | Clearer cost breakdown for businesses | Final price upfront but may cause confusion for VAT-registered buyers |
| Input VAT Deductions | Businesses can claim VAT credits | VAT cannot be separated for claiming |
| Industry Standard | Used by wholesalers and distributors | Used by retailers targeting consumers |
Why Wholesale Dito Store Uses VAT-Exclusive Pricing
Wholesale Dito Store's VAT-exclusive pricing strategy is legally sound, tax-efficient, and business-friendly. As a B2B wholesaler, the company prioritizes:
✔ Full compliance with the NIRC and BIR regulations.
✔ Transparency and accuracy in pricing for business clients.
✔ Facilitation of input VAT claims, reducing tax burdens for VAT-registered buyers.
✔ Standard wholesale trade practices for easy cost comparison and financial planning.
By using VAT-exclusive pricing, Wholesale Dito Store ensures a seamless and tax-compliant purchasing process for businesses, distributors, and resellers across the Philippines.
For bulk orders and VAT-compliant transactions, Wholesale Dito Store remains a trusted partner for business clients seeking cost-effective and transparent wholesale solutions.
Frequently Asked Questions (FAQs)
- Can non-VAT businesses purchase from Wholesale Dito Store?
Yes, non-VAT businesses can buy from Wholesale Dito Store, but they cannot claim input VAT credits. The 12% VAT will still apply to their purchases.
- How can I verify if my business is eligible for input VAT deductions?
Only VAT-registered businesses (gross annual sales over PHP 3 million) can claim input VAT credits. You must provide your VAT-registered TIN and business registration details when purchasing.
- Does Wholesale Dito Store issue VAT-compliant invoices?
Yes, Wholesale Dito Store provides official VAT invoices detailing the base price, VAT amount, and total cost in compliance with BIR regulations.
- Is VAT-exclusive pricing applicable to retail customers?
No, VAT-exclusive pricing is standard for B2B wholesale transactions. Retail customers should look for VAT-inclusive prices at consumer-focused stores like Low Price Dito Store.
