Is a Consignment Sale Subject to VAT? The 60-Day BIR Deemed-Sale Rule
Goods placed on consignment become a “deemed sale” for BIR VAT purposes if the consignee hasn’t actually sold them within 60 days of the date they were consigned — even though no real sale to an end customer has happened yet. This catches consignors off guard because the natural assumption is that VAT only becomes due once the goods actually sell through to a buyer. The BIR’s consignment rule doesn’t wait that long.
Keep Your VAT Filings on Track FREE →What does the 60-day deemed-sale rule actually say? #
Under Section 4.106-7 of Revenue Regulations (RR) No. 16-2005, the BIR’s consolidated VAT regulations, consignment of goods is listed among the transactions “deemed sold” for VAT purposes — triggered specifically by the passage of time rather than by an actual transfer to an end buyer. The regulation’s consignment provision, as summarized consistently across BIR guidance on deemed-sale transactions, treats:
Consignment of goods as deemed sold if actual sale is not made within 60 days following the date such goods were consigned.
This means a VAT-registered consignor can end up owing output VAT on inventory that’s still physically sitting on a retailer’s shelf, unsold, simply because 60 days have passed. The rule exists to prevent consignment arrangements from being used to indefinitely defer output VAT recognition on goods that have, practically speaking, left the consignor’s control.
Does returning the unsold goods get you out of it? #
Only if the return happens within the 60-day window — goods actually returned by the consignee to the consignor within 60 days of consignment are not deemed sold. Once that window closes without either an actual sale or a return, the deemed sale is triggered regardless of what happens to the goods afterward — a late return doesn’t retroactively undo output VAT that already accrued on day 60.
| Scenario | VAT treatment |
|---|---|
| Consignee sells the goods to an end buyer within 60 days | Ordinary sale — output VAT recognized on the actual sale |
| Consignee returns unsold goods to consignor within 60 days | No deemed sale — no VAT triggered |
| Consignee neither sells nor returns the goods within 60 days | Deemed sale — consignor recognizes output VAT on day 60, even without an actual buyer |
| Consignee returns goods after the 60-day deemed sale already occurred | Deemed sale stands; the later return doesn’t reverse the VAT already recognized on the deemed-sale event |
Who recognizes the output VAT, and what’s the base? #
The consignor — the VAT-registered owner of the goods being placed on consignment — recognizes the output VAT on the deemed sale, using the goods’ value at the time of consignment as the tax base, the same way it would for any other deemed-sale transaction under RR No. 16-2005. This is consistent with how the regulation treats other deemed-sale categories, such as goods used for purposes other than the business or distributed to shareholders, where the entity that owns the goods and transfers them out of its inventory is the party recognizing the output tax — not the recipient.
How is this different from consignment for export? #
A separate, narrower rule applies specifically to goods consigned abroad for export: those goods are not treated as export sales — and don’t qualify for VAT zero-rating — until the foreign consignee actually sells them. That’s effectively the reverse timing concern from the 60-day domestic rule: instead of forcing early recognition of a deemed sale, the export-consignment rule holds off recognizing the export sale (and its zero-rating benefit) until an actual sale abroad occurs. A business consigning goods both domestically and for export needs to track these as two different rules, not one.
Worked example #
Vela Home Goods, a VAT-registered furniture maker, consigns ₱500,000 worth of dining sets to a partner retail showroom on June 1, with an agreement that unsold pieces may be returned.
| Date | Event | VAT consequence |
|---|---|---|
| June 1 | Goods consigned to the showroom | No VAT yet — not a completed sale |
| July 15 (Day 45) | Showroom sells ₱200,000 worth to customers | Output VAT recognized on the ₱200,000 actually sold |
| July 30 (Day 60) | ₱300,000 worth remains unsold, not returned | Deemed sale triggers — Vela recognizes output VAT on the remaining ₱300,000 |
| August 10 | Showroom returns ₱100,000 of the still-unsold pieces | Too late to avoid the deemed sale already recognized on Day 60 for that portion |
Vela ends up reporting output VAT on the full ₱500,000 by Day 60, even though only ₱200,000 was an actual completed sale to a paying customer — the deemed-sale rule closes the gap the moment the 60-day clock runs out.
Frequently asked questions #
Is consigning goods to a retailer automatically subject to VAT? #
Not at the moment of consignment itself. VAT ordinarily accrues on the actual sale. The 60-day rule is a deemed-sale backstop that applies once 60 days pass without an actual sale or a return.
What is the legal basis for the 60-day consignment rule? #
Section 4.106-7 of Revenue Regulations No. 16-2005, which lists consignment of goods as a transaction deemed sold if actual sale is not made within 60 days of consignment.
Does returning unsold consigned goods avoid the deemed-sale VAT? #
Only if the return happens within the 60-day window. A return after 60 days doesn’t undo output VAT already triggered by the deemed sale.
Who reports the output VAT under the deemed-sale rule — the consignor or the consignee? #
The consignor, as the VAT-registered owner of the goods placed on consignment.
Does the 60-day rule apply to consignment for export? #
A related but separate rule applies to exports: goods consigned abroad are not treated as export sales — and don’t get zero-rating — until actually sold by the foreign consignee.
Summary #
The 60-day consignment rule under RR No. 16-2005 Section 4.106-7 means a consignor can’t treat unsold inventory on a partner’s shelf as VAT-free indefinitely — 60 days without an actual sale or a return triggers a deemed sale and output VAT on whatever remains. Track consignment dates alongside actual sell-through so the VAT return catches deemed sales on time. For related invoicing timing rules, see VAT on Sale of Goods: When Does Output Tax Accrue Under the EOPT Act? and What Must Appear on a BIR-Compliant Sales Invoice?