RELIEF SLSP for Sales to Government: Why the 5% VAT Withheld Is Creditable, Not Final, Since 2021

A VAT-registered supplier selling to a government office or GOCC still reports the full 12% output VAT on its RELIEF Summary List of Sales and its quarterly VAT return (BIR Form 2550Q) — the 5% VAT the government agency withholds is a creditable amount applied against VAT payable, not a reduction to the reported sale, because Section 37 of the TRAIN Law shifted this withholding from final to creditable beginning January 1, 2021. Suppliers who still treat it as final risk misreporting their output VAT and understating the credit they’re entitled to claim.

This guide covers what changed in 2021, how to report a government sale correctly on RELIEF SLSP and 2550Q, and a worked reconciliation example. For the government agency’s side of this transaction — the two BIR Form 2307 certificates it issues — see BIR Form 2307 for Government Money Payments.

What changed in 2021, and why does it still trip suppliers up? #

Before January 1, 2021, the 5% VAT a government office withheld on a purchase from a VAT-registered supplier was a final tax — the supplier simply absorbed it as settled and used a standard 7% input VAT presumption instead of its actual input tax. Section 37 of the TRAIN Law (Republic Act No. 10963) changed this, and the BIR’s implementing guidance states the shift directly:

“…withholding Value-Added Tax (VAT) from sales to the government or any of its political subdivisions, instrumentalities, or agencies, including all government-owned or controlled corporations (GOCCs) shall be treated as creditable tax… five percent (5%) withholding VAT, beginning January 1, 2021, shall be imposed…”

— Revenue Regulations No. 13-2018, as applied under Revenue Memorandum Circular No. 36-2021, on the shift to a creditable VAT withholding system on sales to government

Because this changed mid-regulatory-cycle rather than through a headline law most suppliers tracked closely, it’s common — more than five years later — to still find a supplier’s bookkeeping treating a government sale’s 5% VAT withholding as a final, absorbed cost rather than a credit to be claimed, which quietly overstates the supplier’s effective tax cost on every government contract.

How does a supplier actually report a government sale on RELIEF SLSP? #

The supplier reports the government sale on RELIEF SLSP exactly like any other sale to a VAT-registered buyer — gross sale amount and full 12% output VAT — because the creditable VAT withholding doesn’t change what was sold or what output VAT was due; it only creates an additional, separate credit the supplier applies on its 2550Q.

A supplier that instead reports the government sale net of the 5% withholding on its SLSP — treating it like the pre-2021 final-tax days — misstates both its gross sales and its output VAT for the quarter, which can trigger a Letter Notice when the BIR’s RELIEF cross-matching system compares the supplier’s reported sales against the government agency’s own reported purchase.

Worked example: reconciling a government sale’s VAT #

Tolentino Office Supplies, Inc., a VAT-registered supplier, sells ₱500,000 (VAT-exclusive) worth of office equipment to a government agency.

Tolentino reports the full ₱500,000 gross sale and ₱60,000 output VAT on its RELIEF Summary List of Sales and 2550Q for the quarter — not a net ₱475,000 figure. Separately, it applies the ₱25,000 VAT withheld (supported by the agency’s BIR Form 2307 under ATC WV010) as a tax credit against its total VAT payable for the quarter, alongside its actual input VAT on purchases. If Tolentino’s total creditable withholding and input VAT for the quarter exceed its total output VAT, the excess carries over to the next quarter rather than being forfeited.

Frequently asked questions #

Is the 5% VAT withheld on sales to government a final tax? #

No, not since January 1, 2021. Section 37 of the TRAIN Law (Republic Act No. 10963), implemented through Revenue Memorandum Circular No. 36-2021, shifted VAT withholding on sales to government offices and GOCCs from a final tax to a creditable one. Before that date it was final; since then, the supplier credits the amount withheld against its own VAT payable instead of treating it as a settled, non-refundable tax.

Does a supplier still report full output VAT on RELIEF SLSP for a government sale? #

Yes. The supplier reports the full 12% output VAT on the sale in its RELIEF Summary List of Sales exactly as it would for any other VAT-registered customer — the 5% VAT withholding is a separate credit applied on the 2550Q VAT return, not a reduction to the sale amount or output VAT reported on the SLSP.

What ATC code does the government agency use for the 5% VAT withholding? #

ATC WV010 for purchases of goods and WV020 for purchases of services, both at 5%, under RMC No. 36-2021 — documented on a separate BIR Form 2307 from the 1%/2% creditable income tax withholding the same government agency also applies.

What happens if the 5% VAT withheld exceeds a supplier’s VAT payable for the quarter? #

The excess is carried over to the next quarter, the same treatment as any other excess creditable input tax or withholding credit under the VAT system — it is not forfeited and is not treated as a final, non-recoverable tax.

Summary #

Since January 1, 2021, the 5% VAT a government office or GOCC withholds on a purchase from a VAT-registered supplier has been creditable, not final, under Section 37 of the TRAIN Law and RMC No. 36-2021 — a supplier still reports the full gross sale and 12% output VAT on its RELIEF SLSP and 2550Q, then separately credits the 5% withheld against its VAT payable. Reporting the sale net of the withholding, a holdover from the pre-2021 final-tax treatment, misstates output VAT and risks a RELIEF cross-matching mismatch. For how to build the RELIEF SLSP DAT file itself, see How to Convert Excel to BIR DAT File for RELIEF SLSP, and for the government agency’s own two-certificate withholding process, see BIR Form 2307 for Government Money Payments.