Can One Sales Invoice Show Both VAT-Exempt and VATable Items? BIR Rules for Mixed Transactions

Yes — a VAT-registered seller can put VAT-exempt, zero-rated, and regular VATable items on one invoice, as long as the sale price is broken down by category and the exempt portion carries the required “VAT-exempt sale” label. Lumping everything into one undifferentiated total, without that breakdown, is what gets a seller into trouble — not the act of combining categories on a single document.

Why would one invoice even have both exempt and taxable items? #

A single transaction often mixes tax treatments without the seller intending anything unusual — a grocery sale with fresh produce (VAT-exempt) and packaged snacks (VATable), or a clinic’s bill combining an exempt medical service with a taxable retail item sold at checkout, are both routine mixed sales. Because the VAT-exempt list under Section 109 of the NIRC covers specific goods and services — not entire business categories — almost any retailer or service provider that sells a varied basket of items will eventually issue an invoice spanning more than one VAT treatment in the same transaction.

Does the law actually allow combining them on one invoice? #

The Tax Code allows a single invoice to cover a sale involving taxable, VAT-exempt, and zero-rated goods, properties, or services together, provided the invoice clearly shows the breakdown of the sale price among those categories, with VAT computed only on the taxable share. As the relevant invoicing provision has been summarized from the statute:

“If the sale involves goods, properties, or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price.”

— Section 113 of the NIRC, as amended, reproduced in secondary commentary summarizing the statutory invoicing requirements (the exact current wording should be checked against the official Tax Code text and Revenue Regulations No. 7-2024 for a filing decision).

An older 2003 circular, Revenue Memorandum Circular No. 61-2003, at one point directed VAT-registered sellers to use separate invoices for taxable and exempt transactions rather than combine them. That older separate-invoice approach doesn’t fit cleanly with the current single-document invoicing framework introduced under the Ease of Paying Taxes Act, so the safer and more current reading is the breakdown-on-one-invoice approach described above — a seller who prefers separate invoices for operational reasons can still issue them that way, but it isn’t the only compliant option.

What has to appear on the invoice for the exempt portion to stay exempt? #

The exempt portion of a mixed invoice only stays exempt if it’s labeled as such — the words “VAT-exempt sale” need to be written or printed prominently on the invoice next to that line, and skipping the label puts the exemption itself at risk. If a VAT-registered seller issues what looks like a regular VAT invoice for an exempt item, without that notation, the BIR can treat the transaction as if it were fully taxable — meaning the seller owes output VAT on a sale that should never have been taxed in the first place, simply because the paperwork didn’t say so. The same logic extends to a zero-rated component, which should carry its own “VAT zero-rated sale” label for the same reason.

What does a compliant mixed invoice need to show? #

Beyond the breakdown and labeling, a mixed invoice still has to carry every other field a standard invoice requires under Revenue Regulations No. 7-2024 — it isn’t a separate, lighter-weight document just because it spans categories.

• The seller’s registered name, TIN (with branch code), and VAT-registered status
• The buyer’s name, address, and TIN, required once the sale reaches ₱1,000 or more to a VAT-registered buyer
• The date of the transaction and a description, quantity, and unit cost for each line item
• The sale price broken down into its taxable, exempt, and zero-rated components
• VAT computed and shown as a separate amount on the taxable portion only
• The “VAT-exempt sale” and/or “VAT zero-rated sale” notation on the applicable lines

Can the buyer still claim input VAT from a mixed invoice? #

A VAT-registered buyer can only claim input VAT on the taxable slice of a mixed invoice — the portion that was actually subject to VAT and separately stated as such — never on the exempt or zero-rated lines, since no VAT was charged there to begin with. This is why the breakdown matters just as much to the buyer as to the seller: an invoice that doesn’t separate the categories gives the buyer no reliable basis for how much input VAT it’s even entitled to claim.

Worked example #

A VAT-registered pharmacy-and-grocery store rings up a single receipt for a customer buying prescription medicine for a chronic illness (VAT-exempt under the Philippines’ expanded VAT exemptions for certain drugs) alongside bottled water and snacks (regular VATable goods):

The invoice shows the medicine line marked “VAT-exempt sale,” the snacks line showing its own ₱33.60 VAT separately, and a total that reconciles both pieces. The pharmacy reports the ₱1,500 as an exempt sale and the ₱280 (plus its VAT) as a regular VATable sale on its VAT return and RELIEF SLSP — not as one undifferentiated ₱1,813.60 transaction.

Frequently asked questions #

Can a VAT-registered seller put VAT-exempt and VATable items on the same invoice? #

Yes. The National Internal Revenue Code allows a single invoice to cover a sale that includes taxable, VAT-exempt, and zero-rated goods, properties, or services, as long as the invoice clearly breaks down the sale price into its taxable, exempt, and zero-rated components, with VAT computed only on the taxable portion.

Is a seller required to use separate invoices for the exempt and taxable parts instead? #

No, separate invoices are not mandatory under the current single-document invoicing framework — a seller may choose to break down one invoice by category instead. Older BIR guidance from 2003 once called for separate invoices in certain cases, but current practice allows a single, clearly itemized invoice.

What happens if a VAT-exempt item isn’t labeled correctly on a mixed invoice? #

If the exempt portion of a sale isn’t marked with the required “VAT-exempt sale” notation, the BIR can treat the entire transaction as subject to VAT, which means the seller owes output VAT on an amount that should have been exempt — the label isn’t a formality, it’s what preserves the exemption.

Does the buyer still get to claim input VAT on a mixed invoice? #

A VAT-registered buyer can claim input VAT only on the taxable portion of a mixed invoice — the amount actually subject to VAT and separately shown as such — not on the exempt or zero-rated portions, since no VAT was charged on those components in the first place.

Does this invoicing rule apply the same way after the EOPT Act changed invoicing requirements? #

Yes, in substance. Revenue Regulations No. 7-2024, implementing the Ease of Paying Taxes Act, consolidated the sales invoice as the single primary document for both goods and services, but it kept the underlying requirement that a sale combining taxable, exempt, and zero-rated components be broken down and labeled accordingly on that invoice.

Summary #

Combining VAT-exempt, zero-rated, and regular VATable items on one invoice is allowed under the NIRC’s invoicing rules, as long as the sale price is broken down by category and the exempt (or zero-rated) portion carries its required label — the breakdown and the label are what actually protect the exemption, not the choice between one invoice or several. Get either wrong and the BIR can tax the whole transaction as if none of it were exempt. For the full field-by-field invoice checklist, see What Must Appear on a BIR-Compliant Sales Invoice?, and for how invoicing changed under the EOPT Act generally, see Invoice vs. Official Receipt: What Changed Under the EOPT Act.