Is a Delivery or Shipping Fee Subject to VAT in the Philippines?

A delivery or shipping fee that a seller bills to a buyer alongside the price of goods or services is, as a general rule, part of the VATable amount — not a separate, VAT-free charge. Under National Internal Revenue Code (NIRC) Sections 106 and 108, the tax base for the 12% value-added tax (VAT) is the total amount the buyer is obligated to pay the seller for the transaction, and a delivery fee the seller itself sets and bills normally falls inside that total, the same as the price of the item being sold.

What do “gross selling price” and “gross receipts” actually cover? #

NIRC Sections 106 and 108 define the VAT base broadly, as the full amount a buyer is obligated to pay a seller for a sale — not just the sticker price of the item. These are the two operative definitions the Bureau of Internal Revenue (BIR) applies depending on whether the transaction is a sale of goods/properties or a sale of services.

For sale of goods and properties, NIRC Section 106(A)(1)(a) defines gross selling price:

“The term ‘gross selling price’ means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, on such goods or properties shall form part of the gross selling price.”

For sale of services, NIRC Section 108 defines gross receipts in similarly broad terms:

“‘Gross receipts’ means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax.”

Both definitions turn on the same idea: it is not only the named “price” of the good or service that counts, but the total amount the buyer is obligated to pay the seller for that transaction. Revenue Regulations (RR) No. 16-2005, the consolidated VAT regulations — as later amended, including by RR No. 4-2007, which confirmed that excise tax forms part of gross selling price — implement these statutory definitions without narrowing them. Neither the statute nor the implementing regulations name an exhaustive list of what counts; the operative test is whether the amount is part of what the buyer must pay to complete the sale.

Is a delivery or shipping fee part of that VATable amount? #

Ordinarily, yes — a delivery or shipping fee that a seller charges the buyer as a condition of, or add-on to, the sale is an amount the buyer is “obligated to pay the seller in consideration of the sale,” which is exactly the language Section 106(A)(1)(a) uses to define gross selling price. If an online seller tells a customer “the item is ₱2,000, plus ₱150 for delivery,” the buyer cannot receive the goods without paying both amounts to the seller. That makes the ₱150 as much a part of the consideration for the sale as the ₱2,000 — there is no separate legal basis in Section 106 or 108 for splitting out a seller-set delivery charge and treating it as VAT-free simply because it is billed on its own line.

This matters in practice because sellers commonly quote a delivery fee separately on an invoice or order confirmation and, sometimes, mistakenly assume “separate line item” means “separate from VAT.” Under the general inclusion rule, it does not. The correct treatment is to add the delivery fee to the price of the goods or services and compute 12% VAT on the combined amount, unless the seller can support a genuinely different characterization — covered next.

Does a genuine pass-through of a courier’s exact fee change the answer? #

No confirmed, VAT-specific carve-out for a pass-through delivery fee was found in NIRC Sections 106/108 or in RR No. 16-2005, as amended — so this post does not assert one. In principle, tax law generally distinguishes an amount a seller collects as its own charge from a true reimbursement it advances strictly as an agent of the buyer, at the exact invoiced cost of a named third party, with no markup and full substantiation. That distinction exists elsewhere in Philippine tax practice — for example, in how professionals document out-of-pocket expense reimbursements for withholding tax purposes — but this research did not surface a BIR issuance applying that same pass-through logic specifically to a delivery or shipping fee for VAT purposes.

One related — but importantly different — rule surfaced in this research and is worth flagging precisely because it is easy to misread: RR No. 16-2023, which requires electronic marketplace operators and digital financial services providers to withhold 1% creditable withholding tax on remittances to online sellers, defines “gross remittance” to exclude separately billed delivery or shipping fees from that withholding base. That exclusion governs a different tax — creditable withholding tax on income remitted to a seller through a platform — computed on a different base than VAT. It does not amend NIRC Sections 106 or 108, and it should not be treated as authority that a delivery fee is VAT-free. A seller relying on the RR No. 16-2023 exclusion to also drop VAT on its delivery fee would be conflating two separate rules.

The table below summarizes the distinction:

Worked example: VAT on a ₱2,000 item plus a ₱150 delivery fee #

Applying the general inclusion rule, a seller who bills a customer ₱2,000 for a product and a separate ₱150 delivery fee computes 12% output VAT on the combined ₱2,150 — not on ₱2,000 alone.

Lantay Home Goods is a VAT-registered online seller in Cebu. A customer orders a kitchen item priced at ₱2,000 (VAT-exclusive) and is charged an additional ₱150 delivery fee that Lantay itself sets and bills — Lantay is not passing through a documented, at-cost third-party courier invoice as an agent of the buyer; it is simply charging for fulfilling the order.

Lantay’s invoice, consistent with the content requirements under RR No. 7-2024, can still show the ₱2,000 product price and ₱150 delivery fee as two separate lines for the customer’s clarity — but the VAT computation and the total amount due are based on the ₱2,150 combined figure, not ₱2,000 alone. Reporting only ₱240 of output VAT (12% of ₱2,000) on this transaction would understate output VAT by ₱18 per sale — a gap that compounds quickly across a high-volume online store and can surface as a deficiency VAT assessment on audit.

How should this appear on a BIR-compliant invoice? #

The delivery fee can be itemized separately from the product price on the invoice, but both amounts should be visible, and the VAT breakdown must be computed on their combined total. See What Must Appear on a BIR-Compliant Sales Invoice? The RR No. 7-2024 Checklist for the full field-by-field requirements — seller details, TIN, serial number, transaction date, description, and a clearly itemized VAT amount — that apply regardless of how many line items make up the sale.

Online sellers who are still getting their registration and filing basics in order should also see BIR Tax Obligations for Online Sellers and Content Creators, which covers registration, books of accounts, and the income tax and VAT/percentage tax obligations that apply once a store starts operating formally.

Frequently asked questions #

Is a delivery fee or shipping fee subject to 12% VAT in the Philippines? #

Generally, yes. When a VAT-registered seller bills a delivery or shipping fee to the buyer as part of a sale of goods or services, that fee is normally part of the gross selling price or gross receipts under NIRC Sections 106 and 108 — the total amount the buyer is obligated to pay the seller for the transaction — and is subject to the same 12% VAT as the price of the item itself.

Does it matter if the seller uses its own delivery service versus a third-party courier? #

It can affect how the transaction is structured, but it does not by itself remove the fee from VAT. Whether the seller delivers using its own riders or arranges a third-party courier, an amount the seller bills the buyer as its own delivery charge is still consideration the buyer pays the seller for completing the sale, and the general inclusion rule under NIRC Section 106 applies unless the seller can support a genuine agency/reimbursement structure.

Is there a confirmed BIR rule excluding delivery fees from the VAT base for online sellers? #

No confirmed carve-out was found in NIRC Sections 106/108 or RR No. 16-2005, as amended. A separate rule, RR No. 16-2023, excludes separately billed delivery or shipping fees from the “gross remittance” base used to compute the 1% creditable withholding tax that e-marketplace operators withhold from online sellers — but that is a different tax, on a different base, and should not be read as changing the VAT treatment of a delivery fee under Sections 106 and 108.

How is VAT computed when a seller charges ₱2,000 for a product plus a ₱150 delivery fee? #

If both amounts are billed by the seller as part of the same sale and neither is a documented, at-cost pass-through of a third party’s charge, the VATable base is the combined ₱2,150, producing output VAT of ₱258 (12% of ₱2,150) for a VAT-inclusive total of ₱2,408 collected from the buyer.

What is the difference between a delivery fee and a true reimbursement of an expense paid on the buyer’s behalf? #

A delivery fee the seller sets and bills as part of fulfilling the sale is consideration for that sale and is includible in gross selling price or gross receipts. A true reimbursement — the seller advancing an identifiable third-party cost at exact invoiced amount, with no markup, properly substantiated and passed through strictly as an agent of the buyer — is a narrower, harder-to-document position and is not the default treatment for an ordinary seller-set delivery or shipping charge.

Should a delivery fee be shown as a separate line on the sales invoice? #

It can be shown as a separate line item for clarity, but under the general inclusion rule it should still be added to the price of the goods or services when computing the 12% VAT and the total VAT-inclusive amount due, consistent with the invoice-content requirements under RR No. 7-2024.

Summary #

The general rule is straightforward: NIRC Sections 106 and 108 define the VAT base as the total amount a buyer is obligated to pay a seller for a sale, and a delivery or shipping fee a seller sets and bills as part of that sale ordinarily falls inside that total — it is taxed the same 12% as the price of the item, whether shown on the same invoice line or a separate one. No confirmed BIR issuance was found carving delivery fees out of the VAT base, and a superficially similar-sounding rule — RR No. 16-2023’s exclusion of separately billed delivery fees from the “gross remittance” base for e-marketplace withholding — governs a different tax entirely and should not be applied to VAT computations. A genuine, documented, at-cost pass-through of a third party’s charge is a conceptually distinct and narrower position, not the default treatment for an ordinary delivery fee. For related invoicing and registration basics, see What Must Appear on a BIR-Compliant Sales Invoice? and BIR Tax Obligations for Online Sellers and Content Creators.