Under the value added tax (VAT) system in the Philippines, a value added tax registered taxpayer is liable for 12% on every sale of goods or services referred to as “Output VAT“, and reduced by the 12% VAT passed on to it by VAT-registered suppliers referred to as “Input VAT“. In effect, the VAT registered taxpayer becomes liable to the Bureau of Internal Revenue (BIR) for the difference between Output VAT and Input VAT. In some industries and business activities engaged in certain taxable sales subject to Zero-percent or termed as “VAT Zero-rated sales” (e.g. export-oriented enterprise, Ecozone registered enterprise, business process outsourcing, etc.) the problem arise with regards to accumulating Input VAT on books of accounts as they do not have much Output VAT on sales.