TAXATION II

PART III
VALUE-ADDED TAX
Sections 105-115 of the NIRC, amended by RA No. !!"
Im#$emented by RR No. 1%-05 as amended by RR No. &-0"
I. PRELIMINARY MATTERS
a. Nat'(e and cha(acte(istic of )AT in *ene(a$
Sec. &.105.-+ of RR No. 1%-05
S,CTION &.105-+. Nat'(e and Cha(acte(istics of )AT. - )AT is a ta. on
cons'm#tion $e/ied on the sa$e, ba(te(, e.chan*e o( $ease of *oods o(
#(o#e(ties and se(/ices in the Phi$i##ines and on im#o(tation of *oods into
the Phi$i##ines. The se$$e( is the one stat'to(i$y $iab$e fo( the #ayment of the
ta. b't the amo'nt of the ta. may be shifted o( #assed on to the b'ye(,
t(ansfe(ee o( $essee of the *oods, #(o#e(ties o( se(/ices. This ('$e sha$$
$i0e1ise a##$y to e.istin* cont(acts of sa$e o( $ease of *oods, #(o#e(ties o(
se(/ices at the time of the effecti/ity of RA No. !!". 2o1e/e(, in the case of
im#o(tation, the im#o(te( is the one $iab$e fo( the )AT.
CASES: CIR vs. Magsaysay Lines GR No. 1!"# $a%e$ &'(y )#* )++!
P'(s'ant to a *o/e(nment #(o*(am of #(i/ati3ation, N4C, a )AT-(e*iste(ed
entity c(eated fo( the #'(#ose of se$$in* (ea$ #(o#e(ty, decided to se$$ to
#(i/ate ente(#(ise a$$ of its sha(es in its 1ho$$y-o1ned s'bsidia(y the Nationa$
5a(ine Co(#o(ation 6N5C7. The N4C decided to se$$ in one $ot its N5C
sha(es and fi/e 657 of its shi#s, 1hich a(e !,"00 48T T1een-4ec0e(,
9:$oec0ne(9 ty#e /esse$s. The /esse$s 1e(e const('cted fo( the N4C
bet1een 1;1 and 1;&, then initia$$y $eased to <'3on Ste/edo(in*
Com#any, a$so its 1ho$$y-o1ned s'bsidia(y. S'bse='ent$y, the /esse$s 1e(e
t(ansfe((ed and $eased, on a ba(eboat basis, to the N5C. The N5C sha(es
and the /esse$s 1e(e offe(ed fo( #'b$ic biddin*. Amon* the sti#'$ated te(ms
and conditions fo( the #'b$ic a'ction 1as that the 1innin* bidde( 1as to #ay
9a /a$'e added ta. of 10> on the /a$'e of the /esse$s.9 5a*saysay <ines,
Inc., offe(ed to b'y the sha(es and the /esse$s fo( P1%;,000,000.00. The bid
1as made by 5a*saysay <ines, #'(#o(ted$y fo( a ne1 com#any sti$$ to be
fo(med com#osed of itse$f, ?a$i1a* Na/i*ation, Inc., and @I5 <imited of the
5a(den A(o'# based in 2on*0on* . The bid 1as a##(o/ed by the Committee
on P(i/ati3ation, and a Notice of A1a(d 1as iss'ed to 5a*saysay <ines.
)AT is '$timate$y a ta. on cons'm#tion, e/en tho'*h it is assessed on many
$e/e$s of t(ansactions on the basis of a fi.ed #e(centa*e.It is the end 'se( of
cons'me( *oods o( se(/ices 1hich '$timate$y sho'$de(s the ta., as the
$iabi$ity the(ef(om is #assed on to the end 'se(s by the #(o/ide(s of these
*oods o( se(/ices 1ho in t'(n may c(edit thei( o1n )AT $iabi$ity 6o( in#'t
)AT7 f(om the )AT #ayments they (ecei/e f(om the fina$ cons'me( 6o( o't#'t
)AT7.The fina$ #'(chase by the end cons'me( (e#(esents the fina$ $in0 in a
#(od'ction chain that itse$f in/o$/es se/e(a$ t(ansactions and se/e(a$ acts of
cons'm#tion. The )AT system ass'(es fisca$ ade='acy th(o'*h the
co$$ection of ta.es on e/e(y $e/e$ of cons'm#tion,yet ass'a*es the
man'fact'(e(s o( #(o/ide(s of *oods and se(/ices by enab$in* them to #ass
on thei( (es#ecti/e )AT $iabi$ities to the ne.t $in0 of the chain 'nti$ fina$$y the
end cons'me( sho'$de(s the enti(e ta. $iabi$ity.
CIR vs. Seaga%e Te,-no(ogy .P-i(s/ GR No. 101#!! 2e34'a4y 11* )++0
The )AT is a 'nifo(m ta. (an*in*, at #(esent, f(om 0 #e(cent to 10 #e(cent
$e/ied on e/e(y im#o(tation of *oods, 1hethe( o( not in the co'(se of t(ade o(
b'siness, o( im#osed on each sa$e, ba(te(, e.chan*e o( $ease of *oods o(
#(o#e(ties o( on each (endition of se(/ices in the co'(se of t(ade o( b'siness
as they #ass a$on* the #(od'ction and dist(ib'tion chain, the ta. bein* $imited
on$y to the /a$'e added to s'ch *oods, #(o#e(ties o( se(/ices by the se$$e(,
t(ansfe(o( o( $esso(.It is an indi(ect ta. that may be shifted o( #assed on to
the b'ye(, t(ansfe(ee o( $essee of the *oods, #(o#e(ties o( se(/ices. As s'ch,
it sho'$d be 'nde(stood not in the conte.t of the #e(son o( entity that is
#(ima(i$y, di(ect$y and $e*a$$y $iab$e fo( its #ayment, b't in te(ms of its nat'(e
as a ta. on cons'm#tion.
b. )AT as an indi(ect ta.
CASE: Con%e5 vs. CIR GR No. 101110 $a%e$ &'(y )* )++
)AT is an indi(ect ta.. As s'ch, the amo'nt of ta. #aid on the *oods,
#(o#e(ties o( se(/ices bo'*ht, t(ansfe((ed, o( $eased may be shifted o(
#assed on by the se$$e(, t(ansfe(o(, o( $esso( to the b'ye(, t(ansfe(ee o(
$essee. Bn$i0e a di(ect ta., s'ch as the income ta., 1hich #(ima(i$y ta.es an
indi/id'a$Cs abi$ity to #ay based on his income o( net 1ea$th, an indi(ect ta.,
s'ch as the )AT, is a ta. on cons'm#tion of *oods, se(/ices, o( ce(tain
t(ansactions in/o$/in* the same. The )AT, th's, fo(ms a s'bstantia$ #o(tion
of cons'me( e.#endit'(es. @'(the(, in indi(ect ta.ation, the(e is a need to
distin*'ish bet1een the $iabi$ity fo( the ta. and the b'(den of the ta.. As
ea($ie( #ointed o't, the amo'nt of ta. #aid may be shifted o( #assed on by
the se$$e( to the b'ye(. 8hat is t(ansfe((ed in s'ch instances is not the $iabi$ity
fo( the ta., b't the ta. b'(den. In addin* o( inc$'din* the )AT d'e to the
se$$in* #(ice, the se$$e( (emains the #e(son #(ima(i$y and $e*a$$y $iab$e fo( the
#ayment of the ta.. 8hat is shifted on$y to the inte(mediate b'ye( and
'$timate$y to the fina$ #'(chase( is the b'(den of the ta.. Stated diffe(ent$y, a
se$$e( 1ho is di(ect$y and $e*a$$y $iab$e fo( #ayment of an indi(ect ta., s'ch as
the )AT on *oods o( se(/ices is not necessa(i$y the #e(son 1ho '$timate$y
bea(s the b'(den of the same ta.. It is the fina$ #'(chase( o( cons'me( of
R,)I,8,R TAX +- DB5I 1
s'ch *oods o( se(/ices 1ho, a$tho'*h not di(ect$y and $e*a$$y $iab$e fo( the
#ayment the(eof, '$timate$y bea(s the b'(den of the ta..
,. Pe4sons Lia3(e .Se,. 1+0/
Pe(sons <iab$e. - Any #e(son 1ho, in the co'(se of t(ade o( b'siness, se$$s
ba(te(s, e.chan*es, $eases *oods o( #(o#e(ties, (ende(s se(/ices, and any
#e(son 1ho im#o(ts *oods sha$$ be s'bEect to the /a$'e-added ta. 6)AT7
im#osed in Sections 10% to 10; of this Code.
The /a$'e-added ta. is an indi(ect ta. and the amo'nt of ta. may be shifted
o( #assed on to the b'ye(, t(ansfe(ee o( $essee of the *oods, #(o#e(ties o(
se(/ices. This ('$e sha$$ $i0e1ise a##$y to e.istin* cont(acts of sa$e o( $ease of
*oods, #(o#e(ties o( se(/ices at the time of the effecti/ity of Re#'b$ic Act No.
""1%.
i. Pe4sons (ia3(e in gene4a(
CASE: CIR vs. CA an$ Co66on7ea(%- Manage6en% Se4vi,es
Common1ea$th 5ana*ement and Se(/ices Co(#o(ation 6CO5AS,RCO, fo(
b(e/ity7, is a co(#o(ation d'$y o(*ani3ed and e.istin* 'nde( the $a1s of the
Phi$i##ines. It is an affi$iate of Phi$i##ine Ame(ican <ife Ins'(ance Co.
6Phi$am$ife7, o(*ani3ed by the $ette( to #e(fo(m co$$ection, cons'$tati/e and
othe( technica$ se(/ices, inc$'din* f'nctionin* as an inte(na$ a'dito(, of
Phi$am$ife and its othe( affi$iates. On Fan'a(y +&, 1+, the ?'(ea' of Inte(na$
Re/en'e 6?IR7 iss'ed an assessment to #(i/ate (es#ondent CO5AS,RCO
fo( deficiency /a$'e-added ta. 6)AT7. CO5AS,RCOGs ann'a$ co(#o(ate
income ta. (et'(n endin* 4ecembe( !1, 1;; indicated a net $oss in its
o#e(ations. CO5AS,RCO asse(ted that the se(/ices it (ende(ed to
Phi$am$ife and its affi$iates, (e$atin* to co$$ections, cons'$tati/e and othe(
technica$ assistance, inc$'din* f'nctionin* as an inte(na$ a'dito(, 1e(e on a
9no-#(ofit, (eimb'(sement-of-cost-on$y9 basis. It a/e((ed that it 1as not
en*a*ed id the b'siness of #(o/idin* se(/ices to Phi$am$ife and its affi$iates.
CO5AS,RCO 1as estab$ished to ens'(e o#e(ationa$ o(de($iness and
administ(ati/e efficiency of Phi$am$ife and its affi$iates, and not in the sa$e of
se(/ices. CO5AS,RCO st(essed that it 1as not #(ofit-moti/ated, th's not
en*a*ed in b'siness. In fact, it did not *ene(ate #(ofit b't s'ffe(ed a net $oss
in ta.ab$e yea( 1;;. CO5AS,RCO a/e((ed that since it 1as not en*a*ed in
b'siness, it 1as not $iab$e to #ay )AT.
ii. 8ho a(e (e='i(ed to (e*iste( fo( )AT 6Sec. +!% A7 HSec. .+!%-1 of RR
No. 1%-05I
Se,. )1! .G/
Any #e(son, 1ho e.#ects to (ea$i3e *(oss sa$es o( (ecei#ts s'bEect to /a$'e-
added ta. in e.cess of the amo'nt #(esc(ibed 'nde( Section 10637 of this
Code fo( the ne.t 1+-month #e(iod f(om the commencement of the b'siness,
sha$$ (e*iste( 1ith the Re/en'e 4ist(ict Office 1hich has E'(isdiction o/e( the
head office o( b(anch and sha$$ #ay the ann'a$ (e*ist(ation fee #(esc(ibed in
S'bsection 6?7 he(eof.
Se,. ".)1!-1 o8 RR No. 1!-+0
6a7 In *ene(a$. - Any #e(son 1ho, in the co'(se of t(ade o( b'siness, se$$s,
ba(te(s, e.chan*es *oods o( #(o#e(ties, o( en*a*es in the sa$e of se(/ices
s'bEect to )AT im#osed in Secs. 10% and 10; of the Ta. Code sha$$ (e*iste(
1ith the a##(o#(iate R4O 'sin* the a##(o#(iate ?IR fo(ms and #ay an ann'a$
(e*ist(ation fee in the amo'nt of @i/e 2'nd(ed Pesos 6P5007 'sin* ?IR @o(m
No. 0%05 fo( e/e(y se#a(ate o( distinct estab$ishment o( #$ace of b'siness
6sa/e a 1a(eho'se 1itho't sa$e t(ansactions7 befo(e the sta(t of s'ch
b'siness and e/e(y yea( the(eafte( on o( befo(e the !1st day of Fan'a(y.
Any #e(son 1ho maintains a head o( main office and b(anches in diffe(ent
#$aces sha$$ (e*iste( 1ith the R4O 1hich has E'(isdiction o/e( the #$ace
1he(ein the main o( head office o( b(anch is $ocated. 2o1e/e(, the
(e*ist(ation fee sha$$ be #aid to any acc(edited ban0 in the Re/en'e 4ist(ict
1he(e the head office o( b(anch is (e*iste(ed #(o/ided that in a(eas 1he(e
the(e a(e no acc(edited ban0s, the same sha$$ be #aid to the R4O, co$$ection
a*ent, o( d'$y a'tho(i3ed t(eas'(e( of the m'nici#a$ity 1he(e each #$ace of
b'siness o( b(anch is sit'ated.
,ach )AT-(e*iste(ed #e(son sha$$ be assi*ned on$y one TIN. The b(anch
sha$$ 'se the -di*it TIN of the 2ead Office #$'s a !-di*it ?(anch Code.
6b7 5andato(yJ
Any #e(son 1ho, in the co'(se of t(ade o( b'siness, se$$s, ba(te(s o(
e.chan*es *oods o( #(o#e(ties o( en*a*es in the sa$e o( e.chan*e of
se(/ices sha$$ be $iab$e to (e*iste( ifJ
i. 2is *(oss sa$es o( (ecei#ts fo( the #ast t1e$/e 61+7 months, othe( than
those that a(e e.em#t 'nde( Sec. 10 6176A7 to 6B7 of the Ta. Code, ha/e
e.ceeded One mi$$ion fi/e h'nd(ed tho'sand #esos 6P1,500,000.007K o(
ii. The(e a(e (easonab$e *(o'nds to be$ie/e that his *(oss sa$es o( (ecei#ts
fo( the ne.t t1e$/e 61+7 months, othe( than those that a(e e.em#t 'nde( Sec.
10 6176A7 to 6B7 of the Ta. Code, 1i$$ e.ceed One mi$$ion fi/e h'nd(ed
tho'sand #esos 6P1,500,000.007.
R,)I,8,R TAX +- DB5I +
,/e(y #e(son 1ho becomes $iab$e to be (e*iste(ed 'nde( #a(a*(a#h 617 of
this s'bsection sha$$ (e*iste( 1ith the R4O 1hich has E'(isdiction o/e( the
head office o( b(anch of that #e(son, and sha$$ #ay the ann'a$ (e*ist(ation fee
#(esc(ibed in s'bsection .+!%-16a7 he(eof. If he fai$s to (e*iste(, he sha$$ be
$iab$e to #ay the o't#'t ta. 'nde( Secs. 10% andLo( 10; of the Ta. Code as if
he 1e(e a )AT-(e*iste(ed #e(son, b't 1itho't the benefit of in#'t ta. c(edits
fo( the #e(iod in 1hich he 1as not #(o#e($y (e*iste(ed.
5o(eo/e(, f(anchise *(antees of (adio and te$e/ision b(oadcastin*, 1hose
*(oss ann'a$ (ecei#t fo( the #(ecedin* ca$enda( yea( e.ceeded
P10,000,000.00, sha$$ (e*iste( 1ithin thi(ty 6!07 days f(om the end of the
ca$enda( yea(.
iii. O#tiona$ )AT Re*ist(ation 6Sec. +!% 27 HSec. .+!%-1 of RR No. 1%-05I
6c7 O#tiona$ )AT Re*ist(ation. -
617 Any #e(son 1ho is )AT-e.em#t 'nde( Sec. &.10-1 6?7 617 6)7 not
(e='i(ed to (e*iste( fo( )AT may, in (e$ation to Sec. &.10-+, e$ect to be )AT-
(e*iste(ed by (e*iste(in* 1ith the R4O that has E'(isdiction o/e( the head
office of that #e(son, and #ay the ann'a$ (e*ist(ation fee of P500.00 fo( e/e(y
se#a(ate and distinct estab$ishment.
6+7 Any #e(son 1ho is )AT-(e*iste(ed b't ente(s into t(ansactions 1hich a(e
e.em#t f(om )AT 6mi.ed t(ansactions7 may o#t that the )AT a##$y to his
t(ansactions 1hich 1o'$d ha/e been e.em#t 'nde( Section 10617 of the Ta.
Code, as amended. HSec. 106+7I
6!7 @(anchise *(antees of (adio andLo( te$e/ision b(oadcastin* 1hose ann'a$
*(oss (ecei#ts of the #(ecedin* yea( do not e.ceed ten mi$$ion #esos
6P10,000,000.007 de(i/ed f(om the b'siness co/e(ed by the $a1 *(antin* the
f(anchise may o#t fo( )AT (e*ist(ation. This o#tion, once e.e(cised, sha$$ be
i((e/ocab$e. 6Sec. 11, Ta. Code7
Any #e(son 1ho e$ects to (e*iste( 'nde( this s'bsections 617 and 6+7 abo/e
sha$$ not be a$$o1ed to cance$ his (e*ist(ation fo( the ne.t th(ee 6!7 yea(s.
The abo/e-stated ta.#aye(s may a##$y fo( )AT (e*ist(ation not $ate( than ten
6107 days befo(e the be*innin* of the ca$enda( ='a(te( and sha$$ #ay the
(e*ist(ation fee #(esc(ibed 'nde( s'b-#a(a*(a#h 6a7 of this Section, 'n$ess
they ha/e a$(eady #aid at the be*innin* of the yea(. In any case, the
Commissione( of Inte(na$ Re/en'e may, fo( administ(ati/e (eason deny any
a##$ication fo( (e*ist(ation. Once (e*iste(ed as a )AT #e(son, the ta.#aye(
sha$$ be $iab$e to o't#'t ta. and be entit$ed to in#'t ta. c(edit be*innin* on
the fi(st day of the month fo$$o1in* (e*ist(ation.
$. Meaning o8 %-e 9-4ase :in %-e ,o'4se o8 %4a$e o8 3'siness; .Se,.
1+0/
Sec. &.105-! of RR No. 1%-05 - 5eanin* of 9In the Co'(se of T(ade o(
?'siness9. - The te(m 9in the co'(se of t(ade o( b'siness9 means the
(e*'$a( cond'ct o( #'(s'it of a comme(cia$ o( economic acti/ity, inc$'din*
t(ansactions incidenta$ the(eto, by any #e(son (e*a(d$ess of 1hethe( o( not
the #e(son en*a*ed the(ein is a non-stoc0, non-#(ofit #(i/ate o(*ani3ation
6i((es#ecti/e of the dis#osition of its net income and 1hethe( o( not it se$$s
e.c$'si/e$y to membe(s o( thei( *'ests7, o( *o/e(nment entity.
Non-(esident #e(sons 1ho #e(fo(m se(/ices in the Phi$i##ines a(e deemed to
be ma0in* sa$es in the co'(se of t(ade o( b'siness, e/en if the #e(fo(mance
of se(/ices is not (e*'$a(.
CASE: CIR vs. Magsaysay Lines GR No. 1!"# $a%e$ &'(y )#* )++!
Inte(#(etation of the te(m MIn the Co'(se of T(ade o( ?'siness. )AT is not a
sin*'$a(-minded ta. on e/e(y t(ansactiona$ $e/e$. Its assessment bea(s di(ect
(e$e/ance to the ta.#aye(Cs (o$e o( $in0 in the #(od'ction chain. 2ence, as
affi(med by Section of the Ta. Code and its s'bse='ent inca(nations, the
ta. is $e/ied on$y on the sa$e, ba(te( o( e.chan*e of *oods o( se(/ices by
#e(sons 1ho en*a*e in s'ch acti/ities, in the co'(se of t(ade o( b'siness.
These t(ansactions o'tside the co'(se of t(ade o( b'siness may in/a(iab$y
cont(ib'te to the #(od'ction chain, b't they do so on$y as a matte( of accident
o( incident. As the sa$es of *oods o( se(/ices do not occ'( 1ithin the co'(se
of t(ade o( b'siness, the #(o/ide(s of s'ch *oods o( se(/ices 1o'$d ha(d$y, if
at a$$, ha/e the o##o(t'nity to a##(o#(iate$y c(edit any )AT $iabi$ity as a*ainst
thei( o1n acc'm'$ated )AT co$$ections since the acc'm'$ation of o't#'t )AT
a(ises in the fi(st #$ace on$y th(o'*h the o(dina(y co'(se of t(ade o( b'siness.
Is the sa$e s'bEect to )AT N
No. The sa$e is not s'bEect to )AT.
9co'(se of b'siness9 o( 9doin* b'siness9 connotes (e*'$a(ity of acti/ity. In the
instant case, the sa$e 1as an iso$ated t(ansaction. The sa$e 1hich 1as
in/o$'nta(y and made #'(s'ant to the dec$a(ed #o$icy of Ao/e(nment fo(
#(i/ati3ation co'$d no $on*e( be (e#eated o( ca((ied on 1ith (e*'$a(ity. It
sho'$d be em#hasi3ed that the no(ma$ )AT-(e*iste(ed acti/ity of N4C is
$easin* #e(sona$ #(o#e(ty. This findin* is confi(med by the Re/ised Cha(te( of
the N4C 1hich bea(s no indication that the N4C 1as c(eated fo( the #(ima(y
#'(#ose of se$$in* (ea$ #(o#e(ty.
R,)I,8,R TAX +- DB5I !
e. ,.ce#tions to the R'$e of Re*'$a(ity
f. O't#'t Ta. /s. In#'t Ta.es
i. So'4,es o8 In9'% Ta5 .Se,. 11+ A/
.A/ C4e$i%a3(e In9'% Ta5. -
617 Any in#'t ta. e/idenced by a )AT in/oice o( officia$ (ecei#t iss'ed in
acco(dance 1ith Section 11! he(eof on the fo$$o1in* t(ansactions sha$$ be
c(editab$e a*ainst the o't#'t ta.J
6a7 P'(chase o( im#o(tation of *oodsJ
6i7 @o( sa$eK o(
6ii7 @o( con/e(sion into o( intended to fo(m #a(t of a finished
#(od'ct fo( sa$e inc$'din* #ac0a*in* mate(ia$sK o(
6iii7 @o( 'se as s'##$ies in the co'(se of b'sinessK o(
6i/7 @o( 'se as mate(ia$s s'##$ied in the sa$e of se(/iceK o(
6/7 @o( 'se in t(ade o( b'siness fo( 1hich ded'ction fo(
de#(eciation o( amo(ti3ation is a$$o1ed 'nde( this Code, e.ce#t a'tomobi$es,
ai(c(aft and yachts.
6b7 P'(chase of se(/ices on 1hich a /a$'e-added ta. has been
act'a$$y #aid.
6+7 The in#'t ta. on domestic #'(chase of *oods o( #(o#e(ties sha$$ be
c(editab$eJ
6a7 To the #'(chase( '#on cons'mmation of sa$e and on im#o(tation
of *oods o( #(o#e(tiesK and
6b7 To the im#o(te( '#on #ayment of the /a$'e-added ta. #(io( to the
(e$ease of the *oods f(om the c'stody of the ?'(ea' of C'stoms.
2o1e/e(, in the case of #'(chase of se(/ices, $ease o( 'se of
#(o#e(ties, the in#'t ta. sha$$ be c(editab$e to the #'(chase(, $essee o(
$icensee '#on #ayment of the com#ensation, (enta$, (oya$ty o( fee.
6!7 A )AT-(e*iste(ed #e(son 1ho is a$so en*a*ed in t(ansactions not
s'bEect to the /a$'e-added ta. sha$$ be a$$o1ed ta. c(edit as fo$$o1sJ
6a7 Tota$ in#'t ta. 1hich can be di(ect$y att(ib'ted to t(ansactions
s'bEect to /a$'e-added ta.K and
6b7 A (atab$e #o(tion of any in#'t ta. 1hich cannot be di(ect$y
att(ib'ted to eithe( acti/ity.
The te(m 9in#'t ta.9 means the /a$'e-added ta. d'e f(om o( #aid by a
)AT-(e*iste(ed #e(son in the co'(se of his t(ade o( b'siness on im#o(tation
of *oods o( $oca$ #'(chase of *oods o( se(/ices, inc$'din* $ease o( 'se of
#(o#e(ty, f(om a )AT-(e*iste(ed #e(son. It sha$$ a$so inc$'de the t(ansitiona$
in#'t ta. dete(mined in acco(dance 1ith Section 111 of this Code.
The te(m 9o't#'t ta.9 means the /a$'e-added ta. d'e on the sa$e o(
$ease of ta.ab$e *oods o( #(o#e(ties o( se(/ices by any #e(son (e*iste(ed o(
(e='i(ed to (e*iste( 'nde( Section +!% of this Code.
ii. E5,ess <'%9'% o4 In9'% Ta5 .Se,. 111 =/
,.cess O't#'t o( In#'t Ta.. - If at the end of any ta.ab$e ='a(te( the o't#'t
ta. e.ceeds the in#'t ta., the e.cess sha$$ be #aid by the )AT-(e*iste(ed
#e(son. If the in#'t ta. e.ceeds the o't#'t ta., the e.cess sha$$ be ca((ied
o/e( to the s'cceedin* ='a(te( o( ='a(te(s. any in#'t ta. att(ib'tab$e to the
#'(chase of ca#ita$ *oods o( to 3e(o-(ated sa$es by a )AT-(e*iste(ed #e(son
may at his o#tion be (ef'nded o( c(edited a*ainst othe( inte(na$ (e/en'e
ta.es, s'bEect to the #(o/isions of Section 11+.
iii. R'(e on In9'% Ta5 on Ca9i%a( Goo$s .Se,. .11+-1 o8 RR No. 1!-+0/
C$aim fo( In#'t Ta. on 4e#(eciab$e Aoods. - 8he(e a )AT-(e*iste(ed
#e(son #'(chases o( im#o(ts ca#ita$ *oods, 1hich a(e de#(eciab$e assets fo(
income ta. #'(#oses, the a**(e*ate ac='isition cost of 1hich 6e.c$'si/e of
)AT7 in a ca$enda( month e.ceeds One 5i$$ion #esos 6P1,000,000.007,
(e*a(d$ess of the ac='isition cost of each ca#ita$ *ood, sha$$ be c$aimed as
c(edit a*ainst o't#'t ta. in the fo$$o1in* manne(J
6a7 If the estimated 'sef'$ $ife of a ca#ita$ *ood is fi/e 657 yea(s o( mo(e -
The in#'t ta. sha$$ be s#(ead e/en$y o/e( a #e(iod of si.ty 6%07 months and
the c$aim fo( in#'t ta. c(edit 1i$$ commence in the ca$enda( month 1hen the
ca#ita$ *ood is ac='i(ed. The tota$ in#'t ta.es on #'(chases o( im#o(tations
of this ty#e of ca#ita$ *oods sha$$ be di/ided by %0 and the ='otient 1i$$ be the
amo'nt to be c$aimed month$y.
6b7 If the estimated 'sef'$ $ife of a ca#ita$ *ood is $ess than fi/e 657 yea(s -
The in#'t ta. sha$$ be s#(ead e/en$y on a month$y basis by di/idin* the in#'t
ta. by the act'a$ n'mbe( of months com#(isin* the estimated 'sef'$ $ife of
the ca#ita$ *ood. The c$aim fo( in#'t ta. c(edit sha$$ commence in the
ca$enda( month that the ca#ita$ *oods 1e(e ac='i(ed.
R,)I,8,R TAX +- DB5I &
8he(e the a**(e*ate ac='isition cost 6e.c$'si/e of )AT7 of the e.istin* o(
finished de#(eciab$e ca#ita$ *oods #'(chased o( im#o(ted d'(in* any
ca$enda( month does not e.ceed One mi$$ion #esos 6P 1,000,000.007, the
tota$ in#'t ta.es 1i$$ be a$$o1ab$e as c(edit a*ainst o't#'t ta. in the month of
ac='isitionK P(o/ided, ho1e/e(, that the tota$ amo'nt of in#'t ta.es 6in#'t ta.
on de#(eciab$e ca#ita$ *oods #$'s othe( a$$o1ab$e in#'t ta.es7 a$$o1ed to be
c$aimed a*ainst the o't#'t ta. in the ='a(te($y )AT Ret'(ns sha$$ be s'bEect
to the $imitation #(esc(ibed 'nde( Sec. &.110-" of these Re*'$ations.
The a**(e*ate ac='isition cost of a de#(eciab$e asset in any ca$enda( month
(efe(s to the tota$ #(ice a*(eed '#on fo( one o( mo(e assets ac='i(ed and not
on the #ayments act'a$$y made d'(in* the ca$enda( month. Th's, an asset
ac='i(ed in insta$$ment fo( an ac='isition cost of mo(e than P 1,000,000.00
1i$$ be s'bEect to the amo(ti3ation of in#'t ta. des#ite the fact that the
month$y #aymentsLinsta$$ments may not e.ceed P1,000,000.00.
iv. S'3s%an%ia%ion o8 In9'% Ta5 C4e$i%s .Se,. .11+-# o8 RR No. 1!-+0/
6a7 In#'t ta.es fo( the im#o(tation of *oods o( the domestic #'(chase of
*oods, #(o#e(ties o( se(/ices is made in the co'(se of t(ade o( b'siness,
1hethe( s'ch in#'t ta.es sha$$ be c(edited a*ainst 3e(o-(ated sa$e, non-3e(o-
(ated sa$es, o( s'bEected to the 5> @ina$ 8ithho$din* )AT, m'st be
s'bstantiated and s'##o(ted by the fo$$o1in* doc'ments, and m'st be
(e#o(ted in the info(mation (et'(ns (e='i(ed to be s'bmitted to the ?'(ea'J
617 @o( the im#o(tation of *oods - im#o(t ent(y o( othe( e='i/a$ent doc'ment
sho1in* act'a$ #ayment of )AT on the im#o(ted *oods.
6+7 @o( the domestic #'(chase of *oods and #(o#e(ties - in/oice sho1in*
the info(mation (e='i(ed 'nde( Secs. 11! and +!" of the Ta. Code.
6!7 @o( the #'(chase of (ea$ #(o#e(ty - #'b$ic inst('ment i.e., deed of
abso$'te sa$e, deed of conditiona$ sa$e, cont(actLa*(eement to se$$, etc.,
to*ethe( 1ith )AT in/oice iss'ed by the se$$e(.
6&7 @o( the #'(chase of se(/ices - officia$ (ecei#t sho1in* the info(mation
(e='i(ed 'nde( Secs. 11! and +!" of the Ta. Code.
A cash (e*iste( machine ta#e iss'ed to a (e*iste(ed b'ye( sha$$ constit'te
/a$id #(oof of s'bstantiation of ta. c(edit on$y if it sho1s the info(mation
(e='i(ed 'nde( Secs. 11! and +!" of the Ta. Code.
6b7 T(ansitiona$ in#'t ta. sha$$ be s'##o(ted by an in/ento(y of *oods as
sho1n in a detai$ed $ist to be s'bmitted to the ?IR.
6c7 In#'t ta. on 9deemed sa$e9 t(ansactions sha$$ be s'bstantiated 1ith the
in/oice (e='i(ed 'nde( Sec. &.11!-+ of these Re*'$ations.
6d7 In#'t ta. f(om #ayments made to non-(esidents 6s'ch as fo( se(/ices,
(enta$s and (oya$ties7 sha$$ be s'##o(ted by a co#y of the 5onth$y Remittance
Ret'(n of )a$'e Added Ta. 8ithhe$d 6?IR @o(m 1%007 fi$ed by the (esident
#ayo( in beha$f of the non-(esident e/idencin* (emittance of )AT d'e 1hich
1as 1ithhe$d by the #ayo(.
6e7 Ad/ance )AT on s'*a( sha$$ be s'##o(ted by the Payment O(de(
sho1in* #ayment of the ad/ance )AT.
II. VAT <N G<<DS AND SERVICES
a. De8ini%ion o8 goo$s an$ se4vi,es .Se,. 1+! an$ Se,. 1+#/
S,C. 10% The te(m 9*oods9 o( 9#(o#e(ties9 sha$$ mean a$$ tan*ib$e and
intan*ib$e obEects 1hich a(e ca#ab$e of #ec'nia(y estimation and sha$$
inc$'deJ 6a7 Rea$ #(o#e(ties he$d #(ima(i$y fo( sa$e to c'stome(s o( he$d fo(
$ease in the o(dina(y co'(se of t(ade o( b'sinessK 6b7 The (i*ht o( the
#(i/i$e*e to 'se #atent, co#y(i*ht, desi*n o( mode$, #$an, sec(et fo(m'$a o(
#(ocess, *ood1i$$, t(adema(0, t(ade b(and o( othe( $i0e #(o#e(ty o( (i*htK 6c7
The (i*ht o( the #(i/i$e*e to 'se in the Phi$i##ines of any ind'st(ia$,
comme(cia$ o( scientific e='i#mentK 6d7 The (i*ht o( the #(i/i$e*e to 'se
motion #ict'(e fi$ms, ta#es and discsK and 6e7 Radio, te$e/ision, sate$$ite
t(ansmission and cab$e te$e/ision time.
S,C. 10; The #h(ase 9sa$e o( e.chan*e of se(/ices9 means the #e(fo(mance
of a$$ 0inds o( se(/ices in the Phi$i##ines fo( othe(s fo( a fee, (em'ne(ation o(
conside(ation, inc$'din* those #e(fo(med o( (ende(ed by const('ction and
se(/ice cont(acto(sK stoc0, (ea$ estate, comme(cia$, c'stoms and immi*(ation
b(o0e(sK $esso(s of #(o#e(ty, 1hethe( #e(sona$ o( (ea$K 1a(eho'sin* se(/icesK
$esso(s o( dist(ib'to(s of cinemato*(a#hic fi$msK #e(sons en*a*ed in mi$$in*
#(ocessin*, man'fact'(in* o( (e#ac0in* *oods fo( othe(sK #(o#(ieto(s,
o#e(ato(s o( 0ee#e(s of hote$s, mote$s, (estho'ses, #ension ho'ses, inns,
(eso(tsK #(o#(ieto(s o( o#e(ato(s of (esta'(ants, (ef(eshment #a($o(s, cafes
and othe( eatin* #$aces, inc$'din* c$'bs and cate(e(sK dea$e(s in sec'(itiesK
$endin* in/esto(sK t(ans#o(tation cont(acto(s on thei( t(ans#o(t of *oods o(
ca(*oes, inc$'din* #e(sons 1ho t(ans#o(t *oods o( ca(*oes fo( hi(e anothe(
domestic common ca((ie(s by $and, ai( and 1ate( (e$ati/e to thei( t(ans#o(t of
*oods o( ca(*oesK se(/ices of f(anchise *(antees of te$e#hone and te$e*(a#h,
(adio and te$e/ision b(oadcastin* and a$$ othe( f(anchise *(antees e.ce#t
those 'nde( Section 11 of this CodeK se(/ices of ban0s, non-ban0 financia$
inte(media(ies and finance com#aniesK and non-$ife ins'(ance com#anies
6e.ce#t thei( c(o# ins'(ances7, inc$'din* s'(ety, fide$ity, indemnity and
bondin* com#aniesK and simi$a( se(/ices (e*a(d$ess of 1hethe( o( not the
R,)I,8,R TAX +- DB5I 5
#e(fo(mance the(eof ca$$s fo( the e.e(cise o( 'se of the #hysica$ o( menta$
fac'$ties. The #h(ase Gsa$e o( e.chan*e of se(/icesG sha$$ $i0e1ise inc$'deJ
617 The $ease o( the 'se of o( the (i*ht o( #(i/i$e*e to 'se any co#y(i*ht,
#atent, desi*n o( mode$, #$an sec(et fo(m'$a o( #(ocess, *ood1i$$, t(adema(0,
t(ade b(and o( othe( $i0e #(o#e(ty o( (i*htK
6+7 The $ease of the 'se of, o( the (i*ht to 'se of any ind'st(ia$, comme(cia$
o( scientific e='i#mentK
6!7 The s'##$y of scientific, technica$, ind'st(ia$ o( comme(cia$ 0no1$ed*e o(
info(mationK
6&7 The s'##$y of any assistance that is anci$$a(y and s'bsidia(y to and is
f'(nished as a means of enab$in* the a##$ication o( enEoyment of any s'ch
#(o#e(ty, o( (i*ht as is mentioned in s'b#a(a*(a#h 6+7 o( any s'ch 0no1$ed*e
o( info(mation as is mentioned in s'b#a(a*(a#h 6!7K
657 The s'##$y of se(/ices by a non(esident #e(son o( his em#$oyee in
connection 1ith the 'se of #(o#e(ty o( (i*hts be$on*in* to, o( the insta$$ation
o( o#e(ation of any b(and, machine(y o( othe( a##a(at's #'(chased f(om
s'ch non(esident #e(son.
6%7 The s'##$y of technica$ ad/ice, assistance o( se(/ices (ende(ed in
connection 1ith technica$ mana*ement o( administ(ation of any scientific,
ind'st(ia$ o( comme(cia$ 'nde(ta0in*, /ent'(e, #(oEect o( schemeK
6"7 The $ease of motion #ict'(e fi$ms, fi$ms, ta#es and discsK and
6;7 The $ease o( the 'se of o( the (i*ht to 'se (adio, te$e/ision, sate$$ite
t(ansmission and cab$e te$e/ision time.
<ease of #(o#e(ties sha$$ be s'bEect to the ta. he(ein im#osed i((es#ecti/e of
the #$ace 1he(e the cont(act of $ease o( $icensin* a*(eement 1as e.ec'ted if
the #(o#e(ty is $eased o( 'sed in the Phi$i##ines.
3. VAT 3ase 8o4 goo$s an$ se4vi,es .Se,. 1+! an$ Se,.1+#/
S,C. 10%. )a$'e-Added Ta. on Sa$e of Aoods o( P(o#e(ties. -
6A7 Rate and ?ase of Ta.. - The(e sha$$ be $e/ied, assessed and co$$ected
on e/e(y sa$e, ba(te( o( e.chan*e of *oods o( #(o#e(ties, /a$'e-added ta.
e='i/a$ent to ten #e(cent 610>7 of the *(oss se$$in* #(ice o( *(oss /a$'e in
money of the *oods o( #(o#e(ties so$d, ba(te(ed o( e.chan*ed, s'ch ta. to be
#aid by the se$$e( o( t(ansfe(o(.
S,C. 10;. )a$'e-added Ta. on Sa$e of Se(/ices and Bse o( <ease of
P(o#e(ties. -
6A7 Rate and ?ase of Ta.. - The(e sha$$ be $e/ied, assessed and co$$ected, a
/a$'e-added ta. e='i/a$ent to ten #e(cent 610>7 of *(oss (ecei#ts de(i/ed
f(om the sa$e o( e.chan*e of se(/ices, inc$'din* the 'se o( $ease of
#(o#e(ties.
,. Meaning o8 g4oss se((ing 94i,e an$ g4oss 4e,ei9%s .Se,. 1+! an$
Se,.1+#/
Sec. 10%
The te(m 9*(oss se$$in* #(ice9 means the tota$ amo'nt of money o( its
e='i/a$ent 1hich the #'(chase( #ays o( is ob$i*ated to #ay to the se$$e( in
conside(ation of the sa$e, ba(te( o( e.chan*e of the *oods o( #(o#e(ties,
e.c$'din* the /a$'e-added ta.. The e.cise ta., if any, on s'ch *oods o(
#(o#e(ties sha$$ fo(m #a(t of the *(oss se$$in* #(ice.
Sec.10;
The te(m 9*(oss (ecei#ts9 means the tota$ amo'nt of money o( its e='i/a$ent
(e#(esentin* the cont(act #(ice, com#ensation, se(/ice fee, (enta$ o( (oya$ty,
inc$'din* the amo'nt cha(*ed fo( mate(ia$s s'##$ied 1ith the se(/ices and
de#osits and ad/anced #ayments act'a$$y o( const('cti/e$y (ecei/ed d'(in*
the ta.ab$e ='a(te( fo( the se(/ices #e(fo(med o( to be #e(fo(med fo( anothe(
#e(son, e.c$'din* /a$'e-added ta..
$. R'(es on sa(es o8 Rea( P4o9e4%y
i. R'$e on Sa$es on Insta$$ment HRR No. Sec. &.10%-! of RR No. 1%-05 as
amended by Sec. ! of RR No. &-0"I

Insta$$ment sa$e of (esidentia$ ho'se and $ot o( othe( (esidentia$ d1e$$in*s 1ith
*(oss se$$in* #(ice e.ceedin* P1,000,000.00, 1he(e the inst('ment of sa$e
61hethe( the inst('ment is nominated as a deed of abso$'te sa$e, deed of
conditiona$ sa$e o( othe(1ise7 1as e.ec'ted #(io( to No/embe( 1, +005,
sha$$ be s'bEect to ten #e(cent 610>7 o't#'t )AT.
Sa$e of (ea$ #(o#e(ty on insta$$ment #$an means sa$e of (ea$ #(o#e(ty by a (ea$
estate dea$e(, the initia$ #ayments of 1hich in the yea( of sa$e do not e.ceed
t1enty-fi/e 6+5>7 of the *(oss se$$in* #(ice.
In case of insta$$ment sa$e, the se$$e( sha$$ be s'bEect to o't#'t )AT on the
insta$$ment #ayments (ecei/ed, inc$'din* the inte(ests and #ena$ties fo( $ate
#ayment, act'a$$y andLo( const('cti/e$y (ecei/ed, s'bEect to the #(o/isions of
Sec.&.10%-& he(eof. Co((es#ondin*$y, the b'ye( of the #(o#e(ty can c$aim the
in#'t ta. in the same #e(iod as the se$$e( (eco*ni3ed the o't#'t ta..
Insta$$ment #ayments, inc$'din* inte(ests and #ena$ties, act'a$$y andLo(
const('cti/e$y (ecei/ed sta(tin* @eb('a(y 1, +00% sha$$ be s'bEect to t1e$/e
#e(cent 61+>7 o't#'t )AT.
ii. See a$so ('$e on sa$e of (ea$ #(o#e(ty 'se in b'siness 6Sec. 1& 6$7 of RR
No. &-0"7
R,)I,8,R TAX +- DB5I %
617 Sa$e of (ea$ #(o#e(ties not #(ima(i$y he$d fo( sa$e to c'stome(s o( he$d fo(
$ease in the o(dina(y co'(se of t(ade o( b'siness. 2o1e/e(, e/en if the (ea$
#(o#e(ty is not #(ima(i$y he$d fo( sa$e to c'stome(s o( he$d fo( $ease in the
o(dina(y co'(se of t(ade o( b'siness b't the same is 'sed in the t(ade o(
b'siness of the se$$e(, the sa$e the(eof sha$$ be s'bEect to )AT bein* a
t(ansaction incidenta$ to the ta.#aye(Cs main b'siness.
iii. Co44e(a%e 7i%- Se,. 1+" on e5e69% sa(es o8 Rea( P4o9e4%y
617 Sa$e of (ea$ #(o#e(ties not #(ima(i$y he$d fo( sa$e to c'stome(s o( he$d fo(
$ease in the o(dina(y co'(se of t(ade o( b'siness o( (ea$ #(o#e(ty 'ti$i3ed fo(
$o1-cost and socia$i3ed ho'sin* as defined by Re#'b$ic Act No. "+",
othe(1ise 0no1n as the B(ban 4e/e$o#ment and 2o'sin* Act of 1+, and
othe( (e$ated $a1s, ho'se and $ot and othe( (esidentia$ d1e$$in*s /a$'ed at
One mi$$ion #esos 6P1,000,0007 and be$o1J P(o/ided, That not $ate( than
Fan'a(y !1st of the ca$enda( yea( s'bse='ent to the effecti/ity of this Act and
each ca$enda( yea( the(eafte(, the amo'nt of One mi$$ion #esos 6P1,000,0007
sha$$ be adE'sted to its #(esent /a$'e 'sin* the Cons'me( P(ice Inde., as
#'b$ished by the nationa$ Statistics Office 6NSO7K
e. VAT on I69o4%a%ions .Se,. 1+>/
In Aene(a$. - The(e sha$$ be $e/ied, assessed and co$$ected on e/e(y
im#o(tation of *oods a /a$'e-added ta. e='i/a$ent to ten #e(cent 610>7
based on the tota$ /a$'e 'sed by the ?'(ea' of C'stoms in dete(minin* ta(iff
and c'stoms d'ties #$'s c'stoms d'ties, e.cise ta.es, if any, and othe(
cha(*es, s'ch ta. to be #aid by the im#o(te( #(io( to the (e$ease of s'ch
*oods f(om c'stoms c'stodyJ P(o/ided, That 1he(e the c'stoms d'ties a(e
dete(mined on the basis of the ='antity o( /o$'me of the *oods, the /a$'e-
added ta. sha$$ be based on the $anded cost #$'s e.cise ta.es, If any.
i. E5e69% I69o4%a%ions 'n$e4 Se,. 1+"
S,C. 10. ,.em#t T(ansactions. - The fo$$o1in* sha$$ be e.em#t f(om the
/a$'e-added ta.J
6a7 Sa$e of nonfood a*(ic'$t'(a$ #(od'ctsK ma(ine and fo(est #(od'cts in thei(
o(i*ina$ state by the #(ima(y #(od'ce( o( the o1ne( of the $and 1he(e the
same a(e #(od'cedK
6b7 Sa$e of cotton seeds in thei( o(i*ina$ stateK and co#(aK
6c7 Sa$e o( im#o(tation of a*(ic'$t'(a$ and ma(ine food #(od'cts in thei(
o(i*ina$ state, $i/estoc0 and #o'$t(y of o( 0in* *ene(a$$y 'sed as, o( yie$din* o(
#(od'cin* foods fo( h'man cons'm#tionK and b(eedin* stoc0 and *enetic
mate(ia$s the(efo(. P(od'cts c$assified 'nde( this #a(a*(a#h and #a(a*(a#h
6a7 sha$$ be conside(ed in thei( o(i*ina$ state e/en if they ha/e 'nde(*one the
sim#$e #(ocesses of #(e#a(ation o( #(ese(/ation fo( the ma(0et, s'ch as
f(ee3in*, d(yin*, sa$tin*, b(oi$in*, (oastin*, smo0in* o( st(i##in*. Po$ished
andLo( h's0ed (ice, co(n *(its, (a1 cane s'*a( and mo$asses, and o(dina(y
sa$t sha$$ be conside(ed in thei( o(i*ina$ stateK
6d7 Sa$e o( im#o(tation of fe(ti$i3e(sK seeds, seed$in*s and fin*e($in*sK fish,
#(a1n, $i/estoc0 and #o'$t(y feeds, inc$'din* in*(edients, 1hethe( $oca$$y
#(od'ced o( im#o(ted, 'sed in the man'fact'(e of finished feeds 6e.ce#t
s#ecia$ty feeds fo( (ace ho(ses, fi*htin* coc0s, a='a(i'm fish, 3oo anima$s
and othe( anima$s *ene(a$$y conside(ed as #ets7K
6e7 Sa$e o( im#o(tation of coa$ and nat'(a$ *as, in 1hate/e( fo(m o( state,
and #et(o$e'm #(od'cts 6e.ce#t $'b(icatin* oi$, #(ocessed *as, *(ease, 1a.
and #et(o$at'm7 s'bEect to e.cise ta. im#osed 'nde( Tit$e )IK
6f7 Sa$e o( im#o(tation of (a1 mate(ia$s to be 'sed by the b'ye( o( im#o(te(
himse$f in the man'fact'(e of #et(o$e'm #(od'cts s'bEect to e.cise ta.,
e.ce#t $'b(icatin* oi$, #(ocessed *as, *(ease, 1a. and #et(o$at'mK
6*7 Im#o(tation of #assen*e( andLo( ca(*o /esse$s of mo(e than fi/e
tho'sand tons 65,0007 1hethe( coast1ise o( ocean-*oin*, inc$'din* en*ine
and s#a(e #a(ts of said /esse$ to be 'sed by the im#o(te( himse$f as o#e(ato(
the(eofK
6h7 Im#o(tation of #e(sona$ and ho'seho$d effects be$on*in* to the (esidents
of the Phi$i##ines (et'(nin* f(om ab(oad and non(esident citi3ens comin* to
(esett$e in the Phi$i##inesJ P(o/ided, That s'ch *oods a(e e.em#t f(om
c'stoms d'ties 'nde( the Ta(iff and C'stoms Code of the Phi$i##inesK
6i7 Im#o(tation of #(ofessiona$ inst('ments and im#$ements, 1ea(in* a##a(e$,
domestic anima$s, and #e(sona$ ho'seho$d effects 6e.ce#t any /ehic$e,
/esse$, ai(c(aft, machine(y othe( *oods fo( 'se in the man'fact'(e and
me(chandise of any 0ind in comme(cia$ ='antity7 be$on*in* to #e(sons
comin* to sett$e in the Phi$i##ines, fo( thei( o1n 'se and not fo( sa$e, ba(te(
o( e.chan*e, accom#anyin* s'ch #e(sons, o( a((i/in* 1ithin ninety 607 days
befo(e o( afte( thei( a((i/a$, '#on the #(od'ction of e/idence satisfacto(y to
the Commissione(, that s'ch #e(sons a(e act'a$$y comin* to sett$e in the
Phi$i##ines and that the chan*e of (esidence is bona fideK
6E7 Se(/ices s'bEect to #e(centa*e ta. 'nde( Tit$e )K
607 Se(/ices by a*(ic'$t'(a$ cont(act *(o1e(s and mi$$in* fo( othe(s of #a$ay
into (ice, co(n into *(its and s'*a( cane into (a1 s'*a(K
6$7 5edica$, denta$, hos#ita$ and /ete(ina(y se(/ices s'bEect to the #(o/isions
of Section 1" of Re#'b$ic Act No. ""1%, as amendedJ
6m7 ,d'cationa$ se(/ices (ende(ed by #(i/ate ed'cationa$ instit'tions, d'$y
acc(edited by the 4e#a(tment of ,d'cation, C'$t'(e and S#o(ts 64,CS7 and
the Commission on 2i*he( ,d'cation 6C2,47, and those (ende(ed by
*o/e(nment ed'cationa$ instit'tionsK
6n7 Sa$e by the a(tist himse$f of his 1o(0s of a(t, $ite(a(y 1o(0s, m'sica$
com#ositions and simi$a( c(eations, o( his se(/ices #e(fo(med fo( the
#(od'ction of s'ch 1o(0sK
R,)I,8,R TAX +- DB5I "
6o7 Se(/ices (ende(ed by indi/id'a$s #'(s'ant to an em#$oye(-em#$oyee
(e$ationshi#K
6#7 Se(/ices (ende(ed by (e*iona$ o( a(ea head='a(te(s estab$ished in the
Phi$i##ines by m'$tinationa$ co(#o(ations 1hich act as s'#e(/iso(y,
comm'nications and coo(dinatin* cente(s fo( thei( affi$iates, s'bsidia(ies o(
b(anches in the Asia-Pacific Re*ion and do not ea(n o( de(i/e income f(om
the Phi$i##inesK
6=7 T(ansactions 1hich a(e e.em#t 'nde( inte(nationa$ a*(eements to 1hich
the Phi$i##ines is a si*nato(y o( 'nde( s#ecia$ $a1s, e.ce#t those 'nde(
P(esidentia$ 4ec(ee Nos. %%, 5+ and 150K
6(7 Sa$es by a*(ic'$t'(a$ coo#e(ati/es d'$y (e*iste(ed 1ith the Coo#e(ati/e
4e/e$o#ment A'tho(ity to thei( membe(s as 1e$$ as sa$e of thei( #(od'ce,
1hethe( in its o(i*ina$ state o( #(ocessed fo(m, to non-membe(sK thei(
im#o(tation of di(ect fa(m in#'ts, machine(ies and e='i#ment, inc$'din* s#a(e
#a(ts the(eof, to be 'sed di(ect$y and e.c$'si/e$y in the #(od'ction andLo(
#(ocessin* of thei( #(od'ceK
6s7 Sa$es by e$ect(ic coo#e(ati/es d'$y (e*iste(ed 1ith the Coo#e(ati/e
4e/e$o#ment a'tho(ity o( Nationa$ ,$ect(ification Administ(ation, (e$ati/e to
the *ene(ation and dist(ib'tion of e$ect(icity as 1e$$ as thei( im#o(tation of
machine(ies and e='i#ment, inc$'din* s#a(e #a(ts, 1hich sha$$ be di(ect$y
'sed in the *ene(ation and dist(ib'tion of e$ect(icityK
6t7 A(oss (ecei#ts f(om $endin* acti/ities by c(edit o( m'$ti-#'(#ose
coo#e(ati/es d'$y (e*iste(ed 1ith the Coo#e(ati/e 4e/e$o#ment A'tho(ity
1hose $endin* o#e(ation is $imited to thei( membe(sK
6'7 Sa$es by non-a*(ic'$t'(a$, non- e$ect(ic and non-c(edit coo#e(ati/es d'$y
(e*iste(ed 1ith the Coo#e(ati/e 4e/e$o#ment A'tho(ityJ P(o/ided, That the
sha(e ca#ita$ cont(ib'tion of each membe( does not e.ceed @ifteen tho'sand
#esos 6P15,0007 and (e*a(d$ess of the a**(e*ate ca#ita$ and net s'(#$'s
(atab$y dist(ib'ted amon* the membe(sK
6/7 ,.#o(t sa$es by #e(sons 1ho a(e not )AT-(e*iste(edK
617 Sa$e of (ea$ #(o#e(ties not #(ima(i$y he$d fo( sa$e to c'stome(s o( he$d fo(
$ease in the o(dina(y co'(se of t(ade o( b'siness o( (ea$ #(o#e(ty 'ti$i3ed fo(
$o1-cost and socia$i3ed ho'sin* as defined by Re#'b$ic Act No. "+",
othe(1ise 0no1n as the B(ban 4e/e$o#ment and 2o'sin* Act of 1+, and
othe( (e$ated $a1s, ho'se and $ot and othe( (esidentia$ d1e$$in*s /a$'ed at
One mi$$ion #esos 6P1,000,0007 and be$o1J P(o/ided, That not $ate( than
Fan'a(y !1st of the ca$enda( yea( s'bse='ent to the effecti/ity of this Act and
each ca$enda( yea( the(eafte(, the amo'nt of One mi$$ion #esos 6P1,000,0007
sha$$ be adE'sted to its #(esent /a$'e 'sin* the Cons'me( P(ice Inde., as
#'b$ished by the nationa$ Statistics Office 6NSO7K
6.7 <ease of a (esidentia$ 'nit 1ith a month$y (enta$ not e.ceedin* ,i*ht
tho'sand #esos 6P;,0007K P(o/ided, That not $ate( than Fan'a(y !1st of the
ca$enda( yea( s'bse='ent to the effecti/ity of Re#'b$ic Act No. ;+&1 and
each ca$enda( yea( the(eafte(, the amo'nt of ,i*ht tho'sand #esos 6P;,0007
sha$$ be adE'sted to its #(esent /a$'e 'sin* the Cons'me( P(ice Inde. as
#'b$ished by the Nationa$ Statistics Office 6NS07K
6y7 Sa$e, im#o(tation, #(intin* o( #'b$ication of boo0s and any ne1s#a#e(,
ma*a3ine (e/ie1 o( b'$$etin 1hich a##ea(s at (e*'$a( inte(/a$s 1ith fi.ed
#(ices fo( s'bsc(i#tion and sa$e and 1hich is not de/oted #(inci#a$$y to the
#'b$ication of #aid ad/e(tisementsK and
637 Sa$e o( $ease of *oods o( #(o#e(ties o( the #e(fo(mance of se(/ices othe(
than the t(ansactions mentioned in the #(ecedin* #a(a*(a#hs, the *(oss
ann'a$ sa$es andLo( (ecei#ts do not e.ceed the amo'nt of @i/e h'nd(ed fifty
tho'sand #esos 6P550,0007J P(o/ided, That not $ate( than Fan'a(y !1st of
the ca$enda( yea( s'bse='ent to the effecti/ity of Re#'b$ic Act No. ;+&1 and
each ca$enda( yea( the(eafte(, the amo'nt of @i/e h'nd(ed fifty tho'sand
#esos 6550,0007 sha$$ be adE'sted to its #(esent /a$'e 'sin* the Cons'me(
P(ice Inde., as #'b$ished by the Nationa$ Statistics Office 6NSO7.
The fo(e*oin* e.em#tions to the cont(a(y not1ithstandin*, any #e(son 1hose
sa$e of *oods o( #(o#e(ties o( se(/ices 1hich a(e othe(1ise not s'bEect to
)AT, b't 1ho iss'es a )AT in/oice o( (ecei#t the(efo( sha$$, in addition to his
$iabi$ity to othe( a##$icab$e #e(centa*e ta., if any, be $iab$e to the ta. im#osed
in Section 10% o( 10; 1itho't the benefit of in#'t ta. c(edit, and s'ch ta.
sha$$ a$so be (eco*ni3ed as in#'t ta. c(edit to the #'(chase( 'nde( Section
110, a$$ of this Code.
ii. T4ans8e4 o8 Goo$s 3y Ta5-e5e69% Pe4sons .Se,. 1+> =/
6?7 T(ansfe( of Aoods by Ta.-,.em#t Pe(sons. - In the case of ta.-f(ee
im#o(tation of *oods into the Phi$i##ines by #e(sons, entities o( a*encies
e.em#t f(om ta. 1he(e s'ch *oods a(e s'bse='ent$y so$d, t(ansfe((ed o(
e.chan*ed in the Phi$i##ines to non-e.em#t #e(sons o( entities, the
#'(chase(s, t(ansfe(ees o( (eci#ients sha$$ be conside(ed the im#o(te(s
the(eof, 1ho sha$$ be $iab$e fo( any inte(na$ (e/en'e ta. on s'ch im#o(tation.
The ta. d'e on s'ch im#o(tation sha$$ constit'te a $ien on the *oods s'#e(io(
to a$$ cha(*es o( $iens on the *oods, i((es#ecti/e of the #ossesso( the(eof.
8. T4ansa,%ions $ee6e$ sa(e .Se,. 1+! =/
6?7 T(ansactions 4eemed Sa$e. - The fo$$o1in* t(ansactions sha$$ be
deemed sa$eJ
617 T(ansfe(, 'se o( cons'm#tion not in the co'(se of b'siness of *oods
o( #(o#e(ties o(i*ina$$y intended fo( sa$e o( fo( 'se in the co'(se of b'sinessK
6+7 4ist(ib'tion o( t(ansfe( toJ
6a7 Sha(eho$de(s o( in/esto(s as sha(e in the #(ofits of the )AT-
(e*iste(ed #e(sonsK o(
6b7 C(edito(s in #ayment of debtK
6!7 Consi*nment of *oods if act'a$ sa$e is not made 1ithin si.ty 6%07
days fo$$o1in* the date s'ch *oods 1e(e consi*nedK and
R,)I,8,R TAX +- DB5I ;
6&7 Reti(ement f(om o( cessation of b'siness, 1ith (es#ect to in/ento(ies
of ta.ab$e *oods e.istin* as of s'ch (eti(ement o( cessation.
i. Rationa$e of Im#osition
ii. ,n'me(ation O Sec. &.10%-" RR No. 1%-05
iii. Ta5 =ase o8 T4ansa,%ions Dee6e$ Sa(e
RR No. 1!-+0
6b7 The Commissione( of Inte(na$ Re/en'e sha$$ dete(mine the a##(o#(iate
ta. base in cases 1he(e a t(ansaction is deemed a sa$e, ba(te( o( e.chan*e
of *oods o( #(o#e(ties 'nde( Sec. &.10%-" #a(a*(a#h 6a7 he(eof, o( 1he(e the
*(oss se$$in* #(ice is 'n(easonab$y $o1e( than the act'a$ ma(0et /a$'e. The
*(oss se$$in* #(ice is 'n(easonab$y $o1e( than the act'a$ ma(0et /a$'e if it is
$o1e( by mo(e than !0> of the act'a$ ma(0et /a$'e of the same *oods of the
same ='antity and ='a$ity so$d in the immediate $oca$ity on o( nea(est the
date of sa$e.
@o( t(ansactions deemed sa$e, the o't#'t ta. sha$$ be based on the ma(0et
/a$'e of the *oods deemed so$d as of the time of the occ'((ence of the
t(ansactions en'me(ated in Sec. &.10%-"6a7617,6+7, and 6!7 of these
Re*'$ations. 2o1e/e(, in the case of (eti(ement o( cessation of b'siness, the
ta. base sha$$ be the ac='isition cost o( the c'((ent ma(0et #(ice of the *oods
o( #(o#e(ties, 1hiche/e( is $o1e(.
In the case of a sa$e 1he(e the *(oss se$$in* #(ice is 'n(easonab$y $o1e( than
the fai( ma(0et /a$'e, the act'a$ ma(0et /a$'e sha$$ be the ta. base.
*. R'$es fo( Ce(tain Se(/ices
i. Common Ca((ie(s
1. Se,. .1+#-) Nos. 11 an$ 1) o8 RR No. 1!-+0
6117 t(ans#o(tation cont(acto(s on thei( t(ans#o(t of *oods o(
ca(*oes,inc$'din* #e(sons 1ho t(ans#o(t *oods o( ca(*oes fo( hi(e and othe(
domestic common ca((ie(s by $and (e$ati/e to thei( t(ans#o(t of *oods o(
ca(*oesK
61+7 common ca((ie(s by ai( and sea (e$ati/e to thei( t(ans#o(t of #assen*e(s,
*oods o( ca(*oes f(om one #$ace in the Phi$i##ines to anothe( #$ace in the
Phi$i##ines
+. Sec. &.10;-! of RR No. 1%-05
ii. <ease of P(o#e(ties
1. Sec. &.10;-! of RR No. 1%-05
). Lease o8 Resi$en%ia( Uni%s ? @Se,. .1+"-1 .=/.A/ o8 RR No. 1!-+0B
$ease of (esidentia$ 'nits 1ith a month$y (enta$ #e( 'nit not e.ceedin* 100,
(e*a(d$ess of the amo'nt of the a**(e*ate (enta$s (ecei/ed by the $esso(
d'(in* the yea(, P(o/ided, that not $ate( than Fan'a(y !1, +00 and e/e(y
th(ee yea(s the(eafte(, the amo'nt of 100 sha$$ be adE'sted to its #(esent
/a$'e 'sin* the cons'me( #(ice inde., as #'b$ished by the NSO.
The fo(e*oin*, not 1ithstandin*,$ease of (esidentia$ 'nits 1he(e the month$y
(enta$ #e( 'nit e.ceeds 100 b't the a**(e*ate of s'ch (enta$s of the $esso(
d'(in* the yea( do not e.ceed 1.55 sha$$ be $i0e1ise e.em#t f(om )AT,
ho1e/e( the same sha$$ be s'bEected to !> #e(centa*e ta..
In cases 1he(e a $esso( has se/e(a$ (esidentia$ 'nits fo( $ease, some a(e
$eased o't fo( a month$y (enta$ #e( 'nit of not e.ceedin* P10,000.00 1hi$e
othe(s a(e $eased o't fo( mo(e than P10,000.00 #e( 'nit, his ta. $iabi$ity 1i$$
be as fo$$o1sJ
1. The *(oss (ecei#ts f(om (enta$s not e.ceedin* P10,000.00 #e( month #e(
'nit sha$$ be e.em#t f(om )AT (e*a(d$ess of the a**(e*ate ann'a$ *(oss
(ecei#ts.
+. The *(oss (ecei#ts f(om (enta$s e.ceedin* P10,000.00 #e( month #e( 'nit
sha$$ be s'bEect to )AT if the a**(e*ate ann'a$ *(oss (ecei#ts f(om said 'nits
on$y 6not inc$'din* the *(oss (ecei#ts f(om 'nits $eased fo( not mo(e than
P10,000.007 e.ceeds P1,500,000.00. Othe(1ise, the *(oss (ecei#ts 1i$$ be
s'bEect to the !> ta. im#osed 'nde( Section 11% of the Ta. Code.
The te(m G(esidentia$ 'nitsG sha$$ (efe( to a#a(tments and ho'ses P $ots 'sed
fo( (esidentia$ #'(#oses, and b'i$din*s o( #a(ts o( 'nits the(eof 'sed so$e$y as
d1e$$in* #$aces 6e.*., do(mito(ies, (ooms and bed s#aces7 e.ce#t mote$s,
mote$ (ooms, hote$s and hote$ (ooms.
The te(m G'nitG sha$$ mean an a#a(tment 'nit in the case of a#a(tments,
ho'se in the case of (esidentia$ ho'sesK #e( #e(son in the case of
R,)I,8,R TAX +- DB5I
do(mito(ies, boa(din* ho'ses and bed s#acesK and #e( (oom in case of
(ooms fo( (ent.
iii. P4o8essiona( Se4vi,es
iv. Me$i,a( Se4vi,es
1. Se,. .1+"-1 .=/.g/ o8 RR No. 1!-+0

6*7 5edica$, 4enta$, hos#ita$ and /ete(ina(y se(/ices, e.ce#t those (ende(ed
by #(ofessiona$s.
<abo(ato(y se(/ices a(e e.em#ted. If the hos#ita$ o( c$inic o#e(ates a
#ha(macy o( d('* sto(e, the sa$e of d('*s and medicine is s'bEect to )AT
P-i(i99ine Cea(%-,a4e P4ovi$e4s vs. CIR GR No. 1!#1)" $a%e$ A94i( )*
)++>
The S'#(eme Co'(t 6SC7 in one case, affi(med the /a$idity of the im#osition
of the )AT on 25Os, as en'nciated in )AT R'$in* No. 1;-;, on the *(o'nd
that 25Os do not act'a$$y #(o/ide medica$ andLo( hos#ita$ se(/ices, b't
me(e$y a((an*e the #(o/ision of said se(/ices, 1hich 'nde( the $a1, is not a
)AT-e.em#t acti/ity.

III. DER< RATED SALES <2 G<<DS AND SERVICES an$ VAT
EXEMPT SALES
a. Na%'4e o8 De4o Ra%e$ Sa(es
Qe(o-(ated Sa$es of Aoods o( P(o#e(ties. A 3e(o-(ated sa$e of *oods o(
#(o#e(ties by a sa$e by a )AT-(e*iste(ed #e(son is a ta.ab$e t(ansaction fo(
)AT #'(#oses b't the sa$e does not (es'$t in any o't#'t ta..
2o1e/e(, the in#'t ta. on the #'(chases of *oods, #(o#e(ties o( se(/ices
(e$ated to s'ch 3e(o-(ated sa$e sha$$ be a/ai$ab$e as ta. c(edit o( (ef'nd in
acco(dance 1ith Re/. Re*'$ations No. 1%-+005. 6Re/. Re*s. No. 1%-+005,
1st #a(.7
b. Qe(o Rated Sa$e of Aoods 6Sec. 10%7
The fo$$o1in* sa$es by )AT-(e*iste(ed #e(sons sha$$ be s'bEect to 3e(o
#e(cent 60>7 (ateJ
6a7 ,.#o(t Sa$es- The sa$e and act'a$ shi#ment of *oods f(om the
Phi$i##ines to a fo(ei*n co'nt(y, i((es#ecti/e of any shi##in* a((an*ement
that may be a*(eed '#on 1hich may inf$'ence o( dete(mine the t(ansfe( of
o1ne(shi# of the *oods so e.#o(ted and #aid fo( in acce#tab$e fo(ei*n
c'((ency o( its e='i/a$ent in *oods o( se(/ices, and acco'nted fo( in
acco(dance 1ith the ('$es and (e*'$ations of the ?an*0o Sent(a$ n* Pi$i#inas
6b7@o(ei*n C'((ency 4enominated Sa$e- means sa$e to a non(esident of
*oods, e.ce#t those mentioned in Sections 1& and 150, assemb$ed o(
man'fact'(ed in the Phi$i##ines fo( de$i/e(y to a (esident in the Phi$i##ines,
#aid fo( in acce#tab$e fo(ei*n c'((ency and acco'nted fo( in acco(dance 1ith
the ('$es and (e*'$ations of the ?an*0o Sent(a$ n* Pi$i#inas 6?SP7.
c. Qe(o Rated Sa$e of Se(/ices 6Sec. 10; ?7
617 P(ocessin*, man'fact'(in* o( (e#ac0in* *oods fo( othe( #e(sons
doin* b'siness o'tside the Phi$i##ines 1hich *oods a(e s'bse='ent$y
e.#o(ted, 1he(e the se(/ices a(e #aid fo( in acce#tab$e fo(ei*n c'((ency and
acco'nted fo( in acco(dance 1ith the ('$es and (e*'$ations of the ?an*0o
Sent(a$ n* Pi$i#inas 6?SP7K
6+7 Se(/ices othe( than those mentioned in the #(ecedin* #a(a*(a#h, the
conside(ation fo( 1hich is #aid fo( in acce#tab$e fo(ei*n c'((ency and
acco'nted fo( in acco(dance 1ith the ('$es and (e*'$ations of the ?an*0o
Sent(a$ n* Pi$i#inas 6?SP7K
6!7 Se(/ices (ende(ed to #e(sons o( entities 1hose e.em#tion 'nde(
s#ecia$ $a1s o( inte(nationa$ a*(eements to 1hich the Phi$i##ines is a
si*nato(y effecti/e$y s'bEects the s'##$y of s'ch se(/ices to 3e(o #e(cent
60>7 (ateK
6&7 Se(/ices (ende(ed to /esse$s en*a*ed e.c$'si/e$y in inte(nationa$
shi##in*K and
657 Se(/ices #e(fo(med by s'bcont(acto(s andLo( cont(acto(s in
#(ocessin*, con/e(tin*, of man'fact'(in* *oods fo( an ente(#(ise 1hose
e.#o(t sa$es e.ceed se/enty #e(cent 6"0>7 of tota$ ann'a$ #(od'ction.
R,)I,8,R TAX +- DB5I 10
CAS,SJ
CIR vs. A6e4i,an E594ess GR No. 10)!+" $a%e$ &'ne )"* )++0
@actsJ Ame(ican ,.#(ess inte(nationa$ is a fo(ei*n co(#o(ation o#e(atin* in
the Phi$i##ines, it is a (e*iste(ed ta.#aye(. On A#(i$ 1!, 1, H(es#ondentI
fi$ed 1ith the ?IR a $ette(-(e='est fo( the (ef'nd of its 1" e.cess in#'t ta.es
in the amo'nt of P!,"51,0%".0&, 1hich amo'nt 1as a((i/ed at afte( ded'ctin*
f(om its tota$ in#'t )AT #aid of P!,"%!,0%0.&! its a##$ied o't#'t )AT
$iabi$ities on$y fo( the thi(d and fo'(th ='a(te(s of 1" amo'ntin* to
P5,1!.%% and P%,".&!, (es#ecti/e$y. The CTA ('$ed in fa/o( of the he(ein
(es#ondent ho$din* that its se(/ices a(e s'bEect to 3e(o-(ate #'(s'ant to
Section 10;6b7 of the Ta. Refo(m Act of 1" and Section &.10+-+ 6b76+7 of
Re/en'e Re*'$ations 5-%. The CA affi(med the decision of the CTA.
Iss'eJ 8hethe( o( not the com#any is s'bEect to 3e(o-(ate ta. #'(s'ant to the
Ta. Refo(m Act of 1".
2e$dJ Se(/ices #e(fo(med by )AT-(e*iste(ed #e(sons in the Phi$i##ines 6othe(
than the #(ocessin*, man'fact'(in* o( (e#ac0in* of *oods fo( #e(sons doin*
b'siness o'tside the Phi$i##ines7, 1hen #aid in acce#tab$e fo(ei*n c'((ency
and acco'nted fo( in acco(dance 1ith the ('$es and (e*'$ations of the ?SP,
a(e 3e(o-(ated. Res#ondent is a )AT-(e*iste(ed #e(son that faci$itates the
co$$ection and #ayment of (ecei/ab$es be$on*in* to its non-(esident fo(ei*n
c$ient, fo( 1hich it *ets #aid in acce#tab$e fo(ei*n c'((ency in1a(d$y (emitted
and acco'nted fo( in confo(mity 1ith ?SP ('$es and (e*'$ations. Ce(tain$y,
the se(/ice it (ende(s in the Phi$i##ines is not in the same cate*o(y as
M#(ocessin*, man'fact'(in* o( (e#ac0in* of *oodsR and sho'$d, the(efo(e, be
3e(o-(ated. In (e#$y to a ='e(y of (es#ondent, the ?IR o#ined in )AT R'$in*
No. 0;0-; that the income (es#ondent ea(ned f(om its #a(ent com#anyCs
(e*iona$ o#e(atin* cente(s 6ROCs7 1as a'tomatica$$y 3e(o-(ated effecti/e
Fan'a(y 1, 1;;. Se(/ice has been defined as Mthe a(t of doin* somethin*
'sef'$ fo( a #e(son o( com#any fo( a feeR o( M'sef'$ $abo( o( 1o(0 (ende(ed o(
to be (ende(ed by one #e(son to anothe(.R @o( faci$itatin* in the Phi$i##ines
the co$$ection and #ayment of (ecei/ab$es be$on*in* to its 2on* :on*-based
fo(ei*n c$ient, and *ettin* #aid fo( it in d'$y acco'nted acce#tab$e fo(ei*n
c'((ency, (es#ondent (ende(s se(/ice fa$$in* 'nde( the cate*o(y of 3e(o
(atin*. P'(s'ant to the Ta. Code, a )AT of 3e(o #e(cent sho'$d, the(efo(e, be
$e/ied '#on the s'##$y of that se(/ice.
As a *ene(a$ ('$e, the )AT system 'ses the destination #(inci#$e as a basis
fo( the E'(isdictiona$ (each of the ta.. Aoods and se(/ices a(e ta.ed on$y in
the co'nt(y 1he(e they a(e cons'med. Th's, e.#o(ts a(e 3e(o-(ated, 1hi$e
im#o(ts a(e ta.ed. )AT (ate fo( se(/ices that a(e #e(fo(med in the
Phi$i##ines, M#aid fo( in acce#tab$e fo(ei*n c'((ency and acco'nted fo( in
acco(dance 1ith the ('$es and (e*'$ations of the ?SP.R Th's, fo( the s'##$y
of se(/ice to be 3e(o-(ated as an e.ce#tion, the $a1 me(e$y (e='i(es that fi(st,
the se(/ice be #e(fo(med in the Phi$i##inesK second, the se(/ice fa$$ 'nde(
any of the 2o1e/e(, the $a1 c$ea($y #(o/ides fo( an e.ce#tion to the
destination #(inci#$eK that is, fo( a 3e(o #e(cent cate*o(ies in Section 10+6b7
of the Ta. CodeK and, thi(d, it be #aid in acce#tab$e fo(ei*n c'((ency
acco'nted fo( in acco(dance 1ith ?SP ('$es and (e*'$ations. Indeed, these
th(ee (e='i(ements fo( e.em#tion f(om the destination #(inci#$e a(e met by
(es#ondent. Its faci$itation se(/ice is #e(fo(med in the Phi$i##ines. It fa$$s
'nde( the second cate*o(y fo'nd in Section 10+6b7 of the Ta. Code, beca'se
it is a se(/ice othe( than M#(ocessin*, man'fact'(in* o( (e#ac0in* of *oodsR
as mentioned in the #(o/ision. Bndis#'ted is the fact that s'ch se(/ice meets
the stat'to(y condition that it be #aid in acce#tab$e fo(ei*n c'((ency d'$y
acco'nted fo( in acco(dance 1ith ?SP ('$es. Th's, it sho'$d be 3e(o-(ated.
CIR vs. ='46eis%e4 an$ Eain S,an$inavian Con%4a,%o4 Min$anao* In,.
In Commissione( of Inte(na$ Re/en'e /. ?'(meiste( and 8ain Scandina/ian
Cont(acto( 5indanao, Inc. 6A.R. No. 15!+05, Fan'a(y ++, +00"7, it he$d that
the (eci#ient of the se(/ices m'st be a #e(son doin* b'siness o'tside the
Phi$i##ines to ='a$ify fo( 3e(o (ate. It #ainsta0in*$y e.#$ained that the fact the
$a1 sti#'$ates #ayment in Macce#tab$e fo(ei*n c'((ency 'nde( ?SP ('$esR
means that the $e*is$at'(e c$ea($y en/isions e.#o(t sa$es. Bnde( ?SP ('$es,
the #(oceeds of e.#o(t sa$es m'st be (e#o(ted to the ?SP. If the #(o/ide( and
the (eci#ient of the se(/ices a(e both doin* b'siness in the Phi$i##ines, the
t(ansaction is not conside(ed an e.#o(t sa$e e/en if #ayment is denominated
in fo(ei*n c'((ency. In s'ch a case, (e#o(tin* to the ?SP is an 'nnecessa(y
act.
The S'#(eme Co'(t f'(the( (ationa$i3ed that it does not ma0e sense fo(
a$$o1in* 3e(o-(ated )AT fo( se(/ices 1he(e the (eci#ient is doin* b'siness in
the Phi$i##ines. If it 1e(e so, those s'bEect to the (e*'$a( )AT can a/oid
#ayin* the )AT by sim#$y sti#'$atin* #ayment in fo(ei*n c'((ency in1a(d$y
(emitted by the (eci#ient of se(/ices.
8ith the #assa*e of RA !!", ho1e/e(, the E'(is#('dentia$ (e='isite that
se(/ices 6othe( than #(ocessin*, man'fact'(in* o( (e#ac0in* of *oods7 m'st
be (ende(ed to othe( #e(sons doin* b'siness o'tside the Phi$i##ines 1as
inco(#o(ated in the $a1 itse$f. 2ence, $a1 and E'(is#('dence a(e no1 one in
sayin* that the s'##$y of se(/ices 1i$$ be acco(ded )AT 3e(o-(atin* 1hen the
fo$$o1in* (e='i(ements a(e metJ 617 the se(/ice is #e(fo(med in the
Phi$i##inesK 6+7 the se(/ice fa$$s 'nde( any of the cate*o(ies #(o/ided in
Section 10;6?7 of the Ta. CodeK 6!7 the (eci#ient is a #e(son o( entity doin*
b'siness o'tside the Phi$i##inesK and 6!7 it is #aid fo( in acce#tab$e fo(ei*n
c'((ency that is acco'nted fo( in acco(dance 1ith the (e*'$ations of the ?SP.
R,)I,8,R TAX +- DB5I 11
CIR vs. A,esi%e GR No. GR No. 1>)"0 $a%e$ 2e34'a4y 1!* )++>
PAACOR IS ,X,5PT @RO5 PAD5,NT O@ 4IR,CT AN4 IN4IR,CT
TAX,S. 2,NC,, T2, SA<, O@ AOO4S AN4 S,R)IC,S TO PAACOR IS
SB?F,CT TO 0> )AT.
P.4. 1;% *(ants PAACOR an e.em#tion f(om the #ayment of ta.es, di(ect
o( indi(ect. ?y e.tendin* the e.em#tion to entities o( indi/id'a$s dea$in* 1ith
PAACOR, the $e*is$at'(e c$ea($y *(anted e.em#tion a$so f(om indi(ect ta.es.
Section 10+6b76!7 of the 1"" Ta. Code 6no1 Sec. 10;6b76!7 of R.A. ;&+&7
s'bEects to 0> )AT the se(/ices (ende(ed to #e(sons o( entities 1hose
e.em#tion 'nde( s#ecia$ $a1s s'bEects the s'##$y of s'ch se(/ices to 0>
(ate. 2ence, the $ease of #(o#e(ty and sa$e of food and be/e(a*es to
PAACOR is s'bEect to 0> )AT.
d. A'tomatic 3e(o-(ate /s. ,ffecti/e$y 3e(o-(ate
CAS,SJ
CIR vs. Seaga%e Te,-no(ogy .P-i(s/ GR No. 101#!! 2e34'a4y 11* )++0
In te(ms of the )AT com#'tation, 3e(o (atin* and e.em#tion a(e the same,
b't the e.tent of (e$ief that (es'$ts f(om eithe( one of them is not.
A##$yin* the destination #(inci#$e to the e.#o(tation of *oods, a'tomatic 3e(o
(atin* is #(ima(i$y intended to be enEoyed by the se$$e( 1ho is di(ect$y and
$e*a$$y $iab$e fo( the )AT, ma0in* s'ch se$$e( inte(nationa$$y com#etiti/e by
a$$o1in* the (ef'nd o( c(edit of in#'t ta.es that a(e att(ib'tab$e to e.#o(t
sa$es.,ffecti/e 3e(o (atin*, on the cont(a(y, is intended to benefit the
#'(chase( 1ho, not bein* di(ect$y and $e*a$$y $iab$e fo( the #ayment of the
)AT, 1i$$ '$timate$y bea( the b'(den of the ta. shifted by the s'##$ie(s.
In both instances of 3e(o (atin*, the(e is tota$ (e$ief fo( the #'(chase( f(om the
b'(den of the ta.. ?'t in an e.em#tion the(e is on$y #a(tia$ (e$ief, beca'se the
#'(chase( is not a$$o1ed any ta. (ef'nd of o( c(edit fo( in#'t ta.es #aid.
If at the end of a ta.ab$e ='a(te( the o't#'t ta.es cha(*ed by a se$$e( a(e
e='a$ to the in#'t ta.es #assed on by the s'##$ie(s, no #ayment is (e='i(ed.
It is 1hen the o't#'t ta.es e.ceed the in#'t ta.es that the e.cess has to be
#aid.If, ho1e/e(, the in#'t ta.es e.ceed the o't#'t ta.es, the e.cess sha$$ be
ca((ied o/e( to the s'cceedin* ='a(te( o( ='a(te(s. Sho'$d the in#'t ta.es
(es'$t f(om 3e(o-(ated o( effecti/e$y 3e(o-(ated t(ansactions o( f(om the
ac='isition of ca#ita$ *oods, any e.cess o/e( the o't#'t ta.es sha$$ instead
be (ef'nded to the ta.#aye( o( c(edited a*ainst othe( inte(na$ (e/en'e ta.es.
,ffecti/e$y 3e(o-(ated t(ansactions, ho1e/e(, (efe( to the sa$e of *oods o(
s'##$y of se(/ices to #e(sons o( entities 1hose e.em#tion 'nde( s#ecia$ $a1s
o( inte(nationa$ a*(eements to 1hich the Phi$i##ines is a si*nato(y effecti/e$y
s'bEects s'ch t(ansactions to a 3e(o (ate.A*ain, as a##$ied to the ta. base,
s'ch (ate does not yie$d any ta. cha(*eab$e a*ainst the #'(chase(. The
se$$e( 1ho cha(*es 3e(o o't#'t ta. on s'ch t(ansactions can a$so c$aim a
(ef'nd of o( a ta. c(edit ce(tificate fo( the )AT #(e/io's$y cha(*ed by
s'##$ie(s.
CIR vs. Tos-i3a In8o46a%ion EA'i96en% GR No. 10+10 $a%e$ A'g's% "*
)++0
Rationa$e fo( 3e(o-(atin* of e.#o(ts. The Phi$i##ine )AT system adhe(es to
the C(oss ?o(de( 4oct(ine, acco(din* to 1hich, no )AT sha$$ be im#osed to
fo(m #a(t of the cost of *oods destined fo( cons'm#tion o'tside of the
te((ito(ia$ bo(de( of the ta.in* a'tho(ity. HCommissione( of Inte(na$ Re/en'e /.
Toshiba Info(mation ,='i#ment 6Phi$s.7, Inc., A. R.. No. 15015&, A'*'st ,
+005I
e. Des%ina%ion 94in,i9(e an$ ,4oss 3o4$e4 $o,%4ine
As a *ene(a$ ('$e, the )AT system 'ses the destination #(inci#$e as a basis
fo( the E'(isdictiona$ (each of the ta..
Aoods and se(/ices a(e ta.ed on$y in the co'nt(y 1he(e they a(e cons'med.
Th's, e.#o(ts a(e 3e(o-(ated, 1hi$e im#o(ts a(e ta.ed.
Is the(e any e.ce#tion to the destination #(inci#$e N
SBAA,ST,4 ANS8,RJ Des. The $a1 c$ea($y #(o/ides fo( an e.ce#tion to
the destination #(inci#$eK that is, fo( a 3e(o #e(cent )AT (ate fo( se(/ices that
a(e #e(fo(med in the Phi$i##ines, 9#aid fo( in acce#tab$e fo(ei*n c'((ency and
acco'nted fo( in acco(dance 1ith the ('$es and (e*'$ations of the H?SPI.9
The MC(oss ?o(de( 4oct(ineR is a$so 0no1n as the destination #(inci#$e.
2ence, act'a$ o( const('cti/e e.#o(t of *oods and se(/ices f(om the
Phi$i##ines to a fo(ei*n co'nt(y m'st be 3e(o-(ated fo( )ATK 1hi$e, those
destined fo( 'se o( cons'm#tion 1ithin the Phi$i##ines sha$$ be im#osed the
t1e$/e #e(cent 61+>7 )AT.
8. CIR vs. A6e4i,an E594ess GR No. 10)!+" $a%e$ &'ne )"* )++0
As a *ene(a$ ('$e, the /a$'e-added ta. 6)AT7 system 'ses the destination
#(inci#$e. 2o1e/e(, o'( )AT $a1 itse$f #(o/ides fo( a c$ea( e.ce#tion, 'nde(
1hich the s'##$y of se(/ice sha$$ be 3e(o-(ated 1hen the fo$$o1in*
(e='i(ements a(e metJ 617 the se(/ice is #e(fo(med in the Phi$i##inesK 6+7 the
se(/ice fa$$s 'nde( any of the cate*o(ies #(o/ided in Section 10+6b7 of the
Ta. CodeK and 6!7 it is #aid fo( in acce#tab$e fo(ei*n c'((ency that is
acco'nted fo( in acco(dance 1ith the (e*'$ations of the ?an*0o Sent(a$ n*
Pi$i#inas. Since (es#ondentCs se(/ices meet these (e='i(ements, they a(e
R,)I,8,R TAX +- DB5I 1+
3e(o-(ated. Petitione(Cs Re/en'e Re*'$ations that a$te( o( (e/o0e the abo/e
(e='i(ements a(e '$t(a /i(es and in/a$id.
As a *ene(a$ ('$e, the )AT system 'ses the destination #(inci#$e as a basis
fo( the E'(isdictiona$ (each of the ta..H51I Aoods and se(/ices a(e ta.ed on$y
in the co'nt(y 1he(e they a(e cons'med. Th's, e.#o(ts a(e 3e(o-(ated, 1hi$e
im#o(ts a(e ta.ed.
CIR vs. Tos-i3a In8o46a%ion EA'i96en% GR No. 10+10 $a%e$ A'g's% "*
)++0
The Phi$i##ine )AT system adhe(es to the C(oss ?o(de( 4oct(ine, acco(din*
to 1hich, no )AT sha$$ be im#osed to fo(m #a(t of the cost of *oods destined
fo( cons'm#tion o'tside of the te((ito(ia$ bo(de( of the ta.in* a'tho(ity.
2ence, act'a$ e.#o(t of *oods and se(/ices f(om the Phi$i##ines to a fo(ei*n
co'nt(y m'st be f(ee of )ATK 1hi$e, those destined fo( 'se o( cons'm#tion
1ithin the Phi$i##ines sha$$ be im#osed 1ith ten #e(cent 610>7 )AT.
Sa$es of *oods, #(o#e(ties and se(/ices by a )AT-(e*iste(ed s'##$ie( f(om
the C'stoms Te((ito(y to an ,COQON, ente(#(ise sha$$ be t(eated as e.#o(t
sa$es. If s'ch sa$es a(e made by a )AT-(e*iste(ed s'##$ie(, they sha$$ be
s'bEect to )AT at 3e(o #e(cent 60>7. In 3e(o-(ated t(ansactions, the )AT-
(e*iste(ed s'##$ie( sha$$ not #ass on any o't#'t )AT to the ,COQON,
ente(#(ise, and at the same time, sha$$ be entit$ed to c$aim ta. c(editL(ef'nd of
its in#'t )AT att(ib'tab$e to s'ch sa$es. Qe(o-(atin* of e.#o(t sa$es #(ima(i$y
intends to benefit the e.#o(te( 6i.e., the s'##$ie( f(om the C'stoms Te((ito(y7,
1ho is di(ect$y and $e*a$$y $iab$e fo( the )AT, ma0in* it inte(nationa$$y
com#etiti/e by a$$o1in* it to c(editL(ef'nd the in#'t )AT att(ib'tab$e to its
e.#o(t sa$es.
5ean1hi$e, sa$es to an ,COQON, ente(#(ise made by a non-)AT o(
'n(e*iste(ed s'##$ie( 1o'$d on$y be e.em#t f(om )AT and the s'##$ie( sha$$
not be ab$e to c$aim c(editL(ef'nd of its in#'t )AT.
,/en concedin*, ho1e/e(, that (es#ondent Toshiba, as a P,QA-(e*iste(ed
ente(#(ise, is a )AT-e.em#t entity that co'$d not ha/e en*a*ed in a )AT-
ta.ab$e b'siness, this Co'(t sti$$ be$ie/es, *i/en the #a(tic'$a( ci(c'mstances
of the #(esent case, that it is entit$ed to a c(editL(ef'nd of its in#'t )AT.
*. Qe(o Rated Sa$es /s. ,.em#t Sa$es
CIR vs. Ce3' Toyo Co49. GR No. 1"+>1 $a%e$ 2e34'a4y 1!* )++0
Ta.ab$e t(ansactions a(e those t(ansactions 1hich a(e s'bEect to /a$'e-
added ta. eithe( at the (ate of ten #e(cent 610>7 o( 3e(o #e(cent 60>7. In
ta.ab$e t(ansactions, the se$$e( sha$$ be entit$ed to ta. c(edit fo( the /a$'e-
added ta. #aid on #'(chases and $eases of *oods, #(o#e(ties o( se(/ices.
An e.em#tion means that the sa$e of *oods, #(o#e(ties o( se(/ices and the
'se o( $ease of #(o#e(ties is not s'bEect to )AT 6o't#'t ta.7 and the se$$e( is
not a$$o1ed any ta. c(edit on )AT 6in#'t ta.7 #(e/io's$y #aid. The #e(son
ma0in* the e.em#t sa$e of *oods, #(o#e(ties o( se(/ices sha$$ not bi$$ any
o't#'t ta. to his c'stome(s beca'se the said t(ansaction is not s'bEect to
)AT. Th's, a )AT-(e*iste(ed #'(chase( of *oods, #(o#e(ties o( se(/ices that
a(e )AT-e.em#t, is not entit$ed to any in#'t ta. on s'ch #'(chases des#ite
the iss'ance of a )AT in/oice o( (ecei#t.
No1, ha/in* dete(mined that (es#ondent is en*a*ed in ta.ab$e t(ansactions
s'bEect to )AT, $et 's then #(oceed to dete(mine 1hethe( it is s'bEect to 10>
o( 3e(o 60>7 (ate of )AT. To be*in 1ith, it m'st be (eca$$ed that *ene(a$$y,
sa$e of *oods and s'##$y of se(/ices #e(fo(med in the Phi$i##ines a(e ta.ab$e
at the (ate of 10>. 2o1e/e(, e.#o(t sa$es, o( sa$es o'tside the Phi$i##ines,
sha$$ be s'bEect to /a$'e-added ta. at 0> if made by a )AT-(e*iste(ed
#e(son.Bnde( the /a$'e-added ta. system, a 3e(o-(ated sa$e by a )AT-
(e*iste(ed #e(son, 1hich is a ta.ab$e t(ansaction fo( )AT #'(#oses, sha$$ not
(es'$t in any o't#'t ta.. 2o1e/e(, the in#'t ta. on his #'(chase of *oods,
#(o#e(ties o( se(/ices (e$ated to s'ch 3e(o-(ated sa$e sha$$ be a/ai$ab$e as
ta. c(edit o( (ef'nd.
In #(inci#$e, the #'(#ose of a##$yin* a 3e(o #e(cent 60>7 (ate on a ta.ab$e
t(ansaction is to e.em#t the t(ansaction com#$ete$y f(om )AT #(e/io's$y
co$$ected on in#'ts. It is th's the on$y t('e 1ay to ens'(e that *oods a(e
#(o/ided f(ee of )AT. 8hi$e the 3e(o (atin* and the e.em#tion a(e
com#'tationa$$y the same, they act'a$$y diffe( in se/e(a$ as#ects, to 1itJ
6a7 A 3e(o-(ated sa$e is a ta.ab$e t(ansaction b't does not (es'$t in an o't#'t
ta. 1hi$e an e.em#ted t(ansaction is not s'bEect to the o't#'t ta.K
6b7 The in#'t )AT on the #'(chases of a )AT-(e*iste(ed #e(son 1ith 3e(o-
(ated sa$es may be a$$o1ed as ta. c(edits o( (ef'nded 1hi$e the se$$e( in an
e.em#t t(ansaction is not entit$ed to any in#'t ta. on his #'(chases des#ite
the iss'ance of a )AT in/oice o( (ecei#t.
R,)I,8,R TAX +- DB5I 1!
6c7 Pe(sons en*a*ed in t(ansactions 1hich a(e 3e(o-(ated, bein* s'bEect to
)AT, a(e (e='i(ed to (e*iste( 1hi$e (e*ist(ation is o#tiona$ fo( )AT-e.em#t
#e(sons.
In this case, it is 'ndis#'ted that (es#ondent is en*a*ed in the e.#o(t
b'siness and is (e*iste(ed as a )AT ta.#aye( #e( Ce(tificate of Re*ist(ation
of the ?IR.H+"I @'(the(, the (eco(ds sho1 that the (es#ondent is s'bEect to
)AT as it a/ai$ed of the income ta. ho$iday 'nde( ,.O. No. ++%. Pe(fo(ce,
(es#ondent is s'bEect to )AT at 0> (ate and is entit$ed to a (ef'nd o( c(edit of
the 'n'ti$i3ed in#'t ta.es, 1hich the Co'(t of Ta. A##ea$s com#'ted at
P+,15;,"1&.&%, b't 1hich 1e find-afte( (ecom#'tation-sho'$d be
P+,15;,"1&.5+.
-. En'6e4a%ion o8 E5e69% T4ansa,%ions .Se,. 1+"/ Se,. .1+"-1 .=/ o8
RR No. 1!-+0
i. E5e69% Pe4sons vs. E5e69% T4ansa,%ions
F. CIR vs. Seaga%e Te,-no(ogy .P-i(s/ GR No. 101#!! 2e34'a4y 11*
)++0
An e.em#t t(ansaction, on the one hand, in/o$/es *oods o( se(/ices 1hich,
by thei( nat'(e, a(e s#ecifica$$y $isted in and e.#(ess$y e.em#ted f(om the
)AT 'nde( the Ta. Code, 1itho't (e*a(d to the ta. stat's -- )AT-e.em#t o(
not -- of the #a(ty to the t(ansaction. Indeed, s'ch t(ansaction is not s'bEect
to the )AT, b't the se$$e( is not a$$o1ed any ta. (ef'nd of o( c(edit fo( any
in#'t ta.es #aid.
An e.em#t #a(ty, on the othe( hand, is a #e(son o( entity *(anted )AT
e.em#tion 'nde( the Ta. Code, a s#ecia$ $a1 o( an inte(nationa$ a*(eement
to 1hich the Phi$i##ines is a si*nato(y, and by /i(t'e of 1hich its ta.ab$e
t(ansactions become e.em#t f(om the )AT. S'ch #a(ty is a$so not s'bEect to
the )AT, b't may be a$$o1ed a ta. (ef'nd of o( c(edit fo( in#'t ta.es #aid,
de#endin* on its (e*ist(ation as a )AT o( non-)AT ta.#aye(.
IV. TRANSITI<NAL AND PRESUMPTIVE INPUT TAX
Sec. &.111-1 of RR No. 1%-05
S,CTION &.111-1. T(ansitiona$LP(es'm#ti/e In#'t Ta. C(edits. -
6a7 T(ansitiona$ In#'t Ta. C(edits on ?e*innin* In/ento(ies
Ta.#aye(s 1ho became )AT-(e*iste(ed #e(sons '#on e.ceedin* the
minim'm t'(no/e( of P1,500,000.00 in any 1+-month #e(iod, o( 1ho
/o$'nta(i$y (e*iste( e/en if thei( t'(no/e( does not e.ceed P1,500,000.00
6e.ce#t f(anchise *(antees of (adio and te$e/ision b(oadcastin* 1hose
th(esho$d is P10,000,000.007 sha$$ be entit$ed to a t(ansitiona$ in#'t ta. on the
in/ento(y on hand as of the effecti/ity of thei( )AT (e*ist(ation, on the
fo$$o1in*J
617 *oods #'(chased fo( (esa$e in thei( #(esent conditionK
6+7 mate(ia$s #'(chased fo( f'(the( #(ocessin*, b't 1hich ha/e not yet
'nde(*one #(ocessin*K
6!7 *oods 1hich ha/e been man'fact'(ed by the ta.#aye(K
6&7 *oods in #(ocess fo( sa$eK o(
657 *oods and s'##$ies fo( 'se in the co'(se of the ta.#aye(Gs t(ade o(
b'siness as a )AT-(e*iste(ed #e(son.
The t(ansitiona$ in#'t ta. sha$$ be t1o #e(cent 6+>7 of the /a$'e of the
be*innin* in/ento(y on hand o( act'a$ )AT #aid on s'ch, *oods, mate(ia$s
and s'##$ies, 1hiche/e( is hi*he(, 1hich amo'nt sha$$ be c(editab$e a*ainst
the o't#'t ta. of )AT-(e*iste(ed #e(son. The /a$'e a$$o1ed fo( income ta.
#'(#oses on in/ento(ies sha$$ be the basis fo( the com#'tation of the +>
t(ansitiona$ in#'t ta., e.c$'din* *oods that a(e e.em#t f(om )AT 'nde( Sec.
10 of the Ta. Code.
The th(esho$d amo'nt of P1,500,000.00 sha$$ be adE'sted, not $ate( than
Fan'a(y !1, +00 and e/e(y th(ee yea(s the(eafte(, to its #(esent /a$'e 'sin*
the Cons'me( P(ice Inde. as #'b$ished by the NSO.
CASE: 2o4% =oni8a,io Deve(o96en% vs. CIR GR No. 10###0 $a%e$ A94i(
)* )++"
In @o(t ?onifacio 4e/e$o#ment Co(#. /. CIR 6A.R. No. 15;;;5, A#(i$ +, +007,
the co'(t in/a$idated a #(o/ision of Re/en'e Re*'$ations 6RR7 No. 0"-5,
1hich $imits the a##$ication of the ;-#e(cent t(ansitiona$-in#'t ta. to in/ento(y
consistin* of im#(o/ements on$y, and not to the tota$ /a$'e of $ot in/ento(y, in
the case of (ea$-estate dea$e(s. The co'(t em#hasi3ed that the $a1 1hich RR
0"-5 see0s to im#$ement did not ma0e any diffe(entiation bet1een the
t(eatment of a (ea$-estate dea$e( f(om those en*a*ed in othe( t(ansactions
s'ch as, fo( e.am#$e, se$$e(s of comme(cia$ *oods. Th's, the(e is no basis
R,)I,8,R TAX +- DB5I 1&
fo( the ?IR to ma0e that diffe(entiation fo( (ea$-estate dea$e(s in the
im#$ementin* (e*'$ation.
The Co'(t noted that the common standa(d fo( the a##$ication of the
t(ansitiona$ in#'t ta. c(edit, as enacted by ,O +"! and a$$ s'bse='ent ta.
$a1s 1hich (einfo(ced o( (einte*(ated the ta. c(edit, is sim#$y that the
ta.#aye( in ='estion has become $iab$e to )AT o( has e$ected to be a )AT-
(e*iste(ed #e(son. MIt is a##a(ent that the t(ansitiona$ in#'t ta. c(edit o#e(ates
to benefit ne1$y )AT-(e*iste(ed #e(sons, 1hethe( o( not they #(e/io's$y #aid
ta.es in the ac='isition of thei( be*innin* in/ento(y of *oods, mate(ia$s, and
s'##$ies. 4'(in* that #e(iod of t(ansition f(om non-)AT to )AT stat's, the
t(ansitiona$ in#'t ta. c(edit se(/es to a$$e/iate the im#act of the )AT on the
ta.#aye(. At the /e(y be*innin*, the )AT-(e*iste(ed ta.#aye( is ob$i*ed to
(emit a si*nificant #o(tion of the income it de(i/ed f(om its sa$es as o't#'t
)AT. The t(ansitiona$ in#'t ta. c(edit miti*ates this initia$ dimin'tion of the
ta.#aye(Cs income by affo(din* the o##o(t'nity to offset the $osses inc'((ed
th(o'*h the (emittance of the o't#'t )AT at a sta*e 1hen the #e(son is yet
'nab$e to c(edit in#'t )AT #ayments,R ('$ed the Co'(t.
V. VAT RE2UND
a. Co69a4e 7i%- Se,. )+ an$ ))"
S,C. +0&. A'tho(ity of the Commissione( to Com#(omise, Abate and Ref'nd
o( C(edit Ta.es.
C(edit o( (ef'nd ta.es e((oneo's$y o( i$$e*a$$y (ecei/ed o( #ena$ties im#osed
1itho't a'tho(ity, (ef'nd the /a$'e of inte(na$ (e/en'e stam#s 1hen they a(e
(et'(ned in *ood condition by the #'(chase(, and, in his disc(etion, (edeem o(
chan*e 'n'sed stam#s that ha/e been (ende(ed 'nfit fo( 'se and (ef'nd
thei( /a$'e '#on #(oof of dest('ction. No c(edit o( (ef'nd of ta.es o( #ena$ties
sha$$ be a$$o1ed 'n$ess the ta.#aye( fi$es in 1(itin* 1ith the Commissione( a
c$aim fo( c(edit o( (ef'nd 1ithin t1o 6+7 yea(s afte( the #ayment of the ta. o(
#ena$tyJ P(o/ided, ho1e/e(, That a (et'(n fi$ed sho1in* an o/e(#ayment sha$$
be conside(ed as a 1(itten c$aim fo( c(edit o( (ef'nd.
S,C. ++. Reco/e(y of Ta. ,((oneo's$y o( I$$e*a$$y Co$$ected. - no s'it o(
#(oceedin* sha$$ be maintained in any co'(t fo( the (eco/e(y of any nationa$
inte(na$ (e/en'e ta. he(eafte( a$$e*ed to ha/e been e((oneo's$y o( i$$e*a$$y
assessed o( co$$ected, o( of any #ena$ty c$aimed to ha/e been co$$ected
1itho't a'tho(ity, of any s'm a$$e*ed to ha/e been e.cessi/e$y o( in any
manne( 1(on*f'$$y co$$ected 1itho't a'tho(ity, o( of any s'm a$$e*ed to ha/e
been e.cessi/e$y o( in any manne( 1(on*f'$$y co$$ected, 'nti$ a c$aim fo(
(ef'nd o( c(edit has been d'$y fi$ed 1ith the Commissione(K b't s'ch s'it o(
#(oceedin* may be maintained, 1hethe( o( not s'ch ta., #ena$ty, o( s'm has
been #aid 'nde( #(otest o( d'(ess.
In any case, no s'ch s'it o( #(oceedin* sha$$ be fi$ed afte( the e.#i(ation of
t1o 6+7 yea(s f(om the date of #ayment of the ta. o( #ena$ty (e*a(d$ess of any
s'#e(/enin* ca'se that may a(ise afte( #aymentJ P(o/ided, ho1e/e(, That
the Commissione( may, e/en 1itho't a 1(itten c$aim the(efo(, (ef'nd o( c(edit
any ta., 1he(e on the face of the (et'(n '#on 1hich #ayment 1as made,
s'ch #ayment a##ea(s c$ea($y to ha/e been e((oneo's$y #aid.
b. A(o'nds
c. Pe(iods
CAS,J
Con%e5 vs. CIR GR No. 101110 $a%e$ &'(y )* )++
The #oint of contention he(e is 1hethe( o( not the #etitione( may c$aim a
(ef'nd on the In#'t )AT e((oneo's$y #assed on to it by its s'##$ie(s.
2,<4J 8hi$e it is t('e that the #etitione( sho'$d not ha/e been $iab$e fo( the
)AT inad/e(tent$y #assed on to it by its s'##$ie( since s'ch is a 3e(o-(ated
sa$e on the #a(t of the s'##$ie(, the #etitione( is not the #(o#e( #a(ty to c$aim
s'ch )AT (ef'nd.
Section &.100-+ of ?IRCs Re/en'e Re*'$ations "-5, as amended, o( the
MConso$idated )a$'e-Added Ta. Re*'$ationsR #(o/ideJ
Sec. &.100-+. Qe(o-(ated Sa$es. A 3e(o-(ated sa$e by a )AT-(e*iste(ed
#e(son, 1hich is a ta.ab$e t(ansaction fo( )AT #'(#oses, sha$$ not (es'$t in
any o't#'t ta.. 2o1e/e(, the in#'t ta. on his #'(chases of *oods, #(o#e(ties
o( se(/ices (e$ated to s'ch 3e(o-(ated sa$e sha$$ be a/ai$ab$e as ta. c(edit o(
(ef'nd in acco(dance 1ith these (e*'$ations.
The fo$$o1in* sa$es by )AT-(e*iste(ed #e(sons sha$$ be s'bEect to 0>J 6a7
,.#o(t Sa$es M,.#o(t Sa$esR sha$$ mean 57 Those conside(ed e.#o(t sa$es
'nde( A(tic$es +! and "" of ,.ec'ti/e O(de( No. ++%, othe(1ise 0no1n as the
Omnib's In/estments Code of 1;", and othe( s#ecia$ $a1s, e.*. Re#'b$ic
Act No. "++", othe(1ise 0no1n as the ?ases Con/e(sion and 4e/e$o#ment
Act of 1+.
6c7 Sa$es to #e(sons o( entities 1hose e.em#tion 'nde( s#ecia$ $a1s, e.*.
R.A. No. "++" d'$y (e*iste(ed and acc(edited ente(#(ises 1ith S'bic ?ay
5et(o#o$itan A'tho(ity 6S?5A7 and C$a(0 4e/e$o#ment A'tho(ity 6C4A7, R.
A. No. "1%, Phi$i##ine ,conomic Qone A'tho(ity 6P,QA7, o( inte(nationa$
a*(eements, e.*. Asian 4e/e$o#ment ?an0 6A4?7, Inte(nationa$ Rice
Resea(ch Instit'te 6IRRI7, etc. to 1hich the Phi$i##ines is a si*nato(y
effecti/e$y s'bEect s'ch sa$es to 3e(o-(ate.R
R,)I,8,R TAX +- DB5I 15
Since the t(ansaction is deemed a 3e(o-(ated sa$e, #etitione(Cs s'##$ie( may
c$aim an In#'t )AT c(edit 1ith no co((es#ondin* O't#'t )AT $iabi$ity.
Con*('ent$y, no O't#'t )AT may be #assed on to the #etitione(. On the
second iss'e, it may not be amiss to (e-em#hasi3e that the #etitione( is
(e*iste(ed as a NON-)AT ta.#aye( and th's, is e.em#t f(om )AT. As an
e.em#t )AT ta.#aye(, it is not a$$o1ed any ta. c(edit on )AT 6in#'t ta.7
#(e/io's$y #aid. In fine, e/en if 1e a(e to ass'me that e.em#tion f(om the
b'(den of )AT on #etitione(Cs #'(chases did e.ist, #etitione( is sti$$ not
entit$ed to any ta. c(edit o( (ef'nd on the in#'t ta. #(e/io's$y #aid as
#etitione( is an e.em#t )AT ta.#aye(. Rathe(, it is the #etitione(Cs s'##$ie(s
1ho a(e the #(o#e( #a(ties to c$aim the ta. c(edit and acco(din*$y (ef'nd the
#etitione( of the )AT e((oneo's$y #assed on to the $atte(.
A%(as Conso(i$a%e$ Mining vs. CIR GR Nos. 111+ an$ 1#>!1 $a%e$
&'ne #* )++>
In the At$as case, the co'(t ('$ed that the (ec0onin* #oint fo( co'ntin* the
t1o-yea( #(esc(i#ti/e #e(iod is f(om the fi$in* of the )AT (et'(ns and not f(om
Mthe c$ose of the ta.ab$e ='a(te( 1hen the sa$es 1e(e made.R The Co'(t of
Ta. A##ea$s 6CTA7 ado#ted this decision in many of its s'bse='ent cases.
CIR vs. Mi4an% Pag3i(ao Co49. GR No. 1>)1)" $a%e$ Se9%e63e4 1)* )++#
The 5i(ant case ado#ted a diffe(ent ('$e fo( c$aims in/o$/in* (ef'nds of
e.cess in#'t )AT. Bsin* Section 11+ of the Ta. Code as basis, the 5i(ant
case said c$aims in/o$/in* (ef'nds of e.cess-in#'t )AT m'st be fi$ed 1ith the
?'(ea' of Inte(na$ Re/en'e 6?IR7 and 1ith the co'(ts 1ithin t1o yea(s f(om
the c$ose of the ta.ab$e ='a(te( 1hen the (e$e/ant sa$es 1e(e made,
(e*a(d$ess of 1hen the in#'t )AT 1as #aid.
The 5i(ant ('$in* diffe(s si*nificant$y f(om the *ene(a$ ('$e in that, 1hi$e the
(ec0onin* #oint fo( the t1o-yea( #(esc(i#ti/e #e(iod 'nde( the *ene(a$ ('$e is
co'nted f(om the fi$in* of the ta. (et'(n, the 5i(ant case ado#ted the Mc$ose of
the ta.ab$e ='a(te( 1hen the sa$es 1e(e madeR fo( )AT-(ef'nd c$aims. In
sho(t, the 5i(ant case ca(/ed o't the c$aims in/o$/in* e.cess in#'t )AT
(ef'nds f(om the co/e(a*e of the *ene(a$ ('$e and #'t it 'nde( a s#ecia$ ('$e
*o/e(ned by Section 11+ of the Ta. Code.
No(the(n 5ini 2yd(o /s. CIR CTA Case No. "+5" dated 5ay +;, +00
6a$so (ead the se#a(ate o#inion of F'stice Acosta7

VI. <TCER MATTERS
a. Invoi,ing ReA'i4e6en%s .Se,. 111/ @Se,. .1111-1 o8 RR No. 1!-+0B
S,CTION &.11!-1. In/oicin* Re='i(ements. -
6A7 A )AT-(e*iste(ed #e(son sha$$ iss'eJ -
617 A )AT in/oice fo( e/e(y sa$e, ba(te( o( e.chan*e of *oods o( #(o#e(tiesK
and
6+7 A )AT officia$ (ecei#t fo( e/e(y $ease of *oods o( #(o#e(ties, and fo( e/e(y
sa$e, ba(te( o( e.chan*e of se(/ices.
On$y )AT-(e*iste(ed #e(sons a(e (e='i(ed to #(int thei( TIN fo$$o1ed by the
1o(d 9)AT9 in thei( in/oice o( officia$ (ecei#ts. Said doc'ments sha$$ be
conside(ed as a 9)AT In/oice9 o( )AT officia$ (ecei#t. A$$ #'(chases co/e(ed
by in/oicesL(ecei#ts othe( than )AT In/oiceL)AT Officia$ Recei#t sha$$ not
*i/e (ise to any in#'t ta..
)AT in/oiceLofficia$ (ecei#t sha$$ be #(e#a(ed at $east in d'#$icate, the o(i*ina$
to be *i/en to the b'ye( and the d'#$icate to be (etained by the se$$e( as #a(t
of his acco'ntin* (eco(ds.
6?7 Info(mation contained in )AT in/oice o( )AT officia$ (ecei#t. - The
fo$$o1in* info(mation sha$$ be indicated in )AT in/oice o( )AT officia$ (ecei#tJ
617 A statement that the se$$e( is a )AT-(e*iste(ed #e(son, fo$$o1ed by his
TINK
6+7 The tota$ amo'nt 1hich the #'(chase( #ays o( is ob$i*ated to #ay to the
se$$e( 1ith the indication that s'ch amo'nt inc$'des the )ATK P(o/ided, ThatJ
6a7 The amo'nt of ta. sha$$ be sho1n as a se#a(ate item in the in/oice o(
(ecei#tK
6b7 If the sa$e is e.em#t f(om )AT, the te(m 9)AT-e.em#t sa$e9 sha$$ be
1(itten o( #(inted #(ominent$y on the in/oice o( (ecei#tK
6c7 If the sa$e is s'bEect to 3e(o #e(cent 60>7 )AT, the te(m 93e(o-(ated sa$e9
sha$$ be 1(itten o( #(inted #(ominent$y on the in/oice o( (ecei#tK
6d7 If the sa$e in/o$/es *oods, #(o#e(ties o( se(/ices some of 1hich a(e
s'bEect to and some of 1hich a(e )AT 3e(o-(ated o( )AT-e.em#t, the in/oice
o( (ecei#t sha$$ c$ea($y indicate the b(ea0-do1n of the sa$e #(ice bet1een its
ta.ab$e, e.em#t and 3e(o-(ated com#onents, and the ca$c'$ation of the )AT
on each #o(tion of the sa$e sha$$ be sho1n on the in/oice o( (ecei#t. The
R,)I,8,R TAX +- DB5I 1%
se$$e( has the o#tion to iss'e se#a(ate in/oices o( (ecei#ts fo( the ta.ab$e,
e.em#t, and 3e(o-(ated com#onents of the sa$e.
6!7 In the case of sa$es in the amo'nt of one tho'sand #esos 6P1,000.007 o(
mo(e 1he(e the sa$e o( t(ansfe( is made to a )AT-(e*iste(ed #e(son, the
name, b'siness sty$e, if any, add(ess and TIN of the #'(chase(, c'stome( o(
c$ient, sha$$ be indicated in addition to the info(mation (e='i(ed in 617 and 6+7
of this Section.
3. In8o46a%ion 7-i,- 6's% 3e ,on%aine$ .Se,. 111/
SEC. 111. Invoi,ing an$ A,,o'n%ing ReA'i4e6en%s 8o4 VAT-Regis%e4e$
Pe4sons. -
6A7 In/oicin* Re='i(ements. - A )AT-(e*iste(ed #e(son sha$$, fo( e/e(y sa$e,
iss'e an in/oice o( (ecei#t. In addition to the info(mation (e='i(ed 'nde(
Section +!", the fo$$o1in* info(mation sha$$ be indicated in the in/oice o(
(ecei#tJ
617 A statement that the se$$e( is a )AT-(e*iste(ed #e(son, fo$$o1ed by his
ta.#aye(Gs identification n'mbe( 6TIN7K and
6+7 The tota$ amo'nt 1hich the #'(chase( #ays o( is ob$i*ated to #ay to
the se$$e( 1ith the indication that s'ch amo'nt inc$'des the /a$'e-added ta..
6?7 Acco'ntin* Re='i(ements. - Not1ithstandin* the #(o/isions of Section
+!!, a$$ #e(sons s'bEect to the /a$'e-added ta. 'nde( Sections 10% and 10;
sha$$, in addition to the (e*'$a( acco'ntin* (eco(ds (e='i(ed, maintain a
s'bsidia(y sa$es Eo'(na$ and s'bsidia(y #'(chase Eo'(na$ on 1hich the dai$y
sa$es and #'(chases a(e (eco(ded. The s'bsidia(y Eo'(na$s sha$$ contain s'ch
info(mation as may be (e='i(ed by the Sec(eta(y of @inance.
,. ConseA'en,es o8 Iss'ing E44oneo's VAT Invoi,e .Se,. 111/ @ RR
No. .111- o8 RR No. 1!-+0B
S,CTION &.11!-&. Conse='ences of Iss'in* ,((oneo's )AT In/oice o( )AT
Officia$ Recei#t. -
6A7 Iss'ance of a )AT In/oice o( )AT Recei#t by a non-)AT #e(son. - If a
#e(son 1ho is not )AT-(e*iste(ed iss'es an in/oice o( (ecei#t sho1in* his
TIN, fo$$o1ed by the 1o(d 9)AT9, the e((oneo's iss'ance sha$$ (es'$t to the
fo$$o1in*J
617 The non-)AT #e(son sha$$ be $iab$e toJ
6i7 the #e(centa*e ta.es a##$icab$e to his t(ansactionsK
6ii7 )AT d'e on the t(ansactions 'nde( Sec. 10% o( 10; of the Ta. Code,
1itho't the benefit of any in#'t ta. c(editK and
6iii7 a 50> s'(cha(*e 'nde( Sec. +&; 6?7 of the Ta. CodeK
6+7 )AT sha$$ be (eco*ni3ed as an in#'t ta. c(edit to the #'(chase( 'nde(
Sec. 110 of the Ta. Code, #(o/ided the (e='isite info(mation (e='i(ed 'nde(
S'bsection &.11! 6?7 of these Re*'$ations is sho1n on the in/oice o( (ecei#t.
6?7 Iss'ance of a )AT In/oice o( )AT Recei#t on an ,.em#t T(ansaction by
a )AT-(e*iste(ed Pe(son. - If a )AT-(e*iste(ed #e(son iss'es a )AT in/oice
o( )AT officia$ (ecei#t fo( a )AT-e.em#t t(ansaction, b't fai$s to dis#$ay
#(ominent$y on the in/oice o( (ecei#t the 1o(ds 9)AT-e.em#t sa$e9, the
t(ansaction sha$$ become ta.ab$e and the iss'e( sha$$ be $iab$e to #ay )AT
the(eon. The #'(chase( sha$$ be entit$ed to c$aim an in#'t ta. c(edit on his
#'(chase.
$. 2i(ing o8 Mon%-(y an$ G'a4%e4(y VAT Re%'4ns an$ Pay6en% o8 VAT
.Se,. 11/
SEC. 11. Re%'4n an$ Pay6en% o8 Va('e-A$$e$ Ta5. -
6A7 In Aene(a$. - ,/e(y #e(son $iab$e to #ay the /a$'e-added ta. im#osed
'nde( this Tit$e sha$$ fi$e a ='a(te($y (et'(n of the amo'nt of his *(oss sa$es o(
(ecei#ts 1ithin t1enty-fi/e 6+57 days fo$$o1in* the c$ose of each ta.ab$e
='a(te( #(esc(ibed fo( each ta.#aye(J P(o/ided, ho1e/e(, That )AT-
(e*iste(ed #e(sons sha$$ #ay the /a$'e-added ta. on a month$y basis.
Any #e(son, 1hose (e*ist(ation has been cance$$ed in acco(dance 1ith
Section +!%, sha$$ fi$e a (et'(n and #ay the ta. d'e the(eon 1ithin t1enty-fi/e
6+57 days f(om the date of cance$$ation of (e*ist(ationJ P(o/ided, That on$y
one conso$idated (et'(n sha$$ be fi$ed by the ta.#aye( fo( his #(inci#a$ #$ace of
b'siness o( head office and a$$ b(anches.
6?7 8he(e to @i$e the Ret'(n and Pay the Ta.. - ,.ce#t as the Commissione(
othe(1ise #e(mits, the (et'(n sha$$ be fi$ed 1ith and the ta. #aid to an
a'tho(i3ed a*ent ban0, Re/en'e Co$$ection Office( o( d'$y a'tho(i3ed city o(
m'nici#a$ T(eas'(e( in the Phi$i##ines $ocated 1ithin the (e/en'e dist(ict
1he(e the ta.#aye( is (e*iste(ed o( (e='i(ed to (e*iste(.
6C7 8ithho$din* of C(editab$e )a$'e-Added Ta.. - The Ao/e(nment o( any of
its #o$itica$ s'bdi/isions, inst('menta$ities o( a*encies, inc$'din* *o/e(nment-
o1ned o( -cont(o$$ed co(#o(ations 6AOCCs7 sha$$, befo(e ma0in* #ayment on
acco'nt of each #'(chase of *oods f(om se$$e(s and se(/ices (ende(ed by
cont(acto(s 1hich a(e s'bEect to the /a$'e-added ta. im#osed in Sections
10% and 10; of this Code, ded'ct and 1ithho$d the /a$'e-added ta. d'e at
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the (ate of th(ee #e(cent 6!>7 of the *(oss #ayment fo( the #'(chase of
*oods and si. #e(cent 6%>7 on *(oss (ecei#ts fo( se(/ices (ende(ed by
cont(acto(s on e/e(y sa$e o( insta$$ment #ayment 1hich sha$$ be c(editab$e
a*ainst the /a$'e-added ta. $iabi$ity of the se$$e( o( cont(acto(J P(o/ided,
ho1e/e(, That in the case of *o/e(nment #'b$ic 1o(0s cont(acto(s, the
1ithho$din* (ate sha$$ be ei*ht and one-ha$f #e(cent 6;.5>7J P(o/ided, f'(the(,
That the #ayment fo( $ease o( 'se of #(o#e(ties o( #(o#e(ty (i*hts to
non(esident o1ne(s sha$$ be s'bEect to ten #e(cent 610>7 1ithho$din* ta. at
the time of #ayment. @o( this #'(#ose, the #ayo( o( #e(son in cont(o$ of the
#ayment sha$$ be conside(ed as the 1ithho$din* a*ent.
The /a$'e-added ta. 1ithhe$d 'nde( this Section sha$$ be (emitted 1ithin ten
6107 days fo$$o1in* the end of the month the 1ithho$din* 1as made.
e. Ei%--o($ing VAT .Se,. 11 C/ @Se,. .11-) o8 RR No. 1!-+0 as
a6en$e$ 3y Se,. )) o8 RR No. -+>B
S,C. &.11&-+. 8ithho$din* of )AT on Ao/e(nment 5oney Payments and
Payments to Non-Residents. O
6a7The *o/e(nment o( any of its #o$itica$ s'bdi/isions, inst('menta$ities o(
a*encies inc$'din* *o/e(nment-o1ned o( cont(o$$ed co(#o(ations 6AOCCs7
sha$$, befo(e ma0in* #ayment on acco'nt of each #'(chase of *oods andLo(
of se(/ices ta.ed at t1e$/e #e(cent 61+>7 )AT #'(s'ant to Secs. 10% and
10; of the Ta. Code, ded'ct and 1ithho$d a fina$ )AT d'e at the (ate of fi/e
#e(cent 65>7 of the *(oss #ayment the(eof. The fi/e #e(cent 65>7 fina$ )AT
1ithho$din* (ate sha$$ (e#(esent the net )AT #ayab$e of the se$$e(. The
(emainin* se/en #e(cent 6">7 effecti/e$y acco'nts fo( the standa(d in#'t
)AT fo( sa$es of *oods o( se(/ices to *o/e(nment o( any of its #o$itica$
s'bdi/isions, inst('menta$ities o( a*encies inc$'din* AOCCs in $ie' of the
act'a$ in#'t )AT di(ect$y att(ib'tab$e o( (atab$y a##o(tioned to s'ch sa$es.
Sho'$d act'a$ in#'t )AT att(ib'tab$e to sa$e to *o/e(nment e.ceeds se/en
#e(cent 6">7 of *(oss #ayments, the e.cess may fo(m #a(t of the se$$e(sC
e.#ense o( cost. On the othe( hand, if act'a$ in#'t )AT att(ib'tab$e to sa$e to
*o/e(nment is $ess than se/en #e(cent 6">7 of *(oss #ayment, the diffe(ence
m'st be c$osed to e.#ense o( cost.
6b7 The *o/e(nment o( any of its #o$itica$ s'bdi/isions, inst('menta$ities o(
a*encies inc$'din* AOCCs, as 1e$$ as #(i/ate co(#o(ation, indi/id'a$s,
estates and t('sts, 1hethe( $a(*e o( non-$a(*e ta.#aye(s, sha$$ 1ithho$d
t1e$/e #e(cent 61+>7 )AT, sta(tin* @eb('a(y 1, +00%, 1ith (es#ect to
the fo$$o1in* #aymentsJ
617<ease o( 'se of #(o#e(ties o( #(o#e(ty (i*hts o1ned by non-(esidentsK and
6+7 Othe( se(/ices (ende(ed in the Phi$i##ines by non-(esidents
i. Gove4n6en% 9ay6en%s
ii. Se4vi,es Ren$e4e$ 3y Non-4esi$en%s
iii. Ei%--o($ing VAT Re%'4nsHTi6e o8 Pay6en%
8. Po7e4 o8 %-e Co66issione4 %o S's9en$ ='siness <9e4a%ions .Se,.
0/ @Se,. .110-1 o8 RR No. 1!-+0B
SECTI<N .110-1. A$6inis%4a%ive an$ Pena( P4ovisions. I
6a7 S's#ension of b'siness o#e(ations. - In addition to othe( administ(ati/e
and #ena$ sanctions #(o/ided fo( in the Ta. Code and im#$ementin*
(e*'$ations, the Commissione( of Inte(na$ Re/en'e o( his d'$y a'tho(i3ed
(e#(esentati/e may o(de( s's#ension o( c$os'(e of a b'siness estab$ishment
fo( a #e(iod of not $ess than fi/e 657 days fo( any of the fo$$o1in* /io$ationsJ
617 @ai$'(e to iss'e (ecei#ts and in/oices.
6+7 @ai$'(e to fi$e )AT (et'(n as (e='i(ed 'nde( the #(o/isions of Sec. 11& of
the Ta. Code.
6!7 Bnde(statement of ta.ab$e sa$es o( (ecei#ts by !0> o( mo(e of his co((ect
ta.ab$e sa$es o( (ecei#t fo( the ta.ab$e ='a(te(.
6&7 @ai$'(e of any #e(son to (e*iste( as (e='i(ed 'nde( the #(o/isions of Sec.
+!% of the Ta. Code.
6b7 S'(cha(*e, inte(est and othe( #ena$ties. - The inte(est on 'n#aid amo'nt
of ta., ci/i$ #ena$ties and c(imina$ #ena$ties im#osed in Tit$e XI of the Ta.
Code sha$$ a$so a##$y to /io$ations of the #(o/isions of Tit$e I) of the Ta.
Code.
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