2016 Tax II 2nd Exam

TAXATION II TRANSCRIPT OF STENOGRAPHIC NOTES
Based on the Lectures of Atty.Donalvo (2nd Semester of S.Y. 2016-2017)
The four elements of a business is self-explanatory.

MIDTERMS COVERAGE
Let’s go now to the first type of business tax which is VAT
January 11, 2017 or the Value added tax. Now, what is VAT? If you go by the
(By: J Al Reyes)
book, and if have read the cases,
TITLE IV VALUE ADDED TAX
ABAKADA vs. Ermita.
Value added tax is a tax imposed only to increased worth,

Welcome Back! Happy New Year!!!
merit or importance of goods and services and not on the
So, we’re done with transfer tax. Right now we are going to total value of goods and services.
discuss business tax. Now, how many are business taxes
You will learn later on the concept of output taxes and
found under the internal revenue code? There are actually
input taxes okay but I think the proper definition when you
3.
are asked, the better definition for vat is this:
1. VAT or the Value added tax
It is a uniform tax, levied on every importation of goods
2. Percent tax
3. Excise taxes whether or not in the course of trade or business or
imposed on each sale, barter of goods or exchange of
Please do not confuse excise tax here with the excise tax properties or in the rendition of service in the regular
we had in theories ha..because the excise tax we will be course of trade or business.
discussing here is in the form of business tax.
Why based on increased merit?
So now, what do you mean when you say business tax in
taxation parlance? Because if a product or an item is passed along from one
person to another, it increases its value.
Why is it important to know whether this transaction is so
called a business? Diba? Mupalitka, unyaibaligyanimo at a higher price. And
when it is passed to someone else again, of course
Because you ill only impose business taxes as a general papatungan mu siya. Theoretically, ang VAT is imposed
rule when the transaction is for business purposes. only on that “tubo” (on the increase of the worth of such
Otherwise, if it is not for business purposes, you do not goods).
impose any business tax? Like for example, if you sell real
property classified as capital asset it is normally subjected VAT is also said to be a tax on spending because you pay
to capital gains tax. But you do not pay for back for it. it as an addition to your purchase price. Makita mu
Mainly because if you transfer capital asset it is not in the yansaresibo
conduct of your business. ng Jollibee diba?
Now, if you dissect the definition of the term business, The more appropriate definition of VAT, however, is this:
sabidito, business is the regular conducted of commercial
or economic activity where the primary motive is profit or VAT is a tax assessed, levied, and collected on every
livelihood. importation of goods, whether or not in the course of
trade or business, or imposed on each sale, barter,
So the following are the requirement to say one is engaged exchange or lease of goods or properties or on each
in business: rendition of services in the course of trade or
business.
1.) There is a commercial activity;
2.) It is intended for profit;
Is it the sole motive? Perhaps not really you may have CHARACTERISTICS OF VAT
some other motive but for certain, to gain profit is one. A. So, VAT is not income tax. It is still EXCISE TAX.
3.) It is regular and;
4.) It is financial.
Alparaque_Cutamora_Domingo_Jala_Laguialam_Lomondot_Lumapas_Noble_Reyes_Ruyeras_Uy_Vega
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But it is different because while excise tax is a tax on income and whether or not it sells exclusively to
the privilege, VAT is a tax on consumption. members or their guests), or government entity.
B. It is also generally a BUSINESS TAX because Let’s simplify. There are two basic meanings:
generally it is imposed on persons engaged in
business. You can actually see this under: 1) It is regular conduct or pursuit of a commercial or
an economic activity. There is some sense of
Section 105.Persons Liable. continuity.
Any person who, in the course of trade or business, 2) It includes transactions incidental thereto.
sells barters, exchanges, leases goods or
What you have to remember in VAT is that it is
properties, renders services, and any person who
imports goods shall be subject to the value-added “transaction-basis”. In VAT, each transaction will have a
tax (VAT) imposed in Sections 106 to 108 of this corresponding VAT.
Code.
Now, what is the meaning of “incidental thereto”?
x xx
We will find the definition in the cases. Let’s go to the
So as a general rule, when you look at that cases so we will understand this better…
provision, engaged kadapatsa business before VAT
can be levied on your transaction. The first case in point is CIR vs. MAGSAYSAY LINES:
The exception is yungkasunodna “any person who This involved the sale of vessel, ship. What basically
imports goods”. Regardless of whether or not that happened in this case is this. There is a government
transaction is for business purposes there will be a mandate of privatization of certain GOCCs. So the
National Development Company sold all of its shares to
corresponding imposition of VAT. its subsidiary as well as 5 vessels. The subsidiary
auctioned the vessels. And one of those who bought the
So, if I sell my residential lot, it will be subjected to vessel is Magsaysay Lines. So under the contract
Capital Gains Tax, possible. But if someone asks between the subsidiary and NDC including Magsaysay
you, “will I be subjected to VAT?” NO!Because that lines, may nakalagaydoonna “the VAT will be shouldered
is not a business, right? Unless of course if you are by Magsaysay Lines”.
a real estate agent and in the course of business Sabi ng Magsaysay Lines, this should not be subjected to
nagbebentaka ng VAT.
lupa, that is already considered as in the course of Sabi ng BIR, NDC is engaged in the leasing of vessels,
trade or business. So the transaction is already which is incidental to its business.
subjected to VAT.
Sabi ng CTA, BIR you are wrong. This is a completely
But what about importation? Halimbawa mag import isolated transaction hence not subject to VAT.
ka ng cars, example, Maseratti from Italy. If I import Issue: W/N the sale of the vessels is in the course of
an item, regardless of WON such importation is trade or business and hence subjected to VAT?
business, it will be subjected to VAT. Held: SC held, NO. NDC is not liable to VAT. The sale
What do we mean by “in the course of trade or business”? was not made in the regular course of business of NDC.
It is an isolated transaction.
Section 105. x xx Quoting a very old case, sabi ng SC, the term "carrying
on business" does not mean the performance of a single
The phrase 'in the course of trade or business' means the disconnected act, but means conducting, prosecuting
regular conduct or pursuit of a commercial or an and continuing business by performing progressively all
economic activity, including transactions incidental the acts normally incident thereof; While "doing business"
thereto, by any person regardless of whether or not the conveys the idea of business being done, not from time
person engaged therein is a to time, but all the time. "Course of business" is what is
nonstock, nonprofit private usually done in the management of trade or business.
organization (irrespective of the disposition of its net In this case, if you look at the transaction that happened,
NDC is engaged in leasing but this time, binentaniya. So
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subject to VAT? No. Because there was a government Halimbawa: Tau Mu, Lex Talionis. Will you be
mandate, meaning NDC has no choice but to sell its subjected to VAT if you render some sort of
vessels. service?
One thing which is peculiar in this case is that, the (Sir talks about the arrangement of Philamlife’s
applicable law here was the old internal revenue code so
payment scheme being merely on reimbursement
the question is, is this principle still applicable? Okay.
basis.)
Let’s compare this to the case of
Let’s go to the case of CIR vs. COMASECO.
MINDANAOGEOTHERMAL vs. CIR.
Comaseco is consultant ng Philamlife, organized
Ang business ng Geothermal is electricity. Naga by the letter to perform collection, consultative and
generate sila and at the same time nagadistribute other technical services, including functioning as
ng electricity. In the course of their business an internal auditor, of Philamlife and its other
bumilisila ng Nissan Patrol. The time came when affiliates.
the car has fully depreciated so gi sold nila. Nag
file ng tax refund ang Geothermal but the BIR said What happened was, the BIR sent a deficiency
that with regard to the transaction regarding the assessment to Comaseco, stating na you are
car it should have been declared part of the VAT rendering services to Philamlife so you have to
transaction. Vatable siya. Sabinaman ng pay your VAT.
Geothermal, hindi because isolated transaction
Sabi ngComaseco, technically we are not gaining
siya.
anything so we are not engaged in a business.
Held: The SC said it is not an isolated transaction.
Held: SC said even if Comaseco does not earn
It is incidental to the business of geothermal.
any income, as t would say, it is still subjected to
Dibaweird? (laughs) So how is this case different
VAT. Even non-stock, non-profit organization are
from the previous case? First, SC said na, binilimo
subjected to VAT. Anobaang requirement? That
tong car na to para sa business mo eh and been
there is a transaction consisting of sale of goods,
using it in the conduct of your business. Second,
property or services (As long as the entity
Geothermal has been recognizing the car as part
provides service for a fee, remuneration or
of their company property. Third, binentaang car
consideration, then the service rendered is subject
kasi fully depreciated na.
to VAT.)
The difference from the previous case is that in the
Magsaysay case, it was an isolated transaction Lugibasila? No. make no mistake, Vat is an indirect tax.
because of the government mandate. There was Meaning that they can pass or shift the burden to some
no choice but to sell its properties. It’s gonna close
down because they are gonna privatized other person. So let’s discuss that further.
everything.
C. Next (concept) characteristic of a VAT? It is an
Why is it incidental by the way? INDIRECT TAX.
IN THIS CASE, the facts are different kasiang Indirect Tax is that which may be shifted to or
Geothermal, may choice they were not forced to passed on the buyer, transferee or lessee of the
sell.
goods, properties or services. So again, tax on
(SIR: To be honest about it, spending siya; tax on consumption.
hindikomaintindihanang ruling ng SC).
Anoyung consumption? In a case, the SC defined
That’s the only difference. Yung isa may choice,
yungisa, wala. consumption as the use of a thing in a way that
thereby exhausts it.
What about if you are a non-stock, non-profit
organization? If you read the law the law is So what happened in the American express case
specific. The law says VAT is applicable whether or (yung credit card na American company)
not the tax payer (person engaged thereto) is stock
Ok now, American express is a US company but they
or non-stock, non-profit private organization.
have a branch here in the Philippines.
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Anoginagawanila ditto saPilipinas? Basically the What happened was there was a VAT deficiency
brach facilitates the collections for the American assessment for SONY. Here the money was given
express based in hong-kong. So for the hongkong by the sony Singapore to sonyphils. For its
advertising expenses. There was no sale. It is
clients who are here in the Philippines, bayadsila
income? Yes it is. It is part of the pross income of
ditto sa Philippine company, then the Phil. Company sonyPhils. But is it a Vatable transaction? No. in
magbabayadsila or mag pa-process sila with respect the first place there is no transaction to speak of.
to their transaction/s then forward it to hong-kong. No sale, no barter, no exchange that is why the
Parangganyannagyayari (pag sure sir). amount received by sonyPhils is not subject to
VAT. Eventually this case went to the CTA. Sabi
So annex phils., the branch, Registered itself as a ng CTA, BIR is partially correct but we have to
Vat tax payer. Later he claims for a refund and claims remove some of the assessments because they
are not valid. One of the assessment resulted from
to be zero rated so he is asking for credit kasenga an advertising expense.
the services it renders is not consumed here in the
Phils. But in HK. In this case, may nilagaysiyana advertising
expense taposnagbayadsiya ng VAT. So,
pwedesiyagamitinna input VAT. The advertising
The BIR did not do anything about the refund it is
expense by Sony Philippines was actually
asking so American expressed was compelled to file reimbursed by Sony Singapore.
an aaction before the court of tax appeals. And the
court of tax appeals granted the refund, and ofcouse Held: SC said Sony Philippines can claim the Input
Tax. Sabikasi ng BIR since gi reimburse man ng
the BIR appealed.. so it went up to the SC. Sony Singapore ang advertising expense so
expense siya ng Sony Singapore at hindi ng Sony
ISSUE: whether or not the American express is Philippines. Hence if may mag claim man, hindiang
entitled to a refund? (concentrate on where the Sony Philippines kundiang Sony Singapore.
service is consumed)
SC said it doesn’t matter na may reimbursement.
Ibaang Sony PH at Sony Singapore. Further, the
BIR: the services are consumed here in the Phils.
nature of the reimbursement on the part of Sony
Because the services are performed here. PH is income. But it doesn’t mean that it is
subjected to VAT. Why? Was there any sale of
RULING: the Supreme Court said that there is a big goods, property or services between PH and
difference between consumption and performance of Philippines? WALA. Point is, you will only levy
service. It could be said that the service is performed VAT if there is a sale of goods, property or
here in the Phils. Yet the ultimate consumer is services.
located abroad.
How do you compute your VAT, by the way?
So anobaginagawa ng branch nila ditto? They are Output VAT
merely facilitating the receivables belonging to the
-- Input VAT
hongkong based clients which are situated here in
the Phils. But ultimately who benefits of the services? -------------------------------------
It is for the hongkong based clients. That is why the VAT payable
Supreme court said here that ok. American express
Output VAT - From sales
is entitled to a refund.
Input VAT - From purchases
Another thing to remember is that, a person or entity
is only liable for VAT if there is a transaction involved.
Meaning, that there is a sale of goods or services. Or Now, what is “cost deduction method”?
there are importations involved.
According to ABAKADA vs. Ermita, it is a single stage
Case in point here is the case of: tax system and payable only by the original sellers.
Magbenta
CIR vs. SONY PHILIPPINES, GR178697, November ako, akomagbayad ng tax. That is the former VAT law.
17, 2010.
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Right now, the VAT system is a mixture of the cost When the goods are imported in the PH, to be consumed
deduction method and the tax credit method. in the PH, destination is PH, it will be subjected to VAT.
Under the tax credit method, an entity can credit against or But if you export, it is a zero-rated transaction as a general
subtract from the VAT charged on its sales or outputs the rule.
VAT paid on its purchases, inputs and imports.
Another principle: VAT is a PERCENTAGE TAX there are
Let’s go back to the formula: two percentages of VAT right now.
OUTPUT - INPUT = VAT PAYABLE 1. The regular 12% vat

2. And the Zero rated vat
Output VAT - From sales.
That (zero-rated vat) is when you talk about exportation.
Input VAT - The burden you shoulder because Okay discuss natin ng isaisayan.
you have bought something, your purchases
(Jollibee). Next, vat is also a regressive tax (pronouncement in
abakadaguro vs. ermita case).
Going back, yungInput VAT actually tax credit. Why? It
reduces your Output VAT. Lastly, Vat follows the destination principle in the cross
boarder doctrine. Are the two statements the same? I think
So, bakitmixture ang VAT system? it is a matter of how the principle is stated. But I think they
are essentially the same.
Cost deductionsiya because the one liable is the statutory
taxpayer. At the same time it’s a tax credit method Destination principle states that the goods and services is
because in every purchase you pay, you will have tax taxed only in the country where they are consumed while
credit in the form of Input VAT. the cross border doctrine states that vat is to be imposed
to form part to the cost of the goods destined for the
Next, do you remember Tax Pyramiding Scheme? That’s a consumption outside of the territorial border of the taxing
tax on a tax, diba? authority.
Ang manufacturer ibentaniya kay Wholesaler (merong

VAT). Ibentananamanni Wholesaler kay Retailer
(meronnanaman
VAT.) Then from Retailer to the Final Consumer (may January 13, 2017 (1st hour)
ipatongnanamannaVAT). (By: Zarah Domingo)
So, nag patongpatongna. Tax pyramiding bayan? IMPOSITION OF TAX

Some would say na tax pyramiding man siya precisely What is the scope of VAT? What are the transactions
because nagpatongpatongnasiya. covered by VAT?
In my mind, the other authors are correct in saying that it is Sec 105: Persons liable. – Any person who, in the course
of trade or business, sells, barters, exchanges, leases
NOT tax pyramiding because of the existence of input
goods or properties, renders services, and any person who
taxes, the tax credit. In the end, there is deduction. So imports goods shall be subject to the value-added tax
walang tax on a tax namangyayari. (VAT) imposed in Sections 106 to 108 of this Code. xxx
What is the destination There are basically three (3) transactions covered by VAT.
principle (cross-border doctrine)?
Two (2) of them are necessarily in the conduct of your
It states that the goods and services are taxed only in the business.
country where they are consumed. This principle is
applicable only to VAT (must not be outside the territorial 1.) Sale of goods and properties in the conduct of
border of the country). trade and business;
2.) Sale of services and leases in the conduct of
business;
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3.) Importation, whether or not in the course of Xxx

business.
Q: What is the tax rate?
Which is why it is very important to know the coverage or A: The general rule is just 12%.
the extent and meaning of “in the course of trade or
business.” Q: What is the tax base?
A: The gross selling price.
Sec 105: Persons liable. –
xxx
The rule of regularity, to the contrary notwithstanding, Take note, what is subjected to the 12% VAT is the output
services as defined in this Code rendered in the Philippines VAT. We’re talking about output VAT here. That which
by nonresident foreign persons shall be considered as comes from the selling of the property. Disregarding
being rendered in the course of trade or business. everything, output VAT is supposed to be the tax or the
VAT liability of the taxpayer.
“In the course of business” refers to:
1.) the business as usual, regular conduct of activity for Sec 236: Registration Requirements.—
profit; xxx
2.) those which are incidental to the conduct of business. (G) Persons Required to Register for Value-Added Tax.—
(1) Any persons who, in the
Q: Does it mean that when it is an “isolated transaction” it course of trade or business, sells, barters or exchanges
goods or properties, or engages in the sale or exchange of
is no longer covered by VAT?
services, shall be liable to register for value-added tax if:
A: Not necessarily. This is discussed in the Geothermal (a) His gross sales or receipts for the past twelve (12)
case. It does not mean that if it is an isolated transaction, it months, other than those that are exempt under Section
is no longer subject to VAT. For as long as the property is 109 (A) to (U) have exceeded One million nine hundred
used in trade or business, it is possible that such property nineteen thousand five hundred pesos (P1,919,500); or
sold by the taxpayer will be subjected to VAT. (b) There are reasonable grounds to believe that his gross
sales or receipts for the next twelve (12) months, other
than those that are exempt under Section 109 (A) to (U)
If you read the entire codal in Section 105, the last will exceed One million nine hundred nineteen thousand
paragraph: five hundred pesos (P1,919,500). (amended by RA 10376)
Xxx
So that means that if the taxpayer involved, or the service Q: Supposing I am a businessman, and I am engaged in
is rendered by a non-resident foreign person, the selling of goods such as sardinas, general
automatically, it will be considered as a vatable transaction, merchandise, groceries. Am I automatically liable for VAT?
subject to VAT. A: Not necessarily because you also have to consider the
other transactions. There are sale of goods which are
Let us now go to the first type of transaction: sale of goods subjected to:
or properties. 1.) 0% VAT; and
Let us dissect the provision. 2.) VAT-exempt.
But one thing to remember as of now, is, if you sell goods
Sec 106: Value-Added Tax on Sale of Goods or in general and you are not among the exempt transactions,
Properties— you have to think of a certain threshold before the taxpayer
(A) Rate and Base of Tax—There shall be levied, assessed can be subjected to VAT. That figure is P1,919,500.
and collected on every sale, barter or exchange of goods
or properties, a value-added tax equivalent to ten percent
Summary: A person who sells goods or properties, is
(10%) (now 12%) of the gross selling price or gross value
in money of the goods or properties sold, bartered or subject to VAT if his gross sales in a particular year or in
exchanged, such tax to be paid by the seller or transferor; any period within the year, will exceed P1,919,500.
Provided, That the President, upon the recommendation of Remember that figure.
the Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent (12%) Which is why, if you look at the administrative provisions
after any of the following conditions have been satisfied:
for VAT, especially the registration provision of VAT, there
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are 2 types of registration, because whether you like it or the next 3 years, because you opted to register
not, there are some businessman who will not be subjected yourself as a VAT taxpayer, it will not be revoked,
to VAT. That is why you have to identify, whether one is canceled or withdraw it. Thereafter, you can
registered as a VAT-taxpayer or a non-VAT taxpayer. change your registration kung gusto mo.
2.) The taxpayer who opts to register as VAT
There are 2 types of VAT registration. taxpayer even if his gross sales did not exceed
1.) Mandatory VAT registration; P1.9M can avail the benefit of the VAT. That is
2.) Optional VAT registration. the benefit to avail of the input taxes. Input taxes
First, if in a single year, you will exceed the P1,919,500 is in the nature of a tax credit which ultimately
benchmark, the law requires you to register as a VAT reduces your VAT liability.
taxpayer.
Let us have a little practice.
Second, there are reasonable grounds to believe that his Q: What if ang gross sales mo for a single year is just
gross sales or receipts for the next 12 months, other than P700,000 and I am a VAT taxpayer. Am I liable for
those that are exempt under Section 109, will exceed VAT?
P1,919,500. A: Yes
Ex: The business you intend to embark into is selling of
heavy equipments. A second-hand bulldozer, is around Q: What if I opted not to register myself as a VAT
P1.5 Million. What if makabentaka? You have reasonable taxpayer and my gross sales for a single year ay
ground to believe that in a particular year, you will exceed umabotng P2M, am I liable for VAT?
the P1.9 Million benchmark. That is why the law requires A: Look into the transaction involved. Look whether
you to register as a VAT taxpayer. the taxpayer is 0% or VAT exempt taxpayer. Because
once you are a VAT-exempt taxpayer, kahitmagkano
Q: What happens if the taxpayer reaches the P1.9 Million pa ang gross sales mo in a single year, you will never
mark and he does not register himself as a VAT taxpayer. be subjected to VAT. So it really depends on the
A: That taxpayer will still be liable for the ________(*not transaction involved.
clear recording).
Q: What is “gross selling price?”
What about the optional VAT Registration? A: It specifically pertains to the selling of goods.
Sec 236: Registration Requirements.— Ibaang term if the taxpayer is engaged in the selling of
xxx service, because you call it “gross receipts.”
(H) Optional Registration for Value-Added Tax of Exempt
Person.— For the selling of property or goods, the term gross
(1) Any person who is not reuired to register for value-
selling price means the total amount of money or its
added tax under Subsection (G) hereof may elect to
register for value-added tax by registering with the equivalent which the purchaser is obligated to pay to
Revenue District Office that has jurisdiction over the head the seller in consideration of the sale, barter or
office of that person, and paying the annual registration fee exchange of goods, excluding the VAT.
in Subsection (B) hereof.
If you read this provision, essentially there are 2
So even if you are not a VAT taxpayer, you can actually opt components of the gross selling price:
to register yourself as a VAT taxpayer. There’s no problem, 1.) The total price of the goods, the total money or
walang sanction ‘yan. But what is the effect? its equivalent for you to have sold that property or
good;
There are 2 effects. When the taxpayer who is not really 2.) Any excise taxes involved. For example, ang
required to register but they register themselves as a VAT business mo is you are engaged in the selling of
taxpayer: cigarettes--manufacture , distribution and selling
1.) The option or the registration as a VAT taxpayer of cigarettes. We all know that angsigarilyo,
is irrevocable for 3 years. But what if hindi mag- meron ‘yang sin taxes. So, you add that, then
abotng P1.9M? It does not really matter. But for you multiply by 12%, as a general rule.
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Q: What about sales returns, allowances and Q: What is the coverage of the term ‘goods or
discounts? properties?’
A: Normally, in accounting parlance, I call it sales, A: The term goods or properties shall be deemed all
although normally, di yantinatawagna sales. tangible and intangible objects which are capable of
pecuniary estimation and shall include:
Sales Return: For example, bili kayo nggamit, and
then angnabiliniyonggamit is defective. Section 106.Value-Added Tax on Sale of Goods or
Anoangginagawaniyo?Sinasauliniyo. Yan Properties. -
angtinatawagnating sales return. So (A) Rate and Base of Tax. -
mababawasanang sales niyoniyan.Dapat i-minus (1) The term 'goods' or 'properties' shall mean all
tangible and intangible objects which are capable of
dawnatinyan.
pecuniary estimation and shall include:
Sales Discount: It is quite understandable. Yung (a) Real properties held primarily for sale to customers
mgahangyu-hangyunatin.Discounted price or held for lease in the ordinary course of trade or
kasikaibigankita. business;
(b) The right or the privilege to use patent, copyright,
design or model, plan, secret formula or process,
Allowances: Still a deduction from your sales.
goodwill, trademark, trade brand or other like property
or right;
Gross Sales: xxx (c) The right or the privilege to use in the Philippines
Less: of any industrial, commercial or scientific equipment;
Sales Return: xxx (d) The right or the privilege to use motion picture
Allowances: xxx films, tapes and discs; and
(e) Radio, television, satellite transmission and cable
Net Sales xxx television time.
Xxx
Walatayongproblema because the law allows us to So, practically all kinds of properties, diba, kungiisipinninyo,
deduct the sales return and sales allowances. What as long as it is capable of pecuniary estimation.
about sales discounts. Kasiparatinamang reason Tignanniyoyungmga bill ninyosa cable, may 12% VAT sila.
kungbakitnagbibigayng discount, it’s either because Or bill inyosa cellphone, may plus 12% sila. Now, what
kaibigannatinsila or probably you can provide this else? So sabinatinkanina, and sabinatin last time, for a
promise because they are early on their payments (i.e. transaction to be a VATable transaction there must be a
if you pay within 90 days, we give you additional 10% transaction involved to begin with. There must be a sale,
discount as a bonus). barter, or exchange in property. That is the general rule.
The law says you are only allowed to deduct your Is there an instance wherein there is no transaction and yet
discounts if the discount does not depend upon the the law considers it as a vatabletransaction. Ito
happening of a future event. Meaning, angtinatawagnatinna “Transaction Deemed Sale.”
kungmagbigaykang discount, for you to deduct them
from your sales, paramabawasanang tax base natin, it Section 106.Value-Added Tax on Sale of Goods or
should not be dependent upon a condition. It must be Properties.--
an unconditional discount.
(B) Transactions Deemed Sale—The following transactions
shall be deemed sale:
Q: Who pays the VAT?
(1) Transfer, use or consumption not in the course of
A: Of course, the statutory taxpayer for the VAT is the business of goods or properties originally intended for sale
seller. Kahithindiniyoipasasaibangtaoyan, still the or for use in the course of business;
seller is still liable for VAT. The BIR will not go after (2) Distribution or transfer to:
the buyer. It is always the seller. (a) Shareholders or investors as share in the profits of the
VAT-registered persons; or
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(b) Creditors in payment of debt; January 13, 2017 (2nd hour)

(3) Consignment of goods if actual sale is not made within (By: Ria Lumapas)
sixty (60) days following the date such goods were
consigned; and Section 106.
(4) Retirement from or cessation of business, with respect Value – Added Tax on Sale of Goods or Properties. –
to inventories of taxable goods existing as of such x xx
retirement or cessation. (B) Transactions Deemed Sale. The following
transactions shall be deemed sale: (1) Transfer, use or
Q: Supposing you opened a new business--engaged in the consumption not in the course of business of goods or
selling of a certain product. Therefore, properties originally intended for sale or for use in the
anongginawamo?Siyempre, you have to promote your course of business;
business right? What you did was to get a few of your
For the transaction to be considered as a TDS (Transaction
inventories as testers. Sabihinnatin perfume, kumuhakasa Deemed Sale), dapatgamitinmosyahindi para sa business
inventory mo as testers, sobrangdamingnagtest, umabotng mo. Example is tigbaligyakaugbugas. Baligyakaugbugas
P100,000ang worth of goods angkinuha mo. Is that a human walanamoy lung-agon. So
VATable transaction? tawagonnimoinyongkatabang, “gang,
kuhasaugbugasdidtosatindahan kay walanataybugas.”
A(Student answers): I think it is not a VATable transaction Was the rice taken really originally intended for business?
Yes, but where did you use it? You used it not for purposes
because it is not considered as a sale in the course of
of the business but for purposes of consumption.
business.
(2) Distribution or transfer to: (a) Shareholders or
Q: Anobaangsinasabingbatas: consumption of goods, investors as share in the profits of the VAT-registered
properties originally intended for sale, and then you persons; or (b) Creditors in payment of debt;
consume it. Is it not a transaction deemed sale? Kasigi-
consume mo man siya? Where did you use the Take note, dapat VAT-registered person ang involved. And
second, creditors in payment of debt. What is the legal
testers?...Does it mean that if you sell something,
term for that? Dacionenpago. We had a client before. Ang
automatically you have to have profit? Read the law, client naminsi good person. Si bad person nisibat,
basahinmodawulitang provision. Is it a transaction deemed nagrentasya ng property kay client. And then this bad
sale? Under that circumstance, kumuhakang perfume mo, person di nasyanagbabayad ng rent. Eventually, naglayas.
angdamimongkinuhadahilangdamingnagtesting, umabotng Threatened to sue. And then nagsettle. Pero wala man
P100,000. Is it a transaction deemed sale? daw cash ikabayad. Etonalang share ko. The bad person is
a VAT registered person then that transfer is considered as
TDS.
A (Student answers): I think Sir, it is a form of
promotional…It is a form of advertising. (3) Consignment of goods if actual sale is not made
within sixty (60) days following the date such goods
Q: Where did you use the testers? For what purpose? were consigned; and
A(Student answers): For promotion which is related to What is the essence of consignment? Gets nyona idea ng
business. consignment? Benta kayo ng motor. For example, I’m
Emcor, meronako motorcycles. Ibigayko kay MaamPetallo.
Maam, ibaligyana. Kung mabaligyananimonaa kay
Q: What is the missing element why it is not considered commission. That’s how it goes. What if hindimabenta?
TDS? … Normally there is a stipulation napaghindimabenta within a
specific period, Ms. Petallo will have to return to me the
For the transaction to be considered TDS, motorcycles. In taxation, what if I deliver the motorcycles to
dapatgamitinmosiya, hindiparasa business mo. Ms. Petallo, ibentamoyan, ikawnabahalanyan. Kung may
mabentabigaymolangsa akin. And then let’s say, 5%
commission for each motorcycle. What if in that 60-day
period from the date I delivered to you the motorcycles, she
was not able to sell everything. Even if it was not sold but
were not returned, it is deemed a Transaction Deemed
Sale. So even if there is no actual sale that happened, it is
9|P age
considered as if Emcor sold to Ms. Petallo the motorcycles agreement, effectively zero-rated, you sell your products
and it is already considered a vatable transaction. locally but still zero-rated ka. Like for example, you sell in a
PEZA zone, by reason of law, zero-rated transaction
langyan, considered as if export sya.
(4) Retirement from or cessation of business, with
respect to inventories of taxable goods existing as of
such retirement or cessation.
Let’s first discuss export sales. What are considered as
I think this is self-explanatory. If there is inventory export sales?
remaining, even if they are not actually sold; for example,
closing out sale. Di man yanlahatmabenta. What about Section 106.
those inventory not sold, then for purposes of VAT, they Value – Added Tax on Sale of Goods or Properties–
are considered as sold already and the taxpayer will have (A)
to pay a corresponding VAT for the remaining unsold x xx
goods. (2) The following sales by VAT-registered persons
shall be subject to zero percent (0%) rate: (a) Export
How do you now compute for the VAT? Sales. –
The term 'export sales' means:
It will really depend if what is given is the gross selling price (1) The sale and actual shipment of goods from
or invoice price. Sa gross selling price, this means it is the Philippines to a foreign country,
without any VAT yet. How do you get the VAT? You just irrespective of any shipping arrangement that
multiply by 12%. Now, what if what is given is the invoice may be agreed upon which may influence or
price? Pagsinabinatin invoice price, kasalinadyanang VAT. determine the transfer of ownership of the
Paanomomalaman VAT-payable mo? Sabihinnatin goods so exported and paid for in acceptable
120,000 total sales. So how do you get the VAT here? You foreign currency or its equivalent in goods or
just multiply it by 12 and then divide it by 100. To extract services, and accounted for in accordance
the VAT payable, multiply it by 12 and divide by 100. with the rules and regulations of the
BangkoSentral ng Pilipinas (BSP);
Zero-Rated VAT
So, the first is 12%. That is the regular VAT. The next thing
is Zero-rated VAT. Is it still considered a VAT transaction? In other words this is the actual exportation. The sale must
Yes. The taxpayer is still required to register himself as a be made in an acceptable foreign currency. The payment
VAT taxpayer in order for him to avail the benefits of the must be accounted for under the rules and regulation of the
VAT. It’s just that the rate for your output tax is zero BSP. The shipping arrangement doesn’t really matter.
percent. Is it the same with VAT-exempt transactions? It’s
Bentaka ng raw materials and you sell it to a nonresident
different. When you talk of VAT exempt, you don’t talk
about zero percent, you don’t impose any VAT at all. In the buyer. It’s okay if the goods are transferred temporarily to a
same way, since VAT-exempt ka, you cannot claim any local export-oriented enterprise bastaang buyer
input VAT. Whereas in zero-rate transaction, you can still nonresident buyer. Let’s dissect the elements:
claim an input VAT. This is a tax credit. So it is possible
nawalakangbayaranna VAT peromeronkang tax refund (2) Sale of raw materials or packaging materials to a
from the government. So that is why kung covered ka ng nonresident buyer for delivery to a resident local
zero-rated VAT, you must register yourself a zero-rated export-oriented enterprise to be used in
VAT taxpayer. manufacturing, processing, packing or repacking in
the Philippines of the said buyer's goods and paid for
What are the two types of transaction involved in VAT? in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP;
1. Export Sales
2. Effectively zero-rated sales transactions
1. It involves raw materials or packaging materials.
Essentially they are the same. But si effectively zero-rate 2. The buyer involved is a nonresident buyer.
transaction, this refers to local sales. Normally 3. This may be delivered to a local export-oriented
pagsinabimong zero-rated ka, it’s considered as export enterprise.
sales. You sell the product outside the Philippines. Si 4. Must be paid for in acceptable foreign currency in
effectively zero-rated sale, by reason of law or international accordance with BSP rules.
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seller sells his goods to a nonresident person but it will be

If you notice here, what is the difference here with No. 3? delivered to a resident of the Philippines. So it’s considered
as a foreign-denominated sale. Binayaransya in foreign
(3) Sale of raw materials or packaging materials to currency and the payment is accounted for under BSP
export-oriented enterprise whose export sales rules. Take note that this does not apply to the selling of
exceed seventy percent (70%) of total annual automobiles and non-essential goods.
production;
Non-essential goods refer to 1. Jewelries, 2. Perfumes and
toilet waters, 3. Yachts and other vessels intended for
So, in the end you notice there are two types of selling of pleasure or sports.
raw materials which is subject to zero-rated VAT. This is
And then yungmga special laws, sales to persons or
the second one. Etosya, you sell it to a local export-
entities whose exemption under special laws or
oriented enterprise. Binentamosyadito but ultimately the
international agreements. You have the Asian
goods will be shipped outside. What is the difference with
Development Bank, International Rice Institute and the
the selling to a nonresident buyer? Etosi number 3, when
WHO.
you sell to the export-oriented enterprise, it is necessary
that the local export-oriented enterprise, 70% of its sales
must be for exportation. Second difference, the
requirement of payment is in acceptable foreign currency,
walasyadito. If he sells, it’s okay that the payment is in January 19, 2017 (1st and 2nd hour)
peso. What matters is that 70% of its sales must be for (By: Arjan Uy)
exportation. You don’t talk about the BSP rules. Third, take
note that the selling, it doesn’t really matter if the raw Ok short review lang, we already covered tax
materials are used here in the Philippines. As long as you rates, covered transactions, sale of goods and services.
sell it to a local export-oriented enterprise, the total sales We also discussed few cases and the importance of VAT
should be subjected to zero percent irrespective of registration. First, the VAT registered taxpayer will be
saansyagagamitin. You read the case of Atlas subject to VAT regardless of the amount of gross sales that
Consolidated v. CIR, GR No. 146221, September 25, he will have. Also if the taxpayer is a Non-VAT taxpayer
2007. and the transaction is subject to VAT, he will be liable for
VAT once he reaches the threshold amount. General Rule
It is considered as an export sales. What if you sell silver or is 12% and exception is 0% and this 0% involves
diamonds or other precious metals? You apply strict exportation of goods and services.
construction of tax laws. Walayapil. Gold lang. So let us now go to VAT on the importation of goods. We
start with Section 107 (A):
(4) Sale of gold to the BSP;
SEC. 107. Value-Added Tax on Importation of Goods. -
(A) In General. - There shall be levied, assessed and

(5) Those considered export sales under Executive
collected on every importation of goods a value-added tax
Order NO. 226, otherwise known as the Omnibus
equivalent to ten percent (10%)based on the total value
Investment Code of 1987, and other special laws.
used by the Bureau of Customs in determining tariff and
customs duties plus customs duties, excise taxes, if any,
and other charges, such tax to be paid by the importer prior
And then there is an amendment under RA 9337, sale of
to the release of such goods from customs custody:
goods, supplies, equipment and fuel to persons engaged in
Provided, That where the customs duties are determined
international shipping or international air transport
on the basis of the quantity or volume of the goods, the
operations. Meaning, you talk about international carriers.
value-added tax shall be based on the landed cost plus
Foreign Denominated Sale excise taxes, if any Provided, further, That the President,
upon the recommendation of the Secretary of Finance,
And then there is the foreign denominated sale. The shall, effective January 1, 2006, raise the rate of the value-
phrase 'foreign currency denominated sale' means sale added tax to twelve percent (12%), after any of the
to a nonresident of goods, except those mentioned in following conditions has been satisfied:
Sections 149 and 150, assembled or manufactured in the
Philippines for delivery to a resident in the Philippines, paid (i) Value-added tax collection as a percentage of Gross
for in acceptable foreign currency and accounted for in Domestic Product (GDP) of the previous year exceeds two
accordance with the rules and regulations of the BSP. The and four-fifth percent (2 4/5%); or
11 | P a g e
(ii) National government deficit as a percentage of GDP of We are done with goods. SO let’s go to sales of services:
the previous year exceeds one and one-half percent (1 ½
%). SEC. 108. Value-added Tax on Sale of Services and
Use or Lease of Properties. -
Ok so VAT is imposed in the importation of goods. This
time it does not really matter if the goods are consumed for (A) Rate and Base of Tax. - There shall be levied,
business or personal use, for as long as the importation of assessed and collected, a value-added tax equivalent to
goods. So what does importation mean? Importation ten percent (10%) of gross receipts derived from the sale
begins when the carrying vessels or aircraft enters the or exchange of services, including the use or lease of
jurisdiction of the Philippines with intention to unlade properties: Provided, That the President, upon the
herein. recommendation of the Secretary of Finance, shall,
effective January 1, 2006,raise the value-added tax to
Now, when does importation end? Importation is deemed twelve percent (12%), after any of the following conditions
terminated upon the payment of duties, taxes and other has been satisfied:
charges due upon the articles or secured to be paid, at a
port of entry and the legal permit for withdrawal shall have (i) Value-added tax collection as a percentage of Gross
been granted, or in case said articles are free of duties, Domestic Product (GDP) of the previous year exceeds two
taxes and other charges, until they have legally left the and four-fifth percent (2 4/5%); or
jurisdiction.
(ii) National government deficit as a percentage of GDP of
What is the tax base for the importation of goods? the previous year exceeds one and one-half percent (1
Walatayongproblemasa domestic sale of goods because 1/2%).
the tax base is just the gross selling price or the gross
sales. Take note that the tax shall be based on the total This is pretty much the same with sale of goods. This time
value used by the Bureau of Customs in determining tariff we do not talk about gross sales anymore. We talk about
and customs duties, plus customs duties, excise tax and gross receipts. What does gross receipts mean?
other charges. It is not necessarily the price you pay when
you bought the merchandise. What are these other Section. 108 xxx The term "gross receipts" means the total
charges? For example, transportation charges. In this amount of money or its equivalent representing the
case, you include that in the tax base in getting the 12% contract price, compensation, service fee, rental or royalty,
VAT. including the amount charged for materials supplied with
the services and deposits and advanced payments actually
Let’s go toSection 107 (B): or constructively received during the taxable quarter for the
services performed or to be performed for another person,
(B) Transfer of Goods by Tax-exempt Persons. - In the excluding value-added tax. xxx
case of tax-free importation of goods into the Philippines by
persons, entities or agencies exempt from tax where such Take note that you have to exclude the VAT in determining
goods are subsequently sold, transferred or exchanged in gross receipts. What do we mean when we say sales of
the Philippines to non-exempt persons or entities, the services?
purchasers, transferees or recipients shall be considered
the importers thereof, who shall be liable for any internal Section 108. xxx The phrase "sale or exchange of
revenue tax on such importation. The tax due on such services" means the performance of all kinds of services in
importation shall constitute a lien on the goods superior to the Philippines for others for a fee, remuneration or
all charges or liens on the goods, irrespective of the consideration, including those performed or rendered by
possessor thereof construction and service contractors; stock, real estate,
commercial, customs and immigration brokers; lessors of
The example that Dean Quibod would give us is this. property, whether personal or real; warehousing services;
Envoys of the foreign embassies. Most of the time they lessors or distributors of cinematographic films; persons
would bring their own cars here in the Philippines. They engaged in milling processing, manufacturing or repacking
bring their own personal cars, meaning they import. They goods for others; proprietors, operators or keepers of
are actually tax-free under the principle of international hotels, motels, rest houses, pension houses, inns, resorts;
comity. What if that foreign envoy sells his car to a Filipino proprietors or operators of restaurants, refreshment
citizen? Of course, under this provision, that person who parlors, cafes and other eating places, including clubs and
bought the car must pay the corresponding VAT as if he is caterers; dealers in securities; lending investors;
the importer of the property. transportation contractors on their transport of goods or
cargoes, including persons who transport goods or cargoes
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for hire another domestic common carriers by land relative So it covers all kinds of services within the
to their transport of goods or cargoes; common carriers by Philippines. It must be consumed or rendered here in the
air and sea relative to their transport of passengers, goods Philippines. It includes ALL kinds of services which is why
or cargoes from one place in the Philippines to another proffessionals such as engineers, doctors, lawyers and
place in the Philippines; sales of electricity by generation brokers are subject to VAT. If you rendered service, you
companies, transmission, and distribution companies; will be subject to VAT. Take note that this list is not
services of franchise grantees of electric utilities. telephone exclusive. Tingnannyosa baba banda, it says : “similar
and telegraph, radio and television broadcasting and all services regardless of whether or not the performance
other franchise grantees except those under section 119 of thereof calls for the exercise or use of the physical or
this Code, and non-life insurance companies (except their mental faculties.” Thus it includes services pertaining to
crop insurances), including surety, fidelity, indemnity, and intellectual property rights.
bonding companies; and similar services regardless of
whether or not the performance thereof calls for the How about service contractors? They are subject
exercise or use of the physical or mental faculties. The to VAT. Example is a security or manpower agency. There
phrase "sale or exchange of services" shall likewise is a book which says that security agencies are subject to
include: VAT. For example, you are a security agency. In the
service contract, the amount for the service is P1 Million
(1) The lease or the use of or the right or privilege to use and includes the salary of the guards. Question: Do you
any copyright, patent, design or model, plan secret formula have to include in your gross receipts the amount you pay
or process, goodwill, trademark, trade brand or other like as salary to your security guards? Actually, there is a
property or right; jurisprudence and a later BIR ruling that is contradictory. In
one old case of Protector’s Services versus Court of
(2) The lease of the use of, or the right to use of any Appeals [G.R. No. 118176. April 12, 2000], the Supreme
industrial, commercial or scientific equipment; Court said, the VATable amounts includes the salaries of
the security guards.
(3) The supply of scientific, technical, industrial or
commercial knowledge or information; From the full text:Contractor’s tax on gross receipts
imposed on business agents including private detective
(4) The supply of any assistance that is ancillary and watchman agencies, was a tax on the sale of services or
subsidiary to and is furnished as a means of enabling the labor, imposed on the exercise of a privilege. The term
application or enjoyment of any such property, or right as is "gross receipts" means all amounts received by the prime
mentioned in subparagraph (2) or any such knowledge or or principal contractor as the total price, undiminished by
information as is mentioned in subparagraph (3); the amount paid to the subcontractor under a subcontract
arrangement. Hence, gross receipts could not be
(5) The supply of services by a nonresident person or his
diminished by employer's SSS, SIF and Medicare
employee in connection with the use of property or rights
contributions.
belonging to, or the installation or operation of any brand,
machinery or other apparatus purchased from such
But then there is this 2007 BIR Circular that says
nonresident person.
otherwise:
(6) The supply of technical advice, assistance or services
rendered in connection with technical management or From Revenue Memorandum Circular No. 39-2007:
administration of any scientific, industrial or commercial However, for VAT purposes, sellers of services, including
undertaking, venture, project or scheme; Security Agencies, have to be taxed solely on the cash
basis – that is upon actual or constructive receipt of the
(7) The lease of motion picture films, films, tapes and discs; income because the VAT on sale of services is specifically
and imposed by law on the taxpayer’s gross receipts. But in
order that an amount received will form part of gross
(8) The lease or the use of or the right to use radio, receipts, the same must constitute the gross income of the
television, satellite transmission and cable television time. taxpayer when received or earned. Hence, if something is
received by a taxpayer but the amount received does not
Lease of properties shall be subject to the tax herein or will not form part of its gross income (i.e., receipt of
imposed irrespective of the place where the contract of money constituting a loan or liability), the same cannot be
lease or licensing agreement was executed if the property part of its gross receipts subject to VAT.
is leased or used in the Philippines. xxx
So which is which? I think you have to follow jurisprudence.
I think you have to follow the definition of gross receipts.
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Let us now go to the case of CIR versus SM Prime SEC. 118. Percentage Tax on International Carriers. —
Holdings [G.R. No. 183505, February 26, 2010]. Cinema
house siladiba? They are in the business of distributing (A) International air carriers doing; business in the
film. Sabing CIR dapatsilamagbayadng VAT. Sabinamanng Philippines on their gross receipts derived from transport of
SM, we are not engaged in the lease of films, we just cargo from the Philippines to another country shall pay a
exhibit it. And besides salaking amusement tax at that time tax of three percent (3%) of their quarterly gross receipts.
, mamamataydawkanilang business. What did the
Supreme Court say: (B) International shipping carriers doing business in the
Philippines on their gross receipts derived from transport of
From the full text of the case: Considering that there is no cargo from the Philippines to another country shall pay a
provision of law imposing VAT on the gross receipts of tax equivalent to three percent (3%) of their quarterly gross
cinema/theater operators or proprietors derived from receipts.
admission tickets, RMC No. 28-2001 which imposes VAT
on the gross receipts from admission to cinema houses What if one involved domestic carriers with international
must be struck down. We cannot overemphasize that flights? PAL or Cebu Pacific. It is subject to 0% rated VAT.
RMCs must not override, supplant, or modify the law, but That is for trips going outside or abroad.
must remain consistent and in harmony with, the law they
seek to apply and implement. Take note of the case of Diaz versus Secretary of
Finance, G.R. No. 193007, July 19, 2011:
Which I find weird. Kasidiba? “similar services
regardless of whether or not the performance thereof calls From the full text:Consequently, VAT on tollway operations
for the exercise or use of the physical or mental is not really a tax on the tollway user, but on the tollway
faculties.”The list is not exclusive. Perosabing Supreme operator. Under Section 105 of the Code, 31 VAT is
Court di dawganun, which is weird diba? For me it is a imposed on any person who, in the course of trade or
problematic decision. business, sells or renders services for a fee. In other
words, the seller of services, who in this case is the tollway
Anyway,if you encounter a problem with the same set of operator, is the person liable for VAT. The latter merely
facts, just apply the ruling in SM Prime Holdings. shifts the burden of VAT to the tollway user as part of the
toll fees.
Part of the definition of the sale of services is
“transportation contractors on their transport of goods or For this reason, VAT on tollway operations cannot be a tax
cargoes, including persons who transport goods or cargoes on tax even if toll fees were deemed as a "user’s tax." VAT
for hire another domestic common carriers by land relative is assessed against the tollway operator’s gross receipts
to their transport of goods or cargoes; common carriers by and not necessarily on the toll fees. Although the tollway
air and sea relative to their transport of passengers, goods operator may shift the VAT burden to the tollway user, it
or cargoes from one place in the Philippines to another will not make the latter directly liable for the VAT. The
place in the Philippines”. Let us define. When it comes to shifted VAT burden simply becomes part of the toll fees
transportation contractors, we have rules to follow. For now that one has to pay in order to use the tollways.
just think about this:
What about franchise grantees? The general rule is that
Once the transaction is subject to other percentage taxes, franchise grantees are subject to VAT. What are the
it will no longer be subject to VAT, regardless of the exceptions?
amount of gross sales. Transpomunatayo ha. How do you
transport by the way? There are three modes of 1. Franchise grantees of radio and/or television
transportation: land, sea and air. Then another way to broadcasting whose annual gross receipts of the
classify it is transportation of goods and transportation of preceding year do not exceed P10,000,000 shall
passengers. not be subject to VAT, but to the 3% franchise
tax
The general rule is domestic transportation by land, air and 2. Gas and water utilities
sea is subject to VAT. If the taxpayer is a VAT-registered
taxpayer or a non-VAT registered taxpayer who reaches What about sale of electricity? Sale of electricity, as a
the threshold amount. That is the rule. Exception: general rule, is subject to VAT. What is the exception? Sale
transportation of persons by land. Why? What is the tax of power or fuel generated through renewable sources of
consequence? It is subject to other percentage taxes. 3% energy such as biomass. When it comes from renewable
based on the gross receipts. sources of energy, it is 0% rated. The keyword to look out
for is renewable source of energy.
14 | P a g e
Let us go to zero rated sales of services. Going to the second item, an example of this case is the
American Express case (no citation by sir).
(B) Transactions Subject to Zero Percent (0%) Rate - Maalalanyoyun? Yan yung example nyan.
The following services performed in the Philippines by
VAT- registered persons shall be subject to zero percent (4) Services rendered to persons engaged in international
(0%) rate. shipping or international air transport operations, including
leases of property for use thereof.
(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which (5) Services performed by subcontractors and/or
goods are subsequently exported, where the services are contractors in processing, converting, of manufacturing
paid for in acceptable foreign currency and accounted for in goods for an enterprise whose export sales exceed
accordance with the rules and regulations of the seventy percent (70%) of total annual production.
BangkoSentralngPilipinas (BSP);
(6) Transport of passengers and cargo by air or sea
(3) Services rendered to persons or entities whose vessels from the Philippines to a foreign country; and
exemption under special laws or international agreements
to which the Philippines is a signatory effectively subjects (7) Sale of power or fuel generated through renewable
the supply of such services to zero percent (0%) rate; sources of energy such as, but not limited to, biomass,
solar, wind, hydropower, geothermal, ocean energy, and
(4) Services rendered to persons engaged in international other emerging energy sources using technologies such as
shipping or international air transport operations, including fuel cells and hydrogen fuels.
leases of property for use thereof.
Let’s go to exempt transactions. Ito ha medyomarami.
(5) Services performed by subcontractors and/or
contractors in processing, converting, of manufacturing First things first: What is the difference between a zero
goods for an enterprise whose export sales exceed rated transaction and a VAT exempt transaction? And
seventy percent (70%) of total annual production. furthermore you have to distinguish between a VAT exempt
transaction and a VAT exempt person. Magkaibayan ha.
(6) Transport of passengers and cargo by air or sea When you say VAT exempt transaction, it refers to the
vessels from the Philippines to a foreign country; and selling of the goods and services. It is the transaction that
is exempt from VAT. That is why the seller of these goods
(7) Sale of power or fuel generated through renewable and services, there is no corresponding VAT and at the
sources of energy such as, but not limited to, biomass, same time, the person engaged in the transaction cannot
solar, wind, hydropower, geothermal, ocean energy, and claim input taxes.
other emerging energy sources using technologies such as
fuel cells and hydrogen fuels. But what about VAT exempt persons? The person is
exempt from the coverage of VAT. These persons
Let’s break down the requisites of the first one: walasyangbabayaranna output VAT and at the same time
he is relieved from the burden of paying VAT to his
1. Processing, manufacturing or repacking goods suppliers. That is why for VAT exempt persons, these are
for other persons doing business outside the persons engaged in zero rated transactions. Meaning
Philippines walasyang output VAT but the TAX he shoulders when he
2. which goods are subsequently exported buys from VAT-registered persons, he can claim it as a tax
3. where the services are paid for in acceptable credit and a tax refund.
foreign currency
4. and accounted for in accordance with the rules Ang rami exempt transactions dito ha, let’s just discuss a
and regulations of the BangkoSentralngPilipinas few.
(2) Services other than those mentioned in the preceding SEC. 109. Exempt Transactions. -
paragraph, rendered to a person engaged in business
conducted outside the Philippines or to a nonresident (1) Subject to the provisions of Subsection (2) hereof, the
person not engaged in business who is outside the following transactions shall be exempt from the value-
Philippines when the services are performed, the added tax.
consideration for which is paid for in acceptable foreign
currency and accounted for in accordance with the rules (A) Sale or importation of agricultural and marine food
and regulations of the BangkoSentralngPilipinas (BSP) products in their original state, livestock and poultry of or
king generally used as, or yielding or producing foods for
15 | P a g e
human consumption; and breeding stock and genetic (G) Medical, dental, hospital and veterinary services except
materials therefor. those rendered by professionals. [56]
Products classified under this paragraph shall be (H) Educational services rendered by private educational
considered in their original state even if they have institutions, duly accredited by the Department of
undergone the simple processes of preparation or Education(DepED), the Commission on Higher Education
preservation for the market, such as freezing, drying, (CHED), the Technical Education and Skills Development
salting, broiling, roasting, smoking or stripping. Polished Authority (TESDA)and those rendered by government
and/or husked rice, corn grits, raw cane sugar and educational institutions; [57]
molasses, ordinary salt and copra shall be considered in
their original state; (I) Services rendered by individuals pursuant to an
employer-employee relationship;
Ang key word ditto is “for human consumption”. So it does
not include pets and fighting cocks. The provision allows (J) Services rendered by regional or area headquarters
simple processes like for example buladnaisda, etc. established in the Philippines by multinational corporations
which act as supervisory, communications and
(B) Sale or importation of fertilizers; seeds, seedlings and coordinating centers for their affiliates, subsidiaries or
fingerlings; fish, prawn, livestock and poultry feeds, branches in the Asia-Pacific Region and do not earn or
including ingredients, whether locally produced or derive income from the Philippines;
imported, used in the manufacture of finished feeds (except
specialty feeds for race horses, fighting cocks, aquarium (K) Transactions which are exempt under international
fish, zoo animals and other animals generally considered agreements to which the Philippines is a signatory or under
as pets); special laws, except those under Presidential Decree No.
529; [58]
Take note ang exception is the specialty feeds.
(L) Sales by agricultural cooperatives duly registered with
the Cooperative Development Authority to their members
(C) Importation of personal and household effects
as well as sale of their produce, whether in its original state
belonging to the residents of the Philippines returning from
or processed form, to non-members; their importation of
abroad and nonresident citizens coming to resettle in the
direct farm inputs, machineries and equipment, including
Philippines: Provided, That such goods are exempt from
spare parts thereof, to be used directly and exclusively in
customs duties under the Tariff and Customs Code of the
the production and/or processing of their produce;
Philippines;
(M) Gross receipts from lending activities by credit or multi-
(D) Importation of professional instruments and
purpose cooperatives duly registered with the Cooperative
implements, wearing apparel, domestic animals, and
Development Authority;
personal household effects (except any vehicle, vessel,
aircraft, machinery other goods for use in the manufacture (N) Sales by non-agricultural, non- electric and non-credit
and merchandise of any kind in commercial quantity) cooperatives duly registered with the Cooperative
belonging to persons coming to settle in the Philippines, for Development Authority: Provided, That the share capital
their own use and not for sale, barter or exchange, contribution of each member does not exceed Fifteen
accompanying such persons, or arriving within ninety (90) thousand pesos (P15, 000) and regardless of the
days before or after their arrival, upon the production of aggregate capital and net surplus ratably distributed among
evidence satisfactory to the Commissioner, that such the members;
persons are actually coming to settle in the Philippines and
that the change of residence is bona fide; (O) Export sales by persons who are not VAT-registered;
Take note of the elements. Let’s go to real property transactions:
(E) Services subject to percentage tax under Title V; (P) Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade
This is what I was saying earlier. Once it is subject to or business or real property utilized for low-cost and
percentage tax it is no longer subject to VAT. socialized housing as defined by Republic Act No. 7279,
otherwise known as the Urban Development and Housing
(F) Services by agricultural contract growers and milling for Act of 1992, and other related laws, residential lot valued at
others of palay into rice, corn into grits and sugar cane into One million pesos (P1,500,000) [59] and below, house and
raw sugar; lot, and other residential dwellings valued at Two million
16 | P a g e
five hundred thousand pesos (P2, 500, 000) [60] and (V) Services of bank, non-bank financial intermediaries
below: Provided, That not later than January 31, 2009 and performing quasi-banking functions, and other non-bank
every three (3) years thereafter, the amount herein stated financial intermediaries; an
shall be adjusted to their present values using the
Consumer Price Index, as published by the National (W) Sale or lease of goods or properties or the
Statistics Office (NSO); performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual
So that is why if you sell your properties, it is not subject to sales and/or receipts do not exceed the amount of One
VAT. Now, what if you sell real properties and it is part of million five hundred thousand pesos (P1,500,000):
your business? Then distinguish the properties. When you Provided, That not later than January 31, 2009 and every
sell commercial real property subject to VAT. Let’s go to three (3) years thereafter, the amount herein stated shall
residential properties. be adjusted to its present With footnote in the book value
using the Consumer Price Index, as published by. the
1. Sa residential naman, if what is involved is a National Statistics-Office (NSO);
mere residential lot, you have to look at the P1M
threshold (2) A VAT-registered person may elect that Subsection (1)
2. If it is for low cost housing, then VAT exempt not apply to its sale of goods or properties or services:
3. It is for socialized housing, then VAT exempt Provided, that an election made under this subsection shall
4. If it is valued below 3M… it is VAT exempt be irrevocable for a period of three (3) years from the
quarter the election was made.
(Q) Lease of a residential unit with a monthly rental not
exceeding Ten thousand pesos (P10, 000): Provided, That
not later than January 31, 2009 and every three (3) years
thereafter, the amount herein stated shall be adjusted to its
present value using the Consumer Price Index as January 24, 2017
published by the National Statistics Office (NSO); (By: Arjan Uy)
If the monthly rent will not exceed 12,300, such transaction Let’s start with Section 110.
is VAT Exempt. Now if you will ask, what if the total gross
receipts exceed the 1.9M threshold? It is still VAT exempt
so long as the monthly rent will not exceed the P 12,300 SEC. 110. Tax Credits. -
threshold. What is it will exceed 12,300? And the property
involved is real property residential? You have to A. Creditable Input Tax. -
distinguish. If he is VAT registered then subject to VAT sya.
IF he is not VAT registered, you go to the 1.9 M threshold. (1) Any input tax evidenced by a VAT invoice or official
receipt issued in accordance with Section 113 hereof on
(R) Sale, importation, printing or publication of books and the following transactions shall be creditable against the
any newspaper, magazine review or bulletin which appears output tax:
at regular intervals with fixed prices for subscription and
sale and which is not devoted principally to the publication (a) Purchase or importation of goods:
of paid advertisements;
(i) For sale; or
Take note of the elements. How about FHM? Does the
exemption include Ebooks? No it does not.
(ii) For conversion into or intended to form part
(S) Transport of passengers by international carriers; of a finished product for sale including packaging materials;
(T) Sale, importation or lease of passenger or cargo (iii) For use as supplies in the course of
vessels and aircraft, including engine, equipment and business; or
spare parts thereof for domestic or international transport
operations; (iv) For use as materials supplied in the sale of
service; or
(U) Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport
operations; (v) For use in trade or business for which
deduction for depreciation or amortization is allowed under
this Code. [65]
17 | P a g e
xxx a) be allowed input tax on his beginning inventory of

goods, materials and supplies equivalent to two
The term "input tax" means the value-added tax due from percent (2%) of the value of such inventory;
or paid by a VAT-registered person in the course of his b) or the actual value-added tax paid on such
trade or business on importation of goods or local purchase goods, materials and supplies,
of goods or services, including lease or use of property,
from a VAT-registered person. It shall also include the …whichever is higher, which shall be creditable against the
transitional input tax determined in accordance with output tax.
Section 111 of this Code.
(B) Presumptive Input Tax Credits. - Persons or firms
The term "output tax" means the value-added tax due on engaged in the processing of sardines, mackerel and milk,
the sale or lease of taxable goods or properties or services and in manufacturing refined sugar and cooking oil, shall
by any person registered or required to register under be allowed a presumptive input tax, creditable against the
Section 236 of this Code. output tax, equivalent to four percent (4%) of the gross
value in money of their purchases of primary agricultural
Output tax walatayongproblemajan; that is tax due on the products which are used as inputs to their production.
sale. Creditable input VAT basically reduces your tax
payable; your output VAT. Where do you get your input As used in this Subsection, the term 'processing' shall
taxes? Look at Section (1)(a). mean pasteurization, canning and activities which through
physical or chemical process alter the exterior texture or
SO essentially input taxes from your purchases of goods form or inner substance of a product in such manner as to
and services. It is not necessary that the goods will be sold prepare it for special use to which it could not have been
later on because the goods might be used part of a product put in its original form or condition.
that you will sell later on. Now, what do you mean
Presumptive input tax naman refers to very specific
SEC. 111. Transitional/Presumptive Input Tax Credits. -
transactions only. Take note that is 4% of the gross value
in money of their purchases of primary agricultural
(A) Transitional Input Tax Credits. - A person who becomes
products, for example you are engaged in the sale of
liable to value-added tax or any person who elects to be a
mackerel.
VAT-registered person shall, subject to the filing of an
inventory according to rules and regulations prescribed by Let’s go back to Section 110:
the Secretary of finance, upon recommendation of the
Commissioner, be allowed input tax on his beginning Xxx
inventory of goods, materials and supplies equivalent to
two percent (2%) of the value of such inventory or the (3) A VAT-registered person who is also engaged in
actual value-added tax paid on such goods, materials and transactions not subject to the value-added tax shall be
supplies, whichever is higher, which shall be creditable allowed tax credit as follows:
against the output tax.
(a) Total input tax which can be directly attributed to
From the word itself transition, this transitional input tax transactions subject to value-added tax; and
credits are applicable to those who become liable for VAT
(b) A ratable portion of any input tax which cannot be
for the first time. Who are they?
directly attributed to either activity.
a) Those who are first timers in the registration of
their VAT xxx
b) Those who are non required to register as tax
payers but in the middle of the year they are In other words it refers to mixed transactions.
already required to be taxpayers because he or When you talk about mixed transactions, this means that
she has already exceeded the threshold amount the taxpayer has many sets of business. One set of his
businesses is VATable while the other set is a non VAT
So what now is the threshold amount? business. For running his businesses, gagamitsyang raw
18 | P a g e
materials diba? Even if you cannot trace exactly how those be refunded or credited against other internal revenue
raw materials are used in the two sets of business, the law taxes, subject to the provisions of Section 112.
says you can actually apportion the amount of raw
materials or goods based on the sales of all the business. So what happens if there is excess input tax? You can:
(Still Section 110) 1) Carry it over to the next succeeding quarters;

2) Opt for a refung
3) Opt that it be credited against other internal
(2) Provided, that the input tax on goods purchased or
imported in a calendar month for use in trade or business revenue taxes
for which deduction for depreciation is allowed under this
SEC. 112. Refunds or Tax Credits of Input Tax. -
Code shall be spread evenly over the a month of
acquisition and the fifty-nine (59) succeeding months if the
(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-
aggregate acquisition cost for such goods, excluding the
VAT component thereof, exceeds One million pesos (P 1, registered person, whose sales are zero-rated or effectively
000, 000): Provided, however, That if the estimated useful zero-rated may, within two (2) years after the close of the
life of the capital goodis less than five (5) years, as used for taxable quarter when the sales were made, apply for the
depreciation purposes, then the input VAT shall be spread issuance of a tax credit certificate or refund of creditable
over such a shorter period:[67]Provided, finally, that in the input tax due or paid attributable to such sales, except
case of purchase of services, lease or use of properties, transitional input tax, to the extent that such input tax has
the input tax shall be creditable to the purchaser, lessee or
license upon payment of the compensation, rental, royalty not been applied against output tax: Provided, however,
or free. That in the case of zero-rated sales under Section
106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2),
Do not confuse capital goods with capital assets. the acceptable foreign currency exchange proceeds
Pagsinabinating capital assets, that term refers to your thereof had been duly accounted for in accordance with the
income tax principles. Pag.sinabimong capital goods, we rules and regulations of the BangkoSentralngPilipinas
are talking about VAT transaction. Capital goods are those (BSP): Provided, further, That where the taxpayer is
properties used in your business subject to depreciation. engaged in zero-rated or effectively zero-rated sale and
For example, car used in deliveries. Machineries are also also in taxable or exempt sale of goods of properties or
considered capital goods. If you want a more technical services, and the amount of creditable input tax due or paid
definition, capital goods are depreciable goods the useful cannot be directly and entirely attributed to any one of the
life of which is more than one year. So what is the rule transactions, it shall be allocated proportionately on the
here? basis of the volume of sales. Provided, finally, That for a
person making sales that are zero-rated under Section
The VAT that you used to buy the capital goods can be 108(B) (6), the input taxes shall be allocated ratably
claimed as your input tax. That is the general rule. What is between his zero-rated and non-zero-rated sales
the exception? If the useful life of the capital goods
exceeds one year. In that case, you spread it over 60 The general rule is that when there is excess input VAT,
months. BUT ONLY if the value of the goods exceeds 1 the taxpayer cannot claim tax credit certificate or tax
million. refund. So what is the remedy? The only remedy for the
moment is to carry over. So when is the tax payer allowed
The next is Section 110(B): to claim a tax refund or tax credit certificate. There are only
two instances according to law:
(B) Excess Output or Input Tax. - If at the end of any
taxable quarter the output tax exceeds the input tax, the a) where the taxpayer is engaged in zero-rated or
excess shall be paid by the Vat-registered person. If the effectively zero-rated sale;
input tax exceeds the output tax, the excess shall be b) those whose VAT registration is cancelled
carried over to the succeeding quarter or quarters. What are the basic principles you have to remember when
Provided, however, That any input tax attributable to zero-
it comes to tax refund?
rated sales by a VAT-registered person may at his option
19 | P a g e
1) Refund is in the nature of a tax exemption, so When should administrative claim be done? Within two (2)
there is strict construction against the taxpayer. years after the close of the taxable quarter when the sales
And the taxpayer must be able to show that he is were made. It is not two years from the sale ha but two
entitled to such refund. years from the taxable quarter. Because you pay you VAT
2) The proper party to seek the refund for tax is the every taxable quarter. What happens after you file an
statutory taxpayer. It is the seller not the buyer. administrative claim? After filing an administrative claim,
3) The refund must be applied for by VAT registered
three things may happen:
taxpayers. This is a mandatory requirement.
Let’s go now to application. To claim for a refund of tax a) The CIR may grant;
b) The CIR may deny;
credit certificate, you must make an administrative claim in
c) The CIR may not do anything;
the appropriate BIR Office or the RDO where the business
is located. By the way find the meaning of a large taxpayer If the claim is denied you have 30 days to make an appeal
ha, Dean asks that definition: to the CTA in division. This is called now a judicial claim for
refund. If you lose in the CTA in division, then you elevate
Section 245. the matter to the CTA en banc. Let’s not discuss this in
detail as this will be for a later topic.
xxx
Anyway, the CIR upon receipt of the supporting documents
For the purpose of this Section, 'large taxpayer' means a
has 120 days to decide. What will happen if the CIR does
taxpayer who satisfies any of the following criteria;
not do anything within the period? The taxpayer may do
(1) Value-Added Tax (VAT) - Business establishment with two things:
VAT paid or payable of at least One hundred thousand
The taxpayer may opt to wait for the decision. Upon the
pesos (P100, 000) for any quarter of the preceding taxable
receipt of the denial, then he has 30 dyas to appeal
year;
The taxpayer has a 30 day period to appeal before the
(2) Excise tax - Business establishment with excise tax
CTA that begins after the 120 days given to the BIR to
paid or payable of at least One million pesos (P1, 000,000)
decide. When you go for an appeal because of the
for the preceding taxable year;
inaction, you have to make that after the 120 days. These
(3) Corporate Income Tax - Business establishment with periods are mandatory and jurisdictional. Kung ang apply a
annual income tax paid or payable of at least One million sa 110th day, then you will be denied. For this topic you
pesos (P1,000,000) for the preceding taxable year; and read the case of Mindanao II Geothermal Partnership
versus CIR (G.R. No. 193301) and the case of CIR versus
(4) Withholding tax - Business establishment with Visayas Geothermal (G.R. No. 181276), Mas
withholding tax payment or remittance of at least One magandayung second case kasi it summarizes everything
million pesos (P1,000,000) for the preceding taxable year. about this topic.
Provided, however, That the Secretary of Finance, upon Question: Sabinatinkanina we have two year to file the
recommendation of the Commissioner, may modify or add appeal. Suppose sa two years nayan, one month
to the above criteria for determining a large taxpayer after nalangmag.eexpirenayung two years. Then nag apply kasa
considering such factors as inflation, volume of business, last month nay un. Now, should you wait for the 120 day
wage and employment levels, and similar economic period for the CIR to decide, or should you make an appeal
factors. right away so that the two year period given to you will not
expire? In a Supreme Court decided case, it’s okay to file
The penalties prescribed under Section 248 of this Code the administrative claim even if the two year period is about
shall be imposed on any violation of the rules and to expire. You will always have to follow the 120 day rule.
regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner, prescribing the The two year period refers to the filing of the claim. So
place of filing of returns and payments of taxes by large when you file the claim within the two year period, that
taxpayers. period already comes to an end. You already have a
20 | P a g e
vested right to appeal later on should the CIR decision be (2) The total amount which the purchaser pays
adverse to you. What is essential is that you have filed your or is obligated to pay to the seller with the indication that
claim within the 2 year period. such amount includes the value-added tax. Provided, That:
Then you also have the case of CIR versus San Roque (a) The amount of the tax shall be known as a
(G.R. No. 187485), if you read the tax CodeSection 112 separate item in the invoice or receipt;
relating to refund of VAT then there is also Section 229 of
the Tax Code. What is the difference between these two (b) If the sale is exempt from value-added tax,
provisions? Section 229 refers to taxes incorrectly and the term "VAT-exempt sale: shall be written or printed
excessively collected by the government. Whereas, prominently on the invoice or receipt;
Section 112 specifically deals with the refund of the excess
(c) If the sale is subject to zero percent (0%)
input VAT. The reckoning period of Section 229 is the date
value-added tax, the term "zero-rated sale" shall be written
the payment of tax is wrongfully made. When you talk
or printed prominently on the invoice or receipt.
about VAT it is the close of the taxable quarter when the
sale was made. (d) If the sale involved goods, properties or
services some of which are subject to and some of which
If you are engaged in the selling of goods and properties
are VAT zero-rated or Vat exempt, the invoice or receipt
you are required to issue a VAT invoice. If you are
shall clearly indicate the break-down of the sale price
engaged in the selling of services you are required to issue
between its taxable, exempt and zero-rated components,
a VAT Official Receipt. The question is can you
and the calculation of the value-added tax on each portion
interchange them? Why is it it important to issue a VAT
of the sale shall be known on the invoice or receipt:
invoice or VAT OR? This is very important in making your
Provided, That the seller may issue separate invoices or
claim for input taxes. These are the taxes that will prove
receipts for the taxable, exempt, and zero-rated
your claim. Without any of these, you cannot bring any
components of the sale.
application for VAT refund.
What is the information contained in the VAT Invoice or The Supreme Court has already said that you have to
show these ORs and invoices to prove your right to refund.
VAT OR?
We have the case of AT&T versus CIR(G.R. No. 185969).
SEC. 113. Invoicing and Accounting Requirements for Basically, AT&T Philippines is a subsidiary of AT&T
VAT-Registered Persons. - abroad. It filed for an application for the zero rated sales
before the BIR. The BIR did not do anything about it. The
(A) Invoicing Requirements. - A VAT-registered person documents presented here is the VAT invoice and not the
shall issue: official receipts. Take note that AT&T is in the
telecommunications business; it render service.
(1) A VAT invoice for every sale, barter or
exchange of goods or properties; and From the full text:The issue here is an invoice an
acceptable substitution for an official receipt? The Supreme
(2) A VAT official receipt for every lease of Court said no.
goods or properties, and for every sale, barter or exchange
of services. Now, the significance of the difference between a sales
invoice and an official receipt as evidence for zero-rated
(B) Information Contained in the VAT Invoice or VAT transactions.
Official Receipt. - The following information shall be
indicated in the VAT invoice or VAT official receipt: This is not novel.
(1) A statement that the seller is a VAT- For emphasis, even prior to the enactment of R.A. No.
registered person, followed by his Taxpayer's Identification 9337,35 which clearly delineates the invoice and official
Number (TIN); and receipt, our Tax Code has already made the distinction.
21 | P a g e
Section 113 of the NIRC of 1997, as amended is the focal refund partakes of the nature of an exemption. Hence, the
provision, to wit: same rule of strict interpretation against the taxpayer-
claimant applies to the claim.
In a claim for tax refund or tax credit, the applicant must

SEC. 113. Invoicing and Accounting Requirements for prove not only entitlement to the grant of the claim under
VATregistered Persons.- substantive law. It must also show satisfaction of all the
documentary and evidentiary requirements for an
(A) Invoicing Requirements.- A VAT-registered person
administrative claim for a refund or tax credit.
shall, for every sale, issue an invoice or receipt. In addition
to the information required under Section 237, the following In fact, this Court has consistently held as fatal the failure
information shall be indicated in the invoice or to print the word "zero-rated" on the VAT invoices or official
receipt:(Emphasis supplied) receipts in claims for a refund or credit of input VAT on
zero-rated sales, even if the claims were made prior to the
x xxx effectivity of R.A. 9337.20 Clearly then, the present Petition
must be denied.
Although it appears under the above-quoted provision that
there is no clear distinction on the evidentiary value of an
(this next part sir just read)
invoice or official receipt, it is worthy to note that the said
provision is a general provision which covers all sales of a
VAT registered person, whether sale of goods or services. SEC. 114. Return and Payment of Value-Added Tax. -
It does not necessarily follow that the legislature intended
to use the same interchangeably. The Court therefore (A) In General. - Every person liable to pay the value-
cannot conclude that the general provision of Section 113 added tax imposed under this Title shall file a quarterly
of the NIRC of 1997, as amended, intended that the invoice return of the amount of his gross sales or receipts within
and official receipt can beused for either sale of goods or twenty-five (25) days following the close of each taxable
services, because there are specific provisions of the Tax quarter prescribed for each taxpayer: Provided, however,
Code which clearly delineates the difference between the That VAT-registered persons shall pay the value-added tax
two transactions. on a monthly basis.
What is the difference between them? To prove the sale of Any person, whose registration has been cancelled in
goods and services, the best proof is you invoice. But to accordance with Section 236, shall file a return and pay the
prove the purchase of goods and services, the best proof is tax due thereon within twenty-five (25) days from the date
official receipt. Anu man prinesentng AT&T? Yung invoice. of cancellation of registration: Provided, That only one
consolidated return shall be filed by the taxpayer for his
There is also the case of Western Mindanao Power principal place of business or head office and all branches.
Corporation versus CIR (G.R. No. 181136), the CIR
denied the claim for refund for the following grounds: (B) Where to File the Return and Pay the Tax. - Except
as the Commissioner otherwise permits, the return shall be
a) The VAT invoice do not reflect the zero rated filed with and the tax paid to an authorized agent bank,
transaction in the period applied for as refund Revenue Collection Officer or duly authorized city or
b) The VAT invoice did not contain the phrase zero municipal Treasurer in the Philippines located within the
rated
revenue district where the taxpayer is registered or
Sabini Western Mindanao, grabenamani.denyaming required to register.
application just because of some missing details?
(C) Withholding of Value-added Tax. - The Government
From the full text:Being a derogation of the sovereign or any of its political subdivisions, instrumentalities or
authority, a statute granting tax exemption is strictly agencies, including government-owned or -controlled
construed against the person or entity claiming the corporations (GOCCs) shall, before making payment on
exemption. When based on such statute, a claim for tax account of each purchase of goods and services which are
22 | P a g e
f are subject to the value-added tax imposed in Sections exhibitions 10%.

106 and 108 of this Code, deduct and withhold the value- Professional
added tax imposed in Sections 106 and 108 of this Code, basketball is also
deduct and withhold a final value-added tax at the rate of 10%.
As to It is based on GSP or gross
five percent (5%) of the gross payment thereof: Provided,
tax Gross selling value in money or
That the payment for lease or use of properties or property base price(GSP) or gross receipts
rights to nonresident owners shall be subject to ten percent gross value in
(10%) [78] withholding tax at the time of payment. For money for goods
purposes of this Section, the payor or person in control of and Gross
the payment shall be considered as the withholding agent. receipts for
[79] services.
The value-added tax withheld under this Section shall be

Since both are business taxes, is it possible for one
remitted within ten (10) days following the end of the month
TRANSACTION to be subject to both OPT and VAT?
the withholding was made.
NO, when the transaction is already subject to OPT, it is no
longer subject to VAT anymore and vice versa. Both of
them do not go together in a particular transaction.
January 31, 2017 Is it possible for a TAXPAYER to be liable for OPT and
(By: Lyzzaik Laguialam) VAT?
Other Percentage Tax Yes, it is entirely possible in these two instances. First,
when he is engaged in different lines of businesses. For
OPT is an excise tax. It is levied because you are example, one is engaged in the selling of fuel and at the
exercising a privilege, which is doing business. This is same time engaged in the domestic transport of persons by
means that it is also a business tax. land. The latter business is subject to OPT while the former
is to VAT. The taxpayer is engaged in a mixed transaction.
How is it different from VAT? The second instance involves a non-VAT registered
person. It may be that he has not reached the VAT
OPT VAT
threshold or he is not engaged in the business which is not
As to It is a business It is not only a
theory tax. business tax but really covered by OPT or VAT but he issues a VAT invoice.
also a Since a VAT invoice is supposedly issued by a VAT-
consumption tax. registered person only, a person who is not such but issues
As to When it comes to It can be 12% or the same will be required to pay the OPT due from that
rates percentage tax zero-rated. business and for the VAT that he billed to his client plus
the general rule surcharges and penalties.
will always be the
3%. But it really What is the tax base for OPT?
entirely depends
on the It is the GSP of the goods sold or the gross receipts for the
transaction. For
example when sale of service. Gross receipts means the entire receipts
you go to the without any deduction or exclusion as the term is generally
amusement tax or commonly understood.
section of
percentage taxes, The case in point here is Chinabank Corp v CA, GR.
iba-ibayan. 146749 (2003).
Cabarets, night
clubs that’s 18%. This case involves a gross receipts tax imposed on banks.
Boxing Banks have other outside investments like deposits in other
23 | P a g e
banks in which it will earn interest income. Such interest SEC. 125. Amusement Taxes. - There shall be collected
income is subject to 20% final withholding tax. In from the proprietor, lessee or operator of cockpits,
computing the gross receipts, will the withheld tax be cabarets, night or day clubs, boxing exhibitions,
included or excluded? Chinabank contended that it should professional basketball games, Jai-Alai and racetracks
Xxx
be excluded since it did not receive it and ultimately the
government benefited. The SC saidGross receipts means
the entire receipts without any deduction or exclusion. The SEC. 117. Percentage Tax on Domestic Carriers and
FWT held by the other bank was considered constructively Keepers of Garages. - Cars for rent or hire driven by the
received by Chinabank. lessee, transportation contractors, including persons who
transport passengers for hire, and other domestic carriers
From the FT: by land, for the transport of passengers [except owners of
In the same manner, the amount of the final withholding tax bancas] and owners of animal-drawn two wheeled vehicle),
on interest income should not be deducted from the bank’s and keepers of garages shall pay a tax equivalent to three
interest income for purposes of the gross receipts tax. The percent (3%) of their quarterly gross receipts.
final withholding tax on interest, like the creditable The gross receipts of common carriers derived from their
withholding tax on rentals, comes from the bank’s income incoming and outgoing freight shall not be subjected to the
and is money the bank owns that is used to pay the bank’s local taxes imposed under Republic Act No. 7160,
tax liability. The final withholding tax and the creditable otherwise known as the Local Government Code of 1991.
withholding tax constitute payment by the bank to In computing the percentage tax provided in this Section,
extinguish a tax obligation to the government. The bank the following shall be considered the minimum quarterly
can only pay with money it owns, or with money it is gross receipts in each particular case:
authorized to spend. In either case, such money comes Jeepney for hire -
from the bank’s revenues or receipts, and certainly not 1. Manila and other Cities
from the government’s coffers. P 2,400
2. Provincial
1,200
SEC. 116.Tax on Persons Exempt from Value-Added Public utility bus -
Tax (VAT). - Any person whose sales or receipts are Not exceeding 30 passengers
exempt under Section 109(V) of this Code from the 3,600
payment of value-added tax and who is not a VAT- Exceeding 30 but not exceeding 50 passengers
registered person shall pay a tax equivalent to three 6,000
percent (3%) of his gross quarterly sales or receipts: Exceeding 50 passengers
Provided, That cooperatives shall be exempt from the three 7,200
percent (3%) gross receipts tax herein imposed. Taxis -
1. Manila and other Cities
3,600
If you read the provision, not all VAT-exempt transactions 2. Provincial
2,400
are subject to OPT. For example, the sale of agricultural
Car for hire (with chauffer)
food products in its original state is a VAT-exempt 3,000
transaction yet it is not covered by OPT. Only Section Car for hire (without chauffer)
109(V) is covered by the OPT which is the services of 1,800
banks, non-bank financial intermediaries performing quasi-
banking functions and other non-bank financial
intermediaries. As long as the VAT-exempt transaction or The transactions covered here are cars for rent or hire
any other transaction is not found in the OPT provisions of driven by the lessee, transportation contractors, including
the NIRC then it has no obligation to pay for the OPT. persons who transport passengers for hire like vans, and
Another example is the tax for cinema operators. They are other domestic carriers by land, for the transport of
subject to the Amusement Tax under the Local passengers (except owners of bancas and owners of
Government Code but they are not subject to VAT and not animal-drawn two wheeled vehicle), and keepers of
even to OPT. The only amusement activities subject to garages.
OPT is found in:
24 | P a g e
Domestic carrier by land for the transport of passengers is Philippines. That is why they are called special
always subject to OPT regardless of the amount of the corporations and they have different tax treatment.
receipts and if for the transport of goods and cargoes,
they are subject to VAT if VAT-registered; or even if not It refers to the amount of gross revenue derived from
registered, they exceeded the VAT threshold of carriage of persons, excess baggage, cargo, and mail
P1,919,500. originating from the Philippines in a continuous and
uninterrupted flight, irrespective of the place of sale or
What if Domestic Carriers by air like PAL and CebuPac issue and the place of payment of the ticket or passage
or by sea? document.
If PH to PH or within the PH only, it is subject to VAT. If PH The person subject to OPT is an online international carrier
to abroad, it is subject to zero-rated VAT. and the covered transaction here is the transport of cargo
by air or by sea.
What if the animal-drawn vehicle has four wheels? Is it
still subject to OPT or part of the exception? What if it is transport of persons by an international
carrier?
It is subject to OPT.
If PH to PH or within the PH only, it is subject to VAT. If PH
Atty. Donalvo: The exception provides that it should be to abroad, it is subject to zero-rated VAT.
animal-drawn two wheeled vehicle. It should also be
excluded but subject to VAT since it is a service. I think I As to the tax treatment of an online international carrier for
should write something about statutory construction of tax the purpose of income taxation, it is considered as a
laws and exemptions. resident foreign corporation subject to the regular corporate
income tax. For offline international carriers, they are
What if the taxpayer is an International Carrier? subject to income tax based on their GPB.
SEC. 118 Percentage Tax on International Carriers. - SEC. 119. Tax on Franchises. - Any provision of general
or special law to the contrary notwithstanding, there shall
(A) International air carriers doing; business in the be levied, assessed and collected in respect to all
Philippines on their gross receipts derived from transport of franchises on radio and/or television broadcasting
cargo from the Philippines to another country shall pay a companies whose annual gross receipts of the preceding
tax of three percent (3%) of their quarterly gross receipts. year do not exceed Ten million pesos (P10,000.00),
subject to Section 236 of this Code, a tax of three percent
(B) International shipping carriers doing business in the (3%) and on gas and water utilities, a tax of two percent
Philippines on their gross receipts derived from transport of (2%) on the gross receipts derived from the business
cargo from the Philippines to another country shall pay a covered by the law granting the franchise: Provided,
tax equivalent to three percent (3%) of their quarterly gross however, That radio and television broadcasting
receipts. companies referred to in this Section shall have an option
to be registered as a value-added taxpayer and pay the tax
due thereon: Provided, further, That once the option is
What is an international carrier subject to Gross exercised, said option shall not be irrevocable.
Receipts Tax (GRT)?
The grantee shall file the return with, and pay the tax due
This refers to foreign-registered international carriers or thereon to the Commissioner or his duly authorized
carriers of foreign registry and has landing rights in the representative, in accordance with the provisions of
Philippines. It is an onlineforeign international carrier. Section 128 of this Code, and the return shall be subject to
audit by the Bureau of Internal Revenue, any provision of
How do you compute for the Gross Receipts? any existing law to the contrary notwithstanding.
The gross receipts here are computed like the Gross

Philippine Billings (GPB) in income taxation. The GBP in As a general rule, receipts of franchise grantees are
income taxation refers to international carriers but offline subject to VAT. The exceptions are when it is a franchise
carriers since they do not have landing rights in the on radio/television and gas and water utilities provided they
25 | P a g e
are not VAT-registered persons because they have the persons liable for this tax are the persons who avails the
option to register. If they exercise the option to register, it is service, who makes the overseas communication. The rate
irrevocable forever. The rate is 3% for radio/television with is 10%. The service providers will charge it to the persons
a threshold of P10,000,000 and 2% for gas and water who avails the service and will be the one to remit it to the
utilities. BIR.
SEC. 120. Tax on Overseas Dispatch, Message or Who are exempt from this tax?
Conversation Originating from the Philippines. -
1. The Government on the basis of the principle that
(A) Persons Liable. - There shall be collected upon every it cannot tax itself
overseas dispatch, message or conversation transmitted 2. Diplomatic Services on the basis of international
from the Philippines by telephone, telegraph, telewriter comity
exchange, wireless and other communication equipment
service, a tax of ten percent (10%) on the amount paid for 3. International Organizations on the basis of
such services. The tax imposed in this Section shall be international comity
payable by the person paying for the services rendered 4. News Services whether paper, radio or television
and shall be paid to the person rendering the services who
is required to collect and pay the tax within twenty (20) SEC. 127. Tax on Sale, Barter or Exchange of Shares of
days after the end of each quarter. Stock Listed and Traded through the Local Stock
Exchange or through Initial Public Offering. -
(B) Exemptions. - The tax imposed by this Section shall
not apply to: (A) Tax on Sale, Barter or Exchange of Shares of
Stock Listed and Traded through the Local
(1) Government. - Amounts paid for messages transmitted Stock Exchange.- There shall be levied,
by the Government of the Republic of the Philippines or assessed and collected on every sale, barter,
any of its political subdivisions or instrumentalities; exchange, or other disposition of shares of stock
listed and traded through the local stock
(2) Diplomatic Services. - Amounts paid for messages exchange other than the sale by a dealer in
transmitted by any embassy and consular offices of a securities, a tax at the rate of one-half of one
foreign government; percent (1/2 of 1%) of the gross selling price or
gross value in money of the shares of stock sold,
(3) International Organizations. - Amounts paid for bartered, exchanged or otherwise disposed
messages transmitted by a public international organization which shall be paid by the seller or transferor.
or any of its agencies based in the Philippines enjoying xxx
privileges, exemptions and immunities which the
Government of the Philippines is committed to recognize
pursuant to an international agreement; and This provision does not apply to dealers in securities
because they may be subjected to VAT or OPT. The Stock
(4) News Services. - Amounts paid for messages from any Transaction Tax is taxed at a rate of ½ of 1% based on the
newspaper, press association, radio or television
gross selling price or gross value in money of the shares of
newspaper, broadcasting agency, or newstickers services,
to any other newspaper, press association, radio or stock sold, bartered, exchanged or otherwise disposed in
television newspaper broadcasting agency, or newsticker the local stock exchange. If the stocks are not traded or
service or to a bona fide correspondent, which messages listed in the stock exchange the sale or disposition is
deal exclusively with the collection of news items for, or the subject to the capital gains tax of 5% and 10% based on
dissemination of news item through, public press, radio or the net capital gains.
television broadcasting or a newsticker service furnishing a
general news service similar to that of the public press.
Let us call this the Overseas Communications Tax (OCT).

This is an exception to the rule that a business tax is
imposed upon persons engaged in business. The law
applies not to the service providers but to persons availing
the service whether for business or personal purposes. The
26 | P a g e
February 18, 2017 Although this is a Business Tax, this is different from
(By: Jing Lomondot) Percentage Taxes. Percentages taxes, these are taxes
imposed on business in general, specific type of
Review: When you talk about VAT, it would be an excise businesses. But when you talk about excise taxes, this is
tax basically business taxes. You generally impose them still imposed on certain businesses but it involves the
when you are conducting business with the exception of specific articles already. If you are engaged in these kind of
importation. When you import something, whether or not business or in these kind of articles, then most likely than
it’s related to your business, it will be subjected to VAT. not you will have to pay your Excise Taxes.
Right now you should be able to determine what are those
transactions which are subjected to VAT, what are those Excise tax, aside from it being a Business Tax, it also
transactions which are subjected to zero-rated and of applies to the Destination Principle. This will be imposed
course what are those VAT-exempt transactions. You must only on sales, or consumptions, or any dispositions which
be able to distinguish what is the difference between VAT are supposed to here in the Philippines.
and zero-rated transactions. Also, with respect to the Other
Percentage Taxes (OPT), you know VAT and percentage While it is true that excise taxes are business taxes, these
taxes do not go together. Take note that the taxpayer may are privilege taxes, right to conduct business. Cebu
be held liable on the VAT and OPT at the same time Portland Cement vs. CIR provided for an exception.
depending on the type of business he is in but with respect When you talk about the business of extracting minerals,
to a particular transaction, if one transaction is already ad valorem tax on the mineral products, it is not a tax on
subject to OPT, it will no longer be subjected to VAT and the minerals but on the privilege of severing or extracting
vice versa. the same from the earth.
We will be discussing about the third type of business tax, What are goods which are subject to Excise Taxes?
the Excise Tax. If you have read the entirety of the Excise Pag-sinabinatingexcise taxes, there are specific goods by
Tax provisions, it’s just rates and what are the subjects of which the law imposes excise taxes when you are engaged
the Excise Tax. Right now, I will just discuss the basic in that kind of business. So generally there are two things:
principles of Excise Taxes.
1. Certain goods manufactured or produced in the
Section 129. Goods subject to Excise Taxes. - Excise Philippines destined for Philippine consumption
taxes apply to goods manufactured or produced in the 2. Certain goods imported here in the Philippines
Philippines for domestic sales or consumption or for any
other disposition and to things imported. The excise tax But specifically, the goods are as follows:
imposed herein shall be in addition to the value-added tax 1. Alcohol products
imposed under Title IV. 2. Tobacco products
3. Petroleum products
For purposes of this Title, excise taxes herein imposed and 4. Automobiles
based on weight or volume capacity or any other physical 5. Non-essential goods
unit of measurement shall be referred to as 'specific tax' 6. Mineral products
and an excise tax herein imposed and based on selling
price or other specified value of the good shall be referred Basic features of an Excise Tax:
to as 'ad valorem tax.' 1. They are imposed only on specific products
and not on all products.
What is an Excise Tax?
Take note that when we talk about the excise tax in the Iyonlanganimlang, alcohol, tobacco, petroleum, non-
context of business tax, this is different from our basic essentials, minerals, automobiles. When you are engaged
principles ha. Kasepag-sinabinatingexcise tax in general, on those kind of businesses, you will have to pay excise
these are the taxes that we impose in the exercise of a tax.
privilege.
But in the context of business taxes, medyorefined Q: What if I’m already a VAT-registered person and I am
angdefinition. Excise tax here refersto the imposition that engaged in selling or manufacturing of automobiles, do I
applies to goods manufactured or produced in the have to pay the Excise Tax?
Philippines for domestic sales or consumption or for any A: Yes, of course you will have to pay the excise tax.
other disposition including the importation. Excise tax
imposed on the disposition of certain articles or goods for Q: What if hindi pa akoumabotsathreshold, 1.9 million
Philippine consumption. langangakingincome for the gross tax of the year and of
27 | P a g e
course I want to avail of the lower tax rate. Will I still be buyer it is no longer a tax on his part but is already part of
liable for the excise tax? the purchase price. But take note, walatayonginput taxes
A: Yes, you will still be liable for the excise tax. when it comes to excise taxes. Pretty much the same with
percentages taxes, we don’t have any input taxes. The
So what is the conclusion here? Earlier we said, once the concept of Input Tax or Input Tax Credit is exclusive in VAT
person is already liable for VAT, you shall no longer be transactions.
liable for percentage taxes. But when it comes to Excise
Tax, it is possible that VAT and Excise Tax go together or 6. Excise taxes may either be an ad valorem tax
the OPT and the Excise Tax will go together. or a specific tax.
Q: Is there double taxation for that matter? How do you define those? There’s a technical definition
A: I don’t think so, kulangsiyasarequirements. I think the given by the law. It’s given by the codal itself but parahindi
subjects of taxation are different. kayo mawala, pagsinabingAd Valorem, it’s based on the
value of the goods. Pagsinabinamannatingspecific tax, it’s
2. Excise taxes are generally imposed on based on weight or volume capacity or other physical unit
products which are for domestic sale or of measurement,
consumption and in the course of business,
as well as in importation. Section 130. Filing of Return and Payment of Excise Tax
on Domestic Products. -
So the principle is basically the same with VAT. When you
say goods for domestic transactions, if the goods that you (A) Persons Liable to File a Return, Filing of Return on
sell are included in the six (6)items which we mentioned Removal and Payment of Tax. -
earlier then you will have to be liable for the excise taxes.
But once you export it, I think there is no excise tax to be
(1) Persons Liable to File a Return. - Every person
paid anymore. When it’s on importation, whether or not it’s
liable to pay excise tax imposed under this Title
related to your business, you will have to pay your excise
shall file a separate return for each place of
tax. As you learn later, if you will read the codal, one of the
production setting forth, among others the
requirements before the goods imported will be taken out
description and quantity or volume of products to
from the Customs house is the payment of the excise taxes
be removed, the applicable tax base and the
along with the other taxes and charges due to the
amount of tax due thereon: Provided, however,
government.
That in the case of indigenous petroleum, natural
3. They are generally payable prior to their
gas or liquefied natural gas, the excise tax shall be
removal from their place of production or
paid by the first buyer, purchaser or transferee for
from customs duty.
local sale, barter or transfer, while the excise tax on
exported products shall be paid by the owner,
One of the requirements is that
lessee, concessionaire or operator of the mining
kailanganmomunabayaranyongexcise tax before you will
claim.
be able to transport the products that you have produced
from one place to another.
So kungmeronkangdistillery, before they will withdraw the Should domestic products be removed from the
goods paradistribute nila, kailangannilamagbayadngexcise place of production without the payment of the tax,
tax muna. Otherwise, the taxpayer will be penalized and the owner or person having possession thereof
there will be sanctions that you will have suffer if you fail to shall be liable for the tax due thereon.
pay the Excise Taxes.
(2) Time for Filing of Return and Payment of the
4. Excise taxes are generally payable by the Tax. - Unless otherwise specifically allowed, the
manufacturer, producer or the importer. return shall be filed and the excise tax paid by the
manufacturer or producer before removal of
Excises taxes are directly levied upon the manufacturer or domestic products from place of production:
the importer of the taxable goods. Provided, That the tax excise on locally
manufactured petroleum products and indigenous
5. Excise taxes are also in the nature of indirect petroleum/levied under Sections 148 and
taxes. 151(A)(4), respectively, of this Title shall be paid
within ten (10) days from the date of removal of
Meaning, the burden of taxation can be shifted to some such products for the period from January 1, 1998
other person. Pretty much like VAT, on the part of the to June 30, 1998; within five (5) days from the date
28 | P a g e
of removal of such products for the period from July over the locality where the same are mined,
1, 1998 to December 31, 1998; and, before extracted or quarried: Provided, however,
removal from the place of production of such That for metallic minerals processed abroad,
products from January 1, 1999 and thereafter: the return shall be filed and the tax due
Provided, further, That the excise tax on thereon paid to the Revenue District Office
nonmetallic mineral or mineral products, or quarry having jurisdiction over the locality where the
resources shall be due and payable upon removal same are mined, extracted or quarried.
of such products from the locality where mined or
extracted, but with respect to the excise tax on (B) Determination of Gross Selling Price of Goods Subject
locally produced or extracted metallic mineral or to Ad Valorem Tax. - Unless otherwise provided, the price,
mineral products, the person liable shall file a excluding the value-added tax, at which the goods are sold
return and pay the tax within fifteen (15) days after at wholesale in the place of production or through their
the end of the calendar quarter when such products sales agents to the public shall constitute the gross selling
were removed subject to such conditions as may price. If the manufacturer also sells or allows such goods to
be prescribed by rules and regulations to be be sold at wholesale in another establishment of which he
promulgated by the Secretary of Finance, upon is the owner or in the profits of which he has an interest,
recommendation of the Commissioner. For this the wholesale price in such establishment shall constitute
purpose, the taxpayer shall file a bond in an the gross selling price. Should such price be less than the
amount which approximates the amount of excise cost of manufacture plus expenses incurred until the goods
tax due on the removals for the said quarter. The are finally sold, then a proportionate margin of profit, not
foregoing rules notwithstanding, for imported less than ten percent (10%) of such manufacturing cost
mineral or mineral products, whether metallic or and expenses, shall be added to constitute the gross
nonmetallic, the excise tax due thereon shall be selling price.
paid before their removal from customs custody.
(C) Manufacturer's or Producer's Sworn Statement. - Every
(3) Place of Filing of Return and Payment of the manufacturer or producer of goods or products subject to
Tax. - Except as the Commissioner otherwise excise taxes shall file with the Commissioner on the date or
permits, the return shall be filed with and the tax dates designated by the latter, and as often as may be
paid to any authorized agent bank or Revenue required, a sworn statement showing, among other
Collection Officer, or duly authorized City or information, the different goods or products manufactured
Municipal Treasurer in the Philippines. or produced and their corresponding gross selling price or
market value, together with the cost of manufacture or
(4) Exceptions. - The Secretary of Finance, upon production plus expenses incurred or to be incurred until
recommendation of the Commissioner may, by the goods or products are finally sold.
rules and regulations, prescribe:
(D) Credit for Excise tax on Goods Actually Exported. -
(a) The time for filing the return at intervals When goods locally produced or manufactured are
other than the time prescribed in the removed and actually exported without returning to the
preceding paragraphs for a particular class or Philippines, whether so exported in their original state or as
classes of taxpayers after considering factors ingredients or parts of any manufactured goods or
such as volume of removals, adequate products, any excise tax paid thereon shall be credited or
measures of security and such other relevant refunded upon submission of the proof of actual
information required to be submitted under exportation and upon receipt of the corresponding foreign
the pertinent provisions of this Code; and exchange payment: Provided, That the excise tax on
mineral products, except coal and coke, imposed under
(b) The manner and time of payment of Section 151 shall not be creditable or refundable even if
excise taxes other than as herein prescribed, the mineral products are actually exported.
under a tax prepayment, advance deposit or
similar schemes. In the case of locally If you read this provision, you can see that excise taxes
produced of extracted minerals and mineral also apply the “Pay as you File” system.
products or quarry resources where the mine
site or place of extraction is not the same as Q: Who are taxpayers liable to file and pay for the Excise
the place of processing or production, the Tax?
return shall be filed with and the tax paid to A: By this matter, let us distinguish the type of articles that
the Revenue District Office having jurisdiction are being produced or manufactured by the taxpayer. You
29 | P a g e
have the (1) domestic articles and you have the (2) Q: What about the place of filing the payment of excise
imported articles. tax?
(1) For those domestic articles, the excise taxes are
collected from the manufacturers or producers. A: You have Section 130, par. A, no. 3, the return shall be
(2) For imported articles, the excise taxes are filed with and the tax paid to any authorized agent bank or
collected from the importer or the owner of the Revenue Collection Officer, or duly authorized City or
imported articles. Usually, the importers, they are the Municipal Treasurer in the Philippines.
consignees.
Q: What is the tax base of the Excise Tax?
If you want to be specific in the filing of return and payment A: Normally the tax base is the Gross Selling Price. But
of tax, you have Section 130, par.A, no. 2. how will you get the Gross Selling Price? If you read the
provision, Section 130, par. B, the Gross Selling Price,for
This is quite a lengthy provision but we will just have to purposes of the excise tax, as a general rule, is the
dissectthis provision. The first question that you will have to wholesale price excluding the VAT. This is whether the
ask is this, goods are sold at production site or probably through sales
agent or probably through other establishments owned or
Q: When should an excise tax return be filed and when operated by the producer or the manufacturer or in other
should it be paid? entities where the producer or manufacturer has an interest
A: Apart from the application of “Pay as you File” system, in.
the return is filed and the tax is paid before removal of the
domestic product from the place of production. Before the
Q: What about the price is less than the cost of producing
taxpayer will be able to remove the product from its
that particular product such as business tax?
distillery or whatsoever, you will have to pay the excises
taxes due on those articles.
A: Should such price be less than the cost of manufacture
If you read the entire provision, Section 130, par. A, no. 2, plus expenses incurred until the goods are finally sold, then
there would seem to be a difference when it comes to the a proportionate margin of profit, not less than ten percent
tax return filing and the excise tax payment for mineral (10%) of such manufacturing cost and expenses, shall be
products. Dalawangtypes man angmineral products added to constitute the gross selling price.
according to the NIRC. You have the (1) Non-metallic and
(2) Metallic products. So meaning it’s now the government who will make buot-
buoton how much is the Gross Selling Price if the taxpayer
(1) For the nonmetallic mineral or mineral products, will sell the goods or excisable products at less than its
or quarry resources (balas, bato) the excise taxes cost. This is to avoid those people who are tikasan,
shall be due and payable upon removal of such magbaligyadawsilaugmurakaylugisila, ginatagonilaba. So
products from the locality where it is mined or as a form of protection on the part of the government, they
extracted. One of the requirements before they will enacted this provision. Pretty much like the Minimum
be able to extract those nonmetallic mineral Corporate Income Tax. What is the rationale behind it?
resources is they will have to pay their excise tax. This is to avoid those tax evaders as a form of measure on
the part of the government to protect itself from tax
(2) For the locally produced or extracted metallic evaders.
mineral or mineral products, the person liable shall
file a return and pay the tax within fifteen (15) days Let’s go now to the imported articles, matters pertaining to
after the end of the calendar quarter when such imported articles. They are found in Section 131.
products were also removed. One of the
requirements also when you talk about locally Section 131. Payment of Excise Taxes on Importer
produced or extracted metallic mineral or mineral Articles. -
products is that they will have to file a bond before
the BIR and the bond is in such amount which (A) Persons Liable. - Excise taxes on imported
approximates the amount of excise taxes due for articles shall be paid by the owner or importer to
such metallic mineral products. the Customs Officers, conformably with the
regulations of the Department of Finance and
Q: What about importation? before the release of such articles from the
A: The excise taxes shall be paid before the product shall customs house, or by the person who is found in
be removed from the Customs. possession of articles which are exempt from
excise taxes other than those legally entitled to
30 | P a g e
exemption. accordance with the rules and regulations to be

promulgated by the Secretary of Finance, upon
In the case of tax-free articles brought or recommendation of the Commissioner of
imported into the Philippines by persons, entitles, Customs and Internal Revenue, upon
or agencies exempt from tax which are consultation with the Secretary of Tourism and
subsequently sold, transferred or exchanged in the General manager of the Philippine Tourism
the Philippines to non-exempt persons or entitles, Authority.
the purchasers or recipients shall be considered
the importers thereof, and shall be liable for the The tax due on any such goods, products,
duty and internal revenue tax due on such machinery, equipment or other similar articles
importation. shall constitute a lien on the article itself, and
such lien shall be superior to all other charges or
The provision of any special or general law to the liens, irrespective of the possessor thereof.
contrary notwithstanding, the importation of
cigars and cigarettes, distilled spirits and wines (B) Rate and Basis of the Excise Tax on
into the Philippines, even if destined for tax and Imported Articles. - Unless otherwise specified
duty free shops, shall be subject to all applicable imported articles shall be subject to the same
taxes, duties, charges, including excise taxes rates and basis of excise taxes applicable to
due thereon: Provided, however, That this shall locally manufactured articles.
not apply to cigars and cigarettes, distilled spirits
and wines brought directly into the duly chartered
or legislated freeports of the Subic Special It is another long provision but we will just discuss a portion
Economic and Freeport Zone, crated under of this.
Republic Act No. 7227; the Cagayan Special
Economic Zone and Freeport, created under Q: Who pays the excise taxes for the imported articles?
Republic Act No. 7922; and the Zamboanga City A: Let’s be specific now.Sabinatinpagimported articles,
Special Economic Zone, created under Republic syempreangimporter normally. Under Section 131, there
Act No. 7903, and are not transshipped to any are at least 3 personalities involved:
other port in the Philippines: Provided, further,
That importations of cigars and cigarettes, 1. The owner or the importer
distilled spirits and wines by a government-
owned and operated duty-free shop, like the of course you will have to pay it before the products are
Duty-Free Philippines (DFP), shall be exempted released from the Customs house.
from all applicable taxes, duties, charges,
including excise tax due thereon: Provided, still Numbers 2 and no. 3 pertains to articles which are
further, That if such articles directly imported by a “deemed imported” What are these?
government-owned and operated duty-free shop
like the Duty-Free Philippines, shall be labelled 2. By the person who is found in possession of
'tax and duty-free' and 'not for resale': Provided, articles which are exempt from excise taxes
still further, That is such articles brought into the other than those legally entitled to exemption.
duly chartered or legislated freeports under
Republic Acts No. 7227, 7922 and 7903 are 3. In the case of tax-free articles brought or
subsequently introduced into the Philippine imported into the Philippines by persons,
customs territory, then such articles shall, upon entitles, or agencies exempt from tax which
such introduction, be deemed imported into the are subsequently sold, transferred or
Philippines and shall be subject to all imposts exchanged in the Philippines to non-exempt
and excise taxes provided herein and other persons or entitles
statutes: Provided, finally, That the removal and
transfer of tax and duty-free goods, products, One example that Dean used under this provision is this:
machinery, equipment and other similar articles,
from one freeport to another freeport, shall not be Mgaconsul,kanangsaIndonesian Consulate. Di
deemed an introduction into the Philippine bamgaconsul-general nilasometimes they will get their car
customs territory. from their home country and bring it to the Philippines for
their own personal use. Necessarily, to bring that product
Articles consfiscated shall be disposed of in here they will have to import it but because of the principle
31 | P a g e
of international comity, the sovereign cannot tax another 2. The articles are for use in the treatment of
sovereign, when they import it, it’s tax free. tobacco leaf to be used in the manufacture of
cigars and cigarettes
But sometimesnamanlumanasasakyan, they would buy a
new car. Usually
binebentanilayongkanilangsasakyannainimport. What Section 134. Domestic Denatured Alcohol. - Domestic
happens then? When they sell that car to some other alcohol of not less than one hundred eighty degrees (180)
person, that person, the buyer, will have to pay the excise proof (ninety percent (90%) absolute alcohol) shall, when
taxes along with other import charges, etc. because suitably denatured and rendered unfit for oral intake, be
transaction is deemed to be an importation. That is the exempt from the excise tax prescribed in Section 141:
application of this tax-free articles brought or imported but Provided, however, That such denatured alcohol shall be
are subsequently sold to other persons who are non- subject to tax under Section 106(A) of this Code: Provided,
exempt from taxes. further, That if such alcohol is to be used for motive power,
it shall be taxed under Section 148(d) of this Code:
Provisions which are important for this excise tax are the Provided, finally, That any alcohol, previously rendered
EXEMPTION OR CONDITIONAL TAX-FREE REMOVAL unfit for oral intake after denaturing but subsequently
OF CERTAIN ARTICLES rendered fit or oral intake after undergoing fermentation,
dilution, purification, mixture or any other similar process
The taxpayer may remove these excisable articles from shall be taxed under Section 141 of this Code and such tax
their place of production and yet it is tax-free or there is no shall be paid by the person in possession of such
tax implication or at least they will have to comply certain reprocessed spirits.
provisions for the removal to be exempt from excise tax.
I usually term this as “alcohol which is unfit for oral
Those tax-free removal are laid down in Sections 133 to consumption”.
140 of your NIRC. You just have to read them and we will
just discuss a few. Requisites:
1. It’s a withdrawal of domestic alcohol of not less

than 180 degrees proof, meaning 90% absolute
Section 133. Removal of Wines and distilled Spirits for alcohol
Treatment of Tobacco Leaf. - Upon issuance of a permit 2. The alcohol must be denatured and rendered
from the Commissioner and subject to the rules and unfit for oral intake
regulations prescribed by the Secretary of Finance, 3. It must not be used for motive power
manufacturers of cigars and cigarettes may withdraw from
bond, free of excise local and imported wines and distilled Pagsinabinatingmotive power, it pertains to motor vehicles.
spirits in specific quantities and grades for use in the You will not use this alcohol for purposes of petroleum
treatment of tobacco leaf to b used in the manufacture of production.
cigars and cigarettes; but such wines and distilled spirits
must first be suitably denatured. Q: What will happen if you will use this alcohol, before you
will withdraw this alcohol, for purposes of petroleum
Requisites: production?
1. Those wines and distilled spirits in specific A: Then it would be taxed as if it’s under the petroleum
quantities and grades products under Section 148.
Q: What are those specific quantities and grades? Section 135. Petroleum Products Sold to International
Carriers and Exempt Entities or Agencies. - Petroleum
products sold to the following are exempt from excise tax:
A: It’s provided in Revenue Regulations of the BIR. We will
not discuss the details of that because
sobrangdaminiyanand all numbers, it doesn’t make sense (a) International carriers of Philippine or foreign
anymore. Bastaangalamnatin, there are specific quantities registry on their use or consumption outside the
and grades that will be removed at the production site. Philippines: Provided, That the petroleum
products sold to these international carriers shall
be stored in a bonded storage tank and may be
disposed of only in accordance with the rules and
32 | P a g e
regulations to be prescribed by the Secretary of levied, collected and paid for, and in respect of the
Finance, upon recommendation of the transaction so had or accomplished, the corresponding
Commissioner; documentary stamp taxes prescribed in the following
Sections of this Title, by the person making, signing,
(b) Exempt entities or agencies covered by tax issuing, accepting, or transferring the same wherever the
treaties, conventions and other international document is made, signed, issued, accepted or transferred
agreements for their use of consumption: when the obligation or right arises from Philippine sources
Provided, however, That the country of said or the property is situated in the Philippines, and the same
foreign international carrier or exempt entities or time such act is done or transaction had: Provided, That
agencies exempts from similar taxes petroleum whenever one party to the taxable document enjoys
products sold to Philippine carriers, entities or exemption from the tax herein imposed, the other party
agencies; and who is not exempt shall be the one directly liable for the
tax.
(c) Entities which are by law exempt from direct
and indirect taxes. What is DST?
Tax on the documents, instruments, loan agreements and

Take note that not all withdrawal of petroleum products
papers, evidence in the acceptance, assignments, sale or
from the depot are exempt from excise taxes. They are
transfer of an obligation, right or property incident thereto.
only exempt if the purpose of the withdrawal is to sell those
Briefly stated, if you follow this definition, DST is a tax on
products to international carriers and exempt entities or
these documents or instruments that establish or transfer a
agencies. So there are three entities who must be the
right or an obligation. That’s a basic definition.
buyers of these petroleum products:
Q: Is it a business tax?
1. International carriers
A: It’s not a tax on the business itself which is so
transacted but it is a duty upon the facilities made use or
It doesn’t even matter if it is a domestic carrier or an
actually employed in the transaction of the business. It is
international carrier as long as they will withdraw this
not a business tax, the focus here is the transaction and
petroleum from the depot and the purpose of this is form
the document.
international consumption. Dilisiyafor domestic
consumption.
The DST is a form of an excise tax, kaya
ngasabinilaprivilege. It is a tax imposed on the privilege of
2. Exempt entities or agencies covered by tax
entering into a transaction requiring the execution of a
treaties, conventions and other international
document.
agreements
This is by reason of international law or international comity Q: Is it a tax on the transaction or is it a tax on the
execution of a document?
but take note that entities exempt under treatise or
international agreements, it is covered by the rule on
If you follow the codal provision, “upon documents,
reciprocity.
instruments, loan agreements ... sale or transfer of an
obligation” it would seem that the DST is imposed on the
3. Entities which are by law exempt from direct
document itself, right? So if imposed siyasadocument, it’s a
and indirect taxes.
property tax because we’re talking about the document, it’s
not a privilege, di ba? But to be honest about it, I find this
The rest of the provisions, you just read and familiarize
lang. You don’t have to memorize everything. quite a gray area because some Supreme Court decision
like for example HSBC vs. CIR, GR No. 168018, June 4,
2014, they would say that DST is an excise tax in the
(Excise Tax Provisions: Sections 129 to 172 of the NIRC)
exercise of a right or privilege or transfer rights and
obligations incident thereto.
Let’s go now to our last topic, Documentary Stamp Tax
But if you read some other decisions pertaining to the DST
Section 173. Stamp Taxes Upon Documents, Loan
and if you will read your book, Casasola, they would say it
Agreements, Instruments and Papers. - Upon documents,
is a tax on the document evidencing on the transfer.
instruments, loan agreements and papers, and upon
acceptances, assignments, sales and transfers of the
So which is which? So gipangutananakosiDean, is it a tax
obligation, right or property incident thereto, there shall be
on the transaction or is it a tax on the document itself? And
33 | P a g e
Dean would say it’s a combination of both. It’s a tax both notwithstanding, the following instruments, documents and
on the privilege and on the document. It is imposed on the papers shall be exempt from the documentary stamp tax:
transaction itself or upon the document underlying such
act. I find it kind of weird, so let’s just follow him. (a) Policies of insurance or annuities made or
granted by a fraternal or beneficiary society,
A: In other words, it’s just not a tax on the document, it also order, association or cooperative company,
depends on the transaction. It’s also a tax on the operated on the lodge system or local
transaction because both the document executed and the cooperation plan and organized and conducted
type of transaction is considered before you will be able to solely by the members thereof for the exclusive
determine whether such documentary transaction is benefit of each member and not for profit.
subject to DST.
(b) Certificates of oaths administered to any
Q: Who are persons liable for DST?
government official in his official capacity or of
A: The persons who are making, signing, accepting or
acknowledgment by any government official in
transferring the documents or facility evidencing the
the performance of his official duties, written
transaction is liable for the DST.
appearance in any court by any government
official, in his official capacity; certificates of the
Iyanangsabingbatas. In other words, if a person or an entity
administration of oaths to any person as to the
is a part of that transaction, those persons are the ones
authenticity of any paper required to be filed in
liable for the DST. So in the end, if there will be
court by any person or party thereto, whether the
nonpayment of the DST, let’s say it’s a contract of sale, the
proceedings be civil or criminal; papers and
government may go after the buyer or the seller to collect
documents filed in courts by or for the national,
the DST. But as between parties, the parties themselves
provincial, city or municipal governments;
may agree sinomagbayadngDST. So it would seem that
affidavits of poor persons for the purpose of
the DST is also a type of indirect tax, you can shift the
proving poverty; statements and other
burden to one person to another.
compulsory information required of persons or
corporations by the rules and regulations of the
You would notice nakakitanaman kayo ngdeed of sale di
national, provincial, city or municipal
ba, Usually samgadeed of sale, meroniyangprovisions for
governments exclusively for statistical purposes
taxes, who will bear the burden of taxes, that is actually a
and which are wholly for the use of the bureau or
valid provision. Pwedemoipasaangtax sakabilangperson.
office in which they are filed, and not at the
instance or for the use or benefit of the person
Q: What is the exception wherein only one of the parties is
filing them; certified copies and other certificates
liable for the DST?
placed upon documents, instruments and papers
A; Whenever one of the parties is exempt from DST, the
for the national, provincial, city, or municipal
other party not exempt shall bear the burden of paying the
governments, made at the instance and for the
DST.
sole use of some other branch of the national,
provincial, city or municipal governments; and
Let’s go back to our example earlier:
certificates of the assessed value of lands, not
exceeding Two hundred pesos (P200) in value
Consul ako, bentakoyongsasakyannainimportkosupposedly
assessed, furnished by the provincial, city or
that is a tax-free article. Before iyansiya ma rehistrosaLTO,
municipal Treasurer to applicants for registration
kailanganmongDST bayaran.
of title to land.
Q: Who will bear the tax?
It’s a long provision, you just familiarize this. It’s pretty
A: It’s already the buyer because of the fact that the seller,
much like the tax exemptions in income tax. I don’t have
the consul, is practically exempt from taxation.
any discussion for this matter.
Q: Are all documents or transactions subject to DST?
But I would want you to read the case of HSBC.
Of course no. It’s specific.
Q: What about if the document is electronic in nature? Will
There are exceptions provided by the NIRC as found in
it be subjected to DST? Meronnatayong electronic
Section 199.
evidence ngataposmost of the business transactions
nowadays are through emails, electronic documents, etc.
Section 199. Documents and Papers Not Subject to Stamp
Are these covered by the DST law?
Tax. - The provisions of Section 173 to the contrary
34 | P a g e
this case, the DST attaches upon the acceptance of the

A: There is a Revenue Regulation which provides that stockholders subscription of corporation’s capital
electronic documents are already covered under the DST regardless of the actual or constructive delivery of the
as long as the transaction is a covered transaction, certificate of stocks.
electronic documents are taxable documents.
3. It is due when the obligation arises from
HSBC vs. CIR, this is a peculiar case. Because this Philippines sources or the property is located
involves (1) negotiable instruments and (2) it involves within the Philippines.
electronic documents.
Somehow, you will also apply the destination principle or
The case involves bills of exchange. the situs of the transaction must be situated in the
Kasemeronsilangelectronic document na bills of exchange. Philippines.
Anoangrequirement for the bills of exchange before you will
be able to get money from that?Necessarily there will have 4. Fourth, it is only payable to persons and on
to be an acceptance. transactions specifically mentioned in the
law.
If you read this entire case, the Supreme Court said that
since the “bills of exchange” is electronic in nature, you Q: Who are these persons?
cannot consider it as a negotiable instrument in the context
of negotiable instrument law. So you don’t talk about an A: These persons are the one making, signing, issuing or
acceptance because the persons liable here are those accepting or transferring the taxable documents,
making, signing, issuing or accepting or transferring the instruments, or paper.
taxable documents, instruments, or paper.
Exception: if one party is exempt from DST, then no DST
So in the end because of the electronic nature of that can be claimed from him but the other party who is not
document, the transaction did not fall *** acceptance of the exempt will be liable for the DST.
bill of exchange, it’s not a taxable document. So therefore
HSBC was not liable for the DST as held by the Supreme Section 200. Payment of Documentary Stamp Tax. -
Court.
(A) In General. - The provisions of Presidential
Basic features of a DST: Decree No. 1045 notwithstanding, any person
1. It is generally a tax on the document. liable to pay documentary stamp tax upon any
document subject to tax under Title VII of this
We all know that this is not merely a tax on the document Code shall file a tax return and pay the tax in
because you will always have to consider the transactions accordance with the rules and regulations to be
involved. prescribed by the Secretary of Finance, upon
recommendation of the Commissioner.
2. Second, it is due independently of the legal
status of the transactiongiving rise to the
(B) Time for Filing and Payment of the Tax. -
document or instrument.
Except as provided by rules and regulations
promulgated by the Secretary of Finance, upon
So if ever you draft a contract which is subject to DST and
recommendation of the Commissioner, the tax
it ends up to be null and void later on, you cannot file for
return prescribed in this Section shall be filed
refund. Because the government does not care if it’s a valid
within ten (10) days after the close of the month
or invalid document as long as there is a taxable document
when the taxable document was made, signed,
executed involving a taxable transaction, then you will have
issued, accepted, or transferred, and the tax
to pay DST.
thereon shall be paid at the same time the
aforesaid return is filed.
This is actually what happened in the case of Jaka
Investments Corporation vs. CIR, GR no. 147629, July
28, 2010. SC said here that Jaka is not entitled to refund of (C) Where to File. - Except in cases where the
excess DST because DST are levied independently of the Commissioner otherwise permits, the aforesaid
legal status of the transaction giving rise thereto. DSTs are tax return shall be filed with and the tax due shall
paid upon the issuance of said instruments without regard be paid through the authorized agent bank within
to whether the contracts which gave rise to them are the territorial jurisdiction of the Revenue District
rescissible, void, voidable, or unenforceable. That’s why in Office which has jurisdiction over the residence
35 | P a g e
or principal place of business of the taxpayer. In Section 201. Effect of Failure to Stamp Taxable
places where there is no authorized agent bank, Document. - An instrument, document or paper which is
the return shall be filed with the Revenue District required by law to be stamped and which has been signed,
Officer, collection agent, or duly authorized issued, accepted or transferred without being duly
Treasurer of the city or municipality in which the stamped, shall not be recorded, nor shall it or any copy
taxpayer has his legal residence or principal thereof or any record of transfer of the same be admitted or
place of business. used in evidence in any court until the requisite stamp or
stamps are affixed thereto and cancelled.
(D) Exception. - In lieu of the foregoing provisions
of this Section, the tax may be paid either There are two effects:
through purchase and actual affixture; or by
imprinting the stamps through a documentary 1. The document shall not be recorded.
stamp metering machine, on the taxable
document, in the manner as may be prescribed The document shall not be recorded. Kung saROD siya,
by rules and regulations to be promulgated by LRA or probably sa LTO or if you file in PRC, you do not
the Secretary of Finance, upon recommendation pay your DST, the government may refuse registration of
of the Commissioner. that registrable document. You cannot transfer the titles to
the names of the buyer. It does not invalidate the
Q: When do you pay the DST? transaction, the transaction is valid. But it’s just you cannot
transfer it to the name of the recipient of that property.
A: Section 200 par. (B)
2. It shall not be admitted in evidence.
“Pay as you File” System but take note of when is the
reckoning point? 10 days after the close of the month when Q: When do you offer documentary evidence?
the taxable document was made or issued.
A: After testimonial evidence.Pagkataposmongna-present
Q: Where do you file the returns? lahat, you ask the court to give you time or probably make
an offer of evidence.
A: Section 200, par. (C)
Q: When do you object?
Q: What about those tax nakikitanatinsalabasngcourt?
AlamniyonaDST naginabilina stamps ginapilitnato di ba? A: Kung oral siya, you object right then and there or you
make your objection in writing. That is the only time you will
A: That’s DST. This is from Section 200, par. (D) be able to object the presentation of a specific document.
The tax may be paid either through purchase and actual The proper time to exclude the admissibility of this
affixture; or by imprinting the stamps through a document is during the formal offer. Maramitayongreason
documentary stamp metering machine, on the taxable saadmissibility of a document, maramidiyansaRules of
document. Court and you add one here in taxation: If the document
being presented to the court, being formally offered to
Under existing regulations, if the amount of the DST due on the court is a taxable document, you can make an
the taxable document of the transaction is fifteen pesos objection. “Your Honor, we would like to object the
(P15.00) or less, the taxpayer has the option to pay the admissibility of this document because no documentary
DST by way of purchasing those documentary stamps. stamp tax has not been paid.” It is inadmissible
Tawagniyanloose documentary stamps, paghindikamagbayadngDST. So unsay mabuhat?
bastagagmaylangnatransaction. Matanggong di ba?
Q: What are the effects of failure to stamp a taxable The document is inadmissible. Meaning in the resolution of
document? the case the court will not consider this document. Hindi
siyakasali, as if it did not exist at all, as if it was not
Supposedly someone issued a Special Power of Attorney presented at all.
and there is no documentary stamp tax.
But is this strictly applied sacourt? Because I actually saw
this one lawyer who used this provision saNIRC. After
saformal offer, sabiniya“Your Honor, Exhibit A, the
Secretary Certificate, we would like to object because there
36 | P a g e
is no DST stamp. Under the NIRC, if there is no DST for

that particular document, it is a taxable document, it is
inadmissible in court... and lastly for nonpayment of DST…
” So what did the court? What the judge did during that
time is that “in the interest of justice and fairplay” the judge
told the other party who did not place a DST stamps on the
document “to pay the necessary DST within ten days or
otherwise, we will exclude this evidence.” So
kungstriktoiyannajudge, walakangmagawa, mag-MR kana
lang.
Actually to be honest about it guys, angpinakaboring nalaw
subject nanaencounterkoisa taxation. Angpinakaenjoy
dapat is Evidence.
“Perseverance is the hard work you do after you get

tired of the hard work you already did.”
~Newt Gingrich
GOD BLESS! ☺
37 | P a g e

2016 Tax II 2nd Exam

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TAXATION II TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty.Donalvo (2nd Semester of S.Y. 2016-2017)

The four elements of a business is self-explanatory.

Value added tax is a tax imposed only to increased worth,

OUTPUT - INPUT = VAT PAYABLE 1. The regular 12% vat

Ang manufacturer ibentaniya kay Wholesaler (merong

So, nag patongpatongna. Tax pyramiding bayan? IMPOSITION OF TAX

3.) Importation, whether or not in the course of Xxx

(b) Creditors in payment of debt; January 13, 2017 (2nd hour)

seller sells his goods to a nonresident person but it will be

(A) In General. - There shall be levied, assessed and

Take note of the elements. Let’s go to real property transactions:

xxx a) be allowed input tax on his beginning inventory of

(Still Section 110) 1) Carry it over to the next succeeding quarters;

In a claim for tax refund or tax credit, the applicant must

f are subject to the value-added tax imposed in Sections exhibitions 10%.

The value-added tax withheld under this Section shall be

The gross receipts here are computed like the Gross

Let us call this the Overseas Communications Tax (OCT).

exemption. accordance with the rules and regulations to be

1. It’s a withdrawal of domestic alcohol of not less

Tax on the documents, instruments, loan agreements and

this case, the DST attaches upon the acceptance of the

is no DST stamp. Under the NIRC, if there is no DST for

“Perseverance is the hard work you do after you get

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