Vat PDF

TAXATION
FAR EASTERN UNIVERSITY – MANILA

VAT-(VALUE ADDED TAX) (301)
I. Transactions subject to VAT
1. Transactions Tax Based

a. Sales of goods or properties Gross selling price (Accrual basis)
b. Sales of services and lease of properties Gross receipts ( Cash basis)
c. Importation Dutiable (total) value as the tax base on importation, if the BOC uses
Total Amount Due to the Government the total value in determining tariff and customs duties.
FOB/FCA value xxx
Add: Dutiable insurance Xxx Landed cost as the tax base on importation, if custom duties are
Add: Dutiable Freight Xxx determined on the basis of the quantity or volume of goods.
Dutiable Value (Foreign Currency) Xxx
Multiply by : Exchange rate
Dutiable Value (Php) Xxx
Multiply by: Rate of Duty (%)
Customs Duty Xxx
Add the following:
Brokerage fee (if applicable) Xxx
Customs Documentary Stamp P30
Excise tax, if any Xxx
Total Landed Cost (TLC) Xxx
Multiply by: VAT rate 12%
Value Added Tax Xxx
VAT Taxpayers
The following business pay VAT: 1. VAT-registered taxpayers
2. VAT-registrable taxpayers
VAT-registered taxpayers Required to pay VAT even if their annual sales fall below the P3,000,000
VAT threshold (regardless of level of sales).
VAT-registrable taxpayers One who exceeded the P3,000,000 threshold in any 12-month period
but did not register as VAT taxpayer. Even if not so registered, they are
still subject to VAT.
2. In the Course of Trade or Business – Defined

• The phrase “in the course of trade or business” means the regular conduct or pursuit of a commercial or an economic
activity including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is
a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells
exclusively to members or their guests), or government entity.
• The rule of regularity, to the contrary notwithstanding, services as defined in the Tax Code rendered in the Philippines by
non-resident foreign persons shall be considered as being rendered in the course of trade or business.
3. Mandatory Registration under the VAT System

Persons Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in
required to the sale or exchange of services shall be liable to register if:
mandatorily a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Sec.
register 109 (1) (A) to (AA) of the Tax Code, have exceeded three million pesos (P3,000,000) or
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 Sec. 109 (1) (A) to (AA) of the Tax Code, will exceed three million
pesos (P3,000,000).
4. Optional Registration of VAT-Exempt Persons

a. Persons a. Any person who is VAT exempt under Section 109 (BB) not required to register for VAT may elect to be VAT-
allowed VAT registered by registering with the RDO that has jurisdication over the head office of that person, and pay the
registration annual registration fee of P500 for every separate and distinct establishment;
b. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed
transactions) may opt that the VAT apply to his transactions which would have been exempt under Section 109
(1) of the Tax Code;
c. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year
do not exceed P10,000,000 derived from the business covered by the law granting the franchise may opt for VAT
registration. This option, once exercised, shall be irrevocable.
b. Once the election is made, it shall be irrevocable for a period of three (3) years counted from the quarter
Irrevocability when the election was made except for franchise grantees of radio and TV broadcasting whose annual gross
of the optional receipts for the preceding year do not exceed ten million pesos (P10,000,000) where the option becomes
VAT perpetually irrevocable.
registration
Notes:
Annual Gross Sales or Receipts Not Exceeding P100,000
Shall be considered a livelihood activity
Not subject to VAT nor Percentage Tax
Annual Sales/Receipts > P3,000,000 → VAT

Annual Sales /Receipts > P100,000 up to P3,000,000 → Percentage Tax (Non-VAT)
Annual Sales/Receipts ≤ P100,000 (Marginal Income Earner) → Not Subject to VAT nor Percentage Tax
3. VAT output taxes Page 1 of 28

Marginal Income Earners
Marginal Income Earner (MIE)-
Definition (RMC 7-2014)

1. MIE is an individual not deriving compensation as an employee under an employer-employee relationship but who is self-
employed.
2. Gross sales or receipts not exceeding P100,000 in any 12-month period.
3. The activities of MIE should be principally for subsistence or livelihood.
Examples of marginal income earners:
1. Agricultural growers/producers (farmers/fishermen),

2. Selling directly to ultimate consumers,
3. Small sari-sari stores,
4. Small carinderias or “turo-turos”,
5. Drivers/operators of a single unit tricycle
6. Others similarly situated
Marginal income earners do not include
1. Licensed professionals,
2. Consultants, artists, sales agents, brokers and
3. Others similarly situated, including all others whose income have been subjected to withholding tax.
The incidence of being a MIE, as required under RR No. 7-2012, covers the following privileges and minimum registration and tax
compliance requirements:
1. Registration with the BIR using BIR Form 1901 with the following minimal documentary requirements:
a. Sworn Statement of Income for the year; and
b. National Statistics Office Certified or Local Civil Registry Birth Certificate;
2. Exemption from the payment of Annual Registration Fee;
3. Registration of Books of Accounts (e.g. two-column journal or other simplified books for daily expenses and revenues);
4. Issuance of registered principal receipts/sales invoices as prescribed under Revenue Memorandum Order No. 12-2013;
5. Filing and payment of Annual Income Tax Return using BIR Form 1701 similar to any other self-employed individuals; and
6. Exemption from payment of business taxes (i.e. Value-Added Tax or any Percentage Tax).
The BIR District Office, upon evaluation of application for registration, shall issue the Certificate of Registration and shall likewise
ensure compliance with the registration of books of accounts and issuance of Authority To Print for their Principal Receipts/Sales
Invoices.
Privilege Stores
Privilege Stores
To be considered privilege store, the store should engage in a business activity for a cumulative period of not more than 15 days.
Otherwise, they shall be considered regular taxpayers subject to business taxes and income tax.
Most commonly known as “tiangge”, are stall or outlets which are not permanently fixed to the ground during special events such as
festivals and fiestas. (RR 16-2013)
A “privilege store operator” shall not be considered habitually engaged in business. As such, he is exempt from business tax but
subject to income tax.
PROBLEMS
Problem 1: (Ordinary Course of Business) Determine whether or not the following are subject to VAT
Transaction VAT-subject?
1. Sale of bread by a bakery SG Yes
2. Sale of residential lot by a real estate dealer SP Yes
3. Sale of residential house and lot by the owner who resides in such property SP No
4. Sale of food and drinks by restaurant and other eating places SS Yes
5. Importation of raw materials for business purpose I Yes
6. Importation of computer for personal use I Yes
7. Sale of office supplies by a non-profit institution SG Yes
8. Warehousing services by a government owned or controlled operation SS Yes
9. Sale of food and drinks in a club operated by a non-profit organization SS Yes
10. Sale of drinks by Coca-Cola Company SG Yes
Problem 2: (VAT Threshold) Sales during the year:

Subject to: A B C D
12% P900,000 P1,000,000 P950,000 P1,500,000
0% 1,000,000 1,900,000 950,000 2,000,000
Exempt 4,100,000 2,100,000 3,100,000 1,000,000
Total P6,000,000 P5,000,000 P5,000,000 P4,500,000
Which is/are subject to VAT?
Problem 3: (Sales of Goods vs Sales of Services) A VAT-registered taxpayer has the following VAT-exclusive data for the month
of January 20X1:
Accounts receivable, January 1, 20X1 P1,500,000
Sales on account for the month of January 11,000,000
Cash sales for the month of January 1,300,000
Accounts receivable, January 31, 20X1 1,700,000
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Cash purchases for the month of January 20X1 1,400,000
Required: How much is the output tax for the month of January 20X1 assuming the taxpayer is:
a. Trader b. Service provider
Problem 4: (VAT Registration) A, a non-VAT registered taxpayer (sales of services) who started his business on February 14,
20x7 had the following (net of VAT) for 20x7:
Cumulative Sales of Services (Purchase of goods) VAT (Purchase of services)
unpaid to Suppliers VAT unpaid to Suppliers
February 14 to September 30 P1,800,000 P120,000 P300,000
October 1 to October 30 2,200,000 30,000 30,000
November 1 to November 30 4,500,000 25,000 50,000
December 1 to December 30 3,000,000 50,000 250,000
Required:
Question 1: For the month of October, A will pay_____
Question 2: For the month of November, A will pay_____
Question 3: For the quarter ending December, A will pay____
Problem 5: (Computation of VAT payable) All amounts given are VAT not included:
A, None-VAT taxpayer, sells to B, VAT taxpayer P60,000
B, VAT taxpayer, sells to C, VAT taxpayer 90,000
C, VAT taxpayer, sells to D, VAT taxpayer, an exporter 150,000
D, VAT taxpayer, exports 300,000
The value-added tax of B:_____
II. Pro-Forma Computation
Output VAT from regular Domestic Sales and Receipts (exceed P3,000,000) xx
Output VAT from Importation (paid prior to release from Customs) xx
Output VAT from Deemed Sale Transactions xx
Output VAT from Zero-Rated Sales xx
xx
Less:
Input VAT from Purchases of Goods (xx)
Input VAT from Importation (xx)
Input VAT from Purchases of Services (xx)
Input VAT from Deemed Sale Transactions (if not previously claimed) (xx)
Input VAT from Depreciable Capital Goods (xx)
Input VAT from TIV/ Presumptive (xx)
VAT Payable xx
Invoicing Requirement of Subsequent Sale of Goods or Properties Deemed Sold
The subsequent sale of goods or properties deemed sold shall not be subject to VAT. The seller of goods or properties previously
deemed sold shall indicate the sales invoice number wherein the output tax on deemed sale was imposed and the corresponding tax
paid on the items sold.
For going concern taxpayers, this is essential to avoid further imposition of any business tax on the subsequent sale. This is also
essential for the buyer to establish its claims of Input VAT on his purchase of goods previously deemed sold to the seller.
Input VAT on goods or properties Deemed Sold
The claimable input VAT on goods or properties previously deemed sold shall be the portion of the output VAT imposed upon
the goods deemed sold which corresponds to the goods purchased by the buyer.
In the contract of sale or invoice, should state the sales invoice number wherein the output tax on “deemed sale”
Billing Requirements on Output VAT
The output VAT must be specifically indicated in the VAT invoice or receipt. It must be billed separately in the case of sales of
properties where the fair value exceeds the selling price.
(RR 16-2005) if the VAT is not billed separately, the selling price stated in the sales document shall be deemed to be inclusive of
VAT.
Determination of the Output VAT
The amount of output VAT is dependent upon the price quoted by the VAT taxpayer. Such amount is understood to be inclusive of
the VAT in the absence of a special agreement to the contrary.
Note: The same computational procedure is employed if:

1. The quoted price is agreed to be inclusive of VAT or
2. It is agreed that the business absorbs the VAT.
Rule on VAT Not Separately Billed
3. VAT Page 3 of 28
If the VAT is not separately billed in the document of sale, the selling price or the consideration stated therein shall be deemed to be
inclusive of the VAT. The VAT shall be computed from the agreed price as a factor of 12/112.
Incorrect Billing of VAT
If the VAT is incorrectly billed, the amount billed by the taxpayer shall be deemed inclusive of the VAT. The VAT shall be recomputed
as a factor of 12/112.
III. Concept of VAT

1. A VAT is a tax levied on the value of the products of an enterprise in the course of its production and distribution. It
is otherwise known as the tax on Mark-ups.
2. It is a percentage tax imposed at every stage of the transfer of goods on sale, exchange, barter, and the importation of
goods, including transaction deemed by law as a sale or leasing of goods or property and the performance of services in the
course of trade or business.
3. It is based on the gross selling price or gross value in money or net sales when there are sales discounts or sales
returns, whichever is applicable, of the goods or property sold, bartered, or exchanged or the gross receipts derived from
the sale or exchange of services, including the lease of goods or property, or in the case of imported goods, on the total
value of importation or its landed cost plus excise and ad valorem tax and other charges on importation.
IV. Sources of Output VAT
1. Importation
Transaction Tax Base Tax Rate
a. In general (As determined by the BOC)
Importation Total value for tariff and custom duties 12%
“Importer” – refer persons Dutiable Value xxx

bringing goods into the Add: Custom duties xxx
Philippines, whether or not made Excise tax xxx
in the course of trade or business. Other charges prior to release
Importation is not a sale of
of goods from custom custody*** xxx xxx
goods, or sometimes not even a
business activity, yet is subject to Tax base xxx
vat. This is because vat is a
consumption tax levied on sales b. In case where custom duties is based on volume or quantity
to be borne by consumers with xx
sellers acting simply as tax Invoice cost
collectors. Since the origin of Add: Custom duties xxx
importation is from a foreign
seller which is outside Philippine Excise tax xxx
jurisdiction, vat is instead paid Other charges prior to release xxx
directly by the importer.
Total landed cost (Tax base) xxx
Note: *** Examples of other charges prior to release:

a. Insurance
Payment of VAT on b. Freight
Importation - The VAT on c. Postage
importation shall be paid by the d. Commission
importer prior to the release e. Interest
of such goods from customs f. Bank charges
custody. g. Wharfage dues
h. Arrastre charges
i. Brokerage fees
j. Stamps
k. Processing fees
l. Custom duty
m. Excise tax
Note: Facilitation fee(TARIFA)- not included as a charges prior to release from

custom custody.
Excise tax is applicable to manufacturers and importers of sin products, non-

essential goods and beverage.
(RR 16-2005): No VAT shall be collected on importation of goods which are

specifically exempted under Sec. 109 (1) of the tax code.
a. All importations are subject to VAT of 12%, except those exempt under Sec. 4 of RR No. 6-97.
b. Importations made by a tax-exempt taxpayer shall, likewise, be exempt from VAT. However, the subsequent
purchaser, transferee or recipient who are not tax-exempt shall pay the VAT on the imported goods as if he was the
importer.
c. The tax base of imported good for VAT purposes include total value of importation or its landed cost plus excise and ad
valorem tax and other charges on importation.
3. VAT Page 4 of 28
2. Sale of goods
Sale of goods Gross Selling Price 12% or 0%
Gross selling price (a) xxx
Less: Sales discounts (b) Xxx
Sales returns and allowances (c) Xxx (xxx)
Net sales xxx
Add: Excise tax if any
(d) xxx
Tax Base xxx
Notes:
a. Gross sales include:
i. Cash sales
ii. Sales on account (open account)
iii. Installment sales
iv. Deemed sales (Consumption, Consignment, Distribution, Dacion en Pago, and Retirement)
v. Other amounts due from buyer such as for packaging, delivery and insurance.
b. Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not
depend upon the happening of future event may be excluded from gross sales within the same month or
quarter it was given.
c. Sales returns and allowances may be deducted from the gross sales for the month or quarter in which a
refund is made or a credit memo is issued.
d. Excise tax (a business tax), if any, is included in the gross sales, while VAT is excluded.
PROBLEMS
Problem 1: (Computation of VAT) Determine the VAT on the following transactions made by a VAT registered taxpayer during
the month of April.
April 2 Sale of construction materials, net of VAT, P220,000 220,000 x .12 = 26,400
5 Receipt of fee from construction contracts , gross of VAT, P112,000 12,000
7 Recorded its sales of materials in its sales journal amounting to, P200,000 24,000
(Sales per book)
19 Sale of hollow blocks, Selling price including erroneous VAT, P110,000 110,000 x 12/112 = 11,785.71
Problem 2: (VAT Importation) A VAT registered taxpayer imported goods as follows:

Cost price of imported goods P900,000
Insurance premiums 125,000
Freight charges 135,000
Customs duties 600,000
Wharfage fee 20,000
Arrastre fees 30,000
Internal processing fee 40,000
Customs brokerage fee 80,000
Documentary stamp tax 60,000
Interest and other bank charges 90,000
Warehouse and storage fees 100,000
Excise tax 120,000
Facilitation fees (TARA) 50,000
Required:
a. Compute the dutiable value.
b. Compute the VAT on importation.
c. Assume the goods were sold for P3,000,000, how much is the VAT payable to the BIR?
3. Sale of Properties
Sale of real properties on Installment received xxx 12% or 0%
installment plan ( initial
payment do not exceed 25% Add: Interest xxx
of the gross selling price) Other charges xxx xxx
Tax Base xxx
Upon full collection, if the zonal value or market value is higher than the total
receipts or collections, the additional vat shall be paid accordingly (RMC 3-
96; RR 4-3007)
Sale of real properties on cash Selling price stated in the sales documents or fair market value, whichever 12% or 0%
basis or deferred payments is higher
plans (initial payments exceed
25% of the gross selling
price)
1. Sale of real property classified as capital asset is not subject to VAT. Such transaction is subject to capital
gains tax of 6% based on sales price or FMV, whichever is higher.
3. VAT Page 5 of 28
2. In general, sale of real property primarily held in the normal course of business (inventory/ordinary asset) is subject
to VAT, except:
a. Residential lot with selling price of P 1,500,000 and below; and
b. Sale of house and lot and other residential dwellings with selling price at P 2,500,000 and below.
3. Sale of real properties in the course of trade or business

c. On installment plan (initial payments do not exceed 25% of the gross selling price)
Installments received Xxx

Add:
Interest xxx
Other charges xxx Xxx
Tax base Xxx
Note: Upon full payment, if the zonal or market value is higher than the total receipts or collections, the
additional VAT shall be paid accordingly.
d. On cash basis or deferred payment plan (initial payments exceed 25% of the gross selling price)
The tax base shall be the higher between SELLING PRICE stated in the sales document and ZONAL OR MARKET
VALUE.
Notes:
a. If the gross selling price is the zonal or market value of the real property, the zonal or market value shall be
deemed inclusive of the VAT.
b. If the VAT is not billed separately, the selling price stated in the sales document shall be deemed inclusive of the
VAT.
a. Classification of Real Property

1. Sale not in the ordinary course of trade or business
• In general VAT Exempt
2. Sale of residential lot by a real estate dealer
• Selling price < P1,500,000 * VAT Exempt
• Selling price > P1,500,000 VAT
3. Sale of residential lot by a non-dealer
• Use in business (incidental transaction) VAT
• Not use in business (regardless of amount) 6% CGTax
4. Sale of residential house and lot and other residential dwellings by a real estate dealer
• Selling price < P2,500,000** VAT Exempt
• Selling price > P2,500,000 VAT
• NOTE : By 2021, only house and lot – not more than P2,000,000
5. Sale of residential house and lot and other residential dwellings by a non-dealer
• Use in business (incidental transaction) VAT
• Not use in business (regardless of amount) 6% of CGTax
6. Sale of real property classified as low cost housing VAT Exempt
7. Sale of real property classified as socialized housing VAT Exempt
*Apply rules on adjacent lots
**Apply rules on adjacent house and lots and other residential dwellings.
b. Tax Base
Personal property GSP
Real property
1. Cash Sale GSP vs. FMV vs. ZV w/c is the highest
2. Deferred GSP- Gross Selling Price
Payment Basis FMV- Fair Market Value
ZV- Zonal Value
3. Installment Plan [(Collection/GSP)] x GSP vs. FMV vs. ZV w/c ever is the highest
Gross Selling Price- means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller
in consideration of the sale, barter or exchange of the goods and properties, excluding VAT.
NOTES: The following shall be allowed as deductions from gross selling price;
a. Sales discount indicated in the invoice at the time of sale, the grant of which is not dependent upon the happening of a
future
b. Sales returns and allowances for which a proper credit or refund was made for sales previously recorded as taxable sales.
Fair Market Value- means fair market value as shown in the schedule of values of the Provincial and City Assessors (real property tax
declaration).
Zonal Value- means fair market value as determined by the BIR Commissioner.
Deferred Payment Basis- means sales of real property, the initial payments of which in the year of sale exceed 25% of the gross
selling price.
Installment Plan- means sale of real property, the initial payment of which in the year of sale do not exceed 25% of the gross selling
price.
3. VAT Page 6 of 28
c. VAT on Sale of Real Properties
Payment Terms Payment of Output VAT
1. Cash Sale If total selling price is paid immediately Output VAT shall be reported during the
month of sale
2. Deferred Sale If the buyer only paid: Same effect with cash sales. Output VAT
1. Portion of the selling price and shall be reported during the month of sale
2. Initial payment exceeds 25% of the
S.P.
3. Installment Sale If the buyer only paid: The seller or the real estate dealer shall
1. Portion of the selling price and be subject to VAT on installment
2 Initial payment do not exceed 25% of payments, inclusive of interest and
the S.P. penalties.
Initial payment pertain to all payments which the seller receives on or before the execution of the instrument of sale, including cash
or property received, other than the purchaser’s evidence of indebtedness, during the taxable year when the real property was sold.
Down payment xxx
Collection (Yr. Of Sale) xxx
Add:
Interest Xxx If ZV or MV > receipts upon
collection, additional VAT shall
Other charges Xxx xxx
be paid (RMC 3-96; RR 4-2007)
Tax base xxx
4. Sale of Scrap Materials

1. Sale of scrap such as empty drums, plastic bags, cartons, and wood crates; obsolete inventories and fully depreciated
fixed assets at a minimal prices or lower than the purchase price are subject to VAT.
2. Ordinary assets, other than inventories held for sale, which are originally subject to depreciation are are likwise subject
to VAT, when sold.
PROBLEM
Problem 1: (Dealer vs Non-dealer of real property) The following data are taken from sale of a real estate dealer on January 2,
2015:
Gross selling price P10,000,000
Assessed value 15,000,000
Zonal Value 14,200,000
Appraised value 18,000,000
Down payment (January 5, 20x5) 1,000,000
Collection:
January 31, 20x5 1,000,000
January 31, 20x6 2,000,000
January 31, 20x7 2,000,000
a. How much is the output tax for January 31, 20x5, January 31, 20x6 and January 31, 20x7 using 12% VAT rate?
b. Assuming the zonal value in 20x7 is P20,000,000 and the buyer is required to pay surcharges of P20,000. How much is output
tax in 20x7?
c. Assuming the down-payment is P2,000,000, how much is the output tax for January 31, 20x5, January 31, 20x6 and January 31,
20x7 using 12% VAT rate?
d. Assuming the seller is not a real estate dealer but the real property sold is used in business, how much is the output tax for
January 31, 20x5, January 31, 20x6 and January 31, 20x7 using 12% VAT rate?
e. Assuming the seller is not a real estate dealer and the real property sold is not used in business, how much is the output tax for
January 31, 20x5, January 31, 20x6 and January 31, 20x7 using 12% VAT rate?
5. Sale of Service
Sales of services Gross receipts computed as follows: 12% or 0%
Cash received (actually or constructively) Xxx
Advance payments for future projects Xxx
Materials charged with the services Xxx
Gross receipts (excluding vat) Xxx
Note: Receivables, although earned, are not included
a. In general, all kinds of sale, exchange or supply of services rendered in the Philippines are subject to 12% VAT, except
those which are classified and qualified as zero-rated or VAT-exempt.
b. Under the situs of service criteria services performed outside the Philippines, even if undertaken in the course of
business, are BEYOND the scope of VAT.
c. Tax Base:
i. Total amount of money or its equivalent representing the contract price, compensation service fee, rental or
royalty.
ii. Amount charged for materials supplied, with the services and deposits and advance payments actually or
constructively received during the taxable quarter, excluding VAT.
3. VAT Page 7 of 28
VAT in Professional Fees
As a rule, earnings from a practice of profession will be subject to VAT if:
i. The professional is a VAT-registered person; or
ii. A non-VAT registered but his total gross receipts exceed P 3,000,000.
Also, aside from VAT is subject to creditable withholding tax :

Professional fees, talent fees, etc for services rendered- on the gross professional, promotional, and talent fees or any
other form of remuneration for services rendered by the following:
Individual payee:
If gross income for the current year did not exceed P3,000,000 Five percent (5%)
If gross income is more than P3,000,000 or VAT registered regardless Ten percent (10%)
of amount
Non-Individual payee:
If gross income for the current year did not exceed P720,000 Ten percent (10%)
If gross income exceeds P720,000 Fifteen percent (15%)
VAT on Service Contractors

i. Subject to 12% VAT
ii. If the contract is with the government, the government shall withhold final withholding VAT of 5%.
iii. Also subject to 2% creditable withholding tax for sale of services and 1% creditable withholding tax for
sale of goods.
VAT on Security Agency

i. Agency fees are subject to 12% VAT, excluding the salary of the guards.
ii. Subject to a 2% creditable withholding tax for sale of service based on the agency fee.
iii. If the contract does not separate the agency fees from the salary of the guards, the whole amount will be
subjected to VAT and 2% creditable withholding tax.
VAT on Real Estate Brokers

i. The commission income of real estate brokers are subject to VAT of 12% if he is VAT-registered or his total
commission exceeds P3,000,000 per year.
VAT on Dealers in Securities

Gross receipts Gross receipts computed as follows: 12% or 0%
for dealer in Gross selling price xxx
securities
Less: Acquisition cost of securities sold for the
month or quarter (xxx)
Balance xxx
Add: Other or incidental income xxx
Gross receipts xxx
Dealers in securities are subject to VAT based on their gross receipts (gross selling price less cost of securities
sold).
VAT on Lending Investors

i. Lending investors includes all persons not include banks (depository and savings), non-bank financial
intermediaries, finance companies, and other financial intermediaries not performing quasi-banking.
ii. Subject to VAT of 12% on their interest incomes.
iii. Does not include banks, other financial intermediaries performing quasi-banking functions and pawnshops.
VAT on Transportation Services

i. Subject to VAT of 12% on:
• Transport of goods and cargoes whether by land, air and sea.
• Transport of passengers by air and sea.
ii. Transport of passengers by land are subject to 3% OPT.
VAT on Lessor of Commercial and Residential Units

i. If the monthly rent per unit does not exceed P15,000, regardless of the aggregate amount, the lessor is exempted
from VAT and OPT.
ii. If the monthly rent per unit exceeds P 15,000, but the aggregate amount does not exceed P3,000,000, the lessor
is only subject to OPT, not to VAT.
iii. If the monthly rent per unit exceeds P 15,000 and the aggregate amount does exceed P3,000,000, the lessor is
only subject to VAT.
VAT on the sale of electricity by generation and distribution companies

Gross receipts Gross receipts shall refer to the following: 12% or 0%
on the sale of a. Total amount charged by generation companies for the sale of electricity
electricity by and related ancillary services; and/or
generation, b. Total amount charged by transmission companies for transmission of
transmission electricity and related ancillary services; and/or
3. VAT Page 8 of 28
and distribution c. Total amount charged by distribution companies and electric
companies cooperatives for distribution and supply of electricity and related electric
service. The universal charge passed on and collected by distribution
companies and electric cooperatives shall be excluded from the
computation of the Gross Receipts.
Sale of power or fuel generated through renewable source of energy

• The sale of power or fuel from renewable source of energy is zero
rated.
• Renewable sources of energy may include, but is not limited to,
biomass, solar, wind, hydropower, geothermal and steam, ocean
energy and other emerging sources using technologies such as
fuel cells and hydrogen fuels. (RA 9513 and RA 9337)
• The zero rated is limited on sale of power and does not extend to sales
of services related to the maintenance or operation of plants generating
said fuel.
Types of business in the electricity business:

1. Generation companies – refers to persons or entities authorized by the
Energy Regulatory Commission (ERC) to operate a facility used in the production
of electricity.
2. Transmission companies - refers to any person or entity that owns and
conveys electricity through the high voltage backbone system and or sub-
transmission assets.
3. Distribution companies – refers to persons or entities including a
distribution utility such as electric cooperative which operates a distribution
system with the provision of RA 9136.
Distribution companies and transmission companies are just “ pass through”

entities (RMC 62 – 2012, RMC 71-2012, RMC 61-2005)
PROBLEMS
Problem 1: (Service Contractor) Sale of services by a VAT-registered contractor:
Collections on total invoice price for contracts completed
(including P448,000 for materials) P1,120,000
Receivables on billings (VAT included) 336,000
Advances on contracts (VAT included) 224,000
Retentions on contracts made by clients out of contract price
already earned 90,000
Purchases of:
Materials (VAT included)-Not yet paid 224,000
Services of sub-contractor (VAT not included)-Not yet paid 440,000
Services of person subject to percentage taxes 55,000
Salaries of employees 60,000
The Value added tax payable is
Problem 2: (Purchases of goods/services by government from VAT registered suppliers) A government agency has the
following purchases for the month of January 20x1 from VAT registered suppliers of goods and/or services:
Purchases of goods (gross of VAT) P1,120
Purchases of series (net of VAT) 5,600
Required:
1. How much is the amount payable to the supplier of goods?
2. How much is the amount payable to the supplier of services?
Problem 3: (Security services) ABC Security Agency is engaged in the selling of security services to various clients. During the
month of December, it billed one of its clients of the following:
Monthly Salary P6,000
13th month pay 6,000
Agency fee at 15% 1,800
SSS and Philhealth 300
Leave with pay 450
Total Agency Fee P14,550
Based on the above data, how much is the output VAT payable of ABC Security Agency?
3. VAT Page 9 of 28
Problem 4: (Hotel and restaurant Industry) ABC Hotel and Restaurant had the following collections from its customers during
the month:
Room charges P392,000
Laundry services 7,392
Food and Beverage consumption 806,400
Corkage 9,020
Handling charges for providing telephone, telex, cable or fax services 2,464
Actual cost of long distance and overseas telephone calls collected by the establishment for the PLDT 11,385
Cake shop sales 9,184
Service charges billed separately and actually distributed to waiters and employees 61,820
Local taxes charged 5,764
How much is the output tax of ABC Hotel and Restaurant?
Problem 5: (Lease of Real Properties) During the entire year of 200A, Mr. Lino’s total receipts from lease of 35 residential units
are as follows:
Residential units Rate per month No. of units Annual gross receipts
Class 1 P20,000 7 P1,680,000
Class 2 16,000 8 1,440,000
Class 3 8,000 20 1,920,000
Total gross receipts 35 P5,040,000
Required: Compute the total amount of business tax?
Problem 6: (Transportation Services) Victory Bus Inc. reported the following income and expenses during the year:
Gross receipts from transport of:
Passengers P19,800,000
Cargoes 10,000,000
Advances from passengers 500,000
Refunds made for passengers 300,000
Operating expenses, excluding business taxes 24,400,000
Required:
1. Total business taxes
2. Income tax due
Problem 7: (Medical Services) Healthcare Corporation, a VAT-registered business, is engaged in the following medical services
with the following gross receipts during the year:
Health maintenance services P3,000,000
Medical and drugs distributions 4,900,000
Hospital services 6,000,000
Sales of scrap materials 100,000
Required: Compute for the following:
1. Amount not subject to VAT
2. Net VAT payable if the input VAT is P860,000
Problem 8: (Dealer in Securities) Ms. A is a VAT-registered stockbroker and a dealer in securities. She has the following data for
the first quarter of 20x7 (net of applicable taxes):
Commissions received from representing buyers P 200,000
Commissions received from representing sellers 300,000
Selling price of shares of stock:
Abby Corp. shares of stock held as inventory 400,000
Jude Corp. shares of stock held as investment 600,000
Acquisition cost of shares of stock:
Abby Corp. shares of stock held as inventory 300,000
JudeCorp. shares of stock held as investment 350,000
Operating expenses connected with VAT-subject
transactions:
Supplies bought from VAT-registered supplier 70,000
Salaries of employees 90,000
Electricity 5,000
Water 3,000
What is the VAT payable for the quarter using the 12% VAT rate?
6. Deemed Sale Transactions (CCDDR)

a. Transfer, use or consumption not in the course of trade or business of goods or properties originally intended for
sale or for use in the course of trade or business;
b. Consignment of goods if not sold within 60 days following the date of consignment;
c. Distribution or transfer to creditors in payment of debt or dacion en pago;
d. Distribution or transfer to shareholders or investors as share in the profit; and
e. Retirement from or cessation of business or incorporation of single proprietorship with respect to all goods on hand,
whether capital goods, stock in trade, supplies or materials, as of the date of such retirement, cessation or
incorporation,
Notes: 1) In cases 1 to 4 the tax base is the market value

2) In case 5, the tax base is the lower between acquisition cost or market value.
The commissioner of internal revenue shall determine the appropriate tax base where the gross selling price is
unreasonably lower than the actual market value (lower by more than 30% of the actual market value)
3. VAT Page 10 of 28
f. Transfer of assets as a result of merger or consolidation are not considered as deemed sale transaction. However,
the unused input tax of the dissolved corporation, as of the date of merger or consolidation, shall be absorbed by the
surviving corporation.
PROBLEM
Problem 1: (Deemed sale transactions) The following data relates to the transactions of ABC Company for the month of
November (amounts are gross of tax).
Sales P594,000
Sales returns and allowances 13,200
Payment of goods to creditors 27,500
Consignment sales 34,100
Goods out on consignment – 45 days 22,000
Goods out on consignment – 75 days 68,750
Distribution of goods as goodwill to employees 11,000
Purchases 253,000
How much is the VAT payable by ABC Company for the month of November?
7. Zero-Rated Sales
a. Export Sales
1. Sales of goods and properties

i. The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of
the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services,
and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
ii. ***Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local
export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines
of the said buyer’s good and paid for in acceptable foreign currency or its equivalent in goods or services,
and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
iii. ***Sale of raw materials or packaging materials to export-oriented enterprises whose export sales exceed
70% of total annual production.
iv. ***Those considered export sales under the Omnibus Investment Code of 1987 (E. O. No. 226) and other
special laws, e.g., sales to diplomatic missions and other agencies and/or instrumentalities granted tax
immunities.
***Provided, That subparagraphs (ii), (iii), and (iv) hereof shall be subject to the twelve percent (12%) value-
added tax and no longer be considered export sales subject to zero percent (0%) VAT rate upon satisfaction of the
following conditions:
(1) The successful establishment and implementation of an enhanced VAT refund system that grants refunds of
creditable input tax within ninety (90) days from the filing of the VAT refund application with the Bureau: Provided,
That, to determine the effectivity of item no. 1, all applications filed from January 1, 2018 shall be processed and
must be decided within ninety (90) days from the filing of the VAT refund application; and
(2) All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by December 31, 2019.
Provided, That the Department of Finance shall establish a VAT refund center in the Bureau of Internal Revenue
(BIR) and in the Bureau of Customs (BOC) that will handle the processing and granting of cash refunds of
creditable input tax.
An amount equivalent to five percent (5%) of the total VAT collection of the BIR and the BOC from the
immediately preceding year shall be automatically appropriated annually and shall be treated as a special
account in the General Fund or as trust receipts for the purpose of funding claims for VAT refund:
Provided, That any unused fund, at the end of the year shall revert to the General Fund.
Provided, further, That the BIR and the BOC shall be required to submit to the Congressional Oversight Committee
on the Comprehensive Tax Reform Program (COCCTRP) a quarterly report of all pending claims for refund and any
unused fund.
v. Sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air
transport operations. Provided, that the goods, supplies, equipment and fuel shall be used for
international shipping and air transport operation.
vi. Sales to persons or entities whose exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects such sales to zero rate.
2. Sales of services and lease of properties
a) Processing, manufacturing or repacking of goods for other persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sental ng Pilipinas (BSP). (Note With Condition)
b) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside
the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are
performed, the consideration for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
c) Services rendered to persons or entities whose exemption under special laws or international agreement to which the
Philippines is a signatory effectively subjects to supply of such services to zero percent rate.
d) Services rendered to persons engaged in international shipping or air transport operations, including lease of property for
use thereof; Provided, that these services shall be exclusive for international shipping or air transport
operations Notes: Provided, however, that the services referred to herein shall not pertain to those made to common
carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to
another place in the Philippines, the same being subject to 12% VAT.
e) Services performed by subcontractors and /or contractors in processing, converting or manufacturing goods for an
enterprise whose export sales exceed 70% of the total annual production. (Note With Condition)
f) Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. Gross receipts
of international air and sea carriers doing business in the Philippines are still liable to the 3% percentage tax under Sec.
118 of the Tax Code and not to VAT.
g) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind,
hydropower, geothermal and steam, ocean energy, and other emerging sources using technologies such as fuel cells and
hydrogen fuels, Provided, however, that zero rating shall apply strictly to the sale of power or fuel generated through
renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants
generating said power.
b. Effectively zero-rated sales

- Effectively zero-rated sales of goods and properties shall refer to the local sale (constructive export) by a VAT-
registered person to a person or entity who was granted indirect tax exemptions under special laws or international
agreement, such as:
i. Sale to Asian Development Bank (ADB);
ii. Sale to International Rice Research Institute (IRRI);
iii. Sale to duly registered and accredited enterprises with Subic Bay Metropolitan Authority (SBMA); and
iv. Sale to duly registered and accredited enterprises with Philippine Economic Zone Authority (PEZA).
1) Enterprises Registered Under the Bases Conversion and Development Act of 1992 and The Special Economic Zone
Act of 1995 (R.A.7916)
• Registered Activities
Enterprises that are registered with the :
a) Subic Bay Metropolitan Authority (SBMA)
b) Clark Development
c) Philippine Economic Zone Authority (PEZA)
• Unregistered Activities
Engage in registered as well as unregistered activities.
Registered Activities
Taxability of BOI or PEZA Registered Enterprises: Note that BOI income tax holiday incentive has a sunset provision
which expires in not more than 10 years. Upon graduation to the income tax holiday incentive, an entity may register as
an ordinary enterprise or remain as a BOI-registered enterprise. But either way, there is no more income tax holiday
incentive. There are benefits, however, of remaining as a BOI-registered enterprise particularly on VAT.
Income derived by such enterprises from registered activities shall be subject to such tax treatment as may be specified in
the terms of registration, i.e.:
5% preferential tax rate
Income tax holiday (ITH)
Regular income tax rate
• Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on
business establishments operating within the ecozone.
• In lieu thereof, five percent (5%) of the gross income earned (GIE) by all business enterprises within the ecozone
shall be paid and remitted as follows:
• Three percent (3%) to the National Government (60% x 5%)
• Two percent (2%) to the Local Government (40% x 5%)
Unregistered Activities (Outside Registered Operations)

• Subject to the appropriate taxes.
Final tax on passive income
Capital gains tax
30% regular corporate tax (not part of registered activities)
• Sale of scrap materials and income from other activity are subject to regular rate.
• The gain on the sale of factory and office building by a PEZA entity.
PROBLEMS
Problem 1: (Export sales) ABC Company, a VAT-registered business, had the following selected data for the month:
Export sales P1,815,000
Domestic sales 1,452,000
Purchases of goods for export 422,000
Purchases of good for domestic sales 618,200
Purchases of suppliers 254,100
Ending inventory 1,000,000
How much is the VAT payable by ABC Company for the month if the amounts given are inclusive of tax?
Problem 2: (PEZA) A PEZA-registered enterprise has the following data for the current year:
Gross revenue P100,000,000
Cost of services 50,000,000
Operating expenses 10,000,000
Other income 5,000,000
a. How much is the tax due assuming it enjoys income tax holiday?
b. Using the same data in the preceding number, how much is the tax due assuming it is subject to 5% preferential rate?
c. Using the same data in the preceding number, how much is the tax due assuming it is subject to the 30% regular corporate
income tax rate?
8. VAT EXEMPT TRANSACTIONS
VAT-Exempt Transaction Under Section 109

Exempt sale
a. Sale or importation of: of goods
- agricultural and marine food products in their original state. Exempt
- livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and importation
- breeding stock and genetic materials;
Examples of Agricultural and Marine Food Products in their Original State
Agricultural Marine Livestock Poultry
Polished/husked rice Fish Cows Fowls
Corn grits Crustaceans such as: Bulls Ducks
Raw cane sugar and Molasses Lobsters, shrimps Calves Geese
Ordinary salt Prawns, oysters Pigs Turkey
Copra Mussels, clams Sheep
Trout, eels Goats
Rabbits
The term in original state means unprocessed. However, an agricultural or marine food product is still considered
in its original state and unprocessed even if it undergone simple process of:
1. Preparation for the market
2. Preservation or
3. Packaging, including advanced technology means of packaging. (Advanced Technology – means of packaging
which do not alter the nature of agricultural or marine food products being “in original state”.)
Examples:
Acts of preparation Acts of preservation Advanced technology
1. Boiling 1. Freezing 1. Shrink wrapping in plastics
2. Broiling 2. Drying 2. Vacuum packing
3. Husking 3. Salting 3. Tetra-packing
4. Roasting 4. Smoking 4. Other similar packaging methods
5. Stripping
6. Grinding
The following agricultural or marine food products are considered in their original state and are exempt:
1. Husked rice 5. Ordinary salt 9. Ground meat
2. Corn grits 6. Copra 10. Smoked fish
3. Raw cane sugar 7. Dried fish
4. Roasted coffee beans 8. Sundried fruits
The importation of processed products and those considered not in their original state shall be subject to VAT.
Processed agricultural or marine food products pertain to those which have undergone changes in their chemical
compositions or have undergone complex processing or treatment.
Examples of processed agricultural or marine food products:

1. Refined sugar 4. Canned sardines or mackerel
2. Wine or vinegar 5. Vegetable or coconut oil
3. Butter 6. Soy
b. Sale or importation of: Exempt sale

- fertilizers, seeds, seedlings and fingerlings; of goods
- fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the Exempt
manufacture of finished feeds. importation
- (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally
considered as pets);
c. Importation of personal and household effects Exempt

- belonging to residents of the Philippines returning from abroad and importation
- non-residing citizens coming to resettle in the Philippines;
- Provided, that such goods are exempt from custom duties under the Tariff and Customs Code of the Philippines;
d. Importation of professional instruments and implements, tools of trade, occupation or employment, wearing Exempt
apparel, domestic animals, and personal and household effects belonging to persons coming to settle in the importation
Philippines or Filipinos or their families and descendants who are now residents or citizens of other countries, such
parties hereinafter referred to as overseas Filipinos, in quantities and of the class suitable to the profession, rank or
position of the persons importing said items, for their own use and not for barter or sale, accompanying such
persons, or arriving within a reasonable time: Provided, That the Bureau of Customs may, upon the production of
satisfactory evidence that such persons are actually coming to settle in the Philippines and that the goods are
brought from their former place of abode, exempt such goods from payment of duties and taxes: Provided, further,
That vehicles, vessels, aircrafts, machineries and other similar goods for use in manufacture, shall not fall within
this classification and shall therefore be subject to duties, taxes and other charges;
e. Services subject to percentage tax; Exempt sale
of services
f. Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane Exempt sale
into raw sugar; of services
RR No. 4-2015 (Definition of Raw Sugar and Raw Cane Sugar for VAT purposes)
Raw Sugar — refers to sugar whose content of sucrose by weight in dry state, corresponds to a polarimeter
reading of less than 99.5 o. Raw Sugar produced each production year shall be classified. for internal revenue
purposes, as follows:
''A" is raw sugar which is intended for export to the United States Market.
"B" is raw sugar which is intended for the Domestic Market.
''C" is raw sugar which is reserved for, but have not yet matured for release to the Domestic Market.
"D" is raw sugar which is intended for export to the World Market.
''E" is reclassified "D" sugar for sale to Food Processors/Exporters operating Customs Bonded
Warehouse (CBW) or to an enterprise located within the special processing export zone.
'Raw Cane Sugar —refers to sugar produced by simple process of conversion of sugar cane without need of any
mechanical or similar device such as muscovado. For this purpose, raw cane sugar refers only to muscovado
sugar. Thus only muscovado is exempt from VAT under Section 109 (1) (A) of the Tax Code.
Centrifugal process of producing sugar is not in itself a simple process. Therefore, any type of sugar produced
therefrom are not exempt from VAT such as raw sugar and refined sugar.
Only raw sugar cane is exempt from vat.

Raw sugar as sugar whose content of sucrose by weight in dry state, corresponds to a polarimeter reading of less
than 99.5o.
Refined sugar as sugar whose content of sucrose by weight in dry state, corresponds to a polarimeter reading of
99.5o and above.
Sugar Refinery Mill refers to entity, natural or juridical, engaged in the business of milling sugar cane into raw or
in the refining of raw sugar.
Cane sugar produced from the following shall be presumed, for internal revenue purposes, as refined sugar:
1. Product of a refining process
2. Product of a sugar refinery
3. Product of a production line of a sugar mill accredited by the BIR to be producing and /or capable of producing
sugar with polarimeter reading of 99.5o and above.
Nonetheless, sugar produced from sugar production lines accredited by the Bureau to be capable of producing sugar
with polarimeter reading of 99.5° or above shall be prima facie presumed to be refined sugar.
SECTION 3. Advance VAT. — Refined sugar and raw sugar, shall be subject to advance payment of VAT by
the owner/seller before the sugar is withdrawn from any sugar refinery/mill.
Base Price The amount of advance VAT payment shall be determined by applying the vat rate of
12% on the applicable base price of P1,400 per 50 kg. bag for refined sugar and
P1,000 per 50 kg. bag for all other types of sugar.
Exempt from 1. Withdrawal of raw cane sugar
Advance payment of 2. Withdrawal of sugar by duly accredited and registered agricultural cooperative of
VAT (RR 6-2015) good standing.
3. Withdrawal of sugar by duly accredited and registered agricultural cooperative
which is sold to another agricultural cooperative
Withdrawal or The proprietor of a sugar refinery/mill shall not allow the issuance of
transfer of quedan/warehouse receipts or other evidence of ownership or allow any withdrawal of
ownership of sugar sugar from its premises without proof of payment of advance VAT.
Credit for advance In addition to input tax credits under Sec. 110 of the tax code, the advance payment
payment of VAT made by sellers of sugar under RR 6-2015 shall be allowed as credit against
the output tax based on the actual gross selling price of sugar.
g. Medical, dental, hospital and veterinary services, except those rendered by professionals; Exempt sale
of services
Laboratory services are exempted. Hospital bills constitute medical services.
If the hospital or clinic operates a pharmacy or drugstore, the sale of drugs and medicines are :
1. Sales made by the drugstore to the in-patients which are included in the hospital bills are part of
medical bills exempt from VAT.
2. Sales of the drug store to the out-patients are subject to VAT, because they are not part of medical
services of the hospital.
(RR 14-2013) Doctor’s fee paid by a patient admitted/confined in a hospital should not be subject to VAT
h. Educational services rendered by: Exempt sale
- private educational institutions, duly accredited by DepEd, CHED and Technical Education and Skills Development of services
Authority (TESDA), and
- those rendered by government educational institutions;
Educational services does not include seminars, in service training, review classes and other similar services
rendered by persons who are not accredited by the DepED, the CHED, and TESDA
i. Services rendered by individuals pursuant to an employer-employee relationship; Exempt sale

of services
j. Services rendered by regional or area headquarters established in the Philippines by multinational corporations: Exempt sale
- which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in of services
the Asia-Pacific Region and
- do not earn or derive income from the Philippines
k. Transactions which are exempt Exempt sale

- under international agreement to which the Philippines is a signatory or of goods
- under special laws except those granted under PD No. 529, Petroleum Exploration Concessionaries under Exempt sale
Petroleum Act of 1949; of services
l. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Exempt sale
Authority to their members as well as of goods
- sale of their produce, whether in its original state or processed form, to non-members; Exempt
-their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used importation
directly and exclusively in the production and/or processing of their produce;
Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer of the
agricultural product sold is the cooperative itself. If the cooperative is not the producer (e.g., trader), then only
those sales to its members shall be exempted from VAT; It is to be reiterated, however, that sale or importation of
agricultural food products in their original state is exempt from VAT irrespective of the seller and buyer thereof,
pursuant to Subsection (a) hereof;
Sales by Agricultural Cooperatives To member To non-members

Sale of cooperative’s own produce Exempt Exempt
Other than the cooperative’s own produce (i.e. from traders) Exempt VAT*
*Sale to non-members - Exempt if referring to agricultural food products in its original state.
m. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good Exempt sale
standing with the Cooperative Development Authority; of services
Gross receipts by Credit or Multi-purpose cooperatives From members From Non-

members
From lending activities Exempt Exempt
From non-lending activities VAT VAT
Exempt sale
n. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered and in good standing with the of services
Cooperative Development Authority;
- Provided, That the share capital contribution of each member does not exceed P15,000 and regardless of the
aggregate capital and net surplus ratably distributed among the members;
Gross receipts by From members From non-
members
Electric cooperatives VAT VAT
Non-agricultural, non-electric, non-lending/credit cooperatives
Contribution per member ≤ P15,000 Exempt Exempt
Contribution per member > P15,000 VAT VAT
Under the IRR, all duly-registered cooperatives enjoy exemption from transactions with insurance companies and
banks.
Also, cooperatives dealing exclusively with members are exempt from payment of any taxes and fees, including but
not limited to, income tax, percentage tax, donor's tax, excise tax, documentary tax, and the annual registration
fee of P500.
Electric cooperatives are also exempt from payment of Value Added Tax (VAT) on systems loss and VAT on the
distribution of electricity to their members.
Cooperatives doing business with members and non-members with accumulated reserves and undivided net
savings of not more than P10 million are exempted from the same taxes as those that deal with members only.
Likewise, business transactions with members of duly registered cooperatives which have accumulated reserves
and undivided net savings of more than P10 million are exempted from all national internal revenue taxes for which
it is liable.
On the other hand, duly registered cooperatives with accumulated reserves and undivided net savings of more than
P10 million dealing with non-members shall pay their income taxes and VAT at their full rate, subject to some
exemptions.
VAT, will not be collected against sales by agricultural cooperatives, including sales to non-members, importation of
direct farm inputs, machineries and equipment, including spare parts, to be used directly and exclusively in the
production and/or processing of their produce; gross receipts from lending companies by credit or multi-purpose
cooperatives; and sales by non-agricultural, non-electric and non-credit cooperatives.
o. Export sales by persons who are not VAT registered; Exempt sale
Non-VAT VAT registered of goods
registered
Export sales Vat Exempt Vatable (zero rated
sales)
Export Sales by a VAT Registered Entity

Output tax Zero
Input tax 1. Refunded
2. Claimed as deduction or tax credit against output
3. Claimed as tax credit against any internal revenue taxes
Export Sales by a Non-VAT Registered Entity

Output tax VAT exempt
Input tax Not allowed (charged to cost or expense)
:
p. The following sales of real properties are exempt from VAT, namely: Exempt sale
of real
1. Sale of real property not primarily held for sale to customer or held for lease in the ordinary course of trade or properties
business.
However, even if the real property is not primarily for sale to customers or held for lease in the ordinary course
of trade or business but the same is used in the trade or business of the seller, the sale thereof shall be subject
to VAT being a transaction incidental to the taxpayer’s main business;
2. Sale of real property utilized for low-cost housing (price ceiling per unit of: Level 1 - P450,000 to P1,700,000;
Level 2 - P1,700,000 to P3,000,000;
(1) 3. Sale of real property utilized for socialized housing (price ceiling for house and lot – P450,000;
for lot only – P180,000);
4. Sale of residential lot valued at P1,500,000 and below and house and lot and other residential dwellings
valued at P2,500,000 and below.
Provided, That beginnning January 1, 2021, the VAT exemption shall only apply to sale of real properties not
primarily held for sale to customers or held for lease in the ordinary course of trade or business, sale of real
property utilized for socialized housing as defined by Republic Act No. 7279, sale of house and lot, and other
residential dwellings with selling price of not more than Two million pesos (P2,000,000): Provided, further, That
every three (3) years thereafter, the amount herein stated shall be adjusted to its present value using the
Consumer Price
q. Lease of: Exempt lease

- residential units of properties
- with a monthly rental not exceeding P15,000
- regardless of the amount of the aggregate rentals received by the lessor during the year.
Residential unit shall refer to

1. Apartment and houses and lots used for residential purposes
2. Buildings or parts or units thereof used solely as dwellings places (i.e., dormitories, rooms, bed spaces) except
motels, motel rooms, hotel and hotel rooms.
Unit shall refer to

1. Apartment unit in case of apartments
2. House in case of residential houses
3. Per person in case of dormitories, boarding houses and bed spaces
4. Per room in case of rooms for rent
Lease of Residential Units

Monthly Rental Annual Receipts Tax
Monthly rental ≤P15,000 > P3,000,000 VAT exempt
Monthly rental ≤P15,000 ≤P3,000,000 VAT exempt
Monthly rental > P15,000 > P3,000,000 VAT
Monthly rental > P15,000 ≤P3,000,000 VAT exempt**
** Non-VAT registered (Subject to 3% percentage tax)
Lease of commercial units, regardless of the amount of monthly rental is subject to VAT unless the lessor is non-
VAT registered and annual gross receipts ≤P3,000,000.
r. Sale or importation, printing or publication of books and any newspaper, magazine, review or bulletin which Exempt sale
appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the of goods
publication of paid advertisement; Exempt sale
of services
Exempt
importation
s. Transport of passengers by international carriers Exempt
importation
(RR 15-2015) The transport of passengers by international carriers doing business in the
Philippines shall be exempt from value-added tax (VAT), as amended by RA No. 10378.
The transport of cargo by international carriers doing business in the Philippines shall be exempt from VAT
pursuant to Sections 109(1)(E) of the NIRC, as amended by RA No. 10378.
International carriers exempt under Sections 109(1)(S) and 109(1)(E) of the NIRC, as amended, shall not be
allowed to register for VAT purposes.
Sea or Air Carriers owned by Foreign Corporation:

International Carriers (Air/Water)
Passenger VAT exempt Not Subject to 3% Common Carrie Tax
Cargoes VAT exempt 3% Common Carrier Tax
Sea or Air Carriers owned by Domestic Corporation:

From Phils to From Phils. To Abroad
Phils.(>P3,000,000)
Domestic Carriers (Air/Water) VAT – 12% VAT Exempt VAT Zero Rated
Passenger Yes NV registered VAT registered
Cargoes Yes NV registered VAT registered
t. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare Exempt sale
parts thereof for domestic or international transport operations. of goods
(RR 15-2015) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, Exempt
equipment and spare parts thereof for domestic or international transport operations; Provided, however, that importation
the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be
subject to the/requirements on restriction on vessel importation and mandatory vessel retirement program of
Maritime Industry Authority (MARINA).
u. Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations; Exempt
provided, that the fuel, goods, and supplies shall be used for international shipping or air transport importation
operations.
(RR 15-2015) Importation of fuel, goods and supplies by persons engaged in international shipping and air
transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to
the transport of goods and/or passengers from a port in the Philippines directly to a foreign port, or vice-versa,
without docking or stopping at any other port in the Philippines unless the docking or stopping at any other
Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load
passengers and/or cargoes bound for abroad; Provided further, that if any portion of such fuel, goods or supplies
is used for purposes other than that mentioned in this paragraph, such fuel, goods and supplies shall be subject
to 12% VAT;
v. Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank Exempt sale
financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Secs. 121 and of services
122, respectively, of the Tax Code; and
(W) Sale or lease of goods and services to senior citizens and persons with disability, as provided under Republic Exempt sale
Act Nos. 9994 (Expanded Senior Citizens Actof2010) and10754 (An Act Expanding the Benefits and Privileges of of goods
Persons With Disability), respectively; Exempt sale
of services
(X) Transfer of property in merger or consolidation [under section 40 (C) (2) of the NIRC/tax-free exchange] Exempt lease
of properties
(Y) Association dues, membership fees, and other assessments and charges collected by homeowners associations Exempt sale
and condominium corporations; of services
(Z) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); Exempt sale
of goods
(AA) Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension beginning January 1, Exempt sale
2019; and of goods
(BB) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in Exempt sale
the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of Three million pesos of goods
(P3,000,000). Exempt sale
of services
Exempt lease
of properties
Sale or lease of
- goods or properties or
- the performance of services
- other than the transactions mentioned in the preceding paragraphs,
- the annual gross annual sales and/or receipts do not exceed the amount of P3,000,000.
For the purpose of the threshold of P3,000,000, the husband and wife shall be considered separate taxpayers.
However, the aggregation rule for each taxpayer shall apply. For instance, if a professional, aside from the practice
of his profession, also derives revenue from other lines of business which are otherwise subject to VAT, the same
shall be combined for purposes of determining whether the threshold has been exceeded. Thus, the VAT-exempt
sales shall not be included in determining the threshold.
PWD/ Senior Citizen Discount = (Total Billing Amount - VAT) x 20%
Amount Due:
Total bill inclusive of VAT Xxx
Less: VAT (xxx)
Total bill exclusive of VAT Xxx
Less: 20% discount (xxx) **
Total amount Due Xxx
** Total Billing Amount

No. Of Customers Less VAT x 20%
NOTES: Any person whose sales or receipts are exempt under Section 109 (1) (BB) of the Tax Code from the payment of value-
added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or
receipts: Provided, however, that the following shall be exempt from the payment of three percent (3%) percentage
tax:
1. Cooperatives: and
2. Self-employed individuals and professionals availing of the 8% tax on gross sales and/or receipts and other non-operating income,
under Sections 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of the Tax Code, as amended.
Summary: VAT exempt vs. Zero rated sales

VAT exempt sales Zero-rated sales
Output VAT No output VAT No output VAT
Input VAT treatment Deductible against gross income/Cost Creditable or refundable
PROBLEMS
Problem 1: (Passed on VAT) Determine whether or not the VAT can be passed-on and the treatment of the passed-on VAT.
Can pass on VAT? Treatment
1. Sale by a VAT registered seller to a VAT-registered trader Input tax Yes
2. Sale by a VAT registered seller to a VAT-exempt trader Cost and expense Yes
3. Sale by a VAT-registered seller to IRRI - No
4. Sale by a VAT-exempt seller to a VAT-subject trader - No
Problem 2: (VAT Exempt Transactions) Identify whether the following are subject to VAT (T) or Not subject to VAT (NT)
1. Sale of lechon manok (roasted chicken)
2. Sale of coconut
3. Sale of cotton
4. Sale of smoked fish (tinapa)
5. Sale of boneless bangus
6. Sale of marinated bangus
7. Importation of grapes for sale
8. Importation of frozen meat for sale
9. Sale of shells and coral products by a dealer
10. Export sale by a VAT-registered person
11. Export sale by persons who are not VAT-registered
12. Lease of residential units with a monthly rental of P15,000 per unit but with an aggregate annual gross rentals of
P3,500,000
13. Lease of residential units with a monthly rental of P16,000 per unit but with an aggregate annual gross rentals of
P3,500,000
14. Lease of commercial units with a monthly rental of P15,000 per unit but with an aggregate annual gross rentals of
P3,500,000
15. Tuition fees of a private university
16. Tuition fees of a review school
17. Sale of books by a bookstore
18. Importation of machineries and equipment
19. Sale of drugs and medicine in a hospitals pharmacy
20. Painting sold by art gallery
21. Importation of bamboo poles
22. Importation of special feeds for race horses
23. Professional fees by CPA’s/Laywer’s
24. Income earned by banks
25. Hospital services
26. Pawnshops
27. Sale of newspaper
28. Sale of deboned meat
29. Sale of salted egg
30. Keeper of garage owner/operator
31. Parking lot operator
32. Massage parlors
33. Sale of Books
34. Sale of E-Books
35. Sale of ordinary salt
36. Sale of iodized salt
37. Sale of refined sugar
38. Sale of Muscovado
39. Importation of fuel, goods and supplies by persons engaged in international shipping
40. Sale of goods, supplies, equipment and fuel to persons engaged in international shipping
41. Medical services rendered by professionals
42. Medical services rendered to confined patient by a doctor employed by the hospital
43. Sale of drugs and medicine by a pharmacy operating in a hospital (Out patient)
44. Sale of drugs and medicine by a pharmacy operating in a hospital (In patient)
45. Sale of two (2) adjacent lots to one buyer where the aggregate value exceeds P1,500,000
46. Sale of two (2) adjacent condominium units to one buyer where the aggregate value exceed P2,500,00
47. Sale of condominium unit and parking lot (selling price of condominium unit is P3,000,000 inclusive of the parking lot
valued at P500,000)
a. Parking lot
b. Condominium unit
37. Sale of medicine to Senior Citizen and PWD
38. Association dues, membership fees, and other assessment and charged collected by homeowners associations and
condominium corporation
39. Sale of gold to the BSP
40. Sale of drugs and medicines prescribed for diabetes, high cholesterol and hypertension, beginning January 1, 2019
V. Sources of Input VAT
1. Importation and Domestic Purchase of Goods

a. Goods for sale
b. Goods for conversion into finished product (including packaging materials)
c. Goods for use as supplies
d. Goods for use as materials supplied in the sale of services
e. Goods for use in trade or business for which depreciation or amortization is allowed
f. Transactions deemed sale (CCDDR)
g. In case of importation, an input tax may be claimed for the importation of goods for business use by a VAT-
registered taxpayer. Input tax paid by a non-VAT person, whether for personal or business use, are not creditable.
Also, input VAT paid by a VAT registered on goods imported for personal use are not creditable.
2. Purchase of Services
3. Purchase of Capital Goods
Claim for input tax on depreciable goods
a. Applies only to domestic purchase or importation of capital goods subject to depreciation for income tax
purposes.
b. Where the aggregate acquisition cost (exclusive of VAT) of depreciable capital goods during any calendar month
does not exceed P1,000,000, the total input tax is creditable against output tax in the month acquired
(Outright Credit)
c. Where the aggregate acquisition cost (exclusive of VAT) of depreciable capital goods during any calendar month
exceeds P1,000,000, the total input tax is creditable against output tax, as follows:
i. Spread evenly over 60 months (starting in the calendar month acquired) the input tax, if the
estimated useful life of the depreciable capital good is 5 years or more.
ii. Spread evenly over the actual number of months of estimated useful life (starting in the calendar
month acquired) the input tax, if the estimated useful life of the depreciable capital good is less
than 5 years.
d. If the depreciable capital good is sold or transferred within a period of 5 years or prior to the exhaustion of
the amortizable input tax thereon, the entire unamortized input tax on the capital good sold or transferred
can be claimed as input tax credit in the month/quarter when the sale or transfer was made.
Deductibility of Depreciation Expenses (Purchase of Vehicles and Other Expenses Related)

1. If the depreciable cost exceed P2,400,000:
a. No input tax
b. No depreciation expense
c. No maintenance expense
The following guidelines shall be observed in determining whether depreciation expense can be claimed or not on
account of Vehicles capitalized by the taxpayer, or in claiming other expenses and input taxes on account of said
Vehicle:
No deduction from gross income for depreciation shall be allowed unless the taxpayer substantiates the purchase with
sufficient evidence, such as official receipts or other adequate records which contain the following, among others:
a Specific motor vehicle identification Number, Chassis Number, or other registrable identification numbers of the
vehicle.
b. The total price of the specific Vehicle subject to depreciation; and
c. The direct connection or relation of the Vehicle to the development, management operation, and/or conduct of
the trade or business or profession of the taxpayer.
2. Only one vehicle for land transport is allowed for use of an official or employee, the value of which should not
exceed Two Million Four Hundred Thousand Pesos (P2,400,000);
3. No depreciation shall be allowed for yachts, helicopters, airplanes and/or aircrafts, and land vehicles which
exceed the above threshold amount, unless the taxpayer’s main line of business is transport operations or lease of
transportation equipment and vehicles purchased are used in said operations;
4. All maintenance expenses on account of non-depreciable vehicles for taxation purposes are disallowed in its entirely;
5. The input taxes on the purchase of non-depreciable Vehicles and all input taxes on maintenance expenses incurred
thereon are likewise disallowed for taxation purposes.
4. Zero-Rated Sales
a. The input VAT may at the option of the taxpayer, be claimed for (a) tax refund, the claim of which shall be filed
and made within 2 years from the close of the quarter when such sales are made, or (b) tax credit against
internal revenue taxes.
Refund of Input Tax
a. Input Tax on Zero-Rated Sales of Goods or Property, Etc

A VAT registered person whose sales of goods, properties or services are zero rated or effectively zero rated may
apply for the issuance of a tax credit certificate or refund of input tax attributable to such sales. The input tax that may
be subject of the claim shall exclude the portion of input tax that has been applied against output tax. The application
should be made within 2 years after the close of the taxable quarter when the sales were made.
b. Unused Input Tax of Person Who Retired or Ceased Business

A VAT registered person whose registration has been cancelled due to retirement or cessation of business, or due to
change in or cessation of status may, within 2 years from the date of cancellation, apply for the issuance of a tax
credit certificate for any unused input tax which he may use in payment of his other internal revenue taxes. He shall
be entitled to a refund if he has no internal revenue tax liabilities.
Rule on Refund or Conversion of Tax Credit Certificate

1. Zero-rated Sales – file application with BIR within 2 years from the end of the taxable quarter.
2. Cancellation of VAT registration- files application with BIR within 2 years from date of cancellation.
.
c. Period of Refund or Tax Credit of Input Tax
Refund or tax credit certificate shall be granted within 90 days from the date of submission of complete documents.
In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of
submission of the official receipts or invoices and other documents in support of the application filed in accordance with
Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not
proper, the Commissioner must state in writing the legal and factual basis for the denial.
“In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the
receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That
failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety
(90)-day period shall be punishable under Section 269 of this Code.
d. Manner of Giving Refunds
Refunds shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his authorized
representative without the necessity of being countersigned by the COA chairman.
5. Presumptive Input VAT

a. Persons or firms who can avail:
Processor of: (SaMaMi) Manufacturer of: (ReCoPa)

1. Sardines 1. Refined sugar
2. Mackerel 2. Cooking oil
3. Milk 3. Packed noodle based instant meals
b. Basis of presumptive input tax - Gross value in money of purchases of primary agricultural and marine
food products used as inputs in the processing or manufacturing of SaMaMi and ReCoPa.
c. Rate of presumptive input tax – 4%
6. Transitional Input VAT
a. Persons who can avail:
a. Persons who become liable to VAT for the first time
b. Persons who elect to be VAT-registered
b. Basis of transitional input tax - Beginning inventory of VAT-subject goods, materials and supplies.
c. Transitional input tax allowed - The HIGHER between:
a. 2% of the VAT-subject beginning inventory value for income tax purposes; and
b. Actual VAT paid on such beginning inventory.
7. Standard Input VAT (Sale to Government)

a. The sale to Government or its political subdivision by VAT-registered person shall be subject to 12% VAT, provided
that:
i. The government shall withhold 5% final withholding VAT upon payment to the VAT registered person;
ii. The VAT-registered person may claim a Standard Input VAT of 7% against its output VAT from the sale to
government. The Actual Input VAT attributable to sales of goods and services to the government shall not
be credited against the Output vat arising from sales to non-government entities.
VI. Withholding VAT

Transactions Withholding Agent Withholding VAT Rate
1. Purchase of goods by Government or any of its political subdivisions, 5% of gross payment made (final)
Government, political instrumentalities or agencies, including
subdivisions, etc. government owned or controlled corporations
(GOCCs)
2. Purchase of services Government or any of its political subdivisions, 5% of gross payment made (final)
by Government, instrumentalities or agencies, including
political subdivisions, government owned or controlled corporations
etc. (GOCCs)
3. Payments for services Government or any of its political subdivisions, 12% on payments (final)
rendered in the instrumentalities or agencies, including
Philippines by a non- government owned or controlled corporations
resident (GOCCs)
Private corporations, individuals, estate and

trusts, whether large or non-large taxpayers
4. Purchases of goods or Payor-purchaser in the course of trade of 12% of payee’s gross sales or receipts
services in the course business
of trade or business
(payee-seller has more Payee-seller shall execute:
than one payor-buyer) 1. Waiver of the privilege to Claim input
tax credit and
2. Notice of availment of the option to pay
the tax through the withholding process
5. Purchases of goods or Payor-purchaser in the course of trade of 12% of payee’s gross sales or receipts
services in the course business
of trade or business
(payee-seller has only Payee-seller shall execute waiver and notice of
one payor-buyer for availment as in above
the whole year)
Withholding of Value-added Tax. – The Government or any of its political subdivisions, instrumentalities or agencies, including
government-owned or -controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and
services which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-
added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at the rate of five percent
(5%) of the gross payment thereof: Provided, That beginning January 1, 2021, the VAT witholding system under this Subsection
shall shift from final to a creditable system: Provided, further, That the payment for lease or use of properties or property rights
to nonresident owners shall be subject to twelve percent (12%) withholding tax at the time of payment: Provided, finally, That
payments for purchases of goods and services arising from projects funded by Official Development Assistance (ODA) as defined
under Republic Act No. 8182, otherwise known as the ‘Official Development Assistance Act of 1996’, as amended, shall not be
subject to the final withholding tax system as imposed in this Subsection. For purpose.es of this Section, the payor or person in
control of the payment shall be considered as the withholding agent
VII. Remittance of withholding VAT

Remittance of • First two months of each calendar quarter : 10th (non-eFPS) or 15th (eFPS), of the following month
withholding VAT • Quarter: Last day of the month following the close of the quarter.
BIR form BIR Form 1600
Withholding Tax Statement for Taxes Withheld - Every payor required to deduct and withhold taxes under this subsection shall
furnish each payee, a withholding tax statement, in triplicate, within twenty (20) days from the close of the quarter. The
prescribed form (BIR Form No, 2307 for creditable withholding tax and BIR Form 2306 for final withholding tax) shall be
used, showing the monthly income payments made, the quarterly total, and the amount of taxes withheld. Provided, however, that
upon request of the payee, the payor must furnish such statement, simultaneously with the income payment.
PROBLEMS
Problem 1: (Sources of Input tax) A processor of sardines and mackerel registered under the VAT system on January 2, 20x6
after his sales exceeded the VAT threshold amount in the previous year had the following selected data in his books:
Inventory, December 31, 20x5 purchased from VAT-registered seller:

Cost P600,000.00
Net realizable value 500,000.00
VAT paid on December 31, 20x5 inventory 72,000.00
Inventory, December 31, 20x5 purchased from

VAT-exempt seller 800,000.00
The following transactions recorded in his books during the first month of the 20x6 were:
Sales of canned sardines and mackerel, net of VAT P800,000.00
Purchases of fresh sardines 70,000.00
Purchases of ordinary salt, onions, tomatoes, ginger and other spices 60,000.00
Purchases of labels and packaging materials, net of VAT 50,000.00
Bills from a trucking company for the delivery of canned
sardines and mackerel, net of VAT (only P10,000 was paid) 40,000.00
a. How much is the output tax?

b. How much is the transitional input tax?
c. How much is the presumptive input tax?
d. How much is the total creditable input taxes?
e. How much is the value-added tax payable?
Problem 2: (Standard Input Tax)A VAT-registered trader has the following transactions:
Sales of good to private entities, net of 12% VAT P 2,500,000
Purchases of goods sold to private entities,
gross of 12% VAT 896,000
Sales to a government owned corporation (GOCC),
net of 12% VAT 1,000,000
Purchases of goods sold to GOCC, net of 12% VAT 700,000
Required:
a. How much is the withholding VAT?
b. How much is the standard input tax?
c. What is the treatment of the excess actual input VAT attributable to sales to GOCC?
d. How much is the creditable input tax on sale to private entities?
e. How much is the VAT payable?
Problem 3 (Capital Goods and Vehicles) A VAT taxpayer, made the following purchases of capital goods and vehicles from VAT
registered sellers for use in his business (amounts are net of vat) for the 3rd quarter and fourth quarter:
Year 20X1 Estimated life Cost
July 10- Machine 1 2 years P200,000
July 16- Machine 2 6 years 900,000
Aug. 8 - Machine 3 2 years 400,000
Aug. 20 - Machine 4 6 years 500,000
Sept. 14 - Machine 5 7 years 2,000,000
Oct. 15 – 1 vehicle for the president of the company 10 years 2,500,000
Oct. 15 – 1 vehicle for the vice president of the company 10 years 2,400,000
Nov. 15 – Maintenance of vehicle 1 (president) 500,000
Nov. 15 – Maintenance of vehicle 1 ( vice president) 400,000
Dec. 15 – vehicle (mainline of business) 10 years 3,000,000
Machine 1 was retired on September 30, 20X1.
Required:
1. The input tax in July is___
2. The input tax in August is___
3. The input tax in September is___
4. The input tax in October is__
5. The input tax in November is__
6. The input tax in December is___
VIII. Excess output or input taxes

a. If at the end of any taxable month or quarter the output tax exceeds the input tax, the difference is VAT payable
(current liability).
b. If the input tax at the end of any taxable quarter (inclusive of input tax carried over from the previous quarter)
exceeds the output tax, the excess input tax (current asset) shall be carried over to the succeeding taxable
month or quarter, provided that any input tax attributable to 0-rated sales by a VAT-registered person may at
his option be refunded or applied for a tax credit certificate.
c. Input taxes on zero-rated sales of goods, properties or services

The input taxes on zero-rated sales of goods, properties or services may at the option of the VAT-registered person
be:
i. Refunded (within 2 years after the close of the quarter when such sales were made); or
ii. Converted into tax credit certificates which may be used in paying other NIRC taxes (the two-year
peremptory period applies); or
iii. Applied against the output tax of domestic sales.
d. Unused input tax of persons who retired

Unused input taxes of persons whose registration has been cancelled due to retirement from or cessation of
business may be converted into tax credit certificate which may be used in payment of other NIRC taxes within 2
years from the date of cancellation or claim for refund if there be no internal revenue tax liabilities against which
the tax credit certificate may be utilized.
e. Period within which to refund

Refund or tax credit certificate shall be granted within 90 days from the date of submission of complete documents.
If the Commissioner fully or partially denies the application for VAT refund or issuance of tax credit certification
(TCC) on the expiration of 90-day period, the taxpayer may appeal to the Court of Tax Appeals within 30 days from
the receipt of the denial; otherwise, the decision will become final.
f. Manner of giving refunds

Refunds shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his authorized
representative without the necessity of being countersigned by the COA Chairman.
VI. Administrative Requirements

1. Return and payment of VAT
a. In general - VAT return shall be filed and the tax due thereon be paid within 25 days following the close of each
taxable quarter.
b. VAT-registered persons shall declare and pay VAT on a monthly basis, not later than the 20th day following
the close of each of the first two months of a taxable quarter; taxpayers under the EFPS, on or before a
prescribed due date based on the business industries classification.
VAT Filing and Payment
Monthly 20th (Non-EFPS) or 21st -25th (EFPS), of the following month (BIR Form 2550M)
Quarterly 25th of the month following the close of the taxable quarter (BIR Form 2550Q)
Effective 2023: VAT Filing shall be limited to quarterly filing and payment
Business Industry Period of Filing of Monthly VAT Declarations

Group A: 25 days following the end of the month
Group B: 24 days following the end of the month
Group C: 23 days following the end of the month
Group D: 22 days following the end of the month
Group E: 21 days following the end of the month
GROUP A
Banking institutions
Insurance and pension funding
Non-bank financial intermediation
Activities auxiliary to financial intermediation
Water transport
Hotels and restaurant
Land transport
GROUP B
Manufacture and repair of furniture
Manufacture of basic metals
Manufacture of chemicals and chemical products
Manufacture of coke, refined petroleum and fuel products
Manufacture of electrical machinery and apparatus N.E.C
Manufacture of fabricated metal products
Manufacture of food, products, and beverages
Manufacture of machinery and equipment NEC
Manufacture of medical, precision, optical instruments
Manufacture of motor vehicles, trailers and semi-trailers
Manufacture of office, accounting and computing machinery
Manufacture of other non-metallic mineral products
Manufacture of other wearing apparel
Manufacture of radio, TV and communication equipment/apparatus
Manufacture of rubber and plastic products
Manufacture of textiles
Manufacture of wood and wood products
Manufacture NEC
Metallic Ore Mining
Non-metallic Mining and Quarrying
GROUP C
Retail sale
Wholesale Trade and Commissioner trade
Sale, maintenance, repair of motor vehicle, sale of automotive fuel
Collection, purification and distribution of water
Computer and related activities
Real estate activities
GROUP D
Air transport
Electricity, Gas, Steam and Hot water supply
Postal and telecommunications
Publishing, printing and reproduction of recorded media
Recreational, cultural and sporting activities
Recycling
Renting of Goods and Equipment
Supporting and Auxiliary Transport Activities
GROUP E
Activities of membership organization inc.
Health and social work
Private educational services
Public educational services
Research and development
Agricultural, Hunting and Forestry
Farming of animals
Fishing
Other service activities
Miscellaneous business activities
Unclassified
a. Filing of quarter return and payment of value added tax- Within twenty five (25) days following the close of the taxable
year.
b. Meaning of taxable quarter - The term “ Taxable Quarter” shall mean the quarter that is synchronized to the income tax
quarter of the taxpayer (i.e. calendar quarter or fiscal quarter).
c. Quarter return includes the amounts reflected in the monthly VAT declarations- Amounts reflected in the monthly VAT
declarations for the first two (2) months of the quarter shall still be included in the quarterly VAT return, which reflects the
cumulative figures for the taxable quarter.
d. Monthly payments to be credited in the quarterly VAT return- Payments in the monthly VAT declarations shall be
credited in the quarterly VAT return to arrive at the net VAT payable, or excess input tax/overpayment as of the end of the
quarter.
e. Deductions from the quarterly VAT payable/(Excess input tax)- The VAT payable/Excess Input Tax for each taxable
quarter shall be reduced by the total amount of taxes previously paid for the immediately preceding two (2) months, and the
advance payments/ creditable VAT withheld by the payors for the three months of the quarter.
f. Rule in Carry-Over of Excess Input Tax

1) Excess input tax in the 1st month of the quarter can be carried over to the 2nd month.
2) Excess input tax in the 2nd month CANNOT be carried over the 3rd month (quarterly VAT).
3) Excess input tax in the 3rd month may be carried over to the::
a. 1st month of the subsequent quarter (monthly return) (BIR Form 2550-M)
b. 3rd month of the subsequent quarter (quarterly return) (BIR Form 2550-Q)
Where to file the return and pay the tax - In any one of the following located within the revenue district where the taxpayer
is registered or required to register:
a. Authorized agent bank
b. Revenue district office
c. Revenue collection officer
d. Duly authorized city or municipal treasurer
Only one consolidated quarterly VAT return or monthly VAT declaration covering the results of operation of the head office as
well as the branches for all lines of business subject to VAT shall be filed by the taxpayer, for every return period, with the BIR
office where the taxpayer is required to be registered
2. Persons whose registration has been cancelled

a. Any person whose registration has been cancelled shall file a return and pay the tax due thereon within 25 days
from the end of the month the business ceases to operate or when VAT registration has been officially cancelled.
b. Only one consolidated return shall be filed for the principal place of business or head office and all branches.
PROBLEMS
Problem 1: (Mixed Transactions) ABC has the following information:
Domestic Export
Sales to private entities P1,000,000 P1,000,000
Sales to the government 1,000,000
Sales of exempt goods 1,000,000
Input taxes passed on by VAT-registered suppliers on:
Sales to private entities 60,000 40,000
Sales to the government 50,000
Sales of exempt goods 20,000
Purchase of depreciable capital goods not attributable to any specific activity (monthly authorization for 240,000
60 months)
The sales to the government were subjected to the automatic deduction of the creditable withholding tax (CWT) on its purchases
from domestic suppliers.
Required:
a. The input taxes attributable to export sales which may be refunded or credited against any other internal revenue tax, including
the value added tax on domestic sales to private entities:
b. What is the treatment of the difference between the actual and standard input tax on sales to the government?
c. The journal entry to take up the domestic sales to the government is:
d. The journal entry to recognize the difference between actual and standard input tax on the sales to the government is:
b. The input taxes attributable to export sales which may be refunded or credited against any other internal revenue tax, including
the value added tax on domestic sales to private entities:
c. What is the treatment of the difference between the actual and standard input tax on sales to the government?
d. The journal entry to take up the domestic sales to the government is:
e. The journal entry to recognize the difference between actual and standard input tax on the sales to the government is:
Problem 2: (Quarterly VAT) The following data for the current year are presented to you:
Jan Feb Mar Apr May Jun
Output tax P100,000 P120,000 P80,000 P50,000 P90,000 P120,000
Input tax 80,000 110,000 120,000 100,000 50,000 60,000
Required:
1. Compute the VAT payable for the months of January to June.
2. What is the BIR Form Return to be filed?
3. When is the last day for the filing of VAT return?
4. Assuming electronic filing and the taxpayer is under Group C, when in the last day for the filing of VAT return?
VII. Invoicing Requirement, Refund of Input Taxes and Others
1. Invoicing requirement for VAT-registered taxpayers (VAT Invoice and VAT Official Receipt)
A VAT-registered person shall issue:
a. A VAT invoice for every sale, barter or exchange of goods or properties; and
b. A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.
2. Information contained in the VAT invoice or VAT official receipt

1. Name of the seller
2. Business style of the seller
3. Business address of the seller
4. A statement that the seller is a VAT-registered person, followed by his TIN
5. Name of buyer
6. Business style of buyer
7. Address of Buyer
8. TIN of buyer if VAT-registered and amount exceed P1,000
9. Date of Transaction
10. Quantity
11. Unit cost
12. Description of the goods or properties or nature of the service
13. Purchase price plus the VAT, provided that:
The amount of tax shall be shown as a separate item in the invoice or receipt;
If the sale is exempt from VAT, the term “VAT-Exempt Sale” shall be written or printed prominently on the invoice
or receipt;
If the sale is subject to zero percent (0%) VAT, the term “ZERO-RATED SALE” shall be written or printed
prominently on the invoice receipt;
If the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or
exempt from VAT (mixed sale), the invoice or receipt shall clearly indicate the breakdown of the sales price
between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale
shall be shown on the invoice or receipt.
14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt.
What additional information must be contained in the VAT invoice or VAT receipt in the case of sales in the amount of
one thousand pesos. P1,000 or more?
In the case of sales in the amount of one thousand pesos (P1,000) or more where the sale or transfer is made by a VAT-registered
taxpayer to another VAT-Registered person, the name, business style, if any, address and Taxpayer Identification Number
(TIN) of the purchaser, customer or client.
Section 237 Receipts or Invoices
It is expressly provided that the issuance of the receipt or invoice shall be made at the point of sale.
The threshold amount is increased to ₱100.00.
Within 5 years from the effectivity of the law and upon the establishment of the necessary storing and processing system, the
following shall be required to issue electronic receipts or sales or commercial invoices in lieu of manual receipts/invoices:
•taxpayers engaged in the export of goods and services
•taxpayers engaged in e-commerce, and
•taxpayers under the jurisdiction of the Large Taxpayers Service Other taxpayers may also opt to issue electronic receipts/invoices
in lieu of manual ones.
The digital record of electronic receipts/invoices shall be kept by the purchaser, customer or client and the issuer for a period of 3
years from the close of the taxable year.
Section 237 (A) Electronic Sales Reporting System [new]
The taxpayers that will be mandated under Section 236 to issue electronic receipts/invoices shall be required to electronically
report their sales data to the BIR through the use of electronic point of sales systems.
The machines, fiscal devices, and fiscal memory devices shall be at the expense of the taxpayers.
3. Consequence of issuing an erroneous VAT invoice or VAT official receipts

a. By a Non-VAT registered person:
• If a person who is not a VAT registered person issues an invoice or receipt showing his TIN followed by the word
VAT, the Non-VAT person shall be liable to :
1) The percentage tax applicable to his transactions.
2) The VAT due on the transactions without the benefit of any tax credit and
3) 50% surcharge.
Type of Taxable Sale Tax Payable
Sales of non-VAT taxpayers who issues VAT invoice or receipt Percentage tax + Output VAT+50% surcharge
b. By a VAT registered person:

• If a VAT registered person issues a VAT invoice or official receipt for a VAT-exempt transaction but fails to display
prominently on the invoice or receipt the term “VAT Exempt Sale”, the transaction shall become taxable and the issuer shall
be liable to pay the VAT thereon.
In both cases, if the invoice/receipts contain the required information, the “purchaser” shall be allowed to recognize an input tax
credit.
Exempt sales billed as regular sales Output VAT – Input VAT
c. By a VAT registrable person:

• The sales of registrable person are subject to VAT despiste their non-registration as VAT taxpayers but no input VAT credit
is allowed
Sales of VAT-registrable persons Output VAT
4. Power of the Commissioner to Suspend Business Operations

The Commissioner of Internal Revenue or his authorized representative may order suspension or closure of a business
establishment for a period of not less than 5 days for any of the following violations:
a. Failure to issue receipts or invoices;
b. Failure to file VAT return;
c. Understatement of taxable sales or receipts by 30% or more of the correct taxable sales or receipts for the taxable
quarter.
d. Failure of any person to register as required under the law.
5. Mandatory Registration under the VAT System

Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or
exchange of services shall be liable to register if:
a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Sec. 109 (1)(A) to (AA)
of the Tax Code, have exceeded P3,000,000; or
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 Sec. 109 (1)(A) to (AA) of the Tax Code, will exceed P3,000,000.
6. Optional Registration of VAT-Exempt Persons

a. Any person who is VAT-exempt under Section 109 (BB) not required to register for VAT may elect to be VAT-registered by
registering with the RDO that has jurisdiction over the head office of that person, and pay the annual registration fee of P500
for every separate and distinct establishment;
b. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed transactions) may opt
that the VAT apply to his transactions which would have been exempt under Section 109 (1) of the Tax Code;
c. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed
P10,000,000 derived from the business covered by the law granting the franchise may opt for VAT registration. This option,
once exercised, shall be irrevocable.
• Once the election is made, it shall be irrevocable for a period of three (3) years counted from the quarter when the election
was made except for franchise grantees of radio and TV broadcasting whose annual gross receipts for the preceding year do
not exceed ten million pesos (P10,000,000) where the option becomes perpetually irrevocable.
VIII. Substituted VAT Return
1. Substituted VAT Return (Payee with Lone Payor)

a. In case of sale of goods or services by persons subject to VAT, whose gross sales or receipts have been already been
subjected to VAT by the lone payor, payee (seller) shall no longer be required to file the monthly VAT declaration
and the quarterly returns
b. The Monthly Remittance Return of VAT Withheld duly filed by the withholding agent-payor serves as the substituted
return of the payee (seller) with lone payor
2. Payee with several payors

Payees with several payors are still required to file the regular VAT return reflecting the consolidated total of all taxable
transactions for the taxable period and applying as tax credits the taxes withheld by several payors
IX. Substituted Official Receipts
1. Sellers who are exempt from issuing Official Receipts

Sellers of services whose gross receipts have been subjected to Final VAT shall be exempt from the obligation of
issuing duly registered VAT official receipts covering their receipts for services sold
X. Short Period Return
1. Final return of a person who retires from business

Any person who retires from business with due notice to the BIR office where the taxpayer (head office) is registered and
whose VAT registration has been cancelled shall file a final quarterly return and pay the tax due thereon within twenty five (25)
days from the end of the month when the business ceases to operate or when the VAT registration has been officially cancelled
2. Subsequent monthly declarations/quarterly returns to be filed after retirement
Subsequently monthly declarations/quarterly returns are still required to be filed if the results of the winding up of the
affairs/business of the taxpayer reveal taxable transactions
3. Effective date of VAT registration
All persons first registered shall be liable to VAT on the effective date of registration stated in their Certificates of Registration
(i.e. the first day of the month following their registration)
4. Initial Monthly VAT declaration or quarterly VAT return
a. If the effective date of registration falls on the first or second month of the taxable quarter, the initial monthly VAT
declaration shall be filed within twenty (20) days after the end of the month, and the initial quarterly return shall be filed on
or before the 25th day after the end of the taxable quarter
b. If the effective date of registration falls on the third month of the taxable quarter, the quarterly return shall be filed on or
before the 25th day of the month following the end of the taxable quarter, and no monthly VAT declarations need be filed for
the initial quarter.
XI. Submission of Quarterly Summary Lists of Sales/Purchases
1. Persons required to submit summary lists of sales/purchases (RR 1-2012) All Value-Added Tax (VAT) registered
taxpayers:
Persons Required to Submit Summary Lists of Sales/Purchases.
a. Persons Required to Submit Summary Lists of Sales.
All persons liable for VAT such as manufacturers, wholesalers, service-providers, among others are required to submit
Summary List of Sales.
b. Persons Required to Submit Summary Lists of Purchases.
All persons liable for VAT such as manufacturers, service-providers, among others are required to file Summary List of
Purchases.
2. Where to File the Summary Lists of Sales or Purchases

The quarterly summary list of all sales or purchases, whichever is applicable, shall be submitted to the RDO, LTDO, or LTAD
having jurisdiction over the taxpayer.
3. When to submit the Summary lists of sales or purchases

The quarterly summary list shall be submitted, on or before the 25th day of the month following the close of the taxable quarter
(VAT quarter) – calendar quarter or fiscal quarter
Taxpayers under the jurisdiction of the LTS, and those enrolled under EFPS, shall, through electronic filing facility submit their
Summary List of Sales/Purchases to the RDO/LTDO/LTAD, on or before the 30th day of the month following the close the
taxable quarter.
4. Submission of Summary lists of Sales or Purchases in Magnetic Form

For taxpayers authorized to use computerized accounting system, the above list shall be submitted in magnetic form using
Compact Disk-Recordable (CDR)
5. Bookkeeping Requirements
a. Subsidiary sales and purchase ledgers to record daily sales and purchases.
b. Subsidiary record in ledger from for depreciable assets and capital goods.
c. Total input tax and monthly input tax claimed in VAT return.
PROBLEMS
Problem 1: (Short period return) (april 25) (March 20/Arpirl 25) (Arpil 25)
Case 1. A VAT registered taxpayer retires from business on February 20X7 and his VAT registration is cancelled. When is the filing
of the final quarterly return and payment of the VAT due thereon?
Case 2. The effective date of registration falls on February 20X7. When is the filing of the initial monthly VAT declaration and the
quarterly VAT return and the payment of the VAT due thereon?
Case 3. The effective date of registration falls on March 20X7. When is the filing of the initial monthly VAT declaration and the
quarterly VAT return and the payment of the VAT due thereon?
Problem 2: Indicate what VAT invoice or VAT official receipt shall be issued by the following assuming VAT threshold amount is
exceeded.
1. School supplies trader Inv
2. Trucking business Rec
3. Massage parlor Rec
4. Banana farm owner Non inv
5. Wareshousing services Or
6. Fuel or power supplier generated from renewable sources of energy Zero invoi
7. Movie theatre owner Or
8. Professional basketball player in the PBA Or
9. Contract singer of Radio Companies Or
10. Fresh vegetable dealer Non vat invoi
Problem 3: Indicate whether receipts are required and whether the receipts should indicate the name and address of the
customer/client in the following cases:
Amount of Receipt Name of
Sale or Issued Customer
Service (Yes or No) (Yes or No)
1. Restaurant ₱ 250 Yes Yes, if sale is made by a person liable to VAT to
2. Restaurant 90 Yes another person liable to VAT, or if receipt is issued to cover
3. Restaurant 20 No payment made as rentals, commissions, compensation,
4. Manufacturer 250 Yes or fees.
5. Manufacturer 90 Yes
6. Manufacturer 20 No No, if otherwise.
7. Practitioner 250 Yes
8. Practitioner 20 No
Note: Answers in the second column follow the general rule. However, receipts shall be issued regardless of amount where:
a) the sale is made by a person liable to VAT to another person liable to VAT; or
b) the receipt is issued to cover payment made as rentals, commissions, compensation, or fees.

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TAXATION

FAR EASTERN UNIVERSITY – MANILA

I. Transactions subject to VAT

1. Transactions Tax Based

2. In the Course of Trade or Business – Defined

3. Mandatory Registration under the VAT System

4. Optional Registration of VAT-Exempt Persons

Annual Sales/Receipts > P3,000,000 → VAT

3. VAT output taxes Page 1 of 28

Definition (RMC 7-2014)

1. Agricultural growers/producers (farmers/fishermen),

Problem 2: (VAT Threshold) Sales during the year:

The value-added tax of B:_____

II. Pro-Forma Computation

Invoicing Requirement of Subsequent Sale of Goods or Properties Deemed Sold

Input VAT on goods or properties Deemed Sold

Billing Requirements on Output VAT

Determination of the Output VAT

Note: The same computational procedure is employed if:

Rule on VAT Not Separately Billed

Incorrect Billing of VAT

III. Concept of VAT

IV. Sources of Output VAT

“Importer” – refer persons Dutiable Value xxx

Note: *** Examples of other charges prior to release:

Note: Facilitation fee(TARIFA)- not included as a charges prior to release from

Excise tax is applicable to manufacturers and importers of sin products, non-

(RR 16-2005): No VAT shall be collected on importation of goods which are

Problem 2: (VAT Importation) A VAT registered taxpayer imported goods as follows:

3. Sale of real properties in the course of trade or business

Installments received Xxx

a. Classification of Real Property

4. Sale of Scrap Materials

Also, aside from VAT is subject to creditable withholding tax :

VAT on Service Contractors

VAT on Security Agency

VAT on Real Estate Brokers

VAT on Dealers in Securities

VAT on Lending Investors

VAT on Transportation Services

VAT on Lessor of Commercial and Residential Units

VAT on the sale of electricity by generation and distribution companies

Transaction Tax Base Tax Rate

Sale of power or fuel generated through renewable source of energy

Types of business in the electricity business:

Distribution companies and transmission companies are just “ pass through”

The Value added tax payable is

6. Deemed Sale Transactions (CCDDR)

Notes: 1) In cases 1 to 4 the tax base is the market value

1. Sales of goods and properties

2. Sales of services and lease of properties

b. Effectively zero-rated sales

Unregistered Activities (Outside Registered Operations)

8. VAT EXEMPT TRANSACTIONS

VAT-Exempt Transaction Under Section 109

Examples of processed agricultural or marine food products:

b. Sale or importation of: Exempt sale

c. Importation of personal and household effects Exempt

Only raw sugar cane is exempt from vat.

i. Services rendered by individuals pursuant to an employer-employee relationship; Exempt sale

k. Transactions which are exempt Exempt sale

Sales by Agricultural Cooperatives To member To non-members