Zero- rated / Effectively Zero-rated Transactions

Purpose: To exempt the transaction completely from VAT previously collected since
input taxes passes to him may be recovered as refunds or credits

A rate 0% of the gross selling price will be applied if:

1. Export sale;
2. Foreign currency denominated sale; or
3. Sales to persons or entities whose exemption under the special laws, or
international agreements to which the Philippines is a signatory (effectively-zero
rated sales).

FOR GOODS

EXPORT SALES

- The sales and actual shipments or exportations of goods from the Philippines to a
foreign country, irrespective of an shipping arrangement that may be agreed
upon which may influence or determine the transfer of ownership of the goods,
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 BSP.

NOTE: See page 292 for other export sales example.

FOREIGN CURRENCY DENOMINATED SALES

- Sales to non-residents of goods assembled or manufactures in the Philippines,

- For delivery to residents in the Philippines, and
- Paid in acceptable foreign currency and accounted for in accordance with BSP
rules and regulations.

This does not apply to automobiles and non-essential goods subject to EXCISE TAX.

CROSS BORDER PRINCIPLE / DESTINATION PRINCIPLE

- No VAT shall be imposed to form part of the cost of goods destined outside of
the territorial border of the taxing authority. (CIR v. Seagate Technology)

FOR SERVICES

A 0% rate of the gross receipts will be applied in the following instances:

1. Processing, manufacturing, or repacking of good for other persons doing
business outside the Philippines. Which goods are subsequently exported and
paid for in acceptable foreign currency and accounted for in accordance with
rules and regulations of the BSP;