1) Sale of:

a. Real properties not primarily held for sale to customers or held for
lease in the ordinary course of trade or business. However, even if
the real property is not primarily held for sale to customers or held
for lease in the ordinary course of trade or business but the same
is used in trade or business of the seller, the sale thereof shall be
subject to vat being a transaction incidental to the taxpayer’s main
business.

b. Real property utilized for low-cost housing as defined under RA No.

7279, otherwise known as the “Urban Development and Housing
Act of 1992” and other related laws.

“Low-cost housing” refers to housing projects intended for homeless low-

income family beneficiaries, undertaken by the Government or private
developers, which may either be a subdivision or a condominium, registered
and licensed by the Housing and Land Use Regulatory Board/Housing
(HLURB) under BP Blg. 220, PD 957, or any other similar law, wherein the unit
selling price is within the selling price per unit as set by the Housing and
otherwise known as the “Urban Development and Housing Act of 1992” and
other laws.

c. Real property utilized for “socialized housing” as defined by

Republic Act no. 7279, and other related laws such as RA No. 7835
and RA No. 8763, wherein the price selling per unit is P450,000 or
as may from time to time be determined by HUDCC and the NEDA
and other related laws.

“Socialized housing” refers to housing programs and projects covering houses

and lots or home lots only that are undertaken by the government or the
private sector for the underprivileged and homeless citizens, which shall
include sites and services development, long-term financing, liberalized terms
on interest payments, and as such other benefits in accordance with the
provisions of Republic Act 7279, otherwise known as the “Urban
Development and Housing Act of 1992” and RA No. 7837 and RA No. 8763.
“Socialized Housing” shall also refer to projects intended for the
underprivileged and homeless wherein the housing package selling price is
within the lowest interest rates under the Unified Home Lending Program
(UHLP) or any equivalent housing program of the Government, the private
sector or non-government organizations.

d. Real properties primarily held for sale to customers or held for

lease in the ordinary course of trade or business, if:
 i. Residential lot valued at:
 Prior to Jan. 1, 2018: P1,919,500 and below:
 Beg. Jan. 1, 2018 (TRAIN Law): P1,500,000
ii. House and lot, and other residential dwellings valued at:
 Prior to Jan. 1, 2018: P3,199,200 and below;
 Beg. Jan. 1, 2018 (TRAIN Law): P2,500,000

NOTE:
 If two or more adjacent residential lots are sold or disposed in favor
of one buyer, for the purpose of utilizing the lots as one residential
lot, the sale shall be exempt from vat only if the aggregate value do
not exceed P1,500,000 (as amended). Adjacent residential lots,
although covered by separate titles and/or separate tax
declarations, when sold to one and the same buyer, whether
covered by one separate Deed of Conveyance, shall be presumed
as sale of one residential lot.

 Provided, that the beginning 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 under RA No. 7279, sale of house and lot and other
residential dwellings with selling price of not more that two million
pesos (P2,000,000); Provided, further, that every three (3) years
thereafter, the amounts state herein shall be adjusted to its
present value using the Consumer Price Index, as published by the
Philippine Statistics Authority (PSA).

2) Lease of a residential unit with a monthly rental not exceeding

P15,000 (P12,800 prior to Jan. 1, 2018), regardless of the amount
of aggregated rentals received by the lessor during the year.

NOTES:
 LEASE of RESIDENTIAL UNITS where the monthly rental per unit
exceeds P15,000 (previously P12,800) but the aggregate of such
rentals of the lessor during the year do not exceed P 3,000,000
(previously P1,919,500) shall likewise be exempt from VAT,
 however, the same shall be subjected to three (3%) percentage tax
(RR 16-2011; RR 13-2018).
 In case where a lessor has SEVERAL RESIDENTIAL UNITS for LEASE,
some are leased out for a monthly rental per unit of not exceeding
P15,000 beginning Jan. 1, 2018 (previously P12,800) while other
are leased out for more than P15,000 or P12,800, as the case may
be, per unit, his tax liability will be:
- The gross receipts from rentals not exceeding P15,000 (previously
P12,800) per month per unit shall be exempt from VAT regardless
of the aggregate annual gross receipts.
- The gross receipts from rentals exceeding P15,000 (previously
P12,800) per month per unit shall be subject to VAT if the annual
gross receipts (from said units only – not including the gross
receipts from units leased out for not more than P15,000
(previously P12,800) exceed P3,000,000 (P1,919,500 prior to
2018). Otherwise, the gross receipts shall be subject to three
percent (3%) percentage tax under section 116 of the tax code (RR
16-2011; RR 13-2018).

3.) Sale, importation, printing or publication of book sand any

newspaper, magazine, review or bulletin:
a. Appears at regular intervals;
b. With fixed prices for subscription and sale;
c. Not devoted principally to the publication of paid
advertisements.

4.) Transport of passengers by international carriers doing business

in the Philippines. The same shall not be subject to Other
Percentage Taxes as amended under RA10378 and Transport of
cargo by international carriers doing business in the Philippines, as
the same is subject to 3% common carrier’s tax (Other Percentage
Taxes) as amended under RA10378 and (RR-15-2015).

5.) “Sale, importation or lease of passenger or cargo vessels and

aircraft, including engine, engine, equipment and spare parts
thereof for domestic or international transport operations,
provided, that 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 MARINA (RR-15-2015).
6.) Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations, provided that:
 Fuel, goods and supplies shall be exclusively or shall pertain
to the transport of goods and/or passenger from a port in the
Philippines directly to a foreign port without stopping at any
other port in the Philippines.
 Fuel, goods or supplies is used for the purposes other than
that mentioned in the preceding paragraph, such portion of
fuel, goods and supplies shall be subjected to 12% vat.

7.) “Services of banks, non-bank financial intermediaries performing

quasi-banking functions, and other non-bank financial
intermediaries such as money changers and pawnshops, subject to
percentage tax under Sections 121 and 122, respectively, of the Tax
Code.

8.) Sale or lease of goods and services to senior citizens and persons
with disabilities, as provided under RA No. 9994 (Expanded Senior
Citizens Act of 2010) and RA No. 10754 (An Act Expanding the
Benefits and Privileges of Persons with Disability (PWD),
respectively.

9.) Transfer of property pursuant to Section 40(C)(2) of the Tax Code,

as amended (Upon effectivity of RA109563-TRAIN law only; new
provision).

10.) Association dues, membership fees, and other assessments

and charges collected on a purely reimbursements basis by
homeowner’s associations and condominium corporations
established under RA No. 9904 (Magna Carta for Homeowners’ and
Homeowners Association) and RA No. 4726 (Condominium Act),
respectively. This provision shall take effect only beginning January
1, 2018 or upon the effectivity of RA10963-TRAIN Law (new
provision).

11.) Sale of Gold to the Bangko Sentral ng Pilipinas (BSP). This

provision shall take effect only beginning January 1, 2018 or upon
the effectivity of RA10963-TRAIN Law (new provision)
 12.) Sale of drugs and medicines prescribed for diabetes, high
cholesterol, and hypertension beginning January 1, 2019 (new
provision)
13.) “Sale or lease of goods or properties or the performance of
services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts do not exceed
the amount of P3,000,000, as amended (previously P1,919,5000).

VAT REGISTRATION

1) MANDATORY REGISTRATION
a. Any person or entity who, in the course of his trade or business,
sells, barters, exchanges, leases goods or properties and renders
services subject to VAT, if the aggregate amount of actual gross
sales or receipts exceed P3,000,000 (as amended) for the past
12 months (other than those that are exempt) OR there are
reasons to believe that the gross sales or receipts for the next 12
months will exceed P3,000,000.
b. Radio and/or television broadcasting companies whose annual
gross receipts of the preceding year exceeds P10,000,000.
c. A person required to register as VAT taxpayer but failed to
register.

Penalty for non-registration of those required to

register as VAT?
He shall be liable to pay the tax as if he were a VAT-
registered person but
he cannot avail the benefits of input tax credit for
the period he was not
properly registered
2) OPTIONAL REGISTRATION
Any person who is VAT-exempt or not required to register for
VAT may, in relation to D.1.a above, 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 P500.00 for
every separate and distinct establishment. Any person who elects
to register under optional registration shall not be allowed to
cancel his registration for the next three (3) years.
 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, as amended [Sec.109(2)].

Franchise grantees of radio and/or television broadcasting

whose annual gross receipts of the preceding year do not exceed
ten million pesos (P10,000,000.00) derived from the business
covered by the law granting the franchise may opt for VAT
registration. This option, once exercised, shall be irrevocable.
(Sec. 119, Tax Code).

The above-stated taxpayers may apply for VAT registration not

later than ten (10) days before the beginning of the calendar
quarter and shall pay the registration fee unless they have already
paid at the beginning of the year. In any case, the Commissioner
of Internal Revenue may, for administrative reason deny any
application for registration. Once registered as a VAT person, the
taxpayer shall be liable to output tax and be entitled to input tax
credit beginning on the first day of the month following
registration.

3) CANCELLATION OF VAT REGISTRATION

Instances when a VAT-registered person may cancel his VAT

registration:
1. If he makes a written application and can demonstrate to the
commissioner’s satisfaction that his gross sales or receipts for
the following twelve (12) months, other than those that exempt
under Section 109(A) to (U), will not exceed P3,000, 000, as
amended; or
2. If he has ceased to carry on his trade or business, and does not
expect to recommence any trade or business within the next
twelve (12) months.
  The cancellation for registration will be effective from the
first day of the following month the cancellation was
approved.

3. POWER OF THE COMMISSIONER TO SUSPEND BUSINESS

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

E. VAT FOR SELLER OR GOODS, PROPERTIES AND SERVICES

 PERSONS LIABLE – Any person who, in the course of his

trade or business:
1. Sells, barters or exchanges goods or properties (Seller
of Goods or Properties)
2. Leases goods or properties (Lessor)
3. Renders services (Service Provider)

 MEANING OF “IN THE COURSE OF TRADE OR BUSINESS” –

the regular conduct or pursuit of a commercial or
economic activity, including transaction 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.
  FORMULA:

Output Tax PXXX

Input Tax (XX)
VAT Payable (Excess Input Tax) PXXX

F. OUTPUT TAX OF SELLER OF GOODS OR PROPERTIES

 KINDS OF SALE OF GOODS OR PROPERTIES SUBJECT TO VAT:

1. Actual Sale
2. Transactions deemed sale:
a) Transfer, use or consumption not in the course of business or
goods or properties originally intended for sale or for use in
the course of business. Transfer of goods or properties not in
the course of business can take place when VAT-registered
person withdraws goods from his business for his personal
use;
b) Distribution or transfer to:
i. Shareholders or investors share in the profits of VAT-
registered person;
ii. Consignment of goods if actual sale is not made within
60 days following the date such goods were consigned;
and
c) Consignment of goods if actual sale is not made within 60
days following the date such goods were consigned; and
d) Retirement from or cessation of business with respect to all
goods on hand, whether capital goods, stock-in-trade,
supplies or materials as of the date of such retirement or
cessation, whether or not the business is continued by the
new owner or successor.

 FORMULA IN COMPUTING OUTPUT TAX

Tax Base PXXX

Rate XX%
Output Tax PXXX
  TAX BASE
Actual Sale
Personal Property GSP
Real Property
GSP vs. FMV vs. ZV
1. Cash Sale w/c
2. Deffered Payment ever is the highest
Basis
[(Collection/GSP) x
3. Installment Plan GSP
vs. FMV vs. ZV w/c
ever is
the highest]
Transaction Deemed Sale
1. (a), (b) and ('c)
above FMV
AC vs. FMV (w/c
2. (d) above ever is GSP –
lower Gross
Selling
Price
FMV – Fair Market Value
ZV – Zonal Value
AC – Acquisition Cost

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 or properties,
excluding VAT. The excise tax, if any, on such goods or properties shall
form part of the gross selling price.

NOTE: 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 event;
and
 b) Sales returns and allowances for which a proper credit or refund
was made for sales previously recorded as taxable sales.

DEFINITION OF GROSS SELLING PRICE EXPRESSED IN A FORMULA:

Gross Sales PXXX
Less: Sales discount XX
Sales returns & allowances XX XX
Net Sales PXXX
Add: Excise Tax XX
Tax Base PXXX

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 sale 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

COMPONENTS OF INITIAL PAYMENT:

Down payment PXXX
Other collections in the year of sale XXX
Excess of unpaid mortgage over cost XXX
Initial Payments PXXX