- Subject to 0% VAT - Output VAT - Zero output VAT but with deductible input VAT - Zero-rated - input tax is claimable against other output VAT or as a tax refund. Exempt Sales – input VAT is a deduction against gross income. - Input VAT cannot be claimed as deduction against gross income because it is tax credit or tax refund TYPES OF ZERO – RATED SALES OF GOODS 1. Export Sales a. Direct Export - acceptable foreign currency or its equivalent in goods or services - accounted for in accordance with rules and regulations of the BSP b. Sale to economic zones and tourism enterprise zone - economic zones including tourism zones are considered foreign territories. c. Sale of goods or properties, supplies, equipment and fuel to persons engaged in international shipping or international air transport operation. TYPES OF ZERO – RATED SALES OF GOODS 2. Effectively zero-rate sale - 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. REQUIREMENTS : 1. requires prior application with the appropriate BIR office. ( Sec 4.106-6, RR 16-2005) - approved application shall be valid until Dec. 31 of the same year and renewable yearly. - to be filed at Audit Information, Tax Exemption and Incentives Division (AITEID) - Large Taxpayers Audit and Investigation Division ( LTAID I & II) , BIR National Office. ZERO – RATED SALES OF SERVICES This will include only the following : • Sale of services to non-residents • Effectively zero-rated sales of services • Services rendered to persons engaged in international shipping or air transport operations including lease of properties thereof • Transport of passengers and cargoes by domestic air or sea carriers from Philippines to a foreign country. • Sale of power and fuel generated from renewable sources of energy • Services rendered to ecozones or tourism enterprise zones EXAMPLE OF ENTITIES GRANTED INDIRECT TAX EXEMPTION UNDER SPECIAL LAWS OR TAX AGREEMENT : • Asian Development Bank • International Rice Research Institute (IRRI) • United Nation(UN) and its various organization • United States Agency for International Development (USAID) and its personnel and contractors • Embassies, qualified employees and dependents – subject to reciprocity law. • Philippine National Red Cross • Philippine Amusement and Gaming Corporation and its licensees or contractors.