CHAPTER 4: Exempt Sales of Goods, Properties and Services

Exempt Sales (Goods, properties and services)

 Exempt from consumption taxpayers

 VAT taxpayers – shall not bill any output VAT
 NON-VAT Taxpayer – shall not be subject to percentage tax on sales/receipts

EXEMPT SALES OR RECEIPTS

1. Sale of certain basic necessities

2. Sale exempts by law, treaty or contracts
3. Casual sales or sales by non-business sellers
4. Export sales of non-VAT registered persons

EXEMPT SALES OF GOODS OR SERVICES (SECRET Tax-free GOLD)

2. Sale of exempt goods.

a. Agricultural and marine food products in their original state.

b. Fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry feeds, including
ingredients used in the manufacture of finished feeds.
c. Books, newspapers, or magazines
d. Medicines prescribed for diabetes, high cholesterol and hypertension
e. Passenger or cargo vessels and aircrafts.

3. Sales of goods by cooperatives

Sales by agricultural cooperatives duly registered in good standing with the Cooperative Development Authority
(CDA) to their members as well as sales of their produce, whether in is original state or processed form to non-
members; Their importation of Direct Farm inputs, machineries and equipment, including spare parts thereof to
be used directly and exclusively in the production and or processing of their produce.

Related Activities Unrelated Activities

Sales from members Exempt Taxable
Sales from non-members Taxable if accumulated reserves Taxable
exceeds 10,000,000

4. Sales of residential Properties

a. Sale of real properties utilized for low-cost housing

a. House and Lot package – P450,000
b. Residential Lots only – P180,000
b. Sale of real properties utilized for socialized housing wherein the price ceiling per unit is P750,000
c. Sale of Residential Lot valued at P1,919,500 and below
d. Sale of residential dwelling valued at P3,199,200 and below.

 sale of adjacent lots- within 12 month period in favor of one buyer shall be treated as one
  Parking Lots are Taxable

5. Export of Sales of Non-VAT taxpayers – 0%

6. Sales exempt under Treaties

a. PEZA registered enterprises
b. Asian Development Bank
c. International Rice Research Institute
d. Philippine National Red Cross
e. Embassies of Foreign governments
f. The Philippines Amusement and Gaming Corporation

7. Tax-free exchange of property

a. The exchange of properties in pursuant to a plan of merger or consolidation

b. The transfer of property that resulted in the initial acquisition of corporate control.

8. Sale of gold to the Bangko Sentral ng Pilipinas (BSP)

II. EXEMPT SALES OF SERVICES MNEMONICS: SEARCHH VA TRIPS

1. Schools

- Educational Services rendered by private educational institution duly accredited by the

Department of Education (DEPED), the commission on Higher Education (CHED), and
Technical Education and skills Development Authority (TESDA) and those rendered by
government educational institutions.
 The exemption does not cover services rendered by educational institutions that are not accredited by
DEPED, CHED or TEDDA such as SEMINARS, TRAININGS, REVIEW CLASSES AND OTHER SEMINAR
SERVICES
2. Employees.
- Services performed by an individual in pursuant to an employer and employee relationship.
3. Agricultural Contract growers and millers.
- Services by agricultural contract growers and milling fr others of palay into rice, corn into
corn grits, and sugar cane into raw sugar.
4. Residential Leasing
- Lease of residential unit with monthly rental not exceeding P15,000.
5. Cooperative services
- Gross receipts from lending activities by credit or multi purpose cooperatives duly
registered and in good standing with the Cooperative Development Authority.

6. Hospitals
- Medical, dental, hospitals and veterinary services except those rendered by professionals
and sales of drugs by a hospital drug store.
OUT-patient sales of medicine, and Rent income are TAXABLE
7. Home owner’s association or condominium corporations
- Association dues, membership fees, and other assessments and charges collected by
homeowners associations and condominium corporations.
8. Lease passenger or Cargo vessels and aircrafts including engine equipment and spare parts thereof for
domestic or international transport operations.
 - Intended for passenger or cargo transport
9. Treaty-exempt services
- Sales of goods exempt under international agreement to which the Philippines is a signatory
or under special laws.
10. Regional area headquarters
- Services rendered by regional or area headquarters established in the Philippines by
multinational corporations which act as supervisory communications, and coordinating
centers for their affiliates, subsidiaries or branches in the Asia pacific region and do not or
derive income from the Philippines.
11. International carriers (outgoing-0% VAT) (incoming-exempt)
- Transport of passengers (outgoing) by international carriers.
12. Printers or publishers

- They must appear at regular intervals with fixed prices for subscription
- The sale must not be devoted principally to the publication of paid advertisements.
13. Senior Citizens and persons with disability
- Sale of basic essential services to senior citizens and persons with disability by service
establishments such as:

a. Restaurant
b. Hotels and Lodging establishment
c. recreation centers, such as theater, cinema houses, concert halls, carnivals and such other places of
leisure or amusement.
d. Hospital and clinic
e. Land, air and sea travel
f. Medical, dental, diagnostic and laboratory fees and professional medical fees
g, Funeral and burial services for the burial of senior citizens

OTHER EXEMPT SALES OF SERVICES

1. Sales of goods or services taxed by special laws

a. Sale of goods or services by Ecozone-Locators
b. Sale of amusement service by theaters and cinemas

2. Sales by persons not engaged in businesses

3. Sale of assets held for use

Invoicing requirement for exempt sales

 Pre-printed caption “exempt” on the receipt