BUSINESS AND TRANSFER TAXATION

Business Taxation (Students’ Handouts)

CHAPTER 4 – EXEMPT SALES OF GOODS, PROPERTIES AND SERVICES

Exempt sales are not subject to VAT and percentage tax. Hence, VAT taxpayer shall not bill any output
VAT and non-VAT person shall not be subject to 3% percentage tax.

Exempt Sales of Goods, Properties or Services

1. Sale of agricultural and marine food products in their original state
2. Sale of fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry feeds,
including ingredients used in the manufacture of finished feeds
3. Services by agricultural contract growers and milling for others of palay into rice, corn into corn
grits, and sugar cane into raw sugar
4. Educational services rendered by private educational institution duly accredited by the
Department of Education, the Commission on Higher Education and Technical Education and
Skills Development Authority and those rendered by government educational institution
5. Services performed by individuals in pursuant to an employer and employee relationship
6. Medical, dental, hospital and veterinary services, except those rendered by professionals and
sales of drug by a hospital drug store
7. Transport of passengers by international carriers (RA 10378)
8. Services rendered by regional or area headquarters established in the Philippines by
multinational corporations which acts 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
9. Sales by agricultural cooperatives duly registered in good standing with the Cooperative
Development Academy to their members, as well as sales of their produce, whether in its 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
10. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered
and in good standing with the Cooperative Development Authority
11. Sales by non-agricultural, non-electric and non-credit cooperative duly registered and in good
standing with the CDA
12. Exempt sales of real properties:
b. Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of business
c. Sale of real properties utilized for low-cost housing
d. Sale of real properties utilized for socialized housing
e. Sale of residential lot valued at P 1,500,000 and below and other residential dwelling
valued at P2,500,000 and below
13. Lease of residential unit with monthly rental not exceeding P15,000
14. Sale, printing or publication of books and any newspaper, magazine, review, or bulletin which
appear at regular intervals with fixed prices for subscription and sale and which is not devoted
principally to the publication of paid advertisements
15. Sale or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare
parts thereof for domestic or international transport operation
16. Export sales by non-VAT persons
17. Transactions which are exempt under international agreement to which the Philippine is a
signatory or under special laws

Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 1 of 2

BUSINESS AND TRANSFER TAXATION
Business Taxation (Students’ Handouts)

Illustrations

Agricorp is engaged in the farming and horticulture business, It earned the following during a quarter:
Sale of palay and rice P 1,000,000
Sale of banana and mushrooms 100,000
Sale of firewood and charcoal 150,000
Sale of orchids, flowers and bonsai 250,000

The following relates to the sales of Mr. B, a poultry operator:

Sales of chicken P 400,000
Sale of one-day old chicks 120,000
Sale of egg for penoy and balot 180,000
Sale of chicken manure 100,000

Bethany Hospital, a private hospital, had the following receipts and sales during a month:
In-Patient revenue P 1,000,000
Out-patient revenue 1,200,000
Laboratory services 800,000
Sales of drugs and medicines from pharmacy 400,000

Jet Bookstore reported the following sales during the month:

Sales of book inventories P 400,000
Sales of periodicals 200,000
Sales of school supplies 300,000
Commission income from book publishers 30,000

*Sale of adjacent lots

A farming cooperative which transacts business with members and non-members reported the following:
Related Unrelated
Receipts from members P 200,000 P 100,000
Receipts form non-members 300,000 20,000

A VAT-registered restaurant sold foods and beverages totaling P2,240.00 to a senior citizen who
presented a senior citizen identification card. The senior citizen was accompanied by three other non-
senior citizens.

Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 2 of 2