TAXATION
VAT EXEMPT TRANSACTIONS
LEARNING OBJECTIVES
1. Know the nature and characteristics of VAT
2. Identify transactions not subject to Value-added Tax
(VAT).
REVIEW NOTES
Nature and Characteristics of VAT
▪ Excise Tax. It is imposed not on the goods or services as
such but on the privilege of selling or importing goods or
rendering services for a fee, remuneration or consideration.
▪ Business Tax. It is levied on the value-added on certain
goods, properties and services in the domestic market
and/or importer of goods.
▪ Indirect Tax. The amount of tax may be shifted or passed on
to the buyer, transferee or lessee of the goods, properties or
services.
▪ Indirect Tax. The party directly liable for the payment of the
tax is the seller, importer or the service provider, although
the burden of the tax may be shifted or passed on to the
consumer.
▪ Ad Valorem Tax. Computed based on gross selling price or
gross receipts or a certain value.
▪ Fiscal/General/Revenue Tax. The collections from this tax
can be used for any public purpose. It has no specific or pre-
determined purpose.
▪ National Tax. It is a tax imposed by the national
government.
▪ Proportional. The rate is either 12% or 0%.
Exempt Transactions
These are transactions which does not result to any output tax
and no input tax can be allowed.
The following are the transactions exempt from VAT:
1) Sale or importation of:
a. agricultural and marine food product in their original
state;
b. livestock and poultry used as, or producing foods for
human consumption;
c. breeding stock and genetic materials.
Livestock shall include cows, bulls and calves, pigs, sheep,
goats and rabbits.
Poultry shall include fowls, ducks, geese and turkey.
Marine food products shall include fish and crustaceans,
such as, but not limited to, eels, trout, lobster, shrimps,
prawns, oysters, mussels and clams.
Products that will be considered in their original state:
June 12, 2021
i. Products which undergone simple processes of
preparation or preservation for the market
(freezing, drying, salting, broiling, roasting,
smoking or stripping)
ii. polished or husked rice
iii. corn grits
iv. raw cane sugar and molasses
v. ordinary salt
vi. copra
NOTE:
- Livestock or poultry does not include fighting cocks,
race horses, zoo animals and other animals generally
considered as pets.
- Bagasse is not included in the VAT exemption.
2) Sale or importation of:
a. Fertilizers
b. Seeds, seedlings and fingerlings
c. Fish, prawn, livestock and poultry feeds
d. Ingredients used in the manufacture of finished feeds
(except specialty feeds for race horses, fighting cocks,
aquarium fish, zoo animals and other animals generally
considered as pets).
Specialty feeds refers to non-agricultural feeds or food for
race horses, fighting cocks, aquarium fish, zoo animals and
other animals generally considered as pets.
3) Importation of personal and household effects belonging to
the:
a. residents of the Philippines returning from abroad;
b. non-resident citizens coming to resettle in the
Philippines; and
c. such goods must be exempt from customs duties.
4) Importation of professional instruments and implements,
tools of trade, occupation or employment, wearing apparel,
domestic animals, and personal household effects,
provided:
a. it belongs to persons coming to settle in the Philippines,
or Filipinos or their families and descendants who are
now residents or citizens of other countries, such
parties herein referred to as overseas Filipinos;
b. in quantities and of the class suitable to the profession,
rank or position of the persons importing said items;
c. for their own use and not for sale, barter or exchange;
1
 d. accompanying such persons, or arriving within a
reasonable time.
e. Provided, that the Bureau of Customs may, upon the
production of satisfactory evidence that such persons
are actually coming to settle in the Philippines and that
the goods are brought from their former place of abode,
exempt such goods from payment of duties and taxes:
f. Provided, further, that vehicles, vessels, aircrafts,
machineries and other similar goods for use in
manufacture, shall not fall within this classification and
shall therefore be subject to duties, taxes and other
charges.
5) Services subject to percentage tax
6) Services by agricultural contract growers and milling for
others of palay into rice, corn into grits and sugar cane into
raw sugar.
“Agricultural contract” growers refers to those persons
producing for others poultry, livestock or other agricultural
and marine food products in their original state.
7) Medical, dental, hospital and veterinary services except
those rendered by professionals.
NOTES:
- Laboratory services are exempted. If the hospital or
clinic operates a pharmacy or drugstore, the sale of
drugs and medicines are subject to VAT.
- Hospital bills constitute medical services. The sales
made by the drugstore to the in-patients which are
included in the hospital bills are part of medical bills
and therefore exempt from VAT.
- The sales of the drug store to the out-patients are
taxable because they are NOT PART of medical services
of the hospital.
8) Educational services rendered by:
a. private educational institutions, duly accredited by:
i. Department of Education (DepEd)
ii. Commission on Higher Education (CHED)
iii. Technical Education and Skills Development
Authority (TESDA)
b. Government Educational Institutions
“Educational services” shall refer to academic, technical or
vocational education provided by private educational
institutions duly accredited by the DepEd, the CHED and
TESDA and those rendered by government educational
institutions and it does not include seminars, in-service
training, review classes and other similar services rendered
by persons who are not accredited by the DepED, the CHED
and/or TESDA.
9) Services rendered by individuals pursuant to an employer-
employee relationship.
10) 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 earn or
derive income from the Philippines.
11) Transactions which are exempt under international
agreements to which the Philippines is a signatory or under
special laws.
12) Agricultural cooperatives:
a. Sales to their members;
b. Sales to non-members if the cooperative is the
producer (if not (e.g., trader), subject to VAT);
c. Importation of:
i. direct farm inputs, machineries and equipment,
including spare parts thereof;
ii. to be used directly and exclusively in the
production and/or processing of their produce.
SALE TO
TYPE OF PRODUCT MEMBERS NON-
MEMBERS
Agricultural food products in Exempt Exempt
their original state
Other Own Exempt Exempt
agricultural produce
products Not own Exempt VATable
produce
13) Gross receipts from lending activities by credit or multi-
purpose cooperatives duly registered and in good standing
with the Cooperative Development Authority (CDA).
14) Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered and in good standing with the
CDA; Provided, That the share capital contribution of each
member does not exceed P15,000 and regardless of the
aggregate capital and net surplus ratably distributed among
the members.
Importation by non-agricultural, non-electric and noncredit
cooperatives of machineries and equipment including spare
parts thereof, to be used by them are subject to VAT.
15) Export sales by persons who are not VAT-registered
16) 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 subject to VAT 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 Urban Development Coordinating
Council (HUDCC) pursuant to RA 7279, 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 ceiling 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-tem
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. 7835 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 P1,919,500;
ii. House and lot, and other residential dwellings
valued at P3,199,200
NOTES:
- 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 P1,919,500. 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 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 than
two million pesos (P2,000,000); Provided, further, that
every three (3) years thereafter, the amounts stated
herein shall be adjusted to its present value using the
Consumer Price Index, as published by the Philippine
Statistics Authority (PSA).
17) Lease of a residential unit with a monthly rental not
exceeding P15,000, regardless of the amount of aggregated
rentals received by the lessor during the year.
RR No. 16-2011 as amended by RR No. 13-2018
- LEASE of RESIDENTIAL UNITS where the monthly
rental per unit exceeds P15,000 but the aggregate of
such rentals of the lessor during the year do not exceed
P3,000,000 shall likewise be exempt from VAT,
however, the same shall be subjected to three (3%)
percentage tax.
- In cases where a lessor has SEVERAL RESIDENTIAL
UNITS for LEASE, some are leased out for a monthly
rental per unit of not exceeding P15,000 while others
are leased out for more than P15,000 per unit, his tax
liability will be:
a. The gross receipts from rentals not exceeding
P15,000 per month per unit shall be exempt from
VAT regardless of the aggregate annual gross
receipts.
b. The gross receipts from rentals exceeding P15,000
per month per unit shall be subject to VAT if the
annual gross receipts (not including the gross
receipts from units leased out for not more than
P15,000 exceed P3,000,000. Otherwise, the gross
receipts shall be subject to three percent (3%)
percentage tax under section 116 of the tax code.
18) Sale, importation, printing or publication of books and any
newspaper, magazine, review or bulletin which:
a. Appears at regular intervals;
b. With fixed prices for subscription and sale;
c. Not devoted principally to the publication of paid
advertisements.
BIR Ruling dated 31 January 2018
The terms “book”, “newspaper”, “magazine”, “review” and
“bulletin” refer to printed materials in hard copies and do
not include those in digital or electronic format or
computerized versions such as eBooks.
19) Transport of passengers and cargo by international
carriers doing business in the Philippines.
20) Sale, importation or lease of passenger or cargo vessels and
aircraft, including 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.
21) Importation of fuel, goods and supplies by persons engaged
in international shipping or air transport operations;
Provided that/the:
a. 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,
or vice versa, without docking or stopping at any other
port in the Philippines unless the docking or stopping
at any other Philippine port is for the purpose of
unloading of passengers and/or cargoes that originated
from abroad, or to load passengers and/or cargoes
bound for abroad;
b. If fuel, goods or supplies is used for purposes other than
that mentioned in the preceding paragraph, such
portion of fuel, goods and supplies shall be subject to
12% vat.
22) 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.
23) 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.
SENIOR CITIZENS
RR NO. 7-2010 (IMPLEMENTING THE TAX PRIVELEGES
PROVISIONS OF R.A. NO. 9994, OTHERWISE KNOWN AS
“THE EXPANDED SENIOR CITIZENS ACT OF 2010”, AND
PRESCRIBING THE GUIDELINES FOR THE AVAILMENT
THEREOF
Senior citizen or Elderly - refers to any Filipino citizen who
is a resident of the Philippines, sixty (60) years old or above.
It may apply to senior citizens with “dual citizenship” status
provided they prove their Filipino citizenship and have at
least six (6) months residency in the Philippines
The following goods/services sold/rendered to a senior
citizen are vat-exempt and will entitle the latter to a
minimum discount of 20%:
a. Medicine and Drug Purchases including influenza and
pneumococcal vaccines and such other essential
medical supplies, accessories and equipment.
b. Professional fees of attending physicians in all private
hospitals, medical facilities, outpatient clinics and home
health care services.
c. Professional fees of licensed health workers providing
home health care services in all private hospitals,
medical facilities, outpatient clinics, and home health
care services.
d. Medical and dental services, diagnostic and laboratory
fees.
e. On actual fare for land transportation travel.
f. In actual fare for domestic air transport and sea
shipping vessels and the like.
g. On the utilization of services in hotels and similar
lodging establishments, restaurants, recreation
centers.
h. On admission fees charged by theaters, cinema houses
and concert halls, circuses, carnivals and other similar
places of culture, leisure and amusement.
i. On funeral and burial services of senior citizens
Special Discount granted to Senior Citizens and Senior
Citizens Centers
The monthly utilization of water and electricity by the
Senior Citizen supplied by public utilities will be subject to
a five percent (5%) discount (but subject to VAT) upon
concurrence of the following:
1. the individual meters for the said utilities are
registered in the name of the Senior Citizen residing
therein;
2. the monthly consumption does not exceed one hundred
kilowatt hours (100kwh) of electricity and thirty cubic
meters (30m3); and
3. the privilege granted is per household regardless of the
number of Senior Citizens residing therein.
For the consumption of water, electricity and telephone,
there shall be granted by public utilities a discount (but
subject to VAT) of at least fifty percent (50%) on the
consumption by a Senior Citizens Center and residential
care/group homes that are run by the Government or by a
non-stock, non-profit domestic corporation organized and
operated primarily for the purpose of promoting the well
being of abandoned, neglected, unattached, homeless
Senior Citizens, subject to the guidelines formulated by the
Department of Social Welfare and Development (DSWD).
If any of the foregoing goods or services is offered by the
establishment at a promotional discount, the discount that
shall be granted to the Senior Citizen shall be the
promotional discount or the minimum discount. This means
that, in no case shall the discount granted to Senior Citizens
be less than 20%, or in the case of water and electricity
supplied by public utility companies, be less than 5%. The
minimum discount shall not be treated as an addition to the
promotional discount.
Restaurants
- Consistent with the intent of the Law, the phrase
“exclusive use and enjoyment” of the senior citizen shall
mean “for the senior citizen’s personal consumption”
only. As such, the senior citizen discount (and VAT
exemption) shall not apply to “children’s meals” which
are primarily prepared and intentionally marketed for
children. Similarly, the 20% discount (and VAT
exemption) shall not apply to “pre-contracted” party
packages or bulk orders.
- The 20% discount shall apply to Take-Out/Take-
Home/Drive-Thru orders (excluding bulk orders) as
long as it is the senior citizen himself/herself who is
present and personally ordering, and he/she can show
valid senior citizen ID card.
- For Delivery Orders (excluding bulk orders), the 20%
discount shall likewise apply subject to certain
conditions; i.e. senior citizen ID card number must be
given while making the order over the telephone; the
senior citizen ID card must also be presented upon
delivery to verify the identity of the senior citizen
entitled to the 20% discount. Delivery fee charged
separately are not entitled to the discount and is subject
to tax.
Funeral and Burial Expenses
- The beneficiary or any person who shall shoulder the
funeral and burial expenses of the deceased senior
citizen, shall claim the discount for the deceased senior
citizen upon presentation of the death certificate. Such
expenses shall cover the purchase of casket or urn,
embalming, cremation cost, and other related services
such as viewing or wake cost, pick-up from the hospital
morgue, transport of the body to the intended burial
site in the place of origin, but shall exclude obituary
publication and the cost of memorial lot.
RMC NO. 38-2012 (QUESTIONS AND ANSWERS FURTHER
CLARIFYING THE PROVISIONS OF RR NO. 7-2010, AS
AMENDED BY RR NO. 8-2010
Q1. – If a group of 5 comprised of four (4) Non-Senior
Citizens and one (1) Senior Citizen dines in a restaurant,
how should the group be billed?
A1. – In computing the 20% discount and the exemption
from VAT, the formula shall be:
Total Billing Amount less 12% VAT x 20% = Senior Citizen
No. of customers Discount
The formula above will apply if no “individualized” food
item can be ordered or if the transaction with the Senior
Citizen is not processed separately.
Q2. – For restaurants, are condiments and side products
covered by the Senior Citizen Discount and VAT exemption?
A2. Yes. Condiments and side products fall within the ambit
of “other consumable items served by the establishment”.
Q9. What comprises the Most Expensive Meal Combination
(MEMC)?
A9. The MEMC is an amount corresponding to the
combination most expensive and biggest single-serving
meal with beverage served in a quick service restaurant.
The MEMC is deemed flexible and is adjusted accordingly by
food establishments to estimate a single food purchase for
an individual senior citizen. MEMC is applied only to take-
out, take-home, drive thru and delivery orders.
Q14. What is the rule on the purchase of alcoholic products
such as beer, wine, and other liquors? Are they considered
“drinks” entitled to the 20% discount and VAT exemption?
A14. Generally, alcoholic beverages are not subject to the
20% discount and VAT exemption especially if purchased
“in bulk”, “in buckets” or in “cases”. However, if served as a
single serving drink, its purchase by a Senior Citizen is
entitled to the 20% discount and VAT exemption.
However, alcoholic beverages purchased in a bar, club or
cabaret are exempt from VAT but subject to amusement tax
of 18% under Section 125 of the NIRC, as amended. A Senior
Citizen may still avail of the 20% discount on the purchase
of an alcoholic drink but the discount shall be limited only
to a single serving of an alcoholic beverage.
Q15. Are cigars and cigarettes considered “consumables”
subject to the 20% discount?
A15. Cigarettes/cigars are not the food or essential items
deemed subject to 20% discount.
It must be emphasized that one of the objectives of R.A. No.
9994 is to promote the health and benefits of the elderly.
Thus, the State adopted an integrated and comprehensive
approach to health development which endeavors to make
essential goods, health and other social services available to
the elderly people at affordable costs. Cigars and cigarettes,
although considered consumables, are not essential goods
and are considered hazardous to the health of the Senior
Citizens.
Q16. If medicine is bought in a grocery, supermarket, or
convenience store, is it subject to the 20% discount and VAT
exemption.
A16. Yes. The 20% discount and VAT exemption privilege
shall also apply to medicines purchased from drug stores,
hospital pharmacies, medical and optical clinics and similar
establishments including non-traditional outlets
dispensing medicine.
Q17. Are delivery fees/charges for delivery orders subject
to the 20% discount?
A17. A distinction must be made. If the delivery fee/charge
is not billed separately, it is subject to the 20% discount.
However, if such delivery fee/charge is billed separately, it
is not entitled to the 20% discount and is subject to VAT.
Q18. Are toll fees subject to the 20% discount?
A18. No, toll fees are not the same as “fares”. Hence, it is not
subject to the 20% Senior Citizen Discount.
Q20. In the case of purchase of goods and services which are
on promotional discount, e.g. discounted sale upon use of a
membership/privilege card, may the Senior Citizen still
avail of the 20% Discount?
A20. No. In the purchase of goods and services which are on
promotional discount, the Senior Citizen shall avail of either
the promotional discount or the 20% discount, whichever
is higher. However, the discount that must be given to the
Senior Citizen shall in no case be less than 20%.
Q21. If the Senior Citizen used his privilege
card/promotional discount which is higher than the 20% SC
discount, is the sale exempt from VAT?
A21. Yes, the sale of goods and services on promotional
discount is still exempt from VAT.
Q23. In case of business establishments which are not
subject to VAT but to Percentage Tax because their gross
annual sales/receipts do not reach the threshold amount of
P1,919,500 (now 3million pesos), are Senior Citizens also
exempt from the payment of the percentage tax on their
purchases of goods and/or services which are otherwise
exempt from VAT?
A23. No. While RA 9994 expressly provides for the VAT
exemption of Senior Citizens on their purchase of certain
goods and services, the law does not include exemption
from the payment of Percentage Tax.
Q31. What rate of discount shall be granted to Senior
Citizens on their purchase of basic necessities and prime
commodities?
A31. A special discount of five percent (5%) of the regular
retail price of basic necessities and prime commodities.
Q32. Are purchases of basic necessities and prime
commodities exempt from the payment of VAT?
A32. No.
Q34. How much is the maximum amount of purchase per
calendar week?
A34. “Maximum purchase per week” means that Senior
Citizens shall enjoy a special discount of 5% of the retail
price, without exception from VAT, of basic necessities and
prime commodities, provided that the total amount of said
purchase shall not exceed the maximum amount of
purchase per calendar week.
The maximum amount of purchase is One Thousand Three
Hundred Pesos (P1,300) per calendar week, after
combining set limits under prime commodities and basic
necessities, without carry-over of the unused amount.
A special discount of five percent (5%) of the regular retail
price of basic necessities and prime commodities as defined
under Section 2 of the joint DTI-DA Administration Order
No. 10-02, series of 2010, shall be granted to Senior Citizens
on their purchases thereof, taking into consideration that
said purchases shall be for the personal and exclusive
consumption and/or enjoyment of the Senior Citizen
(Section 3, Joint DTI-DA Administrative Order No. 10-02,
Series of 2010).
BASIC NECESSITIES AND PRIME COMMODITIES (JOINT
DTI-DA ADMINISTRATIVE ORDER NO. 17-01)
a) Basic Necessities – are goods vital to the needs of
consumers for their sustenance and existence. For
purposes of these Regulations, basic necessities shall
include:
1. All kinds and variants of rice
2. Corn
3. All kinds of bread (Pastries and cakes not included)
 4. Fresh, dried and canned fish and other marine b. Voter’s ID
products (including frozen and in various modes of c. SSS/GSIS ID
packaging) d. PRC card
5. Fresh pork, beef and poultry meat e. Postal ID
6. All kinds of fresh eggs (excluding quail eggs)
7. Potable water in bottles and containers PERSONS WITH DISABILITIES (PWD’S)
8. Fresh and processed milk (excluding milk labelled
as food supplement) RR No. 5-2017 (RULES AND REGULATIONS IMPLEMENTING
9. Fresh vegetables including root crops R.A. NO. 10754, ENTITLED “AN ACT EXPANDING THE
10. Fresh fruits BENEFITS AND PRIVILEGES OF PERSONS WITH DISABILITY
11. Locally manufactured instant noodles (PWD)” RELATIVE TO THE TAX PRIVELEGES OF PERSONS
12. Coffee and coffee creamer WITH DISABILITY AND TAX INCENTIVES FOR
13. All kinds of sugar (excluding sweetener) ESTABLISHMENTS GRANTING SALES DISCOUNT, AND
14. All kinds of cooking oil PRESCRIBING THE GUIDELINES FOR THE AVAILMENT
15. Salt THEREOF, AMENDING REVENUE REGULATIONS NO. 1-2009
16. Powdered, liquid, bar laundry and detergent soap
17. Firewood Person with Disability (PWD) – are those who have long-term
18. Charcoal physical, mental, intellectual or sensory impairments which in
19. All kinds of candles interaction with various barriers may hinder their full and
20. Household liquified petroleum gas, not more than effective participation in society on an equal basis with others.
11 kgs. LPG content once every five (5) months
bought from LPG dealers Sales Discounts Which May Be Claimed by Qualified Persons with
21. Kerosene, not more than 2 liters per month. Disability (PWD)

b) Prime Commodities – are goods not considered as basic Qualified PWD shall be entitled to claim at least twenty percent
necessities but are essential to consumers. For (20%) discount from the following establishments relative to
purposes of these Regulations, commodities shall the sale of goods and services for their exclusive use and
include: enjoyment or availment of the PWD:
1. Flour 1. Hotels and similar lodging establishments; restaurants and
2. Dried, processed and canned pork, beef and poultry recreation centers;
meat 2. Theaters, cinema houses, concert halls, circuses, carnivals
3. Dairy products not falling under basic necessities and other similar places of culture, leisure and amusement;
4. Onions and garlic 3. All drugstores regarding purchase of generic and branded
5. Vinegar, patis and soy sauce medicine;
6. Toilet/Bath Soap 4. Medical and dental services including diagnostic and
7. Fertilizer laboratory fees (e.g., x-rays, computerized tomography
8. Pesticides scans and blood tests) and professional fees of attending
9. Herbicides doctors in all government facilities or all private hospitals
10. Poultry feeds, livestock feeds and fishery feeds and medical facilities subject to the guidelines to be issued
11. Veterinary products by the DOH, in coordination with the Philippine Health
12. Paper, school supplies Insurance Corporation (PhilHealth);
13. Nipa shingle 5. Domestic air and sea transportation based on the actual
14. Sawali fare. For promotional fares, the PWD can avail the
15. Cement, clinker, GI sheets establishment’s offered discount or the 20% discount
16. Hollow blocks provided therein, whichever is higher;
17. Plywood 6. Land transportation privileges based on the actual fare such
18. Plyboard as, public utility buses or jeepneys (PUBs/PUJs), taxis, Asian
19. Construction nails Utility Vehicles (AUVs), shuttle services and public railways
20. Batteries (excluding cellphone and automotive such as Light Rail Transit (LRT), Metro Rail Transit (MRT),
batteries) Philippine National Railways (PNR), and such other similar
21. Electrical supplies and light bulbs infrastructure that will be construed, established and
22. Steel wires operated by public or private entity; and
7. Funeral and burial services for the death of the PWD:
PROOF OF ENTITLEMENT (IRR OF R.A. 994) Provided, that the beneficiary or any person who shall
shoulder the funeral and burial expenses of the deceased
In the availment of the privileges mentioned above, the senior PWD shall claim the discount under this rule for the
citizen, or his/her duly authorized representative, may submit deceased PWD upon presentation of the death certificate
as proof of his/her entitlement thereto any of the following: and PWD Identification Card (ID) or in its absence, the
1. Senior Citizen Identification Card issued by the Office of the original or certified true copy of the proof of registration
Senior Citizens Affairs (OSCA) in the city or municipality from the issuing local government unit. Such expenses shall
where the elderly resides; cover the purchase of casket or urn, embalming, hospital,
2. The Philippine passport of the elderly person or senior morgue, transport of the body to intended burial site in the
citizen concerned; and place of origin, but shall exclude obituary publication and
3. Other valid documents that establish the senior citizen or the cost of the memorial lot.
elderly person as a citizen of the Republic and at least sixty
(60) years of age which shall include but not be limited to All other goods and services sold by the foregoing
the following government-issued identification documents establishments not included in the above enumeration
indicating an elderly’s birth date or age: expressly provided by law shall not be considered for the
a. Driver’s license 20% discount privilege notwithstanding that the same are
 for the exclusive use and enjoyment or availment of the
PWD.
Prohibition on Availment of Double Discounts
The foregoing privileges granted to PWD shall not be claimed if
the said PWD claims a higher discount as may be granted by the
commercial establishment and/or under other existing laws or
in combination with other discount program/s. Thus, a PWD
who is at the same time a senior citizen can only claim one 20%
discount on a particular sales transaction.
Exemption from VAT On Sale of Goods or Services to Qualified
Persons with Disability
Sales of any goods and services enumerated above to PWD shall
be exempt from VAT.
Proof of Entitlement
The privileges available to PWD who are Filipino citizens may
only be granted upon presentation of any of the following proof
of his/her entitlement thereto:
1. An identification card issued by the Office of Persons with
Disability Affairs (PDAO) or the City/Municipal Social
Welfare and Development Office (C/MSWDO) of the place
where the PWD resides; or
2. The passport of the PWD concerned with apparent
disability; or
3. An Identification Card (ID) issued by the National Council
on Disability Affairs (NCDA).
RR NO. 9-2019 (AMENDING SECTIONS 2, 3 AND 7 OF RR NO. 5-
2017)
- PWDs are granted five percent (5%) off the regular retail
price of the basic necessities and prime commodities as
defined in the Price, but without exception from the VAT.
- The total purchases of basic necessities and prime
commodities should not exceed Php1,300per calendar
week without carry-over of the unused amount and the
amount needs to be spent on at least four kinds of listed
necessities and commodities commensurate to the personal
and exclusive consumption of the PWD within the calendar
week.
24) Transfer of property pursuant to Section 40(C)(2) of the
Tax Code, as amended (Upon effectivity of RA10963-TRAIN
Law on January 1, 2018).
SECTION 40(C)(2) OF THE TAX CODE
a. No gain or loss shall be recognized if in pursuance of a
plan of merger or consolidation –
i. A corporation, which is a party to the merger
or consolidation, exchanges property solely for
stock in a corporation, which is a party to the
merger or consolidation; or
ii. A shareholder exchanges stock in a
corporation, which is a party to the merger or
consolidation, solely for the stock of another
corporation also a party to the merger or
consolidation; or
iii. A security holder of a corporation, which is a
party to the merger or corporation, which is a
party to the merger or consolidation,
exchanges his securities in such corporation,
solely for stock or securities in another
corporation, a party to the merger or
consolidation.
b. No gain or loss shall also be recognized if property is
transferred to a corporation by a person in exchange
for stock or unit of participation in such a corporation
of which as a result of such exchange said person, alone
or together with others, not exceeding four (4) persons,
gains control of said corporation.
Provided, that stocks issued for services shall not be
considered as issued in return for property
25) Association dues, membership fees, and other assessments
and charges collected on a purely reimbursement basis by
homeowners’ 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.
26) Sale of Gold to the Bangko Sentral ng Pilipinas (BSP).
27) Sale of drugs and medicines prescribed for diabetes, high
cholesterol, and hypertension beginning January 1, 2019.
28) 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.
RR NO. 6-2020 (IMPLEMENTING THE TAX EXEMPTION
PROVISION OF R.A. No. 11469 BAYANIHAN TO HEAL AS ONE
ACT
Bayanihan 1 (R.A. No. 11469) is effective from March 25, 2020
up to June 25, 2020.
Based on the law, it is hereby declared that:
a. The importation of critical or needed healthcare equipment
or supplies intended to combat the COVID-19 public health
emergency, including personal protective equipment (i.e.
gloves, gowns, masks, googles, face shields, surgical
equipment and supplies); laboratory equipment and its
reagents; medical equipment and devices; support and
maintenance for laboratory and medical equipment,
surgical equipment and supplies; medical supplies, tools,
and consumables (i.e. alcohol, sanitizers, tissue,
thermometers, hand soap, detergent, sodium
hydrochloride, cleaning materials, povidone iodine,
common medicines (e.g. paracetamol tablet and
suspension, hyoscine tablet and suspension, oral
rehydration solution, and cetirizine tablet and suspension);
testing kits, and such other supplies or equipment as maybe
determined by the DOH and other relevant government
agencies, shall be EXEMPT from VAT.
b. Importation of materials needed to make health equipment
and supplies deemed as critical or needed to address the
current public health emergency shall likewise be EXEMPT
from VAT, provided that the importing manufacturer is
included in the Master List of the Department of Trade and
Industry and other incentive granting bodies.
RR No. 9-2020 (IMPLEMENTING SECTION 4(Z)AND SECTION
4(EE) OF R.A. NO. 11469
Donations of the following shall NOT be treated as a transaction
deemed sale subject to VAT:
a. Donations of all critical or needed healthcare equipment or
supplies;
b. Relief goods such as, but not limited to, food packs (rice,
canned goods, noodles, etc.) and water.

RR NO. 18-2020 (REGULATIONS TO IMPLEMENT SECTION 1 OF
R.A . NO. 11467, AS AMENDED BY R.A. NO. 10963 OR THE TRAIN
LAW
The following transactions shall be EXEMPT from VAT:
(aa) Sale or importation of prescription drugs and medicines
for:
i. Diabetes, high cholesterol, and hypertension beginning
January 1, 2020; and
ii. Cancer, mental illness, tuberculosis, and kidney
diseases beginning January 1, 2023.
RR NO. 26-2020 (IMPLEMENTING SECTION 4 (zzz) of R.A. NO.
11494 OTHERWISE KNOWN AS “BAYANIHAN TO RECOVER AS
ONE ACT” RELATIVE TO DONATIONS OF IDENTIFIED
EQUIPMENT FOR USE IN PUBLIC SCHOOLS
- In case of foreign donation, the importation of personal
computers, laptops, tablets, or similar equipment by the
DEPED, or CHED, or TESDA, shall be exempt from VAT;
provided that if the importer /consignee is other than the
abovementioned agencies, in order for the imported
articles to be exempt from VAT, the importer should
present a Deed of Donation duly accepted by the
abovementioned agencies.
- In the case of local donation where the personal computers,
laptops, tablets or similar equipment are originally
intended for sale or for use in the course of business by the
donor, the same shall not be treated as transaction deemed
sale subject to VAT. Furthermore, any input tax attributable
to the purchase of donated personal computers, laptops,
tablets or similar equipment not previously claimed as
input tax shall be creditable against any output tax.
- The above rules shall also apply to donations by ECOZONE
locators to the abovementioned agencies.
RR NO. 28-2020 (IMPLEMENTING THE TAX EXEMPTION
PROVISIONS UNDER SECTION 4 (cc) AND SECTION 18 OF R.A.
NO. 11494 ON THE INCENTIVES FOR THE MANUFACTURE OR
IMPORTATION OF CERTAIN EQUIPMENT, SUPPLIES OR GOODS
A. The importation from June 25, 2020 to December 19, 2020
of the goods enumerated below and identified as critical
products, essential goods, equipment or supplies need to
contain and mitigate COVID-19, subject to the limitations
and restrictions hereunder, shall be exempt from VAT:
PRACTICE EXAM
1. Who is statutorily liable in the payment of VAT?
a. The seller
b. The buyer
c. Either “a” or “b”
d. Neither “a” nor “b”
2. Andoks, a restaurant, sold litson manok. What is the
classification of the transaction?
1. Goods which may include personal protective
equipment (PPE) such as gloves, gowns, masks,
googles, and face shields; surgical equipment and
supplies; laboratory equipment and its reagents;
medical equipment and devices; support and
maintenance for laboratory and medical equipment,
surgical equipment and supplies, medical supplies,
tools and consumables such as alcohol, sanitizers,
tissue, thermometers, hand soap, detergent, sodium
hypochlorite, cleaning materials, povidone iodine,
common medicines (e.g., paracetamol tablet and
suspension, mefenamic acid, vitamins tablet and
suspension, hyoscine tablet and suspension, oral
rehydration solution, and cetirizine tablet and
suspension; testing kits, and such other supplies or
equipment as determined by the DOH and DTI.
2. Equipment for waste management, including, but not
limited to, waste segregation, storage, collection,
sorting, treatment and disposal services as approved by
the DENR, DOH or other concerned regulatory agencies.
3. Inputs, raw materials and equipment necessary for the
manufacture or production of essential goods related to
the containment or mitigation of COVID-19
enumerated in number 1 above.
For the purpose of qualifying for exemption, the taxpayer must
present a certification from the DTI that the equipment and
supplies being imported are not locally available or of
insufficient quality and preference.
B. Inputs, raw materials and equipment necessary for the
manufacture of essential goods of medical grade related to
containment and mitigation of COVID-19 referred in A (1)
above, as determined by Food and Drug Administration –
Department of Health (FDA-DOH), whether locally sourced
or imported by the registered manufacturer, shall be
exempt from VAT.
C. The sale of finished goods/products under A (1) above,
whether locally manufactured or imported, is subject to
VAT. The sale of inputs, raw materials and equipment
referred to in letter B above to a non-holder of “License to
Operate” issued by FDA-DOH is likewise subject to VAT.
a. Subject to 12% VAT
b. Zero-rated transaction
c. VAT-exempt transaction
d. Either “a” or “b”
3. Sale or importation of ingredients in making ordinary feeds
is:
a. exempt from VAT
 b. subject to 12% VAT a total price of P2,000,000, to a vendee who intends to erect
c. one of the zero-rated transactions his residential house thereon.
d. none of the choices
The sale shall be classified as a:
4. A nurse who worked in Canada for 20 years decided to a. Subject to 12%
retire and returned home to the Philippines to reside there b. Zero-rated transactions
permanently. She brought with her personal and household c. VAT exempt transactions
effects. What is the treatment of such goods, for VAT d. None of the foregoing
purposes, once entered Philippine territory?
a. Exempt from VAT 12. A subdivision developer sold five (5) residential house and
b. Exempt from VAT if the goods are exempt from customs lots, each to different vendees, for P3,000,000 per lot, or a
duties. total sale of P15,000,000 during 2019 taxable year. These
c. Subject to 12% VAT sales shall be:
d. Considered as zero-rated transaction a. Subject to 12% VAT transactions
b. Classified as zero-rated transactions
5. Service fee for milling cassava into flour is: c. Under VAT exempt transactions
a. Exempt from VAT d. None of the foregoing
b. Subject to 12% VAT
c. Considered as zero-rated transaction 13. Camella realty corporation sold the following real
d. Subject to franchise tax properties during the 2019 taxable year:
2 units of residential house and lot P6,000,000
6. An importer of flowers from abroad: 4 residential lots 8,000,000
a. Is liable for VAT, if it registers as a VAT person. 1 commercial lot 3,000,000
b. Is exempt from VAT, because the goods are treated as
agricultural products. 14. How much is the total amount of transactions subject to
c. Is exempt from VAT, provided that his total importation VAT?
of flowers does not exceed P3,000,000. a. P6,000,000 c. P11,000,000
d. Is liable for VAT, despite the fact that it did not register b. P8,000,000 d. P17,000,000
as a VAT person and his total annual sales of flowers do
not exceed P3,000,000. 15. Determine the business taxes in 2019 of the following:
I. Lease of residential units with a monthly rental per
7. Which of the following sale or importation of goods shall not unit not exceeding P15,000 (regardless aggregate
be exempt from VAT? annual gross rentals).
a. Fertilizers II. Lease of residential units with a monthly rental per
b. Seeds, seedlings and fingerlings unit exceeding P15,000 but the aggregate of such
c. Fish, prawn, livestock and poultry feeds, including rentals during the year do not exceed P3,000,000.
ingredients, whether locally produced or imported, III. Lease of commercial units regardless of monthly
used in the manufacture of finished feeds rental per unit.
d. Specialty feeds. A B C D
I None None None Vat
8. Which of the following transactions is exempt from value- II Vat OPT OPT Vat
added-tax? III Vat OPT Vat Vat
a. Medical services such as dental and veterinary services
rendered by professionals. 16. In cases where a lessor in 2018 taxable year has several
b. Legal services. residential units for lease, some are leased out for a monthly
c. Services arising from employee-employer relationship. rental per unit not exceeding P15,000 while others are
d. Services rendered by domestic air transport leased out for more than P15,000 per unit, his tax liability
companies. will be:
a. The gross receipts from rentals not exceeding P15,000
9. Statement 1: Sale by agricultural cooperatives to non- per month per unit shall be exempt from vat regardless
members can only be exempted from VAT if the producer of of the aggregate annual gross receipts.
the agricultural products sold is the cooperative itself. If the b. The gross receipts from rentals exceeding P15,000 per
cooperative is not the producer (e.g. trader), then only month per unit shall be subject to vat if the annual gross
those sales to its members shall be exempted from VAT. receipts from said units including the gross receipts
from units leased out for not more than P15,000 exceed
Statement 2: Sale or importation of agricultural food P3,000,000.
products in their original state is exempt from VAT c. Both statements are correct.
irrespective of the seller and buyer thereof. d. Both statements are incorrect
a. true, true c. false, false
b. true, false d. false, true 17. Which of the following transactions is exempt from value
added tax?
10. Which of the following shall be exempt from vat? a. Sale by an art gallery of literary works, musical
a. Services of banks. composition, work of art and similar creations, or
b. Services of money changers and pawnshops. devices performed for the production of such works.
c. Services of credit cooperatives b. Medical, dental hospital and veterinary professional
d. All of the above services.
c. Sale of cotton and cotton seeds in their original state.
11. In 2018, a real estate dealer sold two (2) adjacent d. Sale of books and any newspaper, magazine, review or
residential lots in the city for a price of P1,000,000 each, or bulletin, which appears at regular intervals with, fixed

9
 prices for subscription and sale which is not devoted kiddie meals so that the latter will have two (2) new toys
principally to the publication of paid advertisements. since each meal have a free one. The price of each meal is
P120, net of VAT. How much is the amount due from Lola
18. Lola Lita, a senior citizen, bought a medicine with a selling Trining?
price of P9,520 inclusive of VAT. How much is the net a. P268.8 c. P240
amount to be paid by Lola? b. P230.4 d. P192
a. P8,500 c. P6,916
b. P7,616 d. P6,800 21. Gabriana Clinic, a VAT-registered entity, performed a
prosthetic surgery on the legs of Loyd, a person with
19. Lolo Sot, a senior citizen went to Jollibee to treat his 4 disability. The total cost of medical operation inclusive of
grandchildren on account of his retirement. They consumed vat was P560,000 . Being a disabled person, Loyd received
food and beverages with gross amount of P1,120, inclusive 20% discount from Gabriana. How much is the total
of VAT. How much is amount to be paid by lolo Sot? amount to be paid by Loyd?
a. P896 c. P1,056 a. P400,000 c. P500,000
b. P920 d. P1,100 b. P448,000 d. P560,000

20. Lola Trining brought her granddaughter to Jollibee for a

treat. Her granddaughter requested that they both order

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