NOTES: VALUE ADDED TAX

Value-Added Tax Description

Value-Added Tax (VAT) is a form of sales tax. It is a tax on consumption levied on the sale, barter,
exchange or lease of goods or properties and services in the Philippines and on importation of goods into
the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee
of goods, properties or services.

Who are Required to File VAT Returns?

 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 Three Million Pesos (Php3,000,000.00)

 A person required to register as VAT taxpayer but failed to register

 Any person, whether or not made in the course of his trade or business, who imports goods

SUMMARY OF DEALINE:

DEADLINE
BIR RETURN FOR
FILING Non-EFPS filer EFPS Filer
VAT
depends on the group category of the
Monthly 2550M every 20th following of the month
company
every 25th following the end of the every 25th following the end of the
Quarterly 2550Q
quarter quarter

CALENDAR YEAR BASIS (January to December)

Assuming under group B
MONTH FILING BIR RETURN FOR VAT Non-EFPS filer EFPS Filer
January 2022 Monthly 2550M February 20, 2022 February 24, 2022
February 2022 Monthly 2550M March 20, 2022 March 24, 2022
March 2022 Quarterly 2550Q April 25, 2022 April 25, 2022

FISCAL YEAR BASIS (April to March)

Assuming under group B
MONTH FILING BIR RETURN FOR VAT Non-EFPS filer EFPS Filer
April 2022 Monthly 2550M May 20, 2022 May 24, 2022
May 2022 Monthly 2550M June 20, 2022 June 24, 2022
June 2022 Quarterly 2550Q July 25, 2022 July 25, 2022

Monthly VAT Declarations

BIR Form 2550M - Monthly Value-Added Tax Declaration (February 2007 ENCS)

Documentary Requirements

1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form No. 2307), if applicable
 2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at
Source (SAWT), if applicable.

3. Duly approved Tax Debit Memo, if applicable

4. Duly approved Tax Credit Certificate, if applicable

5. Authorization letter, if return is filed by authorized representative.

Procedures

1. Fill-up BIR Form No. 2550M in triplicate copies (two copies for the BIR and one copy for the
taxpayer).

2. If there is payment:

o File the Monthly VAT declaration, together with the required attachments, and pay the
VAT due thereon with any Authorized Agent Bank (AAB) under the jurisdiction of
the Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) where the
taxpayer (head office of the business establishment) is registered.

o Accomplish and submit BIR-prescribed deposit slip, which the bank teller shall machine
validate as evidence that payment was received by the AAB. The AAB receiving the tax
return shall stamp mark the word "Received" on the return and machine validate the
return as proof of filing the return and payment of the tax.

o In places where there are no AAB, file the Monthly VAT declaration, together with the
required attachments and pay the VAT due with the Revenue Collection Officer (RCO)

o The RCO shall issue a Revenue Official Receipt upon payment of the tax.

3. If there is no payment:

o File the Monthly VAT Declaration, together with the required attachments, with the
RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent having jurisdiction
over the registered address of the taxpayer (head office of the business establishment).

Deadline

 Manual Filing - Not later than the 20th day following the end of each month

 Through Electronic Filing and Payment System (eFPS):

Business Industry Period for filing Monthly

VAT Declarations
Group A  
Insurance and Pension 25 days following the end of
Funding                                                   the month
Activities Auxiliary to Financial Intermediation
Construction
Water Transport
Hotels and Restaurants
Land Transport
   
Group B  
Manufacture and Repair of Furniture 24 days following the end of
Manufacture of Basic Metals the month
Manufacture of Chemicals and Chemical Products
Manufacture of Coke, Refined Petroleum & Fuel
Products
Manufacture of Electrical Machinery & Apparatus
N.E.C.
Manufacture of Fabricated Metal Products
Manufacture of Food, Products & Beverages
Manufacture of Machinery & Equipment NEC
Manufacture of Medical, Precision, Optical Instruments
Manufacture of Motor Vehicles, Trailer & Semi-Trailers
Manufacture of Office, Accounting & Computing
Machinery
Manufacture of Other Non-Metallic Mineral Products
Manufacture of Other Transport Equipment
Manufacture of Other Wearing Apparel
Manufacture of Paper and Paper Products
Manufacture of Radio, TV & Communication
Equipment/ Apparatus
Manufacture of Rubber & Plastic Products
Manufacture of Textiles
Manufacture of Tobacco Products
Manufacture of Wood & Wood Products
Manufacturing N.E.C.
Metallic Ore Mining
Non-Metallic Mining & Quarrying
   
Group C  
Retail Sale 23 days following the end of
Wholesale Trade and Commission Trade the month
Sale, Maintenance, Repair of Motor Vehicle, Sale of
Automotive Fuel
Collection, Purification and Distribution of Water
Computer and Related Activities
Real Estate Activities
   
Group D  
Air Transport 22 days following the end of
Electricity, Gas, Steam & Hot Water Supply the month
Postal & Telecommunications
Publishing, Printing & Reproduction of Recorded Media
Recreational, Cultural & Sporting Activities
Recycling
Renting of Goods & Equipment
Supporting & Auxiliary Transport Services
   
Group E  
Activities of Membership Organizations, Inc. 21 days following the end of
 Health and Social Work the month
Public Admin & Defense Compulsory Social Security
Research and Development
Agricultural, Hunting, and Forestry
Farming of Animals
Fishing
Other Service Activities
Miscellaneous Business Activities
Unclassified

Quarterly Value-Added Tax Return

BIR Form No. 2550Q - Quarterly Value-Added Tax Return (February 2007 ENCS)

Documentary Requirements

1. Duly issued Certificate of Creditable VAT Withheld at Source (BIR Form 2307), if applicable

2. Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at

Source (SAWT), if applicable

3. Duly approved Tax Debit Memo, if applicable

4. Duly approved Tax Credit Certificate, if applicable

5. Previously filed return and proof of payment, for amended return

6. Authorization letter, if return is filed by authorized representative

Procedures

Fill-up BIR Form 2550Q in triplicate copies (two copies for the BIR and one copy for the taxpayer)

1. If there is payment:

o File the Monthly VAT declaration, together with the required attachments, and pay the
VAT due thereon with any Authorized Agent Bank (AAB) under the jurisdiction of
the Revenue District Office (RDO)/Large Taxpayers District Office (LTDO) where the
taxpayer (head office of the business establishment) is registered.

o Accomplish and submit BIR-prescribed deposit slip, which the bank teller shall machine
validate as evidence that payment was received by the AAB. The AAB receiving the tax
return shall stamp mark the word "Received" on the return and machine validate the
return as proof of filing the return and payment of the tax.

o In places where there are no AAB, file the Monthly VAT declaration, together with the
required attachments and pay the VAT due with the Revenue Collection Officer (RCO)

o The RCO shall issue a Revenue Official Receipt upon payment of the tax.

2. If there is no payment:

o File the Quarterly VAT Return, together with the required attachments with the
RDO/LTDO/Large Taxpayers Assistance Division, Collection Agent having jurisdiction
over the registered address of the taxpayer (head office of the business establishment).
Reminders:

 Only one consolidated Monthly VAT Declaration/Quarterly VAT Return shall be filed covering the
results of operation of the head office as well as the branches for all lines of business subject to
VAT.

 The Quarterly Summary Lists of Sales and Purchases shall be submitted in Compact Disk-
Recordable (CDR)  following the format provided under Section 4.114-3(g) of RR No. 16-2005, as
amended by RR No. 1-2012.

 The Quarterly Summary Lists of Sales and Purchases shall be submitted through electronic filing
facility for taxpayers under the jurisdiction of the Large Taxpayers Service (LTS) and those
enrolled under the eFPS.

Deadline

Within twenty five (25) days following the close of the taxable quarter.

Value-Added Tax Rates 

 On sale of goods and properties - twelve percent (12%) of the gross selling price or gross value in
money of the goods or properties sold, bartered or exchanged

 On sale of services and use or lease of properties - twelve percent (12%) of gross receipts
derived from the sale or exchange of services, including the use or lease of properties

 On importation of goods - twelve percent (12%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such as tax to be paid by the importer prior to the release of such goods from
customs custody; provided, that where the customs duties are determined on the basis of
quantity or volume of the goods, the VAT shall be based on the landed cost plus excise taxes, if
any.

 On export sales and other zero-rated sales - 0%

Who are liable to register as VAT taxpayers?

Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or
engages in the sale or exchange of services shall be liable to register if:

a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt
under Section 109 (A) to (U), have exceeded Three Million Pesos (P3,000,000.00): or

b. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12)
months, other than those that are exempt under Section 109 (A) to (U), will exceed Three Million
Pesos (P3,000,000.00).

When is a new VAT taxpayer required to apply for registration and pay the registration fee?

New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding registration
fee of five hundred pesos (P500.00) using BIR Form No. 0605 for every separate or distinct establishment
or place of business before the start of their business following existing issuances on registration.

Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos (P500.00) not
later than January 31, every year.
What compliance activities should a VAT taxpayer, after registration as such, do promptly or
periodically?

The following compliance activities must be performed by a VAT-registered taxpayer:

a. Pay the annual registration fee of P500.00 for every place of business or establishment that
generates sales;

b. Register the books of accounts of the business/occupation/calling, including practice of

profession, before using the same;

c. Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use
on transactions subject to VAT. (If there are other transactions not subject to VAT, a separate set
of non-VAT invoices or non-VAT official receipts need to be registered for use on transactions not
subject to VAT);

d. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of
the taxable month (for manual filers)/on or before the prescribed due dates enunciated in RR No.
16-2005 (for e-filers) using BIR Form No. 2550M and of the Quarterly VAT Return on or before
the 25th day following the end of the taxable quarter using BIR Form No. 2550Q, reflecting
therein gross receipts (for seller of service)/ gross sales (for seller of goods) and output tax (VAT
on sales); purchases of goods and services made in the course of trade or business/exercise of
profession and input tax (VAT on purchases), other allowable tax credits as in the case of
advance VAT payment and VAT withheld by government payors, and VAT payable or excess
input VAT, whichever is applicable, with the accredited agent banks (AABs) of the BIR or
Revenue Collection Officers (RCOs) of the BIR (in areas without AAB), for returns with payment,
or with the RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns
without payment. (The monthly VAT Declaration and the Quarterly VAT Return shall reflect the
consolidated total for all the taxable lines of activity and all the establishments - head office and
branches);

e. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in
the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales
and Output Tax (if the quarterly sales exceed P2,500,000.00), and the soft copy of the Quarterly
Schedule of Monthly Domestic Purchases and Input Tax/ the soft copy of the Schedule of
Transactional/Individual Importation ( if the quarterly total purchases exceed P1,000,000.00),
reflecting therein the required data prescribed under existing revenue issuances.

What is the liability of a taxpayer becoming liable to VAT and did not register as such?

Any person who becomes liable to VAT and fails to register as such shall be liable to pay the output tax
as if he is a VAT-registered person, but without the benefit of input tax credits for the period in which he
was not properly registered.

Who may opt to register as VAT and what will be his liability?

a. Any person who is VAT-exempt under Sec. 109 of the Tax Code, as amended, may, in relation to
Sec. 109 (2) of the same Code, 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.

b. 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 of the Tax Code, as amended.
 c. 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).

d. Any person who elects to register under optional registration shall not be allowed to cancel his
registration for the next three (3) years.

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.

What are the instances when a VAT-registered person may cancel his VAT registration?

a. 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 are exempt
under Section 109 (A) to (U), will not exceed Three Million Pesos (P3,000,000.00); or

b. 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.

When will the cancellation for registration be effective?

The cancellation for registration will be effective from the first day of the following month the cancellation
was approved.

What is the invoicing/receipt requirement of a VAT-registered person?

A VAT registered person shall issue :

a. A VAT invoice for every sale, barter or exchange of goods or properties; and

b. A VAT official receipt for every lease of goods or properties and for every sale, barter or
exchange of services.

May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT
transactions?

Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided that the
invoice or receipt shall clearly indicate the break-down of the sales price between its taxable, exempt and
zero-rated components and the calculation of the Value-Added Tax on each portion of the sale shall be
shown on the invoice or receipt.

May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-VAT
transactions?

Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and zero-
rated component of its sales provided that if the sales is exempt from value-added tax, the term "VAT-
EXEMPT SALE" shall be written or printed prominently on the invoice or receipt and if the sale is subject
to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed prominently on the
invoice or receipt.

How is the Value-Added Tax presented in the receipt/ invoice?

The amount of the tax shall be shown as a separate item in the invoice or receipt.
Sample:

Sales Price P 100,000.00

VAT 12,000.00

Invoice Amount  112,000.00

What is the information that must be contained in the VAT invoice or VAT official receipt?

1. Name of Seller

2. Description of the goods or properties or nature of the service

3. Unit cost

4. Quantity

5. Date of transaction

6. TIN of buyer, if VAT- registered and amount exceeds P1,000.00

7. Address of Buyer

8. Business Style of Buyer

9. Name of Buyer

10. Statement that the seller is a VAT-registered person, followed by his TIN

11. Business Address of the Seller

12. Business Style of the Seller

13. Purchase price plus the VAT, provided that

o The amount of tax shall be shown as a separate item in the invoice or receipt;

o If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or printed
prominently on the invoice or receipt;

o If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be
written or printed prominently on the invoice receipt; and

o If the sale involves goods, properties or services some of which are subject to and some
of which are zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate
the breakdown of the sales price between its taxable, exempt and zero-rated
components, and the calculation of the VAT on each portion of the sale shall be shown
on the invoice or receipt.

14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt.

What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT-
exempt transactions?

If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction but
fails to display prominently on the invoice or receipt the words "VAT-EXEMPT SALE", the transaction
shall become taxable and the issuer shall be liable to pay the VAT thereon. The purchaser shall be
entitled to claim an input tax credit on his purchase.
What is "output tax"?

Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or services
by any person registered or required to register under Section 236 of the Tax Code.

What is "input tax"?

Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of
goods, properties or services, including lease or use of property in the course of his trade or business. It
shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code,
presumptive input tax and deferred input tax from previous period.

Does amortization of input VAT still allowable?

Yes , but is only allowed until December 31, 2021 after which taxpayers with unutilized input VAT on
capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized:
Provided, That in the case of purchase of services, lease or use of properties, the input tax shall be
creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee.

Additional notes to Input VAT:

 If the seller is vat registered but the buyer is non-vat registered, the latter is not allowed
to recognized "input vat" in its books. Instead, the applicable vat is recognized either as part of
the cost of the purchased or as part of its operating expenses.
 If the seller is non-vat registered, the buyer (even if vat registered) cannot recognize input vat
because the seller did not impose such tax on its sale. 

Carry Over of Excess Input VAT:

GUIDE: Assume transactions for the last quarter of 2020: 

Excess input vat for the month of Oct 2020
Excess input vat for the month of Nov. 2020
Excess input vat for the 3rd quarter of 2020
Excess input vat for the 4th quarter of 2020
May be carried over for the month of November
Cannot be carried over for the month of
December
The Vat return for the month of December will
cover the 4th quarter of the year (October to
December)
May be carried over for the 4th quarter of 2020
May be carried over for the 1st quarter of 2021

What will be the basis of the date of cancellation?

It is the date of issuance of tax clearance by the BIR, after full settlement of all tax liabilities relative to
cessation of business or change of status of concerned taxpayer

What comprises "goods or properties"?

The term "goods or properties" shall mean all tangible and intangible objects, which are capable of
pecuniary estimation and shall include, among others:

a. Real properties held primarily for sale to customers or held for lease in the ordinary course of
trade or business;

b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or
process, goodwill, trademark, trade brand or other like property or right;
 c. The right or privilege to use in the Philippines of any industrial, commercial or scientific
equipment;

d. The right or the privilege to use motion picture films, films, tapes and discs; and

e. Radio, television, satellite transmission and cable television time.

What comprises "sale or exchange of services"?

The term "sale or exchange of services" means the performance of all kinds of services in the Philippines
for others for a fee, remuneration or consideration, whether in kind or in cash, including those performed
or rendered by the following:

a. Construction and service contractors;

b. Stock, real estate, commercial, customs and immigration brokers;

c. Lessors of property, whether personal or real;

d. Persons engaged in warehousing services;

e. Lessors or distributors of cinematographic films;

f. Persons engaged in milling, processing, manufacturing or repacking goods for others;

g. Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts,
theatres, and movie houses;

h. Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places,
including clubs and caterers;

i. Dealers in securities;

j. Lending investors;

k. Transportation contractors on their transport of goods or cargoes, including persons who

transport goods or cargoes for hire and other domestic common carriers by land relative to their
transport of goods or cargoes;

l. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from
one place in the Philippines to another place in the Philippines;

m. Sale of electricity by generating, transmission by any entity including the National Grid
Corporation of the Philippines (NGCP), and distribution companies including electric cooperatives
shall be subject to twelve percent (12%) VAT on their gross receipts.;

n. Franchise grantees of electric utilities, telephone and telegraph, radio and/or television
broadcasting and all other franchise grantees, except 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), and franchise grantees of gas and water utilities;

o. Non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity
and bonding companies; and

p. Similar services regardless of whether or not the performance thereof calls for the exercise of use
of the physical or mental faculties.

The phrase "sale or exchange of services" shall likewise include:

 a. The lease of use of or the right or privilege to use any copyright, patent, design or model, plan,
secret formula or process, goodwill, trademark, trade brand or other like property or right;

b. The lease or the use of, or the right to use of any industrial, commercial or scientific equipment;

c. The supply of scientific, technical, industrial or commercial knowledge or information;

d. The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of
enabling the application or enjoyment of any such property, or right or any such knowledge or
information;

e. The supply of services by a nonresident person or his employee in connection with the use of
property or rights belonging to, or the installation or operation of any brand, machinery or other
apparatus purchased from such non-resident person;

f. The supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial undertaking, venture,
project or scheme;

g. The lease of motion picture films, films, tapes and discs; and

h. The lease or the use of or the right to use radio, television, satellite transmission and cable
television time.

What is a zero-rated sale?

It is a sale, barter or exchange of goods, properties and/or services subject to 0% VAT pursuant to
Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable transaction for VAT purposes, but shall
not result in any output tax. However, the input tax on purchases of goods, properties or services, related
to such zero-rated sales, shall be available as tax credit or refund in accordance with existing regulations.

What transactions are considered as zero-rated sales?

The following services performed in the Philippines by VAT-registered person shall be subject to zero
percent (0%) rate:

a. Services other than processing, manufacturing or repacking rendered to a person engaged in

business conducted outside the Philippines or to a non-resident person engaged in business who
is outside the Philippines when the services are performed, the consideration for which is paid for
in acceptable foreign currency and accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);

b. Services rendered to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects the supply of such services
to zero percent (0%) rate;

c. Services rendered to persons engaged in international shipping or air transport operations,

including leases of property for use thereof; Provided, that these services shall be exclusively for
international shipping or air transport operations.  (Thus, the services referred to herein shall not
pertain to those made to common carriers by air and sea relative to their transport of passengers,
goods or cargoes from one place in the Philippines to another place in the Philippines, the same
being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code, as amended);

d. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a
foreign country. (Gross receipts of international air carriers and international sea carriers doing
business in the Philippines derived from transport of passengers and cargo from the Philippines
to another country shall be exempt from VAT; however they are still liable to a percentage tax of
 three percent (3%) based on their gross receipts derived from transport of cargo from the
Philippines to another country as provided for in Sec. 118 of the Tax Code, as amended); and

e. Sale of power or fuel generated through renewable sources of energy such as, but not limited to,
biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other shipping
sources using technologies such as fuel cells and hydrogen fuels; Provided, however that zero-
rating shall apply strictly to the sale of power or fuel generated through renewable sources of
energy, and shall not extend to the sale of services related to the maintenance or operation of
plants generating said power.

The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

a. Export sales

1. The sale and actual shipment of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement that may be agreed upon which may influence
or determine the transfer of ownership of the goods so exported, paid in acceptable
foreign currency or its equivalent in goods or services, and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

2. The sale of goods, supplies, equipment and fuel to persons engaged in international
shipping or international air transport operations; Provided, That the goods, supplies,
equipment, and fuel shall be used exclusively for international shipping or air transport
operations; Provided, that the same is limited to goods, supplies, equipment and fuel that
shall be used in the transport of goods and passengers 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 passengers and/or cargoes that originated from abroad, or to load
passengers and/or cargoes bound for abroad;Provided, further, that if any portion of such
fuel, goods or supplies is used for purposes other than the mentioned in this paragraph,
such portion of fuel, goods and supplies shall be subject to twelve percent (12%) output
VAT.

b. Sales to Persons or Entities Deemed Tax-exempt under Special Law or International

Agreement

Sale of goods or property to persons or entities who are tax-exempt under special laws or international
agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB),
International Rice Research Institute (IRRI), subject such sales to zero rate.

What are the transactions which are no longer subject to zero-percent (0%)?

1. Sale of gold to BSP

2. Foreign-currency denominated sales

Upon the successful establishment and implementation of an enhanced VAT refund system by the
Department of Finance (DOF), what are the transactions that will now be subject to twelve percent (12%)
and no longer be subject to zero percent (0%)?

1. The sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident
local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in
the Philippines of the said buyer's goods, paid for in acceptable foreign currency, and accounted
for in accordance with the rules and regulations of the BSP;
 2. The sale of raw materials or packaging materials to an export-oriented enterprise whose export
sales exceed seventy percent (70%) of total annual production;

3. Transactions considered export sales under Executive Order No. 226, otherwise known as the
Omnibus Investments Code of 1987, and other special laws

4. Processing, manufacturing or repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported where the services are paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP); and

5. Services performed by subcontractors and/or contractors in processing, converting, or

manufacturing goods for an enterprise whose export sales exceeds seventy percent (70%) of
total annual production.

What transactions are considered deemed sales?

The following transactions are considered as deemed sales:

Transfer, use or consumption, not in the course of business, of 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;

a. Distribution or transfer to:

o Shareholders or investors as share in the profits of the VAT-registered person; or

o Creditors in payment of debt or obligation

b. Consignment of goods if actual sale is not made within sixty (60) days following the date such
goods were consigned. Consigned goods returned by the consignee within the 60-day period are
not deemed sold;

c. 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. The following
circumstances shall, among others, give rise to transactions "deemed sale";

o Change of ownership of the business. There is a change in the ownership of the business

when a single proprietorship incorporated; or the proprietor of a single proprietorship sells
his entire business

o Dissolution of a partnership and creation of a new partnership which takes over the
business.

What is VAT-exempt sale?

It is a sale of goods, properties or service and the use or lease of properties which is not subject to output
tax and whereby the buyer is not allowed any tax credit or input tax related to such exempt sale.

What are the VAT-exempt transactions?

a. Sale or importation of agricultural and marine food products in their original state, livestock and
poultry of a kind generally used as, or yielding or producing foods for human consumption; and
breeding stock and genetic materials therefore;

b. Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and
poultry feeds, including ingredients, whether locally produced or imported, used in the
 manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium
fish, zoo animals and other animals considered as pets);

c. Importation of personal and household effects belonging to residents of the Philippines returning
from abroad and non-resident citizens coming to resettle in the Philippines; Provided, that such
goods are exempt from custom duties under the Tariff and Customs Code of the Philippines;

d. Importation of professional instruments and implements, tools of trade, occupation or

employment, wearing apparel, domestic animals, and personal and household effects ( except
vehicles, vessels, aircrafts machineries and other similar goods for use in manufacture which are
subject to duties, taxes and other charges) belonging 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 hereinafter referred to as overseas Filipinos, in quantities and of the
class suitable to the profession, rank or position of the persons importing said items, for their own
use and not barter or sale, accompanying such persons, or arriving within a reasonable time;
Provided, That the Bureau of Customs may, upon the production of satisfactorily evidence that
such persons are actually coming to settle in the Philippines and that the goods are brought from
their place of residence, exempt such goods from payment of duties and taxes.

e. Services subject to percentage tax under Title V of the Tax Code, as amended;

f. Services by agricultural contract growers and milling for others of palay into rice, corn into grits,
and sugar cane into raw sugar;

g. Medical, dental, hospital and veterinary services except those rendered by professionals;

h. Educational services rendered by private educational institutions duly accredited by the

Department of Education (DepED), the Commission on Higher Education (CHED) and the
Technical Education and Skills Development Authority (TESDA) and those rendered by the
government educational institutions;

i. Services rendered by individuals pursuant to an employer-employee relationship;

j. 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;

k. Transactions which are exempt under international agreements to which the Philippines is a
signatory or under special laws except those granted under P.D. No. 529 - Petroleum Exploration
Concessionaires under the Petroleum Act of 1949;

l. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative
Development Authority (CDA) to their members, as well as 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;

m. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and
in good standing with the Cooperative Development Authority;

n. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in
good standing with CDA; Provided, that the share capital contribution of each member does not
exceed Fifteen Thousand Pesos (P15,000.00) and regardless of the aggregate capital and net
surplus ratably distributed among the members;
o. Export sales by persons who are not VAT-registered;

p. The following sales of real properties:

i. Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business.

ii. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise
known as the "Urban Development and Housing Act of 1992" and other related laws,
such as RA No. 7835 and RA No. 8763;

iii. Sale of real properties utilized for specialized housing as defined under RA No. 7279, and
other related laws, such as RA No. 7835 and RA No. 8763, wherein price ceiling per unit
is Php 450,000.00 or as may from time to time be determined by the HUDCC and the
NEDA and other related laws;

iv. Sale of residential lot valued at One Million Five Hundred Thousand Pesos
(P1,500,000.00) and below, or house and lot and other residential dwellings valued at
Two Million Five Hundred Thousand Pesos (P2,500,000.00) and below, as adjusted
using latest Consumer Price Index values.   (If two or more adjacent 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 of the lots do not exceed
One Million Five Hundred Thousand Pesos (P1,500,000.00).  Adjacent residential lots,
although covered by separate titles and/or separate tax declarations, when sold or
disposed to one and the same buyer, whether covered by one or separate Deed of
Conveyance, shall be presumed as a sale of one residential lot.)

q. Lease of residential units with a monthly rental per unit not exceeding Fifteen Thousand Pesos
(P15,000.00), regardless of the amount of aggregate rentals received by the lessor during the
year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the
amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as
published by the Philippine Statistics Authority (Formerly known as NSO);

r. Sale, importation, printing or publication of books and any newspaper, magazine, review or
bulletin which appears at regular intervals with fixed prices for subscription and sale and which is
not devoted principally to the publication of paid advertisements;

s. Transport of passengers by international carriers;

t. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine equipment
and spare parts thereof for domestic or international transport perations; 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 Maritime Industry Authority (MARINA);

u. Importation of fuel, goods and supplies by persons engaged in international shipping or air
transport operations; Provided, that the said fuel, goods and supplies shall be used 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 passengers
and/or cargoes that originated form abroad, or to load passengers and/or cargoes bound for
abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes
other that the mentioned in the paragraph, such portion of fuel, goods and supplies shall be
subject to 12% VAT;
 v. 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; and

w. Sale or lease of goods and services to senior citizens and persons with disabilities, as provided
under Republic Act Nos. 9994 (Expanded Senior Citizens Act of 2010) and 10754 (An Act
Expanding the Benefits and Privileges of Persons with Disability), respectively;

x. Transfer of property in merger or consolidation (pursuant to Section 40(C)(2) of the Tax Code, as
amended);

y. Association dues, membership fees, and other assessments and charges collected on a purely
reimbursement basis by homeowners’ associations and condominium established under Republic
Act No. 9904 (Magna Carta for Homeowners and Homeowner’s Association) and Republic Act
No. 4726 (The Condominium Act), respectively;

z. Sale of gold to the Banko Sentral ng Pilipinasn (BSP) (previously zero-rated transaction);

aa. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension
(beginning on January 1, 2019 as determined by the Department of Health); and

bb. 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 Three Million Pesos (Php 3,000,000.00).  Note: Self-employed individuals and
professionals availing of the 8% on gross sales and/or receipts and other non-operating income,
under Sections 24 (A)(2)(b) and 24 (A)(2)(c)(2) of the NIRC shall also be exempt from the
payment of twelve (12%) VAT.

What is the difference between a low-cost and a socialized housing?

“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 No. 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 No. 7279 otherwise known as the “Urban Development and Housing Act of 1992” and other laws.

“Socialized housing” refers to housing programs and projects covering houses and lots or home lots only
undertaken by the Government or private sector for the underprivileged and homeless citizens which shall
include sites and services development, long-term financing, liberated terms on interest payments, and
such other benefits in accordance with the provision or RA No. 7279, otherwise known as the “Urban
Development and Housing Act of 1992” and RA No. 7835 and RA No. 8763.  It 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 Lending Program (UHLP) or any equivalent housing program of the
Government, the private sector or non-government organizations.

II.   RELIEF-Related Queries

What is "RELIEF"?

RELIEF means Reconciliation of Listing for Enforcement. It supports the third party information program
of the Bureau through the cross referencing of third party information from the taxpayers' Summary Lists
of Sales and Purchases prescribed to be submitted on a quarterly basis.

Who are required to submit Summary List of Sales?

VAT taxpayers with quarterly total sales/receipts (net of VAT), exceeding Two Million Five Hundred
Thousand Pesos (P2,500,000.00) are required to submit a Summary List of Sales.

Who are required to submit Summary List of Purchases?

VAT taxpayers with quarterly total purchases (net of VAT) of goods and services, including importation
exceeding One Million Pesos (P1,000,000.00) are required to submit Summary List of Purchases.

What are the Summary Lists required to be submitted?

 Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/ Customers and
Output Tax

 Quarterly Summary of List of Local Purchases and Input tax; and

 Quarterly Summary List of Importation.

When is the deadline for submission of the above Summary Lists?

The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or before the
twenty-fifth (25th) day of the month following the close of the taxable quarter -- calendar quarter or fiscal
quarter.

What are the penalties for failure to submit the Summary Lists?

 For failure to file, keep or supply a statement, list or information required on the date prescribed
shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for each such failure,
unless it is shown that such failure is due to reasonable cause and not to willful neglect; and

 An aggregate amount to be imposed for all such failures during a taxable year shall not exceed
Twenty-Five Thousand Pesos (P25,000.00).

III.   What is the treatment for Withholding of VAT on Government Money Payments?

The government or any of its political subdivisions, instrumentalities or agencies, including government-
owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of
goods and/or services taxed at twelve percent (12%) VAT pursuant to Sections 106 and 108 of the Tax
Code, deduct and withhold a Final VAT due at the rate of five percent (5%) of the gross payment.

The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller. The
remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or
services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs
in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Should actual
input VAT attributable to sales to government exceed seven percent (7%) of gross payments, the excess
may form part of the sellers' expense or cost. On the other hand, if actual input VAT attributable to sale to
government is less than seven percent (7%) of gross payment, the difference must be closed to expense
or cost.

The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as
well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall
withhold twelve percent (12%) VAT with respect to the following payments:

Lease or use of properties or property rights owned by non-residents; and

Other services rendered in the Philippines by non-residents.

IV.   In what grounds can the Commissioner of Internal Revenue suspend the business operations
of a taxpayer?

The Commissioner or his authorized representative is empowered to suspend the business operations
and temporarily close the business establishment of any person for any of the following violations:

a. In the case of a VAT-registered Person:

o Failure to issue receipts or invoices;

o Failure to file a value-added-tax return as required under Section 114; or

o Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct
taxable sales or receipts for the taxable quarter.

b. Failure to any Person to Register as Required under Section 236

o The temporary closure of the establishment shall be for the duration of not less than five
(5) days and shall be lifted only upon compliance with whatever requirements prescribed
by the Commissioner in the closure order.

Gross Selling Price:

Gross selling price excludes VAT

Sample Journal entry: 
Cash PXXX
Receivables  XXX
Sales XXX
Output vat  XXX
With Discount

1. On January 5, 2021, Pinoy Food Corporation, vat registered, sold on account goods for  P112,000
inclusive of vat. The term was: 2/10, n/30. Payment was made on January 10, 2021. The total amount
due is: 

The buyer paid within the discount period, therefore, the 2% discount shall be granted. However,
since the discount granted is conditional (to be granted only if paid within 10 days). the basis for the
imposition of vat shall be the selling price before deducting the discount. The total amount to be paid
by the buyer shall be computed as follows: 
Selling price without discount P100,000
Less: cash discount (2,000)
Add: 12% vat based on P100,000 12,000
Total amount due P110,000
SALE OF REAL PROPERTIES

SALE OF BEGINNING 2021 PRIOR TO 2021

1. Real property primarily held for VAT VAT
sale or lease in ordinary course of
trade or business
2. Real property not held for sale or Vat Exempt Vat Exempt
lease not in the ordinary course
of trade or business
3. Real property utilized for Vat Exempt Vat Exempt
socialized housing
4. Residential lot with SP of not Subject to VAT regardless of Vat Exempt
more than P1,919,500 the amount
5. Residential house and lot and VAT exempt under RR 8-2021 Vat Exempt
other residential dwellings with issued on June 11, 2021
SP of not more than P3,199,200
6. Sale of commercial lot/units VAT VAT

 Sale of parking lot in the sale of condominium units is NOT exempt from VAT regardless of the
amount

a. LEASE OF REAL PROPERTIES

 Lease of commercial units = generally subject to vat, regardless of the amount of monthly rental
per unit.
 Lease of residential units: 
o Monthly rental per unit ≤ P15,000 = exempt from business tax/ exempt from VAT
o Monthly rental per unit > P15,000 but the annual gross receipts from these units ≤
P3,000,000 = exempt from vat but subject to 3% percentage tax under Section 116 of the
Tax Code, as amended.
o Monthly rental per unit > P15,000 and the annual gross receipts from this units > P3,000,000
= subject to 12% vat. 
o If the lessor is engaged in renting out residential units with monthly rental per unit of ≤
P15,000 as well as residential units with monthly rental per unit of > P15,000 = treat both
activities separately. The residential units with monthly rental per unit of ≤ R15,000 is
exempt from business taxes while the residential units with monthly rental per unit of >
P15,000 is either subject to Section 116 or vat.
 >15,000 and annual gross receipt exceeds 3,000,000 = subject to VAT
 >15,000 and annual gross receipt NOT exceeds 3,000,000 = subject to Percentage
tax
TRANSPORT OF PASSENGERS OR CARGOES/GOODS BY INTERNATIONAL CARRIERS doing business in
the Philippines

TRANSPORT OF: TREATMENT

PASSENGERS VAT EXEMPT AND NOT SUBJECT TO PERCENTAGE TAX
CARGO OR GOODS VAT EXEMPT BUT SUBJECT TO PERCENTAGE TAX (Common Carrier's Tax)

TRANSPORT OF PASSENGERS OR CARGOES/GOODS BY DOMESTIC COMMON CARRIERS doing business

in the Philippines
TRANSPORT OF: WITHIN PHILIPINES WITHIN PHILIPINES
PASSENGERS    
VAT EXEMPT BUT SUBJECT TO
BY LAND PERCENTAGE TAX (Common VAT (0% VAT)
Carrier's Tax)
BY AIR OR SEA VAT VAT (0% VAT)
CARGO OR GOODS VAT VAT (0% VAT)

Installment Sale:

VAT shall be subject to Installment payments only if installment plan of selling real property was sold by
REAL ESTATE DEALER.

Comparing Consideration vs FMV to get the basis of VAT:

- Get the Vat exclusive amount of the consideration if it is stated that the amount is VAT inclusive,
before comparing this amount to FMV.

Problem: Kaktus Realty Inc, developed a condominium in Manila During the month of January 20 21 it
had the following data (VAT included):
Selling Price
Cash sale of a 3 bedroom unit P5,040,000
Sale of parking lot 560,000
Installment sale of 2 bedroom unit (initial payments 3,920,000
exceed 25% of the selling price) 

The 3 bedroom unit sold for cash had a zonal value of P5,000,000 and the 2 bedroom unit had a
fair market value per Tax Declaration of P3,000,000. How much is the output tax for the month? 
a. P920,000 
b. P900,000 
c. P1,020,000
d. P1,080,000 

Answer: D
3 Bedroom unit 
SP = P5,040,000/1.12 = P4,5000
ZV =P5M 
Output Vat = P5M X 12% P600,000
2 Bedroom unit 
SP = P3,920,000 = P3,500,000
ZV= P3,000,000 60,000 
OV = P3.5M X 12% 420,000
 TOTAL Output Vat P1,080,000

Note: This will be applicable also in computing the initial payment

Selling multiple real properties

Problem: Use the following data for the next two (2) questions:
JJ is a real estate dealer. During the month of October 2020, he sold three (3) commercial lots under the
following terms:
Lot 1 Lot 2 Lot 3
Selling Price  P250,000 P200,000 P300,000
Cost  150,000 130,000 175,000
Gain/Loss  100,000 70,000 125,000
Terms:
Down, Oct. 5, 2020 25,000 50,000 40,000
Due:
Dec. 5, 2020 25,000 20,000 20,000
Year 2021 200,000 130,000 240,000
Zonal Value 2020 350,000 260,000 250,000
 
1. How much is the output tax for October 2020? 
a. P26,500 
b. P34,800 
c. P31,800
d. P40,200 

Answer: D 

2. How much is the output tax for December 2020? 

a. P5,400 
b. P4,500 
c. P6,600
d. none 

Answer: C 
Lot 1 Lot 2 Lot 3 Total
Ratio 20% 35% 20% 20%
Type of Sale Installment Deferred Sale Sale

OCT 2020 P4,200 31,200 4,800 P40,200

DEC 2020 4,200 None 2,400 6,600

Computing Gross Receipts related to sale of real property under installment payment basis:
Problem: Maharlika Residences Inc. is a domestic corporation engaged in real estate business. It has the
following data for the last quarter of 2021: 
Installment Sale of a Townhouse:
Realized gross profit (GPR is 30%) P300,000
Gross selling price  4,000,000
Zonal value  5,000,000
Deferred Sale of a Parking Lot: 
Gross selling price  P1,000,000
 Fair market value  1,500,000
Rental income  800,000
Rent receivable, beg.  300,000
Rent receivable, end  100,000
Importation of materials used in the construction 2,625,000

How much is the VAT due or payable?

a. P285,000 
b. P261,000 
c. P135,000
d. P111,0000 

Answer: C 
Realized gross profit (sale of townhouse) P300,000
Divide by 30%
Gross receipts P1,000,000
Divide by Selling Price 4,000,000
Ratio of initial payment over SP 25%

Type of Sale  Installment sale 

OUTPUT VAT
**From sale of town house (P1M/4M X 5M x 12%) P150,000
Parking lot (P1.5M x 12%) 180,000
From rentals (P800k + 300k -100k) x 12% 120,000
Total P450,000
Less: Input Vat (P2,625,000 x 12%) (315,000)
VAT PAYABLE P135,000

Sale by a Dealer in Securities:

A dealer in securities has the following for the year 2020: 

Sales, shares held as inventory P5,000,000
Sales, shares held as investment 1,500,000
Cost of shares, held as inventory 2,000,000
Cost of shares, held as investment  500,000
Supplies expense, net of vat 100,000
Rent expense, net of vat 200,000

How much is the vat payable? 

a. P470,000
b. P324,000 
c. P270,000
d. vat exempt 

Answer: B
Sales, shares held as inventory P5,000,000
Cost of shares, held as inventory (2,000,000)
Gross income 3,000,000
Vat rate 12%
Output vat P360,000
Less: Input vat
Supplies expense 12,000
 Rent expense 24,000 (36,000)
Vat payable P324,000

Senior Citizen and PWD:

Magna Carta Law: Both are entitled with

1. VAT Exemption on certain items

2. 20% Discounts on certain items
3. 5% Special Discounts on basic necessities and prime commodities.

Senior Citizen

1. Resident of the Philippines

 Includes immigrant from foreign country and has definite intention to reside in Philippines.
2. Filipino Citizen
 If w/ “dual citizenship”, prove filipino citizenship & have at least six months residency in the
Philippines
3. 60 years old or above

PWD (Person with Disability)

1. With mental, physical or sensory impairment to perform activities that can be done by normal
people.

VAT EXEMPT SALES & 20% Discounts

1. Lodging fees, Hotels, restaurant and recreation

2. Fees from theaters, cinema, circuses and other leisure and amusement
3. Medicines at drugstore
4. Medical and dental services (including laboratory and diagnostic test, professional fees) in
Government facilities and all private hospitals in accordance w/ rules and regulations issued by
DOH and with coordination with PhilHealth
5. Fare (domestic AIR & SEA travel)
6. Actual fare for land transportation
7. Funerial and Burial expenses for the death of the PWD
Note:
a. all of the above are applicable to either Senior Citizen and PWD except no. 7
b. The following is not entitled to 20% discount and VAT exemption
 Novelty items and non-consumable items are not entitled to 20% and VAT exemption
(Some Pasalubong items like bottle of ginamos, box of biscocho , several packets of
preserves)
 Alcoholic beverages:
-purchased in bulk, cases, and in buckets
-if single purchased and serving to senior citizen (entitled to 20% and VAT exempt)
-if purchased at bars (VAT exempt but subject to amusement tax of 18%)

c. The following is entitled to VAT exempt but not entitled 20% discount
  Meals intended for children and not for senior citizen
 Cigarettes
 Toll fees (not the same as fares)

5% SPECIAL DISCOUNT

1. 5% of the regular retail price of the:

2. basic necessities – goods vital to the needs of the consumers
3. and prime commodities- goods that are essential to them
4. Discount should be limited to Php 1,300 amount of purchases
5. Senior Citizen – BN and PC are NOT VAT exempt (VATable)unless expressly provides as
exempt under the law. (See listing at the book)
6. PWD – BN and PC are NOT VAT exempt (VATable)
7. The Tax Code and previous BIR guidelines have clarified that those granting discounts are
required to keep separate and accurate records of sales to PWDs. Otherwise, the sales discount
may be disallowed as a deduction for income tax purposes

What if Senior Citizen is at the same time PWD?

- -can only claim a single 20% and 5% on a particular transaction

1. Lola Lita, a senior citizen, bought a medicine with a selling price of P9,520 inclusive of 
VAT. How much is the net amount to be paid by Lola? 
a. P8,500 
b. P7,616 
c. P6,916
d. P6,800 

Answer: D

Receipt: If NOT sold to SC & PWD

Total Sales exclusive of VAT 8,500.00
Vat 8,500 x .12 1,020.00
Total amount payable by the purchaser 9,520.00

Receipt: If sold to SC & PWD

Total Sales inclusive of VAT 9,520.00
Vat 9,520 x .12/1.12 1,020.00
Total Sales exclusive of VAT (basis of discount) 8,500.00
20% discount 8,500 x 20% 1,700.00
Total amount payable by the SC 6,800.00

Purchaser side: Amount to be paid by Lola Lita:

Purchase price = P9,520/1.12 P8,500

Discount (P8,500 x 20%) (1,700)
Amount to be paid by the SC P6,800
 JOURNAL ENTRY OF THE SELLER
Cash P6,800
SC Discount Expense 1,700
Sales P8,500

 Record the sales or revenue at undiscounted amount

 The 20% discount shall be recognized as part of operating expenses (deduction from gross
income).
 Any input vat attributable to the sale to SC and PWDs shall be classified as operating
expenses, thus NO input vat should be creditable against total output VAT

2. How much should the seller should report output VAT?

None- transaction is VAT exempt

3. How much should the seller claim as input VAT related to sale to Lola Lita?
None - operating expenses 

4. Lolo Sot, a senior citizen went to Jollibee to treat his 4 grandchildren on account of his retirement.
They consumed foods and beverages with gross amount of P1,120 inclusive of VAT. How much is
amount to be paid by lolo Sot? 
a. P896 
b. P920 
c. P1,056
d. P1,100 

Answer: C 
 Allocated the GC = P1,120 x 4/5 = P896 (not entitled to VAT exempt and 20% discount)
 Allocated to the SC = P1,120 x 1/5/1.12 x 80% = P160 
 Amount to be paid = P896 + 160 = P1,056 

National Athletes and Coaches:

1. Applies to Qualified National Athletes and Coaches

2. Entitled to 20% discount
3. Subject to 12% VAT

5. Atapang, a national athlete, bought a medicine with a selling price of P9,520 inclusive of 
VAT. How much is the net amount to be paid by Atapang? 
a. P8,500 
b. P7,616 
c. P6,916
d. P6,800 

Answer: D

Receipt: If NOT sold to Qualified athlete or Coaches

Total Sales exclusive of VAT 8,500.00
Vat 8,500 x .12 1,020.00
Total amount payable by the purchaser 9,520.00

Receipt: If sold to Qualified athlete or Coaches

 Total Sales inclusive of VAT 9,520.00
Vat 9,500 x .12/1.12 1,020.00
Total Sales exclusive of VAT (basis of discount) 8,500.00
20% discount 8,500 x 20% 1,700.00
Total amount net of discount 6,800.00
VAT 6,800 x 12% 816.00 basis is net of discount

Total amount payable by the purchaser 7,616.00

6. How much should the seller report output VAT?

Php 816.00

7. How much should the seller claim as input VAT assuming the purchase is amounting to 6,000?
Php 720.00

What if Atapang is at the same time Senior Citizen?

- Shall claim single 20% discount

SUMMARY:

SENIOR CITIZEN PWD ATHLETES

OUTPUT VAT VAT exempt VAT exempt VATable (12%)
INPUT VAT operating expense operating expense creditable input VAT
20% Discount entitled entitled entitled
5% Discount entitled entitled not entitled