VALUE-ADDED TAX (VAT)

National Internal Revenue Code, as amended

Theories

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.
https://www.bir.gov.ph/index.php/tax-information/value-added-tax.html
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.

Who are liable or REQUIRED 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).
https://www.bir.gov.ph/index.php/tax-information/value-added-tax.html
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

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

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

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

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.
c. Take Note of BIR FORM 1905

When will the cancellation for registration be effective?

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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

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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.

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;

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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.

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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. 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);

b. 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);

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c. 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;

d. 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);

e. 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;

f. 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

g. 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 raw materials or packaging materials to a non-resident buyer for
delivery to as a resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the said

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buyer's goods, paid for in acceptable foreign currency, and accounted for in
accordance with the rules and regulations of the BSP;
3. The sale of raw materials or packaging materials to an export-oriented
enterprise whose export sales exceed seventy percent (70%) of total annual
production;
4. Transactions considered export sales under Executive Order No. 226,
otherwise known as the Omnibus Investments Code of 1987, and other
special laws; and
5. 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.

Zero-rated to Twelve-Percent VAT

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

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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.

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What transactions are considered deemed sales?

The following transactions are considered as deemed sales:
a. 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;
b. Distribution or transfer to:
o Shareholders or investors as share in the profits of the VAT-registered person;
o Creditors in payment of debt or obligation
c. 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;
d. 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 therefor;

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;

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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

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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. (1) Sale of property not primarily held for sale to customers or held for lease in
the ordinary course of trade or business;
(2) Real property utilized for low-cost and socialized housing as defined by
Republic Act No. 7279, otherwise known as the 'Urban Development and
Housing Act of 1992,' and other related laws;
(3) Residential lot valued at Two million five hundred thousand pesos
(P2,500,000.00) and below,
(4) House and lot, and other residential dwellings valued at Four million two
hundred thousand pesos (P4,200,000.00) and below: provided, That
beginning January 1, 2024 and every three (3) years thereafter, the amounts
herein stated shall be adjusted to present values using the Consumer Price
Index, as published by the Philippine Statistics Authority (PSA).

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, journal, review bulletin, or any such educational reading material
covered by the UNESCO Agreement on the Importation of Education,
Scientific, and Cultural Materials, including the digital or electronic format
thereof: provided, That the materials enumerated herein are 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

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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 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, 2021;

Provided, That the DOH shall issue a list of approved drugs and medicines
form this purpose within sixty (60) days from the effectivity of this Act; and

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bb. Sale or importation of the following beginning January 1, 2021 to

December 31, 2023:
i. Capital equipment, its spare parts and raw materials, necessary for
the production of personal protective equipment components such
as coveralls, gown, surgical cap, surgical mask, N-95 mask, scrub
suits, goggles and face shield, double or surgical gloves, dedicated
shoes, and shoe covers, for COVID-19 prevention;
ii. All drugs, vaccines and medical devices specifically prescribed and
directly used for the treatment of COVID-19; and
iii. Drugs for the treatment of COVID-19 approved by the Food and Drug
Administration (FDA) for use in clinical trials, including raw materials
directly necessary for the production of such drugs: Provided, That
the Department of Trade and Industry (DTI) shall certify that such
equipment, spare parts or raw materials for importation are not
locally available or insufficient in quantity, or not in accordance with
the quality or specification required: Provided, further, That for item
(ii), within sixty (60) days from the effectivity of this Act, and every
three (3) months thereafter, the Department of Health (DOH) shall
issue a list of prescription drugs and medical devices covered by
this provision: Provided, finally, That the exemption claimed under
this Subsection shall be subject to post audit by the Bureau of
Internal Revenue or the Bureau of Customs as may be applicable.

cc. 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
(P3,000,000.00).

Tax on Persons Exempt from Value-Added Tax (VAT).

Any person whose sales or receipts are exempt under Section 109(CC) of this Code
from the payment of value-added tax and who is not a VAT-registered person shall pay
a tax equivalent to three percent (3%) of his gross quarterly sales or receipts:
Provided, That cooperatives, shall be exempt from the three percent (3%) gross
receipts tax herein imposed: Provided, further, That effective July 1, 2020 until June 30,
2023, the rates shall be one percent (1%).

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.

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“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.

VAT ON GOVERNMENT MONEY PAYMENTS

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.

COMPLIANCE

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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.

Quarterly Value-Added Tax Return

BIR Form No. 2550Q - Quarterly Value-Added Tax Return

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 Quarterly 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 Quarterly 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

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having jurisdiction over the registered address of the taxpayer (head office
of the business establishment).

Reminders:
 Only one consolidated Quarterly VAT Declaration/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 each taxable quarter prescribed for
each taxpayer.

RELIEF

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?

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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).

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