SALES OF GOODS

AND SERVICES

GCRO Module 150 eVer.2.0 JAN 2023 15

 Sale or Exchange of Goods or Properties

The term “Goods or Properties” - shall mean all tangible and intangible
objects which are capable of pecuniary estimation and shall include:

 Real properties held primarily for sale to customers or held for lease in
the ordinary course of trade or business;
 The right or the privilege to use patent, copyright, design or model,
plan, secret formula or process, goodwill, trademark, trade brand or
other like properties or rights;

GCRO Module 150 eVer.2.0 JAN 2023 16

 Sale or Exchange of Goods or Properties

 The right or the privilege to use in the Philippines of

any industrial, commercial or scientific equipment;
 The right or the privilege to use motion picture
films, films, tapes and discs; and
 Radio, television, satellite transmission and cable
television time.

GCRO Module 150 eVer.2.0 JAN 2023 17

 Sale or Exchange of Services

Sale or exchange of services means the performance of all kinds of

services in the Philippines for others for a fee, remuneration or
consideration. It includes those performed or rendered by the following:

 Construction and service contractors;

 Stock, real estate, commercial, customs and immigration brokers;
 Lessors of property, whether personal or real;
 Persons engaged in warehousing services;

GCRO Module 150 eVer.2.0 JAN 2023 18

 Sale or Exchange of Services

 Lessors or distributors of cinematographic films;

 Persons engaged in milling, processing, manufacturing or re-
packing goods for others;
 Proprietors, operators, or keepers of hotels, motels, rest houses,
pension houses, inns, resorts, theaters and movie houses;
 Proprietors or operators of restaurants, refreshment parlors,
cafes and other eating places, including clubs and caterers;
 Dealers in securities;
 Lending investors;

GCRO Module 150 eVer.2.0 JAN 2023 19

 Sale or Exchange of Services

 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.
 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;
 Sales of electricity by generation companies, transmission by any
entity, and/or distribution companies, including electric
cooperatives;

GCRO Module 150 eVer.2.0 JAN 2023 20

 Sale or Exchange of Services

 Franchise grantees of electric utilities, telephone and telegraph,

radio and/or television broadcasting companies whose annual
gross receipt of the preceding year exceeds Ten Million Pesos
(P10,000,000.00) and franchise grantees of gas and water
utilities;
 Non-life insurance companies (except their crop insurances),
including surety, fidelity, indemnity and bonding companies; and
 Similar services regardless of whether or not the performance
thereof calls for the exercise or use of the physical or mental
faculties.

GCRO Module 150 eVer.2.0 JAN 2023 21

 Sale or Exchange of Services include:

 The lease or the 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;
 The lease or the use of, or the right to use of any industrial,
commercial or scientific equipment;
 The supply of scientific, technical, industrial or commercial
knowledge or information;

GCRO Module 150 eVer.2.0 JAN 2023 22

 Sale or Exchange of Services include:

 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 as is mentioned in
subparagraph (b) hereof, or any such knowledge or information
as is mentioned in subparagraph (c) hereof;
 The supply of services by a non-resident 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;

GCRO Module 150 eVer.2.0 JAN 2023 23

 Sale or Exchange of Services include:

 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;
 The lease of motion picture films, films, tapes and discs; and
 The lease or the use of or the right to use radio,
television, satellite transmission and cable television time.

GCRO Module 150 eVer.2.0 JAN 2023 24

 Zero-Rated Sales of Goods

Zero-Rated Transactions are transactions that are subject to VAT but

the rate is at 0%.
(a) Export Sales – the term means:
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 and paid for 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);

GCRO Module 150 eVer.2.0 JAN 2023 25

 Zero-Rated Sales of Goods

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.

GCRO Module 150 eVer.2.0 JAN 2023 26

 Zero-Rated Sales of Goods

The sale of goods, supplies, equipment and fuel to persons engaged in

international shipping or international air transport operations 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, supplies or
equipment is used for purposes other than that mentioned in this
paragraph, such portion of fuel, goods, supplies, and equipment shall be
subject to 12% VAT

GCRO Module 150 eVer.2.0 JAN 2023 27

 Zero-Rated Sales of Goods

(b) Exemptions Under Special Laws or International Agreement

Sales to persons or entities or entities whose exemption from

direct and indirect taxes under special laws or international
agreements to which the Philippines is a signatory effectively
subjects such sales to zero-rate.

GCRO Module 150 eVer.2.0 JAN 2023 28

 Zero-Rated Sales of Goods

(c) Sale of raw materials, inventories, supplies, equipment,

packaging materials, and goods, to a registered export
enterprise, to be used directly and exclusively in its
registered project or activity pursuant to Sections 294 (E) and
295 (D) of Republic Act No. 11534 or the "Corporate Recovery
and Tax Incentives for Enterprise Act" ("CREATE Act"), and
Section 5, Rule 2 of its IRR for a maximum period of
seventeen (17) years from the date of registration, unless
otherwise extended under the SIPP;

GCRO Module 150 eVer.2.0 JAN 2023 29

 Zero-Rated Sales of Goods

Provided, that the term "registered export enterprise" shall refer

to an export enterprise as defined under Section 4 (M), Rule 1 of
the CREATE Act IRR, that is also a registered business
enterprise as defined in Section 4 (W) of the same IRR: Provided
further, That the above-described sales to existing registered
export enterprises located inside ecozones and freeport zones
shall also be qualified for VAT zero-rating under this sub-item
until the expiration of the transitory period (amended by RR No.
21-2021).

GCRO Module 150 eVer.2.0 JAN 2023 30

 Zero-Rated Sales of Goods

The following transactions, previously subject to VAT pursuant to RR

9-2021 as zero rated sales, are now subject to VAT in line with the
successful implementation of a VAT refund system as provided under
subject to adjustments stated in RR No. 13-2021 and 21-2021.

Condition: Directly and exclusively used for the project or

registered activity.

GCRO Module 150 eVer.2.0 JAN 2023 31

 Zero-Rated Sales of Goods

 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 re-packing in the Philippines of the
said buyer’s goods and paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the BSP.
 Sale of raw materials or packaging materials to export-oriented enterprise
whose export sales exceed seventy percent (70%) of total annual
production.
 Those considered export sales under E.O. 226, otherwise known as the
Omnibus Investment Code of 1987, and other special laws.

GCRO Module 150 eVer.2.0 JAN 2023 32

 Zero-Rated Sales of Goods

Conditions for vatability:

 The successful establishment and implementation of an enhanced
VAT refund system that grants refunds of creditable input tax
within ninety (90) days from the filing of the VAT refund application
with the Bureau: Provided, That, to determine the effectivity of
item no. 1, all applications filed from January 1, 2018 shall be
processed and must be decided within ninety (90) days from the
filing of the VAT refund application; and

 (2) All pending VAT refund claims as of December 31, 2017 shall
be fully paid in cash by December 31, 2019.

GCRO Module 150 eVer.2.0 JAN 2023 33

 Zero-Rated Sales of Goods

Conditions for vatability:

 Provided, That the Department of Finance shall establish a VAT
refund center in the Bureau of Internal Revenue (BIR) and in the
Bureau of Customs (BOC) that will handle the processing and
granting of cash refunds of creditable input tax.
 An amount equivalent to five percent (5%) of the total VAT collection
of the BIR and the BOC from the immediately preceding year shall
be automatically appropriated annually and shall be treated as a
special account in the General Fund or as trust receipts for the
purpose of funding claims for VAT refund: Provided, That any
unused fund, at the end of the year shall revert to the General Fund.

GCRO Module 150 eVer.2.0 JAN 2023 34

 Zero-Rated Sales of Goods

Conditions for vatability:

 Provided, further, That the BIR and BOC shall be required
to submit to the Congressional Oversight Committee on the
Comprehensive Tax Reform Program (COCCTRP) a
quarterly report of all pending claims for refund and any
unused fund.

GCRO Module 150 eVer.2.0 JAN 2023 35

 Zero-Rated Sales of Goods

Zero-Rated Transactions are transactions that are subject to VAT

but the rate is at 0%.
1. Services other than processing, manufacturing or re-packing of
goods rendered to a person engaged in business conducted
outside the Philippines or to a non-resident person not 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 BSP;

GCRO Module 150 eVer.2.0 JAN 2023 36

 Zero-Rated Sales of Goods

2. Services rendered to persons or entities whose exemption from

direct and indirect taxes under specials laws or international
agreements to which the Philippines is a signatory effectively
subjects the supply of such services to zero rated (0%) rate;

GCRO Module 150 eVer.2.0 JAN 2023 37

 Zero-Rated Sales of Goods

3. Sale of services, including provision of basic infrastructure, utilities, and

maintenance, repair and overhaul of equipment, to a registered export
enterprise, to be used directly and exclusively in its registered project or
activity pursuant to Sections 294 (E) and 295 (D) of CREATE Act, and
Section 5, Rule 2 of its IRR for a maximum period of seventeen (17) years
from the date of registration, unless otherwise extended under the SIPP;
Provided, That the term "registered export enterprise" shall refer to an
export enterprise as defined under Section 4 (M), Rule 1 of the CREATE
IRR, that is also a registered business enterprise as defined in Section 4
(W) of the same IRR: Provided, further, That the above-described sales to
existing registered export enterprises located inside ecozones and freeport
zones shall also be qualified for VAT zero-rating under this sub-item until
the expiration of the transitory period (amended by RR No. 21-2021)

GCRO Module 150 eVer.2.0 JAN 2023 38

 Zero-Rated Sales of Goods

4. 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 NIRC;

GCRO Module 150 eVer.2.0 JAN 2023 39

 Zero-Rated Sales of Goods

5. Transport of passengers and cargo by domestic air or sea vessels

from the Philippines to a foreign country. Gross receipts of
international air or shipping 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; and

GCRO Module 150 eVer.2.0 JAN 2023 40

 Zero-Rated Sales of Goods

6. 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 emerging 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.

GCRO Module 150 eVer.2.0 JAN 2023 41

 Zero-Rated Sales of Goods

The following transactions, previously considered as zero rated sales,

are now subject to VAT in line with the successful implementation of a
VAT refund system as provided under RR 21-2021.
1. Processing, manufacturing or re-packing 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
BSP.

GCRO Module 150 eVer.2.0 JAN 2023 42

 Zero-Rated Sales of Goods

2. Services performed by subcontractors and/or contractors in

processing, converting, or manufacturing goods for an enterprise
whose export sales exceed seventy percent (70%) of total annual
production.

GCRO Module 150 eVer.2.0 JAN 2023 43

 Zero-Rated Sales of Goods

Conditions for vatability:

 The successful establishment and implementation of an enhanced
VAT refund system that grants and pays refunds of creditable input
tax within ninety (90) days from the filing of the VAT refund
application with the Bureau
 The Secretary of Finance shall provide transitory rules for the grant
of refund under the enhanced VAT Refund System after the
determination of the fulfillment of the condition by the Commissioner
of Internal Revenue
 Department of Finance shall establish a VAT Refund Center in the
BIR and in the Bureau of Customs that will handle the processing
and granting of cash refunds of creditable input tax
GCRO Module 150 eVer.2.0 JAN 2023 44
 Effectively Zero-Rated Transactions

Effectively zero-rated sale of goods and properties – shall refer to

the local sale of goods and properties by a VAT-registered person to a
person or entity who was granted indirect tax exemption under special
laws or international agreement.
Effectively zero-rated sale of services – shall refer to the local sale of
services by a VAT-registered person to a person or entity who was
granted indirect tax exemption under special laws or international
agreement.
Note: RMC 24-2022, 36-2002, 38-2022 and RMC 49-2022 provides
some clarifications on the changes per RR No. 21-2021

GCRO Module 150 eVer.2.0 JAN 2023 45

 Effectively Zero-Rated Transactions

The concerned taxpayer must seek prior approval or prior

confirmation from the appropriate offices of the BIR so that a
transaction is qualified for effective zero-rating. Without an approved
application for effective zero-rating, the transaction otherwise entitled
to zero-rating shall be considered exempt.

GCRO Module 150 eVer.2.0 JAN 2023 46

 Transactions Deemed Sale

Transactions Deemed Sale are transaction that are considered as sale

for VAT purposes although there is no actual sale.
1. 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
2. Distribution or transfer to:
 Shareholders or investors as share in the profits of the VAT -
registered persons; or
 Creditors in payment of debt.

GCRO Module 150 eVer.2.0 JAN 2023 47

 Transactions Deemed Sale

3. Consignment of goods if actual sale is not made within sixty (60)

days following the date said goods were consigned; and

4. Retirement from or cessation of business and change 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.

GCRO Module 150 eVer.2.0 JAN 2023 48

 Change or Cessation of Status of
VAT Registered Persons

Change in status from VAT to Non-VAT / Cessation of Registration

Goods or properties originally intended for sale or use in business,

and capital goods which are existing during said occurrence is
subject to output tax.

GCRO Module 150 eVer.2.0 JAN 2023 49

 Change or Cessation of Status of
VAT Registered Persons

Change in status from VAT to Non-VAT

Except when change/cessation of business is due to:
1. Change of control of a corporation by acquisition of the controlling
interest of such corporation by another stockholder (individual or
corporate) or group of stockholders.
However, the exchange of goods or properties including the
real estate properties used in business or held for sale or
for lease by the transferor, for shares of stocks, whether
resulting in corporate control or not, is subject to VAT.

GCRO Module 150 eVer.2.0 JAN 2023 50

 Change or Cessation of Status of
VAT Registered Persons

Change in status from VAT to Non-VAT

2. Change in the trade or corporate name of the business;

3. Merger or consolidation of corporations. The unused input tax of

the dissolved corporation, as of the date of merger or
consolidation, shall be absorbed by the surviving or new
corporation.

GCRO Module 150 eVer.2.0 JAN 2023 51