Business Tax: Value-Added Tax (Zero-Rated Transactions) Enterprise Zone Authority (TIEZA) subject to the

Zero-Rated Sales provision under Republic Act No. 9593 or the

Zero-rated sales are taxable transaction for VAT Tourism Act of 2009.
purposes, but shall not result in any output tax. However, the 3. Sale of raw materials or packaging materials to
input tax on purchases of goods, properties or services, a nonresident buyer for delivery to a resident
related to such zero-rated sale, shall be available as tax local export-oriented enterprise to be used in
credit or refund in accordance with the Regulations. manufacturing, processing, packing or
Zero-Rated Sales of Goods and Properties repacking in the Philippines of the said buyer’s
a. Export Sales goods and paid for in acceptable foreign
1. The sale and actual shipment of goods from currency and accounted for in accordance
the Philippines to a foreign country, irrespective with the rules and regulations of the Bangko
of any shipping arrangement that may be Sentral ng Pilipinas (BSP).
agreed upon which may influence or 4. Sale of raw materials or packaging materials to
determine the transfer of ownership of the export-oriented enterprise whose export sales
goods so exported and paid for in acceptable exceed 70% of the total annual production.
foreign currency or its equivalent in goods or 5. Those considered export sales under the
services, and accounted for in accordance Omnibus Investment Code of 1987
with the rules and regulations of the Bangko (E.O.No.226), and other special laws.
Sentral ng Pilipinas (BSP). 6. The sale of goods, supplies, equipment and
2. Sale and delivery of goods to registered fuel to persons engaged in international
enterprises within a separate custom territory shipping or international air transport
provided under special laws and registered operations provided, that the goods, supplies,
enterprises within tourism enterprise zones as equipment and fuel shall be used for
declared by the Tourism Infrastructure and
 international shipping or air transport similar commercial documents: Provided,
operations. further, That without actual exportation the
following shall be considered constructively
b. Sales to persons or entities whose exemption under exported for purposes of this provision:
special laws or international agreements to which the
Philippines is a signatory effectively subjects sales to EXPORT SALES UNDER OMNIBUS INVESTMENT
zero rate. CODE (EO 226)

EXPORT SALES UNDER OMNIBUS INVESTMENT CODE 1. Sales to bonded manufacturing warehouses of
(EO 226) export-oriented manufacturers;
"Export sales" shall mean the Philippine port 2. Sales to export processing zones;
F.O.B. value, determined from invoices, bills of 3. Sale to enterprises duly registered and accredited
lading, inward letters of credit, landing with the Subic Bay Metropolitan Authority pursuant to
certificates, and other commercial RA 7227
documents, of exports products exported 4. Sales to registered export traders operating bonded
directly by a registered export producer or the trading warehouses supplying raw materials used in
net selling price of export product sold by a the manufacture of export products under guidelines
registered export producer to another export to be set by the Board in consultation with the Bureau
producer, or to an export trader that of Internal Revenue and the Bureau of Customs;
subsequently exports the same: Provided, That 5. Sales to foreign military bases, diplomatic missions
sales of export products to another producer or and other agencies and/or instrumentalities granted
to an export trader shall only be deemed tax immunities, of locally manufactured, assembled
export sales when actually exported by the or repacked products whether paid for in foreign
latter, as evidenced by landing certificates or currency or not: Provided, further, that export sales of
 registered export trader may include commission
income: and provided, finally, that exportation of
goods on consignment shall not be deemed export
sales until the export products consigned are in fact
sold by the consignee.
EXPORT SALES UNDER OMNIBUS INVESTMENT CODE (EO
226)
Sales of locally manufactured or assembled goods for
household and personal use to Filipinos abroad and
other non-residents of the Philippines as well as returning
Overseas Filipinos under the Internal Export Program of
the government and paid for in convertible foreign
currency inwardly remitted through the Philippine
banking systems shall also be considered export sales.
From Zero-Rated to 12% Subject Transactions
Zero-rated Sales of Goods or Properties which shall be
subject to 12% VAT Upon Satisfaction of Certain
Conditions (under the TRAIN):
1. Sale of raw materials or packaging materials to a
nonresident 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 and paid for
in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP).
2. Sale of raw materials or packaging materials to
export-oriented enterprise whose export sales
exceed 70% of the total annual production.
3. Those considered export sales under the Omnibus
Investment Code of 1987 (E.O.No.226), and other
special laws.
From Zero-Rated to 12% Subject Transactions
Conditions to be satisfied:
1. Successful establishment and implementation of an
enhanced VAT refund system that grants refunds of
creditable input tax within 90 days from the filing of
the VAT refund application with the Bureau.
2. To determine the effectivity of item 1, all applications
filed from January 1, 2018 shall be processed and
must be decided within 90 days from the filing of the
VAT refund application.
All pending VAT refund claims as of December 31, 2017 4. Services rendered to persons engaged in
shall be fully paid in cash by December 31, 2019. international shipping or air transport operations,
including lease of property for use thereof provided,
Zero-Rated Sale of Services and Lease of Properties that these services shall be exclusive for international
1. Processing, manufacturing or repacking of goods for shipping or air transport operation.
other persons doing business outside the Philippines 5. Services performed by subcontractors and/or
which goods are subsequently exported where the contractors in processing, converting, or
services are paid for in acceptable foreign currency manufacturing goods for an enterprise whose export
and accounted for in accordance with the rules and sales exceed 70% of the total annual production.
regulations of the Bangko Sentral ng Pilipinas (BSP). 6. Transport of passengers and cargo by domestic air or
2. Services other than processing, manufacturing or sea carriers from the Philippines to a foreign country.
repacking rendered to a person engaged in business 7. Sale of power or fuel generated through renewable
conducted outside the Philippines or to a nonresident sources of energy. Provided, however, that zero-
person not engaged in business who is outside the rating shall not extend to the sale of services related
Philippines when the services are performed the to the maintenance or operation of plants
consideration for which is paid for in acceptable generating said power.
foreign currency and accounted for in accordance 8. Services rendered to registered enterprises within a
with the rules and regulations of the Bangko Sentral separate custom territory provided under special
ng Pilipinas (BSP). laws and registered enterprises within tourism
3. Services rendered to persons or entities whose enterprise zones as declared by the Tourism
exemption under special laws or international Infrastructure and Enterprise Zone Authority (TIEZA)
agreements to which the Philippines is a signatory subject to the provision under Republic Act No. 9593
effectively subjects the supply of such services to zero or the Tourism Act of 2009.
percent rate.
From Zero-Rated to 12% Subject Transactions Deemed Sale Transactions
a. Transfer, use or consumption, not in the course of
Zero-rated Sales of Services and Lease of Properties business, of goods or properties originally intended for
which shall be subject to 12% VAT Upon Satisfaction of sale or for use in the course of business. Transfer of
Certain Conditions (under the TRAIN): goods or properties not in the course of business can
1. Processing, manufacturing or repacking of goods for take place when VAT-registered person withdraws
other persons doing business outside the Philippines goods from his business for his personal use;
which goods are subsequently exported where the b. Distribution or transfer to:
services are paid for in acceptable foreign currency 1. Shareholders or investors as share in the profits of
and accounted for in accordance with the rules and the VAT-registered person; or
regulations of the Bangko Sentral ng Pilipinas (BSP). 2. Creditors in payment of debt or obligation
2. Services performed by subcontractors and/or c. Consignment of goods if actual sale is not made
contractors in processing, converting, or within sixty (60) days following the date such goods
manufacturing goods for an enterprise whose export were consigned. Consigned goods returned by the
sales exceed 70% of the total annual production. consignee within the 60-day period are not deemed
sold;
Effectively Zero-Rated Sales
d. Retirement from or cessation of business, with respect
Sales of goods or property or services to persons or to all goods on hand, whether capital goods, stock-
entities who are tax-exempt under international in-trade, supplies or materials as of the date of such
agreements to which the Philippines is signatory, such as, retirement or cessation, whether or not the business is
Asian Development Bank (ADB), International Rice continued by the new owner or successor. The
Research Institute (IRRI), etc., shall be effectively subject following circumstances shall, among others, give rise
to VAT at zero-rate. to transactions "deemed sale";
 1. 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
2. Dissolution of a partnership and creation of a new
partnership which takes over the business.

Sale, Transfer, Or Exchange of Imported Goods by

Tax-Exempt Persons

a. In the case of goods imported into the Philippines by

VAT-exempt persons, entities, or agencies which are
subsequently sold, transferred or exchanged in the
Philippines to non-exempt persons or entities, the
latter shall be considered the importers thereof who
shall be liable for VAT on such importation
b. The tax due on such importation shall constitute a lien
on the goods, superior to all charges or liens,
irrespective of the possessor of said goods