V A L U E A D D E D T A X

A business tax → Sales tax

Indirect tax —> burden can be shifted
(seller to buyer)
Imposed:
GSP (sale, barter, or
exchange of goods/properties)
GR (sale of services,
Summary of Tax Consequences of VAT-Taxable and VAT-Exempt Transactions
KINDS OF TRANSACTION TAX CONSEQUENCES (Seller)

A. VAT-Taxable transaction ● subject to VAT at 12%;

1. Sales/leases taxed @12%
● entitled to input tax credit;
● pays excess of output tax over input tax to the
BIR;
● can carry over excess input taxes to succeeding
quarter(s).

2. Sales or leases taxed @0% (zero- ● subject to VAT at 0%;

rated) ● entitled to input tax credit;
● can claim a refund or tax credit for input taxes;

B. Exempt transactions ● VAT exempt

● cannot separately bill output tax to his
customers;
● not entitled to input tax credit;
● shall be liable to VAT if he issues VAT invoice or
● receipt, but without the benefit of input tax
credit.

ZERO-RATED TRANSACTIONS
Does not result in output VAT, but the taxpayer is entitled to input VAT which
shall be available either as a tax credit or as a refund, IF taxpayer is registered.
IF not registered, the sales of the taxpayer will be considered VAT-exempt
sales.

ZERO-RATED SALES foreign consumption. With creditable input VAT as incentives

to VAT EXPORTERS. Non-VAT exporters are EXEMPT FROM

0% Sales of Goods
Direct Export → paid for in foreign currency & complies w/ BSP rules. Shipping terms
don’t matter.
Note: Remember that exemptions under VAT importation are either ZERO-RATED
(VAT taxpayers) or EXEMPT (Non-VAT) if EXPORTED.
If Registered export enterprise, include commission income on sales made for other
companies to zero-rated sales.
To Registered Export Enterprise → applies to local purchases of goods/services directly
and exclusively used in the registered project or activity.
To international carriers → if related to outgoing fights
To persons with indirect tax exemption
→ ADB, IRRI, Red Cross, USAID, PAGCOR
0% Sales of Services
To Non-Residents → not engaged in business in services in PH; performed in PH; paid for in
foreign currency; complies with BSP rules.
Outgoing Transport by Domestic Carriers
Sale of Fuel from renewable sources of energy Generation Co. → 0% VAT
→ Ex.: solar, geothermal, wind, biomass Transmission Co. → 12% VAT
To persons with indirect tax exemption Distribution Co. → 12% VAT
→ ADB, IRRI, UN, Red Cross, USAID, PAGCOR
→ Embassies & Diplomats (reciprocity rule)

TAX CREDIT VAT on Senior Citizens → same rule for Prohibitions:

METHOD: PWD’s Simultaneou
sly SC & PWD
Output VAT Amount Due = Total Billing Amt - VAT - can only claim a
Less: Input VAT single 20%
VAT Due If there is a mix of non-SCs and an SC: dscnt.
Less: Tax Credit = [(Total Billing Amt /No. of Customers) –
VAT still due Cannot be
OUTPUT VAT claimed if

Domestic Sources Recorded in month

Sale of Vatable goods = Gross Sales (net of when GSP is unreasonably lower =
VAT) x 12% 12% x FV → Determined by
Sale of Vatable services = Gross Receipts
Recorded in month Commissioner
(net of VAT) x 12% If other party is the government =
Held for sale, for lease, used in trade or
Sale of Vatable Real Properties
Transfer; use or consumption
Retirement or cessation of
business
Cancellation of VAT status
INPUT VAT
paid or incurred in the course of trade

Criteria for claimable Evidenced by a VAT invoice/OR issued by a VAT taxpayer → XPN: VAT

incurred in relation to For NON-VAT Taxpayers, input

Types of Input
Transitional Input VAT = HIGHER between 2% x vatable beg. Inventory;
Actual VAT paid in beg. inventory

Vatable Goods – purchased from non-VAT sellers xx

- purchased from VAT sellers xx x 12%
Total Beg. Inventory xx x 2%

Regular input VAT → 12% on domestic consumption

Presumptive Input VAT → 4% x Gross Purchase of Primary Agricultural

Products of:

Sa MaMi Co PaRe
 VAT ON
Exempt Importation: VATABLE IMPORTATION → 12% Landed Cost
Exempt Goods → for both import and sale
Basic human food and Dutiable Value xx
related goods Customs Duties xx
Books, newspapers, Excise Tax xx
magazines Other in-land costs xx
Passengers or cargo Landed Cost xx
vessels and aircrafts
critical /needed healthcare SERVICES: → 12% Final WHT VAT x Contract
equipment and supplies Price
Prescription drugs and
medicines for diabetes, etc. Criteria:
1. Services rendered
VAT-Exempt Persons → for import only within
International shipping or 2. Service provider:
air transport operations NRA or NRFC
Agricultural cooperatives 3. Payor is a
Ecozone Locators (PEZA) constituted withholding agent

EXEMPT SALE OF GOODS, PROPERTIES & Not subject to VAT; %

Exempt Sale of Services Exempt Sale of Goods &

Properties
SEARCHH VA TRIPS
Schools SECRET Tax-free Gold
Employees Senior Citizens & PWD
Agricultural contract growers & Exempt Goods
millers Cooperatives
Residential Leasing Residential Properties
Cooperative Services Export Sales by non-VAT
Hospital Services persons
Hospital Owners Association or Treaty-exempt sales of
Condo Corp. goods
Vessels & Aircrafts Leased
Treaty Exempt Sales of Services
Regional Area HQ
International carriers
Printers & Publishers of exempt

SPECIFIC PERCENTAGE VAT exempt = not subject to 12% VAT &

Mnemonic: BICAP FLOW
Banks —------------------------------
5%, 1%, 7%
International Carriers —---------------
3%
Common Carriers —-------------------
3%
Amusement Taxes —-------------------
10%, 15%, 18%, 30%
PSE Sales of Stocks —-----------------
OTHER PERCENTAGE TAX
Note A: Domestic Carriers and Keepers of garages (Transport of Passengers) - land
Operations Area of Business
Minimum Quarterly Gross Receipts Manila and Other Cities Provinces
1. Jeepney for Hire 2,400.00 1,200.00
2. Public Utility Bus
< 30 Passengers 3,600.00 3,600.00
50 > 30 Passengers 6,000.00 6,000.00
< 50 Passengers 7,200.00 7,200.00
3. Taxis 3,600.00 2,400.00
4. Car for hire
w/ Chauffeur 3,000.00 3,000.00
w/o Chauffeur 1,800.00 1,800.00
Note B: PAGCOR - Taxation of Offshore Gaming Licenses
Gaming Tax → in lieu of all other taxes
Formula:
Gross Wagers xxx
Payouts (xxx)
Gross Gaming xxx
Revenue xxx
Rate 5%
Gaming Tax xxx

Note C: Overseas dispatch, message or conversation originating from the Philippines

EXEMPT (DING)
Diplomatic services
International organizations
News agencies or services
Government

Note D: Life insurance premiums

EXEMPT
Premiums refund within six (6) months after payment on account of rejection of risk or returned for other
reasons
Reinsurance premiums
Premiums from life insurance of non-residents received from abroad by branches of domestic corporation,
firm or association doing business outside the Philippines

Excess of premiums on variable contracts in excess of the amounts necessary to insure the lives of the
variable contract owners
Premium collected by a purely cooperative company or association

Note E: Boxing Exhibitions

EXEMPT (Requisites)
Filipino Fighter - at least one of the contenders for World Championship is a citizen of the Philippines
Filipino Promoter - exhibitions are promoted by a citizen/s of the Philippines or by a corporation/ association
at least 60% of the capital of which is owned by said citizen/s

Crown - the World or Oriental Championship is at stake in any division

 E X C I S E TAX

EXCISE TAXES → taxes on goods manufactured KINDS OF ET

or produced in the Philippines for domestic sales Specific tax
or consumption which Ad valorem tax
tax shall be in addition to the value-added tax.
EXAMPLES OF SPECIFIC TAX
CONCEPT & NATURE OF ET ET on:
→ taxes on production Cigarettes Packed by
→ indirect tax Hand
Cigarettes Packed by
GOODS & SERVICES SUBJECT TO ET Machine
ET apply to: petroleum products
goods manufactured or produced in the mineral products
Philippines for domestic sales sweetened beverages
things imported, as well as
services rendered in the Philippines EXAMPLES OF AD VALOREM TAX
ET on:
ET apply specifically to: alcoholic products
Alcohol products, cigars
Tobacco products, automobiles
Petroleum products, non-essential services
Miscellaneous articles such as
automobiles and non-essential goods, MANNER OF COMPUTATION:
Non-essential services, Specific tax = Units x
Sweetened beverages, and Specific tax rate
Mineral products Ad valorem tax = Units x
SP/unit x Ad valorem tax rate

FILING OF RETURN AND PAYMENT OF ET ON DOMESTIC PRODUCT

Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax.
Persons Liable to File a Return
the description and quantity or volume of products to be removed,
the applicable tax base and the amount of tax due thereon.
Time for Filing of Return and Payment ofthe Tax
within ten (10) days from the date of removal of such products for the
period from
January 1, 1998 to June 30, 1998;
within five (5) days from the date of removal of such products for the
period from July
1, 1998 to December 31, 1998; and,
before removal from the place of production of such products from
January 1, 1999 and thereafter.
Place of Filing of Return and Payment of the Tax
Determination of Gross Selling Price of Goods Subject to Ad Valorem Tax
Price excluding VAT → constitute the gross selling price
Manufacturer also sells or allows goods to be sold at wholesale in another
establishment he owns
Manufacturer's or Producer's Sworn Statement
the different goods or products manufactured or produced and their corresponding
gross selling price
together with the cost of manufacture or production
plus expenses incurred or to be incurred until the goods or products are finally sold.
Credit for Excise tax on Goods Actually Exported
When goods locally produced or manufactured are removed and actually exported

PAYMENT OF EXCISE TAXES ON IMPORTED ARTICLES

Person Liable
paid by the owner
Tax-free articles brought or imported into the Philippines by persons, entities, or
agencies exempt from tax
Importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into
the Philippines
Non-labeling or re-selling of certain goods punishable
Destruction of confiscated articles
Lien on the article
Rate and Basis of the Excise Tax on Imported Articles
Unless otherwise specified imported articles shall be subject to the same rates and
basis of excise taxes applicable to locally manufactured articles.
MODE OF COMPUTING CONTENTS OF CASK OR PACKAGE
Every fractional part of a proof liter equal to or greater than a half liter in a cask or
package containing more than one liter shall be taxed as a liter, and any smaller fractional
part shall be exempt but any package of spirits, the total content of which are less than a
 DOCUMENTARY STAMP TAX
DOCUMENTARY STAMP TAX → tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property
incident thereto.
DST → is in nature of an excise tax levied on the exercise by person of certain privileges
conferred by law for the creation, revision, or termination of specific legal relationship through
the execution of specific instruments.
DOCUMENTS SUBJECT TO DST
DST rates → rates shall be applicable on all documents not otherwise expressly
exempted from law, notwithstanding the fact they are in electronic form.
R.A. 8792, otherwise known as the Electronic Commerce Act
electronic documents are the functional equivalent of a written
document under existing laws, and the issuance thereof is therefore tantamount to
the issuance of a written document, and therefore subject to DST.
DST LEVIED INDEPENDENTLY
DST levied upon issuance of documents
→ DSTs are levied independently of the legal status of the transactions giving
rise thereto.
→ must be paid upon the issuance of the instruments, without regard to whether
the

PERSONS LIABLE FOR DST

Persons making the document or facility
On transaction itself
May be shared by parties liable to tax
Paid by one who is not exempt
PAYMENT OF DST
file a tax return and pay the tax in accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the Commissioner.
Time for filing and payment of the tax → shall be filed within ten (10) days after the
close of the month when the taxable document was made, signed, issued, accepted, or
transferred, and the tax thereon shall be paid at the same time the aforesaid return is
filed [Sec. 200 (B), NIRC]
Where to file → authorized agent bank within the territorial jurisdiction of the
Revenue District Office which has jurisdiction over the residence or principal place of
business of the taxpayer.

EFFECTS OF FAILURE TO STAMP TAXABLE DOCUMENTS

Documents not to be recorded
Documents not admitted or used in evidence in any court
No jurat or acknowledgment shall be added
 D O N O R S T A X

DONOR'S TAX (an excise tax)

gratuitous transfer (free)
between living persons (inter vivos)
subject to donor's tax (6% based on total gifts in excess of 250,000)
REQUISITES:
Capacity of the donor
Donative intent
Delivery, either actual or constructive
Acceptance by the donee donation is perfected when the donor knows of the acceptance
of the donee
FORMS:
Movable (personal), amount donated is; below or equal to 5,000 oral or written more
than 5,000- written
Immovable (real) regardless of amount - public instrument/ document (Deed of
Donation)
TAXABLE
Direct donation
Donation through creation of irrevocable trust
Condonation/ remission of debt
Transfer for insufficient consideration (SP < FMV) for personal and real properties
exception: real properties subject to 6% CGT
Specific renunciation of inheritance (unless there are only 2 heirs, exempt from donor's
tax because it become general renunciation)
Renunciation by the surviving spouse of his/her share in the conjugal/community
COMPOSITION OF GROSS GIFTS
Resident or citizen donor NRA - Alien Donor

Personal properties Wherever situated Situated in the Ph.

Real properties Wherever situated Situated in the Ph.

RULE OF RECIPROCITY

Properties covered by the rule Intangible personal properties situated in the Philippines given as
gifts by non-resident alien donor.

Basic rules: a. When there is reciprocity – The intangible personal

properties situated in the Philippines given as gifts by a
non-resident alien donor are not subject to the donor’s tax.
b. When there is no reciprocity – The intangible personal
properties situated in the Philippines given as gifts by a
non-resident alien donor are subject to the donor’s tax.
 E S T A T E T A X

ESTATE TAX RETURN → BIR Form No. 1801

EFFECTIVITY: After the death of the transferor (Mortis causa)
TAX RATE → There shall be levied, assessed, collected and paid upon the transfer of the net estate of every
decedent, whether resident or nonresident of the Philippines, a tax at the rate of six percent (6%) based on the
value of such net estate.

DEDUCTIONS ALLOWED

Estate Tax

Deductions allowed Ordinary deductions

1, Losses*
2. Indebtedness (Claims against the estate)*
3. Taxes*
4. Claims against insolvent debtor*
5. Unpaid mortgage*
6. Vanishing deduction
7. Transfer for public use

Special deductions
1. Family home
2. Standard deduction
3. Amount received under RA 4917

Other deduction
1. Share in the conjugal property

Note: When decedent is NRA:

Phil. GE x LITE*
World GE

ADMINITRATIVE PROVISIONS

Notice of Death Under TRAIN (effective January 1, 2018) – No longer

Notice required
required

1) In all cases of transfer subject to tax;

Tax Returns filed

2) Where the said estate consists of registered or registrable property
(regardless of the value of the gross estate)

Persons to file returns 1) Executor


Information shown in the returns
Time of filing returns
Returns to be supported with
statements certified to by a CPA
Contents of the statements
certified to by a CPA
Filing of certified copy of the
schedule of partition and the
order of the court ordering the
same
Extension for filing the returns
Place of filing of the returns
2) Administrator or
3) Any of the legal heirs
1. The value of the gross estate of the decedent at the time of his
death, or in case of non-resident alien of that part of his gross
estate situated in the Philippines;
2. The deductions allowed from the gross estate;
3. Such part of such information as may at the time be
ascertainable and such supplemental data as may be necessary
to establish the correct taxes;
Within one year from decedent’s death
When the estate tax returns show a gross value exceeding P5,000,000
1. Itemized assets of the decedent with their corresponding gross
value at the time of his death, or in case of non-resident alien,
of that part of his estate situated in the Philippines;
2. Itemized deductions;
3. The amount of tax due whether paid or still due and outstanding
Within 30 days after the promulgation of such order
The Commissioner can, in meritorious cases, extend the filing of returns
for a period not exceeding
30 days.
1) In case of resident decedent:
a. Accredited agent bank;
b. Revenue District Officer;
c. Collection Officer, or
d. Duly authorized Treasurer of the city or municipality where the
decedent was domiciled at the time of death.
2) In case of non-resident decedent:
a. Revenue District Office where the executor or administrator is
registered;
b. Revenue District Office having jurisdiction over the executor or
administrator’s legal residence (if executor or administrator is
not registered);
c. Office of the Commissioner (RDO No. 39 – South Quezon City)
(if the estate does not have an executor or administrator in the
Philippines)
 TAX REMEDIES

Civil remedies for the collection of internal revenue taxes, fees, or charges, and
any increment thereto resulting from delinquency.
TAX REMEDIES OF THE GOV’T The civil remedies for the collection of internal revenue taxes,
fees, or charges, and any increment
1. Remedies for the Collection of Delinquent Taxes. thereto resulting from delinquency shall
be by:
Summary proceedings:
Distraint of personal property and
Levy upon real property and
interest in or rights to real property.
Judicial proceedings:
Civil action or
Criminal action.
Summary or judicial proceedings may be simultaneously pursued
Either of the summary or judicial or both simultaneously may be
pursued in the discretion of the authorities charged with the collection of such
taxes.
Distraint and levy cannot be availed when amount is not more than P100
The remedies of distraint and levy shall not be availed of where
the amount of tax involved is not more than P100.
Judgment of criminal case shall also order payment of taxes
The judgment in the criminal case shall not only impose the

2. Distraint of Personal Property

● Distraint of Personal Property
Actual Distraint Constructive Distraint

1. Personal property is not physically taken.

1. Personal property is physically taken.
2. The taxpayer is already delinquent in
payment of his taxes.
3. Personal property taken is sold in order to
satisfy the tax delinquency.
2. There is no finding yet of a discrepancy, only
that the taxpayer is leaving the country or
disposing of his property in fraud of
creditors or is in the process of liquidation.
3. Personal property is merely held as security
to answer for any future tax delinquency.

● Persons who shall seize and distraint personal property (actual distraint)
 1. Amount of delinquent tax is more than Commissioner or his duly authorized
P1,000,000. representative.
2. Amount of delinquent tax is P1,000,000 or Revenue District Officer
less

● Power to lift order of distraint

○ The commissioner or his duly authorized representative shall have the power to lift order of
distraint.
● Release of distraint property upon payment prior to sale
○ If anytime prior to the consummation of the sale all proper charges are paid to the officer
conducting the sale, the goods or effects distrained shall be restored to the owner.

3. Levy on Real Property

● When to levy
○ After the expiration of the time required to pay the delinquent tax or delinquent revenue, real
property may be levied upon before, simultaneously or after the distraint of personal property
belonging to the delinquent taxpayer.

● How shall levy be effected

○ Levy shall be effected by writing upon a duly authenticated certificate showing the name of the
taxpayer and the amount of the tax and penalty due from him a description of the property
upon which levy is made.

● To whom shall the levy be mailed or served

○ Written notice of the levy shall be mailed to or served upon the:
1) Register of Deeds of the province or city where the property is located, and
2) Upon the delinquent taxpayer,
3) Or if he is absent from the Philippines, to his agent or the manager of the business in
respect to which the liability arose.
4) Or if there is none, to the occupant of the property in question.

● Redemption of property sold

1) The property sold maybe redeemed by the delinquent taxpayer within one year from the date of sale
by paying:
a) the amount of public taxes,
b) penalties and
c) interest thereon from the date of delinquency to the date of sale with
d) 15% interest per annum of the purchase price from date of purchase to the
date of redemption.
2) The owner shall not be deprived of the possession of the property sold and shall
be entitled to the rents and other income thereof until the expiration of the time
allowed for redemption.
 ● Further distraint or levy
○ The remedy by distraint on personal property and levy on realty maybe repeated, if necessary,
until the full amount due, including all expenses, is collected.

4. Distinction Among Warrant of Distraint, Warrant of Levy and Warrant of Garnishment.

Distraint Levy Garnishment

Personal property owned

As to subject matter
Personal property owned Real property owned by
by the taxpayer but in the
by and in possession of and in the possession of
possession of a third
the taxpayer the taxpayer
party

As to disposition for want

Purchased by the Forfeited to the Purchased by the
of bidders or bids
Government then resold Government then sold to Government then resold
inadequate to satisfy tax
to meet deficiency. meet the deficiency. to meet deficiency.
deficiency.

As to advertisement for No advertisement is Advertised once a week No advertisement is

sale. required. for three weeks required.

5. Injunction not Available to Restrain Collection of tax

Injunction not available No court shall have the authority to grant an injunction to restrain the
collection of any national internal revenue tax, fee or charge imposed by Tax
Code.

CTA can issue injunctions The Court of Tax Appeals can issue injunctions while in the exercise of its
appellate jurisdiction in cases pending before it. This is an exception to no
injunction rule.

CTA may enjoin collection The CTA may enjoin collection of taxes if in its opinion the same may
jeopardize the interest of the government and/or the taxpayer.

6. Tax Lien and Remedy for Enforcement of Statutory Penal Provision

Tax lien A legal claim or charge on property, either real or personal, as security from
the payment of a tax obligation.

Remedy for enforcement of The remedy for enforcement of statutory penalties of all sorts shall be by
statutory penal provision criminal or civil action, as the particular situation may require, subject to the
approval of the Commissioner.

7. Period for Assessment and Collection (Summarized)

Period of Internal revenue taxes shall be assessed within 3 years after the due date, or from the
assessment day the return was filed, where a return is filed beyond the due date.
Note: A return filed before the due date shall be considered as filed on such due date.
Return filed was not 1) Collection with prior assessment
false or fraudulent a. Assessment shall be made within 3 years from the date of filing of return or
from the last day required by law for filing, if the return was filed before such
last day;
b. Collection shall be made within 5 years from the date of assessment, either by:
1. Summary proceedings, or
2. Judicial proceedings

2) Collection without prior assessment

a. No proceeding in court without assessment for the collection shall be begun
after the expiration of the 3-year period.

Return filed was 1) Collection with prior assessment.

false or fraudulent a. Assessment shall be made at any time within 10 years after discovery of the
with intent to evade falsity, fraud or omission;
tax or no return was b. Collection shall be made within 5 years from the date of assessment, either by:
filed 1. Summary proceedings, or
2. Judicial proceedings.
2) Collection without prior assessment
a. A proceeding in court for the collection of tax may be filed without assessment
at any time within 10 years after the discovery of the falsity, fraud or
omission.

Extension of 1) If before the expiration of the 3-year period, both the Commissioner and the
assessment taxpayer have agreed in writing to its assessment after such time, assessment maybe
made within the period agreed.
2) The period so agreed upon may be extended by the subsequent written agreement
before the expiration of the 5-year period following the assessment by:
a. Summary proceedings, or
b. Judicial proceedings.