Value-Added Tax

Characteristics (Sec. 105):

Indirect tax where tax shifting is presumed (seller is the one statutorily liable for the payment of the tax but may be shifted to the buyer).
In the course of trade or business means the regular conduct or pursuit of a commercial or an economic activity, including incidental transactions, regardless
whether or not the person engaged therein is a non-stock, nonprofit private organization
VAT-Exempt Transactions (Sec. 109)
Section 109 (A): Agricultural and marine food Considered in original state even if they have “Agri”
products in their original state undergone the simple processes of preparation
such as: 3S-F-D-B-R (freezing, drying, salting, Do NOT include:
broiling, roasting, smoking or stripping) - Fighting cocks (pangsabong)
- Race horses
*VAT exempt sugar: ONLY RAW sugar/sugar cane - Zoo animals
- PETS
*Raw Cane sugar = muscovado sugar NOT refined
sugar
Section 109 (B): Sale or importation of fertilizers except specialty feeds for animal generally “Fer”
(…) including ingredients, whether locally considered as pets
produced or imported, used in the manufacture of NOTE!! Kapag feeds for race horses, fighting
finished feeds cocks, aquarium fish, zoo animals, and pet
animals ⇒ NOT VAT-EXEMPT!!!
(C): Importation of personal and household effects Condition: The goods are exempt from customs “Balikbayan 1”
belonging to the residents of the Philippines duties under the Tariff and Customs Code of the
returning from abroad and nonresident citizens Philippines Resident returning from abroad; and
coming to resettle in the Philippines NR citizen resettling in PH
(D) Importation of professional instruments (…) Condition: Bureau of Customs exempts such “Balikbayan 2”
for their own use and not for barter or sale, goods from payment of duties and taxes
accompanying such persons, or arriving within a Except: vehicles or similar goods for use in OWN use (not for barter/sale)
reasonable time manufacturing
(E) Services subject to percentage tax under Title PT
V
(F) Services by agricultural contract growers and Toll processing “weighing, killing, packaging” ACMil
milling of palay into rice, corn into grits and sugar exempted pertain to services to clients from
cane into raw sugar; which growing of animals was contracted.
(G) Medical, dental, hospital and veterinary Services of professionals > 3M are subject to VAT;
services except those rendered by professionals lab services are exempt, sales of drug store to
outpatients are vatable +doctor’s fee
(H) Educational services by private educational Does not include review classes, in-service
institutions, duly accredited by the DepED, CHED, training, etc., rendered by persons not accredited
TESDA and those rendered by government by DepEd, etc.
educational institutions
(I) Services rendered pursuant to an employer- Compensation income me thinks
employee relationship
(J) Services rendered by regional or area Headquarters that supervise Asia-pacific region
headquarters established in the Philippines (…) branches
which do not earn or derive income from the - So wala silang kinikita sa PH, bale dun
Philippines lang nagtayo ng bldg. eme eme
(K) Transactions which are exempt under Examples special laws:
international agreements to which the Philippines RA 10754 Magna Carta for PWDs
is a signatory or under special laws, except those PD 1869 PAGCOR Charter
under Presidential Decree No. 52 RA 10072 Philippine Red Cross
(L) Sales by agricultural cooperatives duly
M NM
registered with the CDA to their members as well REMEMBER: Only the “agricultural cooperatives”
as sale of their own produce to non-members; are exempt from importation of equipment to be
Own produce E E
their importation of direct farm inputs, used directly and exclusively in the production or
(Processed or at its
machineries and equipment, including spare parts processing of the agricultural cooperative’s
original state)
to be used directly and exclusively in the produce.
production
Other than the E VAT (Exempt if
cooperative’s own referring to
produce (i.e. from agricultural food
traders) product at its
original state)
zzz
(M) Gross receipts from lending activities by credit Both loans to members and non-members
M NM
or multi-purpose cooperatives duly registered
with the Cooperative Development Authority Non-lending activities: VATable
lending activities E E
 non-lending activities VAT VAT
(N) Sales by non-agricultural, non- electric and Contribution per member ≤ 15,000 = EXEMPT
non-credit cooperatives duly registered with the Contribution per member > 15,000 = VAT
Cooperative Development Authority

SUMMARY (L-N)
Gross Receipts/ Sales by From Members From Non-Members

Electric Cooperatives VAT VAT

Agricultural Cooperatives Letter L Letter L

“Lending activities” by lending and multi-purpose cooperatives Letter M Letter M

Non-agricultural, non-electric, non-lending/credit cooperatives

• Contribution per member ≤ 15,000 EXEMPT EXEMPT
• Contribution per member > 15,000 VAT VAT

ll
(O) Export sales by persons who are not VAT- If by VAT person, VATable @ 0%
registered
(P) Sale of real properties not primarily held for GR/Fixed: Dami gantong lumabas sa exercises ni mam zarco
sale to customers or held for lease in the ordinary • Sale of real properties not in the so remember!!
course of trade or business or real property ordinary course of selling/leasing
utilized for low-cost and socialized housing • Socialized housing: Price ceiling = P450K (PQ = pakyu)
per unit
Remember! (3 Exempt)
Beginning January 1, 2018: • Not primarily held for sale in the
• Residential lot @ P1.5M and below ordinary course of business
• Residential dwellings @ P2.5M and o Capital asset (subject to CGT)
below • Held for sale in the ordinary course of
business
Beginning January 1, 2021: o SP ≤ 3,199,200 OR
- Residential dwellings with SP @ P2M or o Socialized housing unit
less (adjusted to its PV every 3 years
using the CPI) Starting January 1, 2021, RESIDENTIAL LOT SALE is
not included na sa VAT exemption
(Q) Lease of a residential unit with a monthly Previously P10,000 REMEMBER!
rental not exceeding Fifteen thousand pesos
(₱15,000) Residential Unit
• ≤ 15,000 – VAT EXEMPT
• > 15,000 – Check annual receipts
o ≤ 3M, VAT EXEMPT, OPT
imposed
o > 3M, VATABLE

Commercial Unit
• GR: VAT-able
• EXC: Non-VAT registered, ≤ 3M AGR
(R) Sale, importation, printing or publication of VAT exempt activities
books, and any newspaper, magazine, journal, 1. Sale
review bulletin, or any such educational reading 2. Importation
material covered by the UNESCO Agreement on 3. Printing
the Importation of Educational, Scientific and 4. Publication
Cultural Materials, including the digital or
electronic format thereof: Provided, That the Yung iba, not exempt na
materials enumerated herein are not devoted
principally to the publication of paid
advertisements;
(S) Transport of passengers by international Eto pala vat exempt
carriers
(T) Sale, importation or lease of passenger or including engine, equipment and spare parts
cargo vessels and aircraft, including engine,
equipment and spare parts thereof for domestic
or international transport operations
U) Importation of fuel, goods and supplies by
persons engaged in international shipping or air
transport operations: Provided, That the fuel,
goods, and supplies shall be used for international
shipping or air transport operations
(V) Services of bank, non-bank financial
intermediaries performing quasi-banking
functions (121), and other non-bank financial
intermediaries (122)
(W) Sale or lease of goods and services to senior
citizens and persons with disability
(X) Transfer of property pursuant to Section
40(C)(2) of the NIRC, as amended
(Y) Associations dues, membership fees, and
other assessments and charges collected by
homeowners’ associations and condominium
corporations
(Z) Sale of gold to the Banko Sentral ng Pilipinas
(BSP)
(AA) Sale of or importation of prescription drugs
and medicines for
(BB) Sale or importation of the following
beginning January 1, 2021 to December 31, 2023
(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 pesos (P3,000,000.00)
Baat parang kahawig nito yung nasa zero-rated T.T
Subject sa OPT to hehe (Sec. 121 and 122 ata)
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
Tax-free Exchanges
• By a corporation in pursuant to plan of
merger or consolidation
• By a person or a group up to 4 persons
resulting to acquisition of control
Previously Zero-rated Mining gold
Diabetes, high cholesterol, and hypertension
- beginning January 1, 2020
(ii) Cancer, mental illness, tuberculosis, and kidney
diseases beginning January 1, 2021. [104]
Provided, That the DOH shall issue a list of
approved drugs and medicines for this purpose
within sixty (60) days from the effectivity of this
Act;
(i) Capital equipment, its spare parts and raw Basta COVID
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; and [106]
(ii) All drugs, vaccines and medical devices
specifically prescribed and directly used for the
treatment of COVID-19; and [106]
(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.
VERY RELEVANT SA OPT!!!
 OUTPUT VAT
Remember!
𝑂𝑢𝑡𝑝𝑢𝑡 𝑉𝐴𝑇 (𝐺𝑟𝑜𝑠𝑠 𝑆𝑎𝑙𝑒𝑠 𝑜𝑟 𝐺𝑟𝑜𝑠𝑠 𝑅𝑒𝑐𝑒𝑖𝑝𝑡𝑠 ∗ 12% 𝑜𝑟 0%)
𝐿𝐸𝑆𝑆: 𝐼𝑛𝑝𝑢𝑡 𝑉𝐴𝑇 (𝐺𝑟𝑜𝑠𝑠 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 𝑜𝑟 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠 ∗ 12%)
= 𝑉𝐴𝑇 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 (𝐸𝑥𝑐𝑒𝑠𝑠 𝑜𝑣𝑒𝑟 𝐼𝑛𝑝𝑢𝑡 𝑉𝐴𝑇)
SOURCES OF OUTPUT VAT
1. Actual Sale (Domestic Sale)
• Actual exchange between buyer and seller
• ORDINARY course of business or trade
• Includes INCIDENTAL TRANSACTIONS

General Bases
Items Tax Base
Goods/Properties Gross Selling Price
Services Gross Receipts
Dealer in Securities Gross Income
Real Properties Higher of Gross Selling Price or FMV (Higher of Zonal or Assessor’s value)

Excise tax IS INCLUDED in the GROSS SELLING PRICE

VAT is excluded in the TAX BASE
• Sale of Goods or Properties (SEC. 4.106-1.)
 Gross Selling Price – total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the
sale, barter, or exchange of the goods or properties, EXCLUDING VAT, INCLUDING EXCISE TAX
o Sales Discount is NOT included è dependent on a future, conditional event (Sec. 106)
o Trade Discount is INCLUDED
TYPES:
a) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
b) The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like
property or right;
c) The right or the privilege to use 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.
• Sale of Services (including lease of properties)
 Gross receipts – total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the
amount charged for materials supplied with the services and deposits applied as payments for services rendered and advance payments actually or
constructively received during the taxable period for the services performed or to be performed for another person, EXCLUDING VAT
 Advance payment of lessee
1. Loan to the lessor from the lessee
2. Option money for the property
3. Security deposit to insure the faithful performance of certain obligations of the lessee to the lessor
4. Prepaid rental
 1-3 not subject to vat, 4 subject to vat
• Incidental Transactions
The phrase “in the course of trade or business” means the regular conduct or pursuit of a commercial or an economic activity, including transactions
incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, nonprofit private organization (irrespective of the
disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.

Examples:
 Sale of PPE (though sales pa rin)
 Machines na di na gagamitin so ibebenta na
 Plant, magmomove in na so ibebenta na current plant
 If property is used in business, subject to VAT
2. Transaction Deemed Sale (Sec 106-B)
• Not actually a sale because there is an absence of actual exchange between buyer and seller but is considered “sale” for VAT purposes
a. Transfer, use or consumption not in the • FMV of the goods consumed
course of business of goods or  BASICALLY, yung goods or properties for SALE is transferred, used, or consumed NOT IN THE
properties originally intended for sale or COURSE OF BUSINESS
for use in the course of business; • For sale yung goods (e.g. inventory), but ginamit siya not for the ordinary course of business
• EX. Ginamit for parties, events yung inventory nila
• BASIS: FMV of Goods Consumed
b. Distribution or transfer to: Basis: Market Value

Example: u transferred inventory to your shareholders, subject to VAT

 (a) Shareholders or investors as share in even if you distribute to creditors in payment of debt, VATABLE
the profits of the VAT-registered
persons; or [pang-profit]
(b) Creditors in payment of debt; [pang-
bayad]
c. Consignment of goods if actual sale is • IF returned within the 60-day period, not deemed sold
not made within sixty (60) days • April 1, goods were consigned. After 60 days (June 1), goods are not yet sold. Deemed as sale
following the date such goods were na siya
consigned; and
d. Retirement from or cessation of Basis: Lower of FMV and Acquisition cost
business, with respect to inventories of
taxable goods existing as of such • Even if magreertire na ang business, and may inventory ka pa, you are still subject to VAT
retirement or cessation.
NOTE: VAT is not imposed on the following change in business structure:
• Change of control of a corporation
• Change in the trade or corporate name
• Merger or consolidation of corporation
3. ZERO-RATED SALES
RATIONALE (so bakit may 0-rate sales?)
• The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods
destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines
to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent
(12%)
 NO VAT is imposed on the goods/services destined to be consumed/done OUTSIDE the territory borders

Input VAT from 0-rated sales can be:

• Refunded
• Claimed as deduction/tax credit against output vat on domestic sales
• Claimed as tax credit (TCC) against any other internal revenue taxes
EXPORT SALES OF GOODS OR PROPERTIES (RR amended na)
1. The sale and actual shipment of goods from the Philippines to a foreign country, irrespective Basically, the EXPORT SALES
of any shipping arrangement that may be agreed upon which may influence or determine the
transfer of ownership of the goods so exported, paid for in acceptable foreign currency or its Before amendment, same pa rin
equivalent in goods or services, and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
2. The sale of goods, supplies, equipment and fuel to persons engaged in international shipping Sale to a person ma engaged sa international
or international air transport operations; Provided, That the goods, supplies, equipment, and shipping/air transport ops
fuel shall be used exclusively for international shipping or air transport operations • EXCLUSIVE USE ONLY for the operations
(otherwise, 12% VAT)
The sale of goods, supplies, equipment and fuel to persons engaged in international shipping • The transport is limited FROM 1 PH port
or international air transport operations is limited to goods, supplies, equipment and fuel that DIRECTLY to a FOREIGN country (vice versa).
shall be used in the transport of goods and passengers from a port in the Philippines directly UNLESS
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
• Bawal magdock sa ibang port ng ph EXCEPT if
unloading passengers and/or cargoes that originated from abroad, or to load passengers mag uunload or load ng passenger or cargo
and/or cargoes bound for abroad: Provided, further, that if any portion of such fuel, goods, na
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, Before amendment, it was like this:

3. Sales to persons or entities whose exemption from direct and indirect taxes under special laws Di ko rin to masyado nagets pero ayun basta
or international agreements to which the Philippines is a signatory effectively subjects such SPECIAL LAW
sales to zero rate;
Sabi sa ppt ni Francine, effectively-zero-rated sales
daw to baka matic na since special law
4. Sale of raw materials, inventories, supplies, equipment, packaging materials and goods, to a Focus sa naka underline
registered export enterprise, to be used directly and exclusively in its registered proiect 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; 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

EXPORT SALES OF SERVICES

1. Services other than processing, manufacturing or repacking rendered to a person engaged in Service to non-resident:
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 Amendment:
which is paid for in acceptable foreign currency and accounted for in accordance with the rules → Difference from Section 108 (1): sa #1 ng tax
and regulations of the BSP code, ang subject ay “processing, manufacturing,
or repacking goods” pero sa #1 ng RR, it is “OTHER
than processing, manufacturing or repacking”
which is mas kahawig nung #2 ng nasa tax code

→ #1 in Tax Code is removed in RR

2. Services to persons or entities whose exemption from direct or indirect taxes under special Effectively 0-rated
laws or international agreements to which the Philippines is a signatory effectively subjects the
supply of such services to zero percent (0%) rate; Amendment:
If you check yung sa Section 108(2), may part doon
na ito ang laman:
“paid for in acceptable foreign currency and
accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas
(BSP)” → Paano binayaran? Pumasok yung foreign
currency (FOREX) sa Philippines.

Removed n to sa RR
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.

4. Services rendered to persons engaged in international shipping or air transport operations, This is like yung nandun sa sale of goods/property
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 12% VAT under Sec. 108 of the Tax Code

5. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a Passenger and Cargo of a domestic carrier (from
foreign country. Gross receipts of international air or shipping carriers doing business in the PH to abroad): 0-rated na ito (you’ll see sa OPT
Philippines derived from transport of passengers and cargo from the Philippines to another yung comparison with this)
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
6. Sale of power or fuel generated through renewable sources of energy such as, but not limited hanggang bentahan lang, di kasama yung pag
to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other maintain
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.
INPUT VAT

ADMINISTRATIVE REQUIREMENTS

GUIDE SA SOLVING!!
 Other Percentage Taxes
• Imposed on gross sales or receipts
• Indirect Tax
o May be shifted to purchaser and will form part of the purchaser’s cost or expense
• Section 116-128 of Tax Code
Taxpayer Description % Tax Base
Sec. 116: Tax on Persons Exempt from VAT/ small businesses
Any person except 1) Cooperatives and 2) Self- Requisites: 3% Gross Quarterly
employed individuals and professionals availing 1. Exempt under 109 (1)(CC) [AGS/R ≤ Php 3M] Sales/Receipts
of the 8% tax on gross sales and/or receipts 2. Not a VAT-registered person
and other non-operating income 3. Not exempt from 109 (1)(A) to (1)(BB)
Rate applicable from July 1, 2020 to June 30, 2023 è 1%
Sec. 117: Tax on Domestic Common Carriers and Keepers of Garages
Operators of: Exception: 3% Higher of Actual
• Cars for rent or hire • Owners of bancas and owners of animal-drawn two-wheeled Quarterly Gross
• Transportation contracts (+ persons vehicle Receipts or Minimum
who transport passengers such as Quarterly Gross
tourist buses for hire) Tax is called Common Carriers Tax (CCT) Receipts
• Other domestic carriers by land for
transport of passengers Remember: Applicable to DOMESTIC CC by LAND for PASSENGERS
• Keepers of Garage Minimum Quarterly Gross Receipts:
Jeepney for hire – Public utility bus –

Manila and other cities P2,400 ≤ 30 passengers P 3,600

Provincial 1,200 > 30 but ≤ 50 passengers 6,000
> 50 passengers 7,200

Taxis - Cars –

Manila and other cities P 3,600 Car for hire (w/chauffer) P 3,000
Provincial 2,400 Car for hire (w/o chauffer) 1,800
Sec. 118: Tax on International Common Carriers
International Carriers Doing Business in the • Transport of GOODS/ CARGOS from PH to abroad 3% Gross Quarterly
Philippines (Resident Foreign Corporations) Receipts
• Air Carriers
• Shipping Carriers
Section 117 and 118 Summary
Domestic Carriers International Carriers
Person Land Air Sea Air Sea
Domestic Sec. 117 12% VAT 12% VAT Person Exempt Exempt
International 0% VAT 0% VAT Cargo Sec. 118 Sec. 118

Cargo Land Air Sea

Domestic 12% VAT 12% VAT 12% VAT
International 0% VAT 0% VAT
,,
Sec. 119: Tax on Franchises
Radio or Television Broadcasting Company Annual Gross Receipts of the preceding year should not exceed Php 10M 3% Annual Gross Receipts
• Not VAT-registered but shall have the option to be registered
• Once elected, registration is irrevocable
Gas and Water Utilities Regardless of the Gross Receipts 2%
Sec. 120: Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines
Person (subscriber) paying for the services Tax is called Overseas Communications Tax (OCT) 10% Amount paid for every
rendered to the person (telecommunications) • Transmission via telephone, telegraph, telewriter exchange, overseas dispatch,
rendering the services wireless and other communication equipment services message, or
• The person rendering the service shall collect and pay the tax conversation
within 20 days after the end of each quarter transmitted from the
Philippines
EXEMPTIONS:
1. Government
2. Diplomatic Services – embassy or consular offices of foreign
government
3. International Organizations – public international organization
or any of its agencies based in PH
4. News Services
Sec. 121: Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi- Banking Functions
Tax is called Gross Receipts Tax (GCT) Gross Receipts
Banks and Non-bank Financial Intermediaries
(doing Quasi-banking functions)
Finance Companies and Other Financial
Companies
Every person, company or corporation doing
life insurance business of any sort in the
Philippines
Except: Purely cooperative companies or
associations
Fire, marine, or miscellaneous insurance agent
authorized under the Insurance Code
Owners of the property who obtained
insurance directly with foreign companies
Collected tax on gross receipts derived from sources WITHIN the Philippines
Financial Intermediaries
• Functions that include lending, investing, or placement of funds or
evidence of indebtedness or equity deposited with them, acquired by
them, or coursed through them
Non-bank Financial Intermediaries
• Authorized by BSP to perform quasi-banking activities
Quasi-banking activities
• Borrowing funds from 20 or more personal or corporate lenders at any
one time
Interest, Commissions and Discounts from lending activities and
financial leasing
• Taxed on the basis of remaining maturities of the instruments
o Maturity ≤ 5 Years (ST) 5%
o Maturity > 5 years (LT) 1%
Note: Pre-termination
- If maturity is shortened because of it, maturity shall be
reckoned TO END as of the date of pretermination
Dividends and equity shares in net income of subsidiaries 0%
Royalties, rentals of property, real or personal, profits, from exchange 7%
and all other items treated as gross income under Sec. 32
Net trading gains within the taxable year on foreign currency debts, 7%
debts securities, derivative and other similar financial instruments
• Cumulative total net gain and net loss since the first month of
the taxable year
• Net loss can only be deducted from the net trading gain
Sec. 122: Tax on Other Bank Financial Intermediaries
Interest, Commissions and Discounts and all other items treated as gross Gross Receipts
income under the tax code
• Those from financial leasing shall be taxed on the basis of
remaining maturities of the instruments
o Maturity ≤ 5 Years (ST) 5%
o Maturity > 5 years (LT) 1%
Note: Pre-termination
If maturity is shortened because of it, maturity shall be reckoned TO
END as of the date of pretermination
Sec. 123: Tax on Life Insurance Premiums
Cooperative Companies or Associations 2% Total premium
• Conducted by members with money collected from among collected, where such
themselves and solely for their own protection and not for premiums are paid in
profit money, notes, credits
or any money
Non-Life Insurance – not covered by this provision substitute
EXCLUSIONS (IMPORTANT!)
1. Premiums refunded within 6 months (rejected risk)
2. Reinsurance premiums where tax has previously been paid
3. Premiums collected or received by any branch of a domestic
corporation, firm, or association doing business outside the
Philippines on account of any life insurance of a NON-
RESIDENT
4. Premiums collected or received on account of any
REINSURANCE
5. Portion of premiums collected or received by the insurance
companies on variable contracts in excess of the amounts
necessary to insure the lives of the variable contract workers
Sec. 124: Tax on Agents of Foreign Insurance Companies
“Twice the Tax under Section 123” 4% Total premium
collected, where such
à Not applicable to reinsurance premiums are paid in
à Shall not affect the right of an owner of property to apply for and 5% money, notes, credits
obtain for himself policies in foreign companies in cases where said or any money
owner does not make use of the services of any agent, company or substitute
corporation residing or doing business in the Philippines.
 à They will have the duty to report to the Insurance Commissioner and
to the Commissioner each case where insurance has been effected
Sec. 125: Amusement Taxes
Proprietor, Lessee or Operator Jai-alia and racetracks 30% Gross Receipts that
Cockpits, cabarets, night or day clubs 18% includes all receipts of
the taxpayer of the
Cockpits – sabungan amusement place
Cabarets – restaurants or clubs where liquor and food are served, with a PLUS income from
stage provided for performances by musicians, dancers or comedians television, radio and
Night or Day Clubs – drinking, dancing and entertainment venues which motion picture rights
serve food and provide entertainment
Professional basketball games (PD 871) 15%
Boxing exhibitions 10%

EXCEPT: World or Oriental Championships in any division is at stake

• Requisites for exemptions
o At least 1 contender is a Philippines’ citizen AND
Exhibition is promoted by a citizen/s of the Philippines or by a
corporation or association at least 60% of the capital of which is owned
by such citizens
Sec. 125-A: GAMING Tax on Services rendered by Offshore Gaming Licenses (OGLs)
Offshore gaming licensees – POGOs Tax base is in lieu of all other direct or indirect internal revenue taxes 5% Higher of Gross
and local taxes, with respect to gaming income gaming revenue or
• Gross gaming revenue or receipts shall mean gross wages less receipts OR agreed
payouts predetermined
minimum monthly
revenue or receipts
from gaming
Sec. 126: Tax on Winnings
Bettor Winnings from Regular Bets in Horse Races 10% Winnings/ dividends
From Double, Forecast/Quinella and Trifecta Bets 4% LESS Cost of ticket
Owners of Winning Race Horses Based on the prizes 10% Gross Winnings
** NOTE on all: Operator, manager, or person will withhold the tax before giving it to the winner
Sec. 127: Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange or through Initial Public Offering
Seller or Transferor Through the Local Stock Exchange 0.6% Gross selling price or
• Individual taxpayer (C/A) • 6/10 of 1% gross value in money
• Corporate taxpayer (D/F) • On every sale, barter, exchange or other disposition of shares of the shares of stock
• Other taxpayers not mentioned of stock listed and traded OTHER THAN sale by dealer in sold, bartered,
above, like estate, trust, trust funds, securities exchanged or disposed
and pension funds
à Any gain derived shall be EXEMPT from capital gains tax and from
regular individual/corporate income tax
REPEALED: Section 6, Bayanihan 2 Initial Public Offering
Stock broker who effected the sale Return on Capital Gains Realized from Sale of Shares of Stocks 0.6% Net capital gains
• 6/10 of 1%
Administrative Requirements
Section 128 (A) Returns of Gross Sales, Receipts or Earnings and Payment of Tax

1. Persons Liable to Pay Percentage Taxes

o Must file quarterly return of the amount of his gross sales, receipts or earnings and pay the tax due WITHIN 25 DAYS AFTER THE END OF
EACH TAXABLE QUARTER
o In the case of a person whose VAT registration is cancelled and who becomes liable to the tax imposed in Section 116 of this Code, the
TAX SHALL ACCRUE from the date of cancellation and shall be paid in accordance with the above
2. Person Retiring from Business
o Must notify the nearest internal revenue officer, file his return and pay the tax due thereon WITHIN 20 DAYS AFTER CLOSING HIS
BUSINESS
3. Determination of Correct Sales or Receipts
o When it is found that a person has failed to issue receipts or invoices, or when no return is filed, or when there is reason to believe that
the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed
under the provisions of this Code, the Commissioner, after taking into account the sales, receipts or other taxable base of other persons
engaged in similar businesses under similar situations or circumstances, or after considering other relevant information may prescribe a
minimum amount of such gross receipts, sales and taxable base and such amount so prescribed shall be prima facie correct for purposes
of determining the internal revenue tax liabilities of such person.
Section 128 (B) Where to File – EXCEPT AS THE COMISSIONER OTHERWISE PERMITS…
• Every person liable to the percentage tax under this Title may, at his option, file a separate return for each branch or place of business, or a
consolidated return for all branches or places of business with the authorized agent bank, Revenue District Officer, Collection Agent or duly
authorized Treasurer of the city or municipality where said business or principal place of business is located.
 Documentary Stamp Tax
• Excise tax on documents, instruments, loan agreements, and papers
• Signifies evidence on the acceptance, assignment, sale or transfer of an obligation, rights or property incident thereto
• Tax is either FIXED or BASED ON PAR/FACE
# Document/Instrument Tax Rate Tax Base
174 Original Issue of Shares of Stock
• With PAR P2.00 per P200 [1%] PAR Value
• Without PAR Actual Consideration
• Stock Dividends Actual Value represented by the Shares
175 Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Shares or Certificates of Stock [2nd Transfer]
• With PAR P1.5 per P200 [0.75%] PAR Value
• Without PAR 50% DST paid on the Original Issuance of Shares
176 Bonds, Debentures, Certificates of Stock or Indebtedness Issued in Foreign Countries
• Similar to the DST required by law on similar instruments when issued, sold or transferred in the Philippines
177 Certificates of Profits or Interest in Property or Accumulations
P1.00 per P200 [0.5%] Face Value
178 Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, and Other Instruments
P3.00 Per Check, Draft or Certificate
179 All Debt Instruments
• Loan agreement between 2 parties P1.5 per P200 [0.75%] Issue price
• Short-term Loan agreement Term in days / 365 Proportional amount in accordance with the
ratio of its terms in number of days to three
hundred sixty days [365 days]
180 Bills of Exchange or Drafts
P0.6 per P200 [0.30%] Face Value
181 Acceptance of Bills of Exchange and Others
P0.6 per P200 [0.30%] Face Value
182 Foreign Bills of Exchange and Letters of Credit
P0.6 per P200 [0.30%] Face Value
183 Life Insurance Policies
LI ≤ P100,000 Exempt
P100,000 < LI ≤ P300,000 P20.00
P300,000 < LI ≤ P500,000 P50.00
P500,000 < LI ≤ P750,000 P100.00
P750,000 < LI ≤ P1,000,000 P150.00
LI > P1,000,000 P200.00
184 Policies of Insurance Upon Property
• General Rule P0.50 on each P4.00 [12.5%] Premium Charged
• Reinsurance Contract/Agreement Exempt
185 Fidelity Bonds and Other Insurance Policies
P0.50 on each P4.00 [12.5%] Premium Charged
186 Policies of Annuities and Pre-Need Plans
• Annuities P1.00 per P200 [0.5%] Premium or installment payment or contract
price collected
• Pre-need Plans P0.400 per P200 [0.20%] Premium or contribution collected
187 Indemnity Bonds
P0.30 on each P4.00 [7.5%] Premium Charged
188 Certificates
P30.00 Each Certificate
189 Warehouse Receipts
• General Rule P30.00
• Value of property ≤ P200 Exempt
190 Jai-alai, Horse Race Tickets, Lotto or Other Authorized Numbers Games
• First P1.00 P0.20 Per ticket
• In excess of the first P1.00 P0.20 For each P1.00 in excess
191 Bills of Lading or Receipts
• P100 < Value ≤ P1,000 P2.00
• Value > P1,000 P20.00

• Freight tickets covering goods, merchandise or effects Exempt

carried as accompanied baggage of passengers on land
and water carriers primarily engaged in the
transportation of passengers
192 Proxies
• General Rule P30.00 Each Proxy
 • Proxies issued affecting the affairs of associations or Exempt
corporations organized for religious, charitable or literary
purposes
193 Powers of Attorney
• General Rule P10.00 Each Document
• Acts connected with the collection of claims due from or Exempt
accruing to the Government
194 Leases and Other Hiring Agreements
• First P2,000 P6.00
• In excess of the first P2,000 P2.00 For every P1,000 excess
195 Mortgages, Pledges and Deeds of Trust
• First P5,000 P40.00 [0.8%] Amount secured
• In excess of the first P5,000 P20.00 [0.4%] For every P5,000 in excess
196 Deeds of Sale, Conveyances and Donation of Real Property
• Consideration ≤ P1,000 P15.00 [1.5%] Higher of consideration or FMV
• On each P1,000 in excess of P1,000 • FMV è Higher of Zonal and
Assessor
• If government is a party, basis
shall be the consideration
• Transfers exempt from donor’s tax under Section 101(a) Exempt
and (b)
197 Charter Parties and Similar Instruments
• If registered gross tonnage of the ship ≤ P1,000 tons • P 1000.00 if duration of charter/contract ≤ 6 Months
• Additional P100 on each month or fraction of a month > 6 months
• If registered tonnage of the ship ≤ P10,000 tons • P2,000 if duration of charter/contract ≤ 6 Months
• Additional P200 on each month or fraction of a month > 6 months
• If registered tonnage > P10,000 • P3,000 if duration of charter/contract ≤ 6 Months
• Additional P300 on each month or fraction of a month > 6 months
198 Assignments and Renewals of Certain Instruments
Same rate as that imposed on the original instrument
EXEMPT TRANSACTIONS (SEC. 199)
(A) Policies of insurance or annuities made or granted by a fraternal or beneficiary society, order, Cooperatives
association or cooperative company, operated on the lodge system or local cooperation plan and Not-for-Profit
organized and conducted solely by the members thereof for the exclusive benefit of each member
and not for profit.
(B) Certificates of oaths administered to any government official in his official capacity or of Super dami but basically this is about
acknowledgment by any government official in the performance of his official duties, written government-related documents
appearance in any court by any government official, in his official capacity; certificates of the
administration of oaths to any person as to the authenticity of any paper required to be filed in court
by any person or party thereto, whether the proceedings be civil or criminal; papers and documents
filed in courts by or for the national, provincial, city or municipal governments; affidavits of poor
persons for the purpose of proving poverty; statements and other compulsory information required
of persons or corporations by the rules and regulations of the national, provincial, city or municipal
governments exclusively for statistical purposes and which are wholly for the use of the bureau or
office in which they are filed, and not at the instance or for the use or benefit of the person filing
them; certified copies and other certificates placed upon documents, instruments and papers for the
national, provincial, city, or municipal governments, made at the instance and for the sole use of
some other branch of the national, provincial, city or municipal governments; and certificates of the
assessed value of lands, not exceeding Two hundred pesos (P200) in value assessed, furnished by
the provincial, city or municipal Treasurer to applicants for registration of title to land.
(C) Borrowing and lending of securities executed under the Securities Borrowing and Lending Program
of a registered exchange, or in accordance with regulations prescribed by the appropriate regulatory
authority: Provided, however, That any borrowing or lending of securities agreement as
contemplated hereof shall be duly covered by a master securities borrowing and lending agreement
acceptable to the appropriate regulatory authority and which agreement is duly registered and
approved by the Bureau of Internal Revenue. (BIR).
(D) Loan agreements or promissory notes, the aggregate of which does not exceed Two hundred fifty
thousand pesos ( P250,000) or any such amount as may be determined by the Secretary of Finance,
executed by an individual for his purchase on installment for his personal use or that for his family
and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture:
Provided, however, That the amount to be set by the Secretary of Finance shall be in accordance
with a relevant price index but not to exceed ten percent (10%) of the current amount and shall
remain in force at least for three (3) years.
(E) Sale, barter or exchange of shares of stock listed and traded through the local stock exchange. LOCAL STOCK EXCHANGE (sa taas kasi, not
traded yun)
 (F) Assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance
of any agreement, contract, charter, or any evidence of obligation or indebtedness, if there is no
change in the maturity date or remaining period of coverage from that of the original instrument.
(G) Fixed income and other securities traded in the secondary market or through an exchange.
(H) Derivatives: Provided, That for purposes of this exemption, repurchase agreements and reverse
repurchase agreements shall be treated similarly as derivatives.
(I) Interbank or interdepartmental advances within the same legal entity.
(J) All forbearances arising from sales or service contracts including credit card and trade receivables:
Provided, That the exemption be limited to those executed by the seller or service provided.
(K) Bank deposit accounts without a fixed term or maturity.
(L) All contracts, deeds, documents, documents and transactions related to the conduct of business of
the Bangko Sentral ng Pilipinas.
(M) Transfer of property pursuant to Section 40 (C) (2) of the National Internal Revenue Code of 1997, as
amended.
(N) Interbank call loans with maturity of not more than seven (7) days to cover deficiency in reverses
against deposit liabilities including those between or among banks and quasi-banks.
Section 196 Donor’s Tax Exemption
• Gifts by a Resident or an NRA:
o to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any
political subdivision of the said Government; and
o To an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization,
trust or philanthropic organization or research institution or organization:
▪ not more than thirty percent (30%) of said gifts shall be used for administration purposes.
▪ a school, college or university and/or charitable corporation, accredited nongovernment organization, trust or philanthropic
organization and/or research institution or organization, incorporated as a non-stock entity, paying no dividends, governed by
trustees who receive no compensation, and devoting all its income, whether students' fees or gifts, donation, subsidies or
other forms of philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of Incorporation

ADMINISTRATIVE REQUIREMENTS
Liability to pay DST [Sec. 173]
• Liable: Person making, signing, issuing, accepting or transferring the documents
• If one party is exempted from the tax, the other party who is not exempted shall be DIRECTLY LIABLE

Filing and Payment

• Filed and paid at the same time within 5 days after the close of the month when the taxable document was signed, issued, accepted or transferred
• Payment options:
o Purchase of DST stamp and actual affixture, OR
o Imprinting a secured stamp on the taxable document through the web-based Electronic Documentary Stamp Tax (eDST) System

Triplicate Filing of Return

1. Constructive affixture of documentary stamps; by the person making, signing, issuing, accepting, or transferring documents, instruments, loan
agreements and papers, acceptances, assignments, sales and conveyances of the obligation, right or property incident thereto wherever the
document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in
the Philippines at the same time such act is done or transaction had;
2. In the case of Electronic Documentary Stamp Tax (eDST) System user, by the taxpayers belonging to the industries mandated to use the web-based
eDST System in the payment/remittance of DST liabilities and the affixture of the prescribed documentary stamp on taxable documents and taxpayers
who, at their option, choose to pay the DST liabilities thru the eDST System pursuant to Revenue Regulations (RR) No. 7-2009; and
3. By a revenue collection agent for remittance of sold loose documentary stamps

Where to File
• [With AAB] With the Authorized Agent Bank (AAB) within the territorial jurisdiction of the Revenue District Office where the residence or place of
business of the taxpayer is located or where the collection agent is assigned
• [Without AAB] Directly with the Revenue Collection Officer (RCO) within the Revenue District Office which has jurisdiction over the residence or
place of business of the taxpayer or where the collection agent is assigned

Failure to pay DST [Sec. 201]

• Will not invalidate the taxable document
• Shall not be recorded (ex. In Registry of Deeds) or admitted or used as evidence in any court until the requisite stamp is affixed thereto and canceled
• No notary or other officer authorized to administer oaths shall add his jurat or acknowledgement to the document unless the proper documentary
stamp is affixed thereto and canceled