About the VAT

VAT
 It is a business tax. Without any business pursued in
the Philippines by the taxpayer, the tax cannot apply.
› 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, non-profit 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 are: Selling
goods, leasing or renting out properties and selling
services.
 Exceptions, where even there is business,
there is no VAT imposable:
 Cooperatives and effective 1/1/19 self employed and professionals
with aggregate gross sales and/or receipts not exceeding 500,000
during any 12-month period shall be exempt from business taxes
(VAT and OPT)
 Sale of real properties utilized for low-cost and socialized housing
(1,500,000 and below for residential lot);
 Sale real properties used for socialized housing (2,500,000 and
below for house and lot and other residential dwellings);
 Sale of house and lot and other residential dwellings valued at
2,000,000 and below effective 1/1/21; and
 Lease of residential unit with a monthly rental of 15,000 and below.
 Exceptions where even there is no
business, VAT is imposable
 Importation of goods for personal use, and
 Services rendered in the Philippines by the non-
resident foreign persons, even isolated, shall be
considered as being rendered in the course of
trade or business.
 It is an indirect tax. The statutory taxpayer has
the option of shifting or passing the tax burden to
another person without violating the law. It is
integrated as part of the selling price of goods or
services sold. The result is high prices. Note:
High prices of goods and services is not caused
alone by the indirect tax added, but substantially
by the too many intermediaries between the point
of production to the end-user. Aside from the tax,
a yet bigger add-on which is the gross profit of
the sellers cascades down to the final consumers
of the goods or services sold.
 It is a national tax. The collection or
administration of the tax is handled by the
national government through the Bureau of
Internal Revenue Offices.
Thresholds for business tax (VAT
or percentage tax)
The Expanded VAT
Transactions which are exempt
from VAT
 Illustration:
 First statement: The importation of vessels intended for
cleaning rivers shall be exempt from VAT.
 Second statement: The importation of passenger or cargo
vessels shall be exempt from VAT.
 First Statement: Sales of drugs and medicines of pharmacy
run by the hospital to outpatients are subject to VAT.
 Second statement: Pharmacy items used in the performance
of medical procedures in hospitals units such as in the
operating and delivery rooms and by other departments are
considered part of medical services rendered by the
hospitals, hence, not subject to VAT.