Business Tax

Types of Transfer
1. Gratuitous
1. Estate Tax
2. Donor’s Tax
2. Onerous Transfer
1. In the course of trade or business
1. VAT
2. Percentage Tax
Excise Tax if applicable and Income tax
2. Not in the course of trade or business
• Subject to income tax
CONSUMPTION TAX
• Consumption tax is a tax upon the utilization of
goods or services by consumers or buyers. It is a tax
on the purchase or consumption of the buyer and
not on the sale of the seller.
• Business tax is a form of consumption tax
• Consumption occurs when one acquires goods or
services by purchase, exchange or other means.
Business Tax
• Tax imposed upon onerous transfer in the course of trade or
business, such as sale, barter, exchange and importation.
Business Tax
VAT OPT Excise
Tax
Sale of Goods/Properties or services
• In general √ - -
• Exempt from VAT - √ -
• Exempt from Business Tax - - -
Manufacturing/Importation and sale of
Sin products, non essential goods or
services
• In General (VAT + Excise tax) √ - √
• (Percentage Tax + VAT) - √ √
TYPES OF BUSINESS TAXES
1. Value Added Tax on sales
2. Percentage Tax
3. Excise Tax
 Characteristics of the VAT on sales
1. Tax on value added
• VAT is a tax on the value added by the seller
2. Top-up on sales
• VAT on sales is required by the law to be included in the price of
the goods as a top-up thereto
3. Tax credit method
• VAT on sales shall be reduced by the amount of VAT paid by the
business on its purchases
4. An explicit consumption tax
• VAT is explicitly disclosed in the invoice or official receipt of the
seller
5. Quarterly tax
• The VAT return is filed quarterly but is paid on a monthly basis.
(Sec. 114 (AJ, NIRC as amended)
Methods of computing VAT
1. Direct method
2. Tax credit method
Direct method
VAT = 12% x (SP – Cost)

Illustration
• A business purchased goods for P200,000 and sold
the same for P250,000. The business paid P24,000
VAT on the purchase of the goods. The business is
subject to 12% VAT.
Tax credit method
Output VAT (12% x SP) XXX
Less: Input VAT (12% X Cost) XXX
VAT due XXX
PERCENTAGE TAX
Percentage tax is a sales tax of various rates,
generally imposed upon the gross sales or gross
receipt of non-VAT registered taxpayers
 Characteristics of the percentage tax
1. Tax on sales or gross receipts
• The total amount due from the buyer(invoice price) is
considered sales or gross receipt The percentage tax is
computed directly ,from this amount
2. An expensed tax
• In income taxation, the percentage tax is presented as an
expense deductible against the sales or gross receipt This
treatment gives percentage tax the impression of being a direct
tax or privilege tax of the sellers.
3. An implicit consumption tax
• The percentage tax is inherently factored by sellers in the pricing
of their goods or services. The percentage tax passes to the
buyer by inclusion to the selling price but the same is not
separately presented in the invoice; hence, not specifically
disclosed to the buyer
4. Monthly or quarterly tax
• The percentage tax is payable monthly for most percentage
taxpayers and quarterly for certain percentage taxpayers.
VAT and Percentage Tax are
mutually exclusive
• General Rule:
Businesses pay either VAT or percentage tax.
Businesses which pay VAT do not pay the percentage
tax. Similarly, businesses which pay percentage tax
do not pay VAT.
• However, a VAT-registered taxpayer may pay both
VAT and percentage tax when It engages in
activities which are specifically designated by the
law as subject to percentage tax
 Persons Liable
Any person who, in the course of his trade or business,
1. Sells,
2. Barters
3. Exchanges or
4. Leases goods or properties, or
5. Renders services, and
6. Any person who imports goods
• in the case of importation of taxable goods, the importer,
whether an individual or corporation and whether or not
made in the course of his trade or business, shall be liable
to VAT. (SECTION 4.105-1, R.R. 16-2005)
Persons Liable
Any person who, in the course of his trade or business,
1. Sells,
refers to any individual, trust, estate,
2. Barters partnership, corporation, joint venture,
3. Exchanges or
cooperative or association
4. Leases goods or properties, or
5. Renders services, and
6. anyperson who imports goods
• in the case of importation of taxable goods, the importer,
whether an individual or corporation and whether or not
made in the course of his trade or business, shall be liable
to VAT. (SECTION 4.105-1, R.R. 16-2005)
 Persons Liable
Any person who, in the course of his trade or business,
1. Sells,
2. Barters
3. Exchanges or
4. Leases goods or properties, or
5. Renders services, and
6. Any person who imports goods
• in the case of importation of taxable goods, the importer,
whether an individual or corporation and whether or not
made in the course of his trade or business, shall be liable
to VAT. (SECTION 4.105-1, R.R. 16-2005)
 In the Course of Trade or Business
The term “in the course of trade or business” means the
1. regular conduct or
2. pursuit of a commercial or 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.
• Non-resident persons who perform services in the
Philippines are deemed to be making sales in the
course of trade or business, even if the performance
of services is not regular.
Covered of Value Added Tax (VAT)
1. VAT on Sale of Goods or Properties
2. VAT on the Sale of Services and Use or Lease of
Properties
3. VAT on Importation of Goods
 'In the course of trade or business'
• 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 nonstock, 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. (Sec
105, R.R. 16-2005, SEC. 4.105-3.)
• Non-resident persons who perform services in the
Philippines are deemed to be making sales in the course
of trade or business, even if the performance of services
is not regular. (R.R. 16-2005, SEC. 4.105-3)
“Marginal Income Earner”
Marginal Income earner
• The activities of such individuals are considered
principally for subsistence or livelihood.
• Not required to pay any Annual Registration Fee
• They are required to register as taxpayers for being
potential income and withholding tax filers.
• They will be registered for the tax type Income Tax and Form
Type 1701.
• They are liable to pay Income Taxes similar to any other
individual engaged in business or practice of profession,
after applying the allowable deductions against their
Gross Income/Sales/Receipts and personal/additional
exemptions granted under the Tax Code.
“Marginal Income Earner”
• Refer to those individual whose business do not realize
gross sales or receipts exceeding P 100,000 in any 12-month
period. (R.R. 7-2012)
• The individual referred to in that section is an individual not
deriving compensation as an employee under an employer-
employee relationship but who is self employed and
deriving gross sales or receipts not exceeding P100,000 in
any 12-month period. Moreover, the activities of such MIE
should be principally for subsistence or livelihood. The MIE,
as herein defined, shall include but not limited to
agricultural growers/producers (farmers/fishenmen) selling
directly to ultimate consumers, small sarisari stores, small
carinderias or "turo-turos", drivers/operators of a single unit
tricycle, and such, but shall not include licensed
professionals, consultants, artists, sales agents, brokers and
others similarly situated, including all others whose income
have been subjected to withholding tax. (RMC 7-2014)
If the Gross sales or receipt
Marginal Income Percentage tax VAT
Earners (MIEs)
P100,000 and Over P100,000 up Over P3,000,000
Below to P3,000,000
Kinds of VAT
1.Value-added Tax on Sale of Goods or
Properties (Sec. 106)
2.Value-added Tax on Importation of
Goods (Sec. 107)
3.Value-added Tax on Sale of Services
and Use or Lease of Properties (Sec.
108)
Legal basis
Section 105. Persons Liable
• Any person who, in the course of trade or business, sells barters, exchanges,
leases goods or properties, renders services, and any person who imports
goods shall be subject to the value-added tax (VAT) imposed in Sections 106
to 108 of this Code.
• The value-added tax is an indirect tax and the amount of tax may be shifted
or passed on to the buyer, transferee or lessee of the goods, properties or
services. This rule shall likewise apply to existing contracts of sale or lease
of goods, properties or services at the time of the effectivity of Republic Act
No. 7716.
• 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 nonstock, 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.
• The rule of regularity, to the contrary notwithstanding, services as defined in
this Code rendered in the Philippines by nonresident foreign persons shall be
considered as being course of trade or business.
Person” refers to any individual, trust, estate,
partnership, corporation,
Persons
association.
Liable - R.R.
joint 16-2005
venture, cooperative or

Any person who, in the course of his trade or

business, sells, barters, exchanges or leases goods or
properties, or renders services, and any person who
imports goods, shall be liable to VAT imposed in
Secs. 106 to 108 of the Tax Code.
However, in the case of importation of taxable goods,
the importer, whether an individual or corporation
and whether or not made in the course of his trade or
business, shall be liable to VAT imposed in Sec. 107
of the Tax Code. (SECTION 4.105-1)
VAT on Sale of Goods or
Properties
 Value-Added Tax on Sale of Goods or
Properties
R.A. 8424 R.A. 9337 R.A. 10963
(A) Rate and Base of (A) Rate and Base of Tax. - There shall be levied, (A) Rate and Base of
Tax. - There shall be assessed and collected on every sale, barter or Tax. - There shall be
levied, assessed and exchange of goods or properties, a value-added levied, assessed and
collected on every tax equivalent to ten percent (10%) of the gross collected on every sale,
sale, barter or selling price or gross value in money of the barter or exchange of
exchange of goods or goods or properties sold, bartered or goods or properties, a
properties, value- exchanged, such tax to be paid by the seller or value-added tax
added tax equivalent transferor: Provided, That the President, upon equivalent to twelve
to ten percent (10%) of the recommendation of the Secretary of percent (12%) of the
the gross selling price Finance, shall, effective January 1, 2006, raise gross selling price or
or gross value in the rate of value-added tax to twelve percent gross value in money
money of the goods or (12%), after any of the following conditions has of the goods or
properties sold, been satisfied: properties sold,
bartered or exchanged, "(i) Value-added tax collection as a percentage bartered or exchanged,
such tax to be paid by of Gross Domestic product (GDP) of the such tax to be paid by
the seller or transferor. previous year exceeds two and four-fifth the seller or transferor
percent (2 4/5%); or
"(ii) National government deficit as a
percentage of GDP of the previous year exceeds
one and one-half percent (1 1/2%)
Goods or Properties
The term “goods or properties” refers to all tangible
and intangible objects which are capable of pecuniary
estimation and shall include, among others:
(1) Real properties in the ordinary course of trade or
business held
(1) primarily for sale to customers or
(2) for lease;
(2) The right or the privilege to use
(1) patent, copyright, design or model, plan, secret formula
or process, goodwill, trademark, trade brand or other like
property or right;
(2) any industrial commercial or scientific equipment;
(3) motion picture films, films, tapes and discs; and
(4) Radio, television, satellite transmission and cable
television time. (Sec 106 , (A) 1)
Gross selling price
• The term 'gross selling price' means the 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 the value-added tax.
The excise tax, if any, on such goods or properties
shall form part of the gross selling price. (Sec 106
(A)1 last par)
Tax Rate of VAT
1. Zero rated (0%)
2. Twelve percent (12%)
3. Exempt transaction
Zero rated (0%)
Zero-Rated Sales of Goods or
Properties
• A zero-rated sale of goods or properties (by a VAT-
registered person) is a taxable transaction for VAT
purposes
• Not result in any output tax.
• Treatment of the input tax on purchases of goods,
properties or services, related to such zero-rated
sale,
• Available as tax credit or
• Refund
Zero-Rated Sales of Goods or
Properties
1. Export Sales
2. Foreign Currency Denominated Sale (Now
deleted under R.A. 10963)
3. Sales to persons or entities whose exemption
under special laws or international agreements to
which the Philippines is a signatory effectively
subjects such sales to zero rate (Added under
R.A. 9337)
Zero-Rated Sales of Goods or
Properties
1. Export Sales
2. Foreign Currency Denominated Sale (Now
deleted under R.A. 10963)
3. Sales to persons or entities whose exemption
under special laws or international agreements to
which the Philippines is a signatory effectively
subjects such sales to zero rate (Added under
R.A. 9337)
 Zero-Rated Sales of Goods or
Properties
The following sales by VAT-registered persons shall be
subject to zero percent (0%) rate:
1. Export Sales
The 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);
Zero-Rated Sales of Goods or
Properties
R.A. 8424 R.A. 10963
(2) Sale and delivery of goods to:
(i)Registered enterprises within a
separate customs territory as provided
under special laws; and
"(ii) Registered enterprises within
tourism enterprise zones as declared
by the Tourism Infrastructure and
Enterprise Zone Authority (TIEZA)
Subject to the provisions under
Republic Act No. 9593 or The Tourism
Act of 2009 (R.A. 10963)
Zero-Rated Sales of Goods or Properties
R.A. 8424 R.A. 10963
(2) 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); (par (2), R.A. 8424 renumbered as par (3) of R.A. 10963)
(3) Sale of raw materials or packaging materials to export-
oriented enterprise whose export sales exceed seventy percent
(70%) of total annual production; (par 3 of R.A. 8424 renumbered
as par (4) R.A. 10963)
(4) Sale of gold to the Bangko Deleted
Sentral ng Pilipinas (BSP); and
 Zero-Rated Sales of Goods or Properties
R.A. 8424 R.A. 10963
(5) Those considered export sales under Executive Order NO.
226, otherwise known as the Omnibus Investment Code of
1987, and other special laws.
(6) The sale of goods, supplies, (6) The sale of goods, supplies,
equipment and fuel to persons equipment and fuel to persons
engaged in international engaged in international
shipping or international air shipping or international air
transport operations. (Added transport operations:
by R.A. 9337) Provided, That the goods,
supplies, equipment and fuel
shall be used for international
shipping or air transport
operations. (amended by R.A.
10963)
 Zero-Rated Sales of Goods or Properties
"Provided, That subparagraphs (3), (4), and (5) hereof shall be subject to the twelve
percent (12%) value-added tax and no longer be considered export sales subject to zero
percent (0%) VAT rate upon satisfaction of the following conditions:
(1) 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 I, 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.
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.
"Provided, further, That the BIR and the 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. (added
by R.A. 10963)
Condition- No longer export sales
under R.A. 10963
1) 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 I, 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
 Considered export sales under
Executive Order No. 226
Mean the Philippine port F.O.B. value determined from
invoices, bills of lading, inward letters of credit, landing
certificates, and other commercial documents, of
export products exported directly by a registered
export producer, or the net selling price of export
products sold by a registered export producer to
another export producer, or to an export trader that
subsequently exports the same; Provided, That sales of
export products to another producer or to an export
trader shallonly be deemed export sales when actually
exported by the latter, as evidenced by landing
certificates or similar commercial documents;
Constructive exportation – EO 226
That without actual exportation the following shall be
considered constructively exported for purposes of these
provisions:
(1) Sales to bonded manufacturing warehouses of export-
oriented manufacturers;
(2) Sales to export processing zones;
(3) Sales to registered export traders operating bonded
trading warehouses supplying raw materials in the
manufacture of export products under guidelines to be
set by the Board in consultation with the Bureau of
Internal Revenue (BIR) and the Bureau of Customs
(BOC);
(4) Sales to diplomatic missions and other agencies and/or
instrumentalities granted tax immunities, of locally
manufactured, assembled or repacked products
whether paid for in foreign currency or not.
 Sales to Persons or Entities Deemed Tax-exempt
under Special Law or International Agreement
Sales of goods or property to persons or entities who
are tax exempt under special laws,
1. Sales to enterprises duly registered and accredited
with the Subic Bay Metropolitan Authority (SBMA)
pursuant to R.A. No. 7227,
2. Sales to enterprises duly registered and accredited
with the Philippine Economic Zone Authority (PEZA)
or international agreements to which the
Philippines is signatory,
1. Asian Development Bank (ADB),
2. International Rice Research Institute (IRRI)
shall be effectively subject to VAT at zero-rate
 Transactions Deemed Sale (Sec 106 B)
The following transactions shall be deemed 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;
• Transfer of goods or properties not in the course of business can take
place when VAT-registered person withdraws goods from his business for
his personal use; (SEC. 4.106-7. (a) (1) R.R. 16-2005)
2) Distribution or transfer to:
a) Shareholders or investors as share in the profits of the VAT-registered
persons; or
b) Creditors in payment of debt;
3) Consignment of goods if actual sale is not made within sixty
(60) days following the date such goods were consigned; and
4) Retirement from or cessation of business, with respect to
inventories of taxable goods existing as of such retirement or
cessation.
i. Change of ownership of the business. There is a change in the
ownership of the business when a single proprietorship incorporates;
or the proprietor of a single proprietorship sells his entire business.
ii. Dissolution of a partnership and creation of a new partnership which
takes over the business. (SEC. 4.106-7. (a) (4) R.R. 16-2005)
Sales Returns, Allowances and
Sales Discounts
• The value of goods or properties sold and
subsequently returned or for which allowances
were granted by a VAT-registered person may be
deducted from the gross sales or receipts for the
quarter in which a refund is made or a credit
memorandum or refund is issued.
• Sales discount granted and indicated in the invoice
at the time of sale and the grant of which does not
depend upon the happening of a future event may
be excluded from the gross sales within the same
quarter it was given. (Sec 106 (d))
 Value-Added Tax on
Importation of Goods
Tax base - VAT on importation
• Twelve percent (12%) based on
• Based on value
• Total value used by the Bureau of Customs in determining tariff
and customs duties, plus customs duties, excise taxes, if any, and
other charges, such tax to be paid by the importer prior to the
release of such goods from customs custody:
• Based on quantity or volume
• Based on the landed cost plus excise taxes, if any.
Transfer of Goods by Tax-exempt
Persons
• In the case of tax-free importation of goods into the
Philippines by persons, entities or agencies exempt
from tax where such goods are subsequently sold,
transferred or exchanged in the Philippines to non-
exempt persons or entities, the purchasers,
transferees or recipients shall be considered the
importers thereof, who shall be liable for any
internal revenue tax on such importation. The tax
due on such importation shall constitute a lien on
the goods superior to all charges or liens on the
goods, irrespective of the possessor thereof. (Sec
107 B)
 Summary of tax base
VAT Tax base
Sale of Goods or Gross selling price or gross value in money of the
Properties goods or properties sold, bartered or exchanged,
such tax to be paid by the seller or transferor

Importation of Goods Based on value

• Total value used by the Bureau of Customs in
determining tariff and customs duties, plus
customs duties, excise taxes, if any, and other
charges, such tax to be paid by the importer prior
to the release of such goods from customs
custody:
Quantity or volume of the goods
• Based on the landed cost plus excise taxes, if any
Sale of Services and Use Gross receipts derived from the sale or exchange of
or Lease of Properties services, including the use or lease of properties
 Summary of tax base
VAT Tax base
Sale of Goods or Gross selling price or gross value in money of the
Properties goods or properties sold, bartered or exchanged,
such tax to be paid by the seller or transferor

Importation of Goods Based on value

• Total value used by the Bureau of Customs in
determining tariff and customs duties, plus
customs duties, excise taxes, if any, and other
charges, such tax to be paid by the importer prior
to the release of such goods from customs
custody:
Quantity or volume of the goods
• Based on the landed cost plus excise taxes, if any
Sale of Services and Use Gross receipts derived from the sale or exchange of
or Lease of Properties services, including the use or lease of properties
Value-added Tax on Sale of
Services and Use or Lease of
Properties
Rate and Base of Tax
• There shall be levied, assessed and
collected, a value-added tax equivalent
to twelve percent (12%) of gross
receipts derived from the sale or
exchange of services, including the use
or lease of properties. (Sec 108)
Gross receipts means
The total amount of money or its equivalent
representing the
a. contract price,
b. compensation,
c. service fee,
d. rental or royalty,
including the amount charged for materials supplied
with the services and deposits and advanced
payments actually or constructively received during
the taxable quarter for the services performed or to
be performed for another person, excluding value-
added tax.
 Sale or exchange of services means
The performance of all kinds of services in the
Philippines for others for a fee, remuneration or
consideration. including those performed or rendered
a. by construction and service contractors;
b. stock, real estate, commercial, customs and
immigration brokers;
c. lessors of property, whether personal or real;
d. warehousing services;
e. lessors or distributors of cinematographic films;
f. Persons engaged in milling, processing,
manufacturing or repacking goods for others;
g. proprietors, operators or keepers of hotels, motels,
resthouses, pension houses, inns, resorts;
 Sale or exchange of services means
h. proprietors or operators of restaurants, refreshment parlors, cafes and other
eating places, including clubs and caterers;
i. dealers in securities;
j. lending investors;
k. 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;
l. 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;
m. sales of electricity by generation companies, transmission by any entity,
and distribution companies, including electric cooperatives;
n. services of franchise grantees of electric utilities;
o. telephone and telegraph, radio and television broadcasting and all other
franchise grantees except those under Section 119 of this Code and
p. non-life insurance companies (except their crop insurances), including
surety, fidelity, indemnity and bonding companies; and
q. similar services regardless of whether or not the performance thereof calls
for the exercise or use of the physical or mental faculties.
Sale or exchange of services shall
likewise include:
(1) 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;
(2) The lease or the use of, or the right to use of any industrial, commercial or scientific
equipment;
(3) The supply of scientific, technical, industrial or commercial knowledge or
information;
(4) 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 (2) or any such knowledge or information as is
mentioned in subparagraph (3);
(5) The supply of services by a nonresident 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 nonresident person;
(6) The supply of technical advice, assistance or services rendered in connection with
technical management or administration of any scientific industrial or commercial
undertaking, venture, projector scheme;
(7) The lease of motion picture films, films tapes and discs; and
(8) The lease or the use of or the right to use radio, television, satellite transmission and
cable television time,
Lease of properties
• Lease of properties shall be subject to the tax
herein imposed irrespective of the place
where the contract of lease or licensing
agreement was executed if the property is
leased or used in the Philippines.
 Summary of tax base
VAT Tax base
Sale of Goods or Gross selling price or gross value in money of the
Properties goods or properties sold, bartered or exchanged,
such tax to be paid by
the seller or transferor
Importation of Goods Based on value
• Total value used by the Bureau of Customs in
determining tariff and customs duties, plus
customs duties, excise taxes, if any, and other
charges, such tax to be paid by the importer prior
to the release of such goods from customs
custody:
Quantity or volume of the goods
• Based on the landed cost plus excise taxes, if any
Sale of Services and Use Gross receipts derived from the sale or exchange of
or Lease of Properties services, including the use or lease of properties
Lease of properties
Lease of properties shall be subject to the tax herein
imposed irrespective of the place where the contract
of lease or licensing agreement was executed if the
property is leased or used in the Philippines
Also include in the sale or exchange of services
1. 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;
2. The lease or the use of, or the right to use of any industrial, commercial or
scientific equipment;
3. The supply of scientific, technical, industrial or commercial knowledge or
information;
4. 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 (2) or any such knowledge or information as is
mentioned in subparagraph (3);
5. The supply of services by a nonresident 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 nonresident
person;
6. The supply of technical advice, assistance or services rendered in connection
with technical management or administration of any scientific industrial or
commercial undertaking, venture, projector scheme;
7. The lease of motion picture films, films tapes and discs; and
8. The lease or the use of or the right to use radio, television, satellite transmission
and cable television time,
VAT Rate
• Twelve percent (12%) Rate
• Zero Percent (0%) Rate
• Exempt Transaction
 Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 *RA 10963
(1) Processing, manufacturing or repacking 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
Bangko Sentral ng Pilipinas (BSP);

*Subject to 12% VAT if the condition satisfied

 Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 RA 10963
(2) Services other than (2) Services other than those mentioned in
those mentioned in the the preceding paragraph rendered to a
preceding paragraph, person engaged in business conducted
the consideration for outside the Philippines or to a nonresident
which is paid for in person not engaged in business who is
acceptable foreign outside the Philippines when the services
currency and are performed, the consideration for which
accounted for in is paid for in acceptable foreign currency
accordance with the and accounted for in accordance with the
rules and regulations rules and regulations of the Bangko Sentral
of the Bangko Sentral ng Pilipinas (BSP)
ng Pilipinas (BSP);
 Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 RA 10963
(3) Services rendered to persons or entities
whose exemption under special laws or
international agreements to which the Philippines
is a signatory effectively subjects the supply of
such services to zero percent (0%) rate;
 Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 RA 10963
(4) Services (4) Services (4) Services rendered to
rendered to rendered to persons engaged in
vessels engaged persons engaged in international shipping or
exclusively in international international air
international shipping or transport operations,
shipping; and international air including leases of
transport property for use thereof:
operations, Provided, That these
including leases of services shall be
property for use exclusive for
thereof. international shipping or
air transport operations
 Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 *RA 10963
(5) Services performed by subcontractors and/or
contractors in processing, converting, of
manufacturing goods for an enterprise whose
export sales exceed seventy percent (70%) of
total annual production.

*Subject to 12% VAT if the condition satisfied

Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 RA 10963
(6) Transport of "(6) Transport of
passengers and passengers and
cargo by air or sea cargo by
vessels from the domestic air or
Philippines to a sea vessel from
foreign country; the Philippines
and to a foreign
country; and
Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 RA 10963
(7) Sale of power or fuel
generated through renewable
sources of energy such as, but
not limited to, biomass, solar,
wind, hydropower, geothermal,
ocean energy, and other
emerging energy sources using
technologies such as fuel cells
and hydrogen fuels.
Zero Percent (0%) Rate
R.A. 8424 R.A. 9337 RA 10963
(8) Services rendered to:
(i) Registered enterprises
within a separate customs
territory as provided under
special law; and
(ii) Registered enterprises
within tourism enterprise
zones as declared by the
TIEZA subject to the
provisions under Republic Act
No. 9593 or The Tourism Act
of 2009
Subject to the twelve percent (12%) value-added tax and no longer be
subject to zero percent (0%) VAT rate

(1) 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.
(3) 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.
Appropriation – To fund VAT
refund
• An amount equivalent to five percent (5%) of the total
value added tax 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.
• Provided, further, That the BIR and the BOC shall be
required to submit to the COCCTRP a quarterly report
of all pending claims for refund and any unused fund.
 Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(a) Sale of nonfood Removed
agricultural products;
marine and forest products
in their original state by the
primary producer or the
owner of the land where
the same are produced;

(b) Sale of cotton seeds in Removed

their original state; and
copra
 a. ) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(c) Sale or importation of agricultural and marine
food products in their original state, livestock and
poultry of or king generally used as, or yielding or
producing foods for human consumption; and
breeding stock and genetic materials therefor.
(now par (a) of R.A. 9337 and RA 10963)
 Considered original state
• Products classified shall be considered in their original
state even if they have undergone the simple
processes of preparation or preservation for the
market, such as freezing, drying, salting, broiling,
roasting, smoking or stripping. Polished and/or
husked rice, corn grits, raw cane sugar and molasses,
ordinary salt, and copra shall be considered in their
original state
 b.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(d) Sale or importation of fertilizers; seeds, seedlings and
fingerlings; fish, prawn, livestock and poultry feeds,
including ingredients, whether locally produced or
imported, used in the manufacture of finished feeds (except
specialty feeds for race horses, fighting cocks, aquarium
fish, zoo animals and other animals generally considered as
pets); (now par (b) of R.A. 9337 and RA 10963)
 Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(e) Sale or importation of Removed
coal and natural gas, in
whatever form or state,
and petroleum products
(except lubricating oil,
processed gas, grease, wax
and petrolatum) subject to
excise tax imposed under
Title VI
 Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(f) Sale or importation of Removed
raw materials to be used
by the buyer or importer
himself in the manufacture
of petroleum products
subject to excise tax,
except lubricating oil,
processed gas, grease, wax
and petrolatum
 Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(g) Importation of Removed
passenger and/or cargo
vessels of more than five
thousand tons (5,000)
whether coastwise or
ocean-going, including
engine and spare parts of
said vessel to be used by
the importer himself as
operator thereof;
 c.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(h) Importation of personal and household effects
belonging to the residents of the Philippines returning
from abroad and nonresident citizens coming to
resettle in the Philippines: Provided, That such goods
are exempt from customs duties under the Tariff and
Customs Code of the Philippines; . (now par (c) of R.A.
9337 and RA 10963)
d.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(i) Importation of professional instruments and (d) Importation of professional
implements, wearing apparel, domestic instruments and implements, tools of
animals, and personal household effects trade, occupation or employment,
(except any vehicle, vessel, aircraft, machinery wearing apparel domestic animals,
other goods for use in the manufacture and personal and household effects
merchandise of any kind in commercial belonging to persons coming to settle in
quantity) belonging to persons coming to the Philippines or Filipinos or their
settle in the Philippines, for their own use and families and descendants who are now
not for sale, barter or exchange, residents or citizens of other countries,
accompanying such persons, or arriving within such parties hereinafter referred to as
ninety (90) days before or after their arrival, overseas Filipinos, in quantities and of
upon the production of evidence satisfactory the class suitable to the profession, rank
to the Commissioner, that such persons are or position of the persons importing said
actually coming to settle in the Philippines items, for their own use and not for
and that the change of residence is bona fide; barter or sale, accompanying such
(par d of R.A. 9337) persons, or arriving within a reasonable
time:
Exempt Transactions par (d) R.A.10963
Importation of professional instruments and implements,
tools of trade, occupation or employment, wearing apparel,
domestic animals, and personal and household effects
belonging to persons coming to settle in the Philippines or
Filipinos or their families and descendants who are now
residents or citizens of other countries, such parties
hereinafter referred to as overseas Filipinos, in quantities and
of the class suitable to the profession, rank or position of the
persons importing said items, for their own use and not for
barter or sale, accompanying such persons, or arriving within
a reasonable time: Provided, That the Bureau of Customs may,
upon the production of satisfactory evidence that such
persons are actually coming to settle in the Philippines and
that the goods are brought from their former place of abode,
exempt such goods from payment of duties and taxes:
Provided, further, that vehicles, vessels, aircrafts, machineries
and other similar goods for use in manufacture, shall not fall
within this classification and shall therefore be subject to
duties, taxes and other charges; (SEC. 4.109-1, R.R. 13-2018)
 e.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(j) Services subject to percentage tax under Title
V; (now par (e) of R.A. 9337 and RA 10963)
 f.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(k) Services by agricultural contract growers and
milling for others of palay into rice, corn into
grits and sugar cane into raw sugar; (now par (f)
of R.A. 9337 and RA 10963)
 g.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(l) Medical, dental, (g) Medical, dental, hospital
hospital and veterinary and veterinary services
services subject to the except those rendered by
provisions of Section 17 of professionals;
Republic Act No. 7716, as
amended
 Section 17 of Republic Act No.
7716
SECTION 17. Effectivity of the Imposition of VAT on Certain Goods, Properties
and Services.— The value-added tax shall be levied assessed and collected on
the following, two (2) years after the effectivity of this Act:
(a) Services performed in the exercise of profession or calling subject to the
professional tax under the Local Government Code or Republic Act No.
7160, and professional services performed by registered general
professional partnerships; actors, actresses, talents, singers and emcees;
radio and television broadcasters, choreographers; musical, radio, movie,
television and stage directors; and professional athletes;
(b) (b) Services rendered by banks, non-bank financial intermediaries,
finance companies and other financial intermediaries not performing
quasi-banking functions;
(c) Freight services rendered by international cargo vessels; and
(d) The lease or use of sports facilities and equipment by amateur players,
as provided under Republic Act No. 6847, except sports facilities and
equipment which are exclusively or mainly for the private use of
shareholders or members of the club or organization which owns or
operates such sports facilities and equipment.
 h.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(m) Educational services rendered by private
educational institutions, duly accredited by the
Department of Education, Culture and Sports
(DECS) now (Department of Education
(DEPED) and the Commission on Higher
Education (CHED), and those rendered by
government educational institutions (now par (h)
of R.A. 9337 and RA 10963)
 Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(n) Sale by the artist Deleted
himself of his works of
art, literary works,
musical compositions
and similar creations, or
his services performed
for the production of
such works.
 i.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(o) Services rendered by individuals pursuant to
an employer-employee relationship (now par (i)
of R.A. 9337 and RA 10963)
 j.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(p) Services rendered by regional or area
headquarters established in the Philippines by
multinational corporations which act as
supervisory, communications and coordinating
centers for their affiliates, subsidiaries or
branches in the Asia-Pacific Region and do not
earn or derive income from the Philippines (now
par (j) of R.A. 9337 and RA 10963)
 k.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(q) Transactions which are exempt under
international agreements to which the
Philippines is a signatory or under special laws,
except those under Presidential Decree Nos. 66,
529 and 1590; (now par (k) of R.A. 9337 and RA
10963)
 l.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(r) Sales by agricultural cooperatives duly registered
with the Cooperative Development Authority to
their members as well as sale of their produce,
whether in its original state or processed form, to
non-members; their importation of direct farm
inputs, machineries and equipment, including spare
parts thereof, to be used directly and exclusively in
the production and/or processing of their produce;
(now par (l) of R.A. 9337 and RA 10963)
 Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(s) Sales by electric cooperatives Deleted
duly registered with the
Cooperative Development
authority or National
Electrification Administration,
relative to the generation and
distribution of electricity as well
as their importation of
machineries and equipment,
including spare parts, which shall
be directly used in the generation
and distribution of electricity;
 m.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(t) Gross receipts from (m) Gross receipts from
lending activities by lending activities by credit
credit or multi-purpose or multi-purpose
cooperatives duly cooperatives duly
registered with the registered with the
Cooperative Cooperative Development
Development Authority Authority;
whose lending
operation is limited to
their members;
 n.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(u) Sales by non-agricultural, non- electric and non-
credit cooperatives duly registered with the
Cooperative Development Authority: Provided, That
the share capital contribution of each member does
not exceed Fifteen thousand pesos (P15,000) and
regardless of the aggregate capital and net surplus
ratably distributed among the members; (now par
(n) of R.A. 9337 and RA 10963)
 o.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(v) Export sales by persons who are not VAT-
registered; (now par (o) of R.A. 9337 and RA
10963)
 p.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(w) Sale of real properties not (p) Sale of real properties not P) Sale of real properties not primarily held for
primarily held for sale to customers primarily held for sale to sale to customers or held for lease in the
or held for lease in the ordinary customers or held for lease in the ordinary course of trade or business or real
course of trade or business or real ordinary course of trade or property utilized for low-cost and socialized
property utilized for low-cost and business, or real property utilized housing as defined by Republic Act No. 7279,
socialized housing as defined by for low-cost and socialized otherwise known as the Urban Development
Republic Act No. 7279, otherwise housing as defined by Republic and Housing Act of 1992, and other related
known as the Urban Development Act No. 7279, otherwise known laws, residential lot valued at One million five
and Housing Act of 1992, and other as the Urban Development and hundred thousand pesos (P1,500,000) and
related laws, house and lot and other Housing Act of 1992, and other below, house and lot, and other residential
residential dwellings valued at One related laws, residential lot dwellings valued at Two million five hundred
million pesos (P1,000,000) and valued at One million five thousand pesos (P2,500,000) and below:
below: Provided, That not later than hundred thousand pesos Provided, That beginning January 1, 2021, the
January 31st of the calendar year (P1,500,000) and below, house VAT exemption shall only apply to sale of real
subsequent to the effectivity of this and lot, and other residential properties not primarily held for sale to
Act and each calendar year dwellings valued at Two million customers or held for lease in the ordinary
thereafter, the amount of One million five hundred thousand pesos course of trade or business, sale of real
pesos (P1,000,000) shall be adjusted (P2,500,000) and property utilized for socialized housing as
to its present value using the below: Provided, That not later defined by Republic Act No. 7279, sale of
Consumer Price Index, as published than January 31, 2009 and every house and lot, and other residential
by the national Statistics Office three (3) years thereafter, the dwellings with selling price of not more than
(NSO); (now par (o) of R.A. 9337 and amounts herein stated shall be Two million pesos (P2,000,000): Provided,
RA 10963) adjusted to their present values further, That every three (3) years thereafter,
using the Consumer Price Index, the amount herein stated shall be adjusted to
as published by the National its present value using the Consumer Price
Statistics Office (NSO); Index, as published by the Philippine
Statistics Authority (PSA);
 VAT Exempt sale of real property
The following sales of real properties are exempt from VAT, namely:
(1) Sale of real properties not primarily held for sale to customers or
held for lease in the ordinary course of trade or business.
(2) Sale of real properties utilized for low-cost housing as defined by
RA No. 7279, otherwise known as the "Urban Development and
Housing Act of 1992" and other related laws
(3) Sale of real properties utilized for socialized housing as defined
under RA No. 7279, and other related laws, such as RA No. 7835
and RA No. 8763, wherein the price ceiling per unit is P450,000.00
or as may from time to time be determined by the HUDCC and the
NEDA and other related laws.
(4) Sale of residential lot valued at One Million Five Hundred Thousand
Pesos (P1,500,000.00) and below, or house & lot and other
residential dwellings valued at Two Million Five Hundred Thousand
Pesos (P2,500,000.00) and below, as adjusted in 2011 using the
2010 Consumer Price Index values.
 VAT Exempt sale of real property
The following sales of real properties are exempt from VAT, namely:
(1) Sale of real properties not primarily held for sale to customers or
held for lease in the ordinary course of trade or business.
(2) Sale of real properties utilized for low-cost housing as defined by
RA No. 7279, otherwise known as the "Urban Development and
Housing Act of 1992" and other related laws
(3) Sale of real properties utilized for socialized housing as defined
under RA No. 7279, and other related laws, such as RA No. 7835
and RA No. 8763, wherein the price ceiling per unit is P450,000.00
or as may from time to time be determined by the HUDCC and the
NEDA and other related laws.
(4) Sale of residential lot valued at One Million Five Hundred Thousand
Pesos (P1,500,000.00) and below, or house & lot and other
residential dwellings valued at Two Million Five Hundred Thousand
Pesos (P2,500,000.00) and below, as adjusted in 2011 using the
2010 Consumer Price Index values.
Not primarily held for sale
• However, even if the real property is not primarily
held for sale to customers or held for lease in the
ordinary course of trade or business but the same
is used in the trade or business of the seller, the
sale thereof shall be subject to VAT being a
transaction incidental to the taxpayer’s main
business
 VAT Exempt sale of real property
The following sales of real properties are exempt from VAT, namely:
(1) Sale of real properties not primarily held for sale to customers or
held for lease in the ordinary course of trade or business.
(2) Sale of real properties utilized for low-cost housing as defined by
RA No. 7279, otherwise known as the "Urban Development and
Housing Act of 1992" and other related laws
(3) Sale of real properties utilized for socialized housing as defined
under RA No. 7279, and other related laws, such as RA No. 7835
and RA No. 8763, wherein the price ceiling per unit is P450,000.00
or as may from time to time be determined by the HUDCC and the
NEDA and other related laws.
(4) Sale of residential lot valued at One Million Five Hundred Thousand
Pesos (P1,500,000.00) and below, or house & lot and other
residential dwellings valued at Two Million Five Hundred Thousand
Pesos (P2,500,000.00) and below, as adjusted in 2011 using the
2010 Consumer Price Index values.
 Low-cost housing
Refers to housing projects intended for homeless low-
income family beneficiaries, undertaken by the
Government or private developers, which may either
be a subdivision or a condominium registered and
licensed by the Housing and Land Use Regulatory
Board/Housing (HLURB) under BP Blg. 220, PD No. 957
or any other similar law, wherein the unit selling price
is within the selling price per unit as set by the
Housing and Urban Development Coordinating
Council (HUDCC) pursuant to RA No. 7279 otherwise
known as the “Urban Development and Housing Act of
1992” and other laws.
 VAT Exempt sale of real property
The following sales of real properties are exempt from VAT, namely:
(1) Sale of real properties not primarily held for sale to customers or
held for lease in the ordinary course of trade or business.
(2) Sale of real properties utilized for low-cost housing as defined by
RA No. 7279, otherwise known as the "Urban Development and
Housing Act of 1992" and other related laws
(3) Sale of real properties utilized for socialized housing as defined
under RA No. 7279, and other related laws, such as RA No. 7835
and RA No. 8763, wherein the price ceiling per unit is P450,000.00
or as may from time to time be determined by the HUDCC and the
NEDA and other related laws.
(4) Sale of residential lot valued at One Million Five Hundred Thousand
Pesos (P1,500,000.00) and below, or house & lot and other
residential dwellings valued at Two Million Five Hundred Thousand
Pesos (P2,500,000.00) and below, as adjusted in 2011 using the
2010 Consumer Price Index values.
Socialized housing
Refers to housing programs and projects covering houses
and lots or home lots only undertaken by the Government
or the private sector for the underprivileged and homeless
citizens which shall include sites and services development,
long-term financing, liberated terms on interest payments,
and such other benefits in accordance with the provisions
of RA No. 7279, otherwise known as the "Urban
Development and Housing Act of 1992" and RA No. 7835
and RA No. 8763. "Socialized housing" shall also refer to
projects intended for the underprivileged and homeless
wherein the housing package selling price is within the
lowest interest rates under the Unified Home Lending
Program (UHLP) or any equivalent housing program of the
Government, the private sector or non-government
organizations. (SEC. 4.109-1 (p), R.R 13-2018)
 VAT Exempt sale of real property
The following sales of real properties are exempt from VAT, namely:
(1) Sale of real properties not primarily held for sale to customers or
held for lease in the ordinary course of trade or business.
(2) Sale of real properties utilized for low-cost housing as defined by
RA No. 7279, otherwise known as the "Urban Development and
Housing Act of 1992" and other related laws
(3) Sale of real properties utilized for socialized housing as defined
under RA No. 7279, and other related laws, such as RA No. 7835
and RA No. 8763, wherein the price ceiling per unit is P450,000.00
or as may from time to time be determined by the HUDCC and the
NEDA and other related laws.
(4) Sale of residential lot valued at One Million Five Hundred
Thousand Pesos (P1,500,000.00) and below, or house & lot and
other residential dwellings valued at Two Million Five Hundred
Thousand Pesos (P2,500,000.00) and below, as adjusted in 2011
using the 2010 Consumer Price Index values. (par (p)
 Summary of Revenue Regulation
Effectivity
R.A. 8424 January 1, 1998
R.A. 9337 July 1, 2005
R.R. 14-2005 July 1, 2005
R.R. 16-2005 November 1, 2005
R.R. 4-2007 15 days after publication (published in
Manila Bulletin on March 22, 2007)
R.R. 16-2011 January 1, 2012
R.R. 3-2012 January 1, 2012
R.R. 13-2018 January 1, 2018
 RR 16-2001, RR 3-2012
Section R.A. 8424 RR 16-2011 R.A. 10963

109 (p) Sale of residential lot 1,500,000 1,919,500 1,500,000

109 (p) Sale of residential house and lot 2,500,000 3,199,200 2,500,000

109 (q) Lease of residential unit 10,000 12,800 15,000

109 (v) Gross annual sales 1,500,000 1,919,500 3,000,000

Residential lot/house & lot
If two or more adjacent residential lots are sold or
disposed in favor of one buyer, for the purpose of
utilizing the lots as one residential lot, the sale shall
be exempt from VAT only if the aggregate value of
the lots do not exceed P1,500,000.00. Adjacent
residential lots, although covered by separate titles
and/or separate tax declarations, when sold or
disposed to one and the same buyer, whether
covered by one or separate Deed of Conveyance,
shall be presumed as a sale of one residential lot.
(SEC. 4.109-1 (p), R.R 13-2018)
Residential lot/house & lot
Provided, That beginning January 1, 2021, the VAT
exemption shall only apply to sale of real properties not
primarily held for sale to customers or held for lease in
the ordinary course of trade or business, sale of real
property utilized for socialized housing as defined by
Republic Act No. 7279, sale of house and lot, and other
residential dwellings with selling price of not more than
Two Million Pesos (P2,000,000.00): Provided, further,
That every three (3) years thereafter, the amounts stated
herein shall be adjusted to its present value using the
Consumer Price Index, as published by the Philippine
Statistics Authority (PSA).
 q.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(x) Lease of a residential (q) Lease of a (Q) Lease of a residential unit
unit with a monthly rental residential unit with a with a monthly Rental not
not exceeding Eight monthly rental not exceeding Fifteen thousand
thousand pesos(P8,000); exceeding Ten pesos (P15,000);
Provided, That not later thousand pesos
than January 31st of the (P10,000) Provided,
calendar year subsequent That not later than
to the effectivity of January 31, 2009 and
Republic Act No. 8241 and every three (3) years
each calendar year thereafter, the amount
thereafter, the amount of herein stated shall be
Eight thousand pesos adjusted to its present
(P8,000) shall be adjusted value using the
to its present value using Consumer Price Index
the Consumer Price Index as published by the
as published by the National Statistics
National Statistics Office Office (NSO);
(NS0);
Residential units
Refer to apartments and houses & lots used for
residential purposes, and buildings or parts or units
thereof used solely as dwelling places (e.g.,
dormitories, rooms and bed spaces) except motels,
motel rooms, hotels and hotel rooms, lodging
houses, inns and pension houses.
Definition of Unit
• The term ‘unit’ shall mean an apartment unit in the
case of apartments, house in the case of residential
houses; per person in the case of dormitories,
boarding houses and bed spaces; and per room in
case of rooms for rent.
Exempt Transactions - Lease
The foregoing notwithstanding, lease of residential
units where the monthly rental per unit exceeds
Fifteen Thousand Pesos (P15,000.00), but the
aggregate of such rentals of the lessor during the
year do not exceed Three Million Pesos
(P3,000,000.00) shall likewise be exempt from VAT;
however, the same shall be subject to three percent
(3%) percentage tax under Section 116 of the Tax
Code.
 Exempt Transactions - Lease
In cases where a lessor has several residential units for lease,
some are leased out for a monthly rental per unit of not
exceeding P15,000.00 while others are leased out for more than
P15,000.00 per unit, his tax liability will be as follows:
1. The gross receipts from rentals not exceeding P15,000.00
per month per unit shall be exempt from VAT regardless of
the aggregate annual gross receipts. It is also exempt from
the 3% percentage tax.
2. The gross receipts from rentals exceeding P15,000.00 per
month per unit shall be subject to VAT if the aggregate
annual gross receipts from said units only exceeds
P3,000,000.00. Otherwise, the gross receipts will be subject
to the 3% tax imposed under Section 116 of the Tax Code.

In case of mixed transactions, the abovementioned rule should

be observed.
Summary – Rule on Gross receipt on leases
VAT Percentage
Residential
Monthly rental not more than P15,000 and the No No
aggregate rental not exceed P3,000,000
Monthly rental not more than P15,000 and the No No
aggregate rental exceed P3,000,000
Monthly rental more than P15,000 and the No Yes
aggregate rental not exceed P3,000,000
Monthly rental more than P15,000 and the Yes No
aggregate rental exceed P3,000,000
Non residential
Monthly rental regardless of amount and the No Yes
aggregate rental not exceed P3,000,000
Monthly rental regardless of amount and the Yes No
aggregate rental exceed P3,000,000
Illustration 1
A lessor rents his 15 residential units for P14,500
per month. During
He is not subjectthe taxable
to VAT since theyear, his
monthly
accumulated gross
rent per receipts
unit does not exceedamounted
P15,000. to
P2,610,000.
He is also not subject to 3%
1. Is the lessor subject to VAT? Percentage Tax.
2. Is the lessor subject to 3% percentage tax?
Illustration 2
A lessor rentsHehis 20subject
is not residential unitsif for
to VAT even P14,500
the accumulated
per month.earnings
During the P3,000,000
exceeded taxable sinceyear, his
the monthly
accumulated rentgross receipts
per unit does amounted
not exceed P15,000. to
P3,480,000.
He is also not subject to 3%
1. Is the lessor subject to VAT? Percentage Tax.
2. Is the lessor subject to 3% percentage tax?
Illustration 3
A lessor rents his 15 residential units for P15,500
per month.He Duringis not thesubject to VATyear,
taxable sincehishis
accumulatedaccumulated
gross receiptsgross receipts
amounteddid tonot
P2,790,000. exceed P3,000,000
He is, however, subject to 3% Percentage
Tax since
1. Is the lessor subject the monthly rent per unit is
to VAT?
more than P15,000.00
2. Is the lessor subject to 3% percentage tax?
Illustration 2
A lessor rents his 20 residential units for P15,500
He is already subject to VAT since the
per month. During the taxable year, his
accumulated earnings exceeded P3,000,000 and
accumulated gross rent
the monthly receipts
per unitamounted to
is more than
P3,720,000.P15,000.00.
He is not subject to 3%
1. Is the lessor subject to VAT? Percentage Tax.
2. Is the lessor subject to 3% percentage tax?
 r.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
(y) Sale, importation, printing or publication of
books and any newspaper, magazine review or
bulletin which appears at regular intervals with
fixed prices for subscription and sale and which is
not devoted principally to the publication of paid
advertisements; and (now par (r) of R.A. 9337 and
RA 10963)
s.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None Transport of passengers
by international carriers;
(par s R.A. 10963)
 t.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None (s) Sale, importation or lease of
passenger or cargo vessels and
aircraft, including engine,
equipment and spare parts
thereof for domestic or
international transport
operations; (renumbered as par
(T) under R.A. 10963)
Exemption: Domestic or
international transport operations
Provided, however, that the exemption from VAT on
the importation and local purchase of passenger
and/or cargo vessels shall be subject to the
requirements on restriction on vessel importation
and mandatory vessel retirement program of
Maritime Industry Authority (MARINA); (SEC. 4.109-1
(t), R.R 13-2018)
 u.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None (t) Importation of fuel, (U) Importation of fuel,
goods and supplies by goods and supplies by
persons engaged in persons engaged in
international shipping international shipping
or air transport or air transport
operations; operations: Provided,
That the fuel, goods
and supplies shall be
used for international
shipping or air
transport operations
Exempt Transactions: International
shipping or air transport operations
• Thus, said fuel, goods and supplies shall be used
exclusively or shall pertain to the transport of goods
and/or passenger 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 or supplies is
used for purposes other than that mentioned in this
paragraph, such portion of fuel, goods and supplies
shall be subject to twelve percent (12%) VAT; (SEC.
4.109-1 (u), R.R 13-2018)
v.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None Services of banks, non-bank financial
intermediaries performing quasi-
banking functions, and other non-
bank financial intermediaries; and
(renumbered as par (V) under R.A.
10963)
w.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None (W) Sale or lease of goods
and services to senior citizens
and persons with disability, as
provided under Republic Act
Nos. 9994 (Expanded Senior
Citizens Act of2010) and
l0754 (An Act Expanding the
Benefits and Privileges of
Persons With Disability)
respectively;
x.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None (X) Transfer of property
pursuant to Section
40(C)(2) of the NIRC, as
amended;
y.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None (Y) Association dues,
membership fees, and
other assessments and
charges collected by
homeowners
associations and
condominium
corporations
z.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None (Z)·Sale of gold to the
Bangko Sentral ng
Pilipinas (BSP);
aa.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
None (AA) Sale of drugs and
medicines prescribed for
diabetes, high
cholesterol, and
hypertension beginning
January 1, 2019; and
 bb.) Exempt Transactions
R.A. 8424 R.A. 9337 RA 10963
Sale or lease of goods or properties Sale or lease of goods or (BB) Sale or lease of
or the performance of services properties or the performance goods or properties or
other than the transactions of services other than the the performance of
mentioned in the preceding transactions mentioned in the services other than the
paragraphs, the gross annual sales preceding paragraphs, the transactions mentioned
and/or receipts do not exceed the gross annual sales and/or in the preceding
amount of Five hundred fifty receipts do not exceed the paragraphs, the gross
thousand pesos (P550,000): amount of One million five annual sales and/or
Provided, That not later than hundred thousand pesos receipts do not exceed
January 31st of the calendar year (P1,500,000): Provided, That the amount of Three
subsequent to the effectivity of not later than January 31, million pesos
Republic Act No. 8241 and each 2009 and every three (3) years (P3,000,000).
calendar year thereafter, the thereafter, the amount herein
amount of Five hundred fifty stated shall be adjusted to its
thousand pesos (550,000) shall be present value using the
adjusted to its present value using Consumer Price Index as
the Consumer Price Index, as published by the National
published by the National Statistics Statistics Office (NSO);
Office (NSO).
Exempt Transactions: Gross receipt
not exceed P3M
• Self-employed individuals and professionals
availing of the 8% tax on gross sales and/or
receipts and other non-operating income, under
Sections 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of this
Code shall also be exempt from the payment of
twelve (12%) VAT.
Illustration:
Mr. JMLH signified his intention to be taxed at “8%
income tax in lieu of the graduated income tax rates
and percentage tax under Section 116” in his 1st
Quarter Income Tax. However, his gross
sales/receipts during the taxable year have
exceeded the VAT threshold as follows:
Gross Sales/Receipt
Amount
January 250,000.00
February 250,000.00
March 250,000.00
April 250,000.00
May 250,000.00
June 250,000.00
July 250,000.00
August 250,000.00
September 250,000.00
October Php 1,000,000.00
November 1,000,000.00
December 1,000,000.00 3,000,000.00
Total gross Sales/Receipts Php 5,250,000.00
 Conclusion:
Mr. JMLH lost the option to pay the 8% commuted tax
rate when his gross sales/receipts exceeded the three
million threshold during the 4th Quarter.
• For business tax purposes, he is subject to the 12%
VAT prospectively starting November 2018.
• He is also required to update his registration from
non-VAT to VAT on or before November 30, 2018.
 Creditable Input Tax
(1) Any input tax evidenced by a VAT invoice or official
receipt issued in accordance with Section 113 hereof
on the following transactions shall be creditable
against the output tax:
a. Purchase or importation of goods:
i. For sale; or
ii. For conversion into or intended to form part of a finished product
for sale including packaging materials; or
iii. For use as supplies in the course of business; or
iv. For use as materials supplied in the sale of service; or
v. For use in trade or business for which deduction for depreciation
or amortization is allowed under this Code, except automobiles,
aircraft and yachts.
b. Purchase of services on which a value-added tax has been
actually paid.
Creditable Input Tax
2) The input tax on domestic purchase of goods or
properties shall be creditable:
a) To the purchaser upon consummation of sale and on
importation of goods or properties; and
b) To the importer upon payment of the value-added tax
prior to the release of the goods from the custody of
the Bureau of Customs.
• However, in the case of purchase of services, lease
or use of properties, the input tax shall be
creditable to the purchaser, lessee or licensee upon
payment of the compensation, rental, royalty or
fee.
 Creditable Input Tax
3) A VAT-registered person who is also engaged in
transactions not subject to the value-added tax
shall be allowed tax credit as follows:
a) Total input tax which can be directly attributed to
transactions subject to value-added tax; and
b) A ratable portion of any input tax which cannot be
directly attributed to either activity.
Input tax
The value-added tax due from or paid by a VAT-
registered person in the course of his trade or
business on importation of goods or local purchase
of goods or services, including lease or use of
property, from a VAT-registered person. It shall also
include the transitional input tax determined in
accordance with Section 111 of this Code.
Output tax
Means the value-added tax due on the sale or lease
of taxable goods or properties or services by any
person registered or required to register under
Section 236 of this Code.
Excess Output or Input Tax
If at the end of any taxable quarter the output tax
exceeds the input tax, the excess shall be paid by the
Vat-registered person. If the input tax exceeds the
output tax, the excess shall be carried over to the
succeeding quarter or quarters. any input tax
attributable to the purchase of capital goods or to
zero-rated sales by a VAT-registered person may at
his option be refunded or credited against other
internal revenue taxes, subject to the provisions of
Section 112.
Determination of Creditable Input
Tax
• The sum of the excess input tax carried over from the
preceeding month or quarter and the input tax
creditable to a VAT-registered person during the taxable
month or quarter shall be reduced by the amount of
claim for refund or tax credit for value-added tax and
other adjustments, such as purchase returns or
allowances and input tax attributable to exempt sale.
• "The claim for tax credit referred to in the foregoing
paragraph shall include not only those filed with the
Bureau of Internal Revenue but also those filed with
other government agencies, such as the Board of
Investments and the Bureau of Customs."
 Transitional Input Tax
R.A. 8424 R.A. 9337 RA 10963
Input tax on his beginning Input tax on his beginning
inventory of goods, inventory of goods, materials
materials and supplies and supplies equivalent to
equivalent for eight two percent (2%) of the value
percent (8%) of the value of such inventory or the
of such inventory or the actual value-added tax paid
actual value-added tax on such goods, materials and
paid on such goods, supplies, whichever is higher
materials and supplies,
whichever is higher,
 Presumptive Input Tax
R.A. 8424 R.A. 9337 RA 10963
Persons or firms engaged in Persons or firms engaged in the
the processing of sardines, processing of sardines, mackerel
mackerel and milk, and in and milk, and in manufacturing
manufacturing refined sugar refined sugar, cooking oil and
and cooking oil, shall be packed noodle based instant
allowed a presumptive input meals, shall be allowed a
tax, creditable against the presumptive input tax, creditable
output tax, equivalent to one against the output tax, equivalent
and one-half percent (1 1/2%) to four percent (4%) of the gross
of the gross value in money of value in money of their purchases
their purchases of primary of primary agricultural products
agricultural products which are which are used as inputs to their
used as inputs to their production
production.
Processing defined
Mean pasteurization, canning and activities which
through physical or chemical process alter the
exterior texture or form or inner substance of a
product in such manner as to prepare it for special
use to which it could not have been put in its original
form or condition.
Presumptive Input Tax
• Public works contractors shall be allowed a
presumptive input tax equivalent to one and one-
half percent (1 1/2%) of the contract price with
respect to government contracts only in lieu of
actual input taxes therefrom. (Sec 111, R.A. 8424,
now deleted in R.A. 9337)
 Refunds or Tax Credits of Input Tax
R.A. 8424 R.A. 9337 RA 10963
(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales
are zero-rated or effectively zero-rated may, within two (2) years after the close of the
taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been applied against
output tax: Provided, however, That in the case of zero-rated sales under Section
106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That
where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in
taxable or exempt sale of goods of properties or services, and the amount of creditable
input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume of sales:
Provided, finally, That for a person making
sales that are zero-rated under Section 108
(B)(6), the input taxes shall be allocated ratably
between his zero-rated and non-zero-rated
sales.
Section 108 (B)(6)
(6) Transport of passengers and cargo by air or sea
vessels from the Philippines to a foreign country; and
Cancellation of VAT Registration
A person whose registration has been cancelled due
to retirement from or cessation of business, or due
to changes in or cessation of status under Section
106(C) of this Code may, within two (2) years from
the date of cancellation, apply for the issuance of a
tax credit certificate for any unused input tax which
may be used in payment of his other internal
revenue taxes
Period within which Refund or Tax
Credit of Input Taxes shall be Made
R.A. 8424 R.A. 9337 RA 10963
In proper cases, the Commissioner shall grant a In proper cases, the Commissioner shall grant a
refund or issue the tax credit certificate refund for creditable input tax within ninety (90)
(deleted under R.A. 10963) for creditable input days from the date of submission of the official
taxes within one hundred twenty (120) days receipts or invoices and other documents in
from the date of submission of compete support of the application filed in accordance with
documents in support of the application filed in Subsections (A) and (B) hereof:
accordance with Subsections (A) and (B) hereof. Provided, That should the Commissioner find that
In case of full or partial denial of the claim for the grant of refund is not proper, the
tax refund or tax credit, or the failure on the Commissioner must state in writing the legal and
part of the Commissioner to act on the factual basis for the denial. (Added under R.A.
application within the period prescribed above, 10963)
(deleted under R.A. 10963) the taxpayer In case of full or partial denial of the claim for tax
affected may, within thirty (30) days from the refund, the taxpayer affected may, within thirty
receipt of the decision denying the claim or (30) days from the receipt of the decision denying
after the expiration of the one hundred twenty the claim, appeal the decision with the Court of Tax
day-period, appeal the decision or the unacted Appeals: Provided, however, That failure on the
claim with the Court of Tax Appeals.- part of any official, agent, or employee of the BIR
to act on the application within the ninety (90)-
day period shall be punishable under Section 269
of this Code. (Added under R.A. 10963)
Manner of Giving Refund
Refunds shall be made upon warrants drawn by the
Commissioner or by his duly authorized
representative without the necessity of being
countersigned by the Chairman, Commission on
Audit, the provisions of the Administrative Code of
1987 to the contrary notwithstanding: Provided, That
refunds under this paragraph shall be subject to post
audit by the Commission on Audit."
 Invoicing Requirements
A VAT-registered person shall issue:
(1) A VAT invoice
• Sale, barter or exchange of goods or properties
(2) A VAT official receipt
• Lease of goods or properties,
• Sale, barter or exchange of services.
 Information Contained in the VAT
Invoice or VAT Official Receipt
The following information shall be indicated in the VAT
invoice or VAT official receipt:
(1) A statement that the seller is a VAT-registered person,
followed by his taxpayer's identification number (TIN);
(2) The total amount which the purchaser pays or is
obligated to pay to the seller with the indication that
such amount includes the value-added tax.
(3) The date of transaction, quantity, unit cost and
description of the goods or properties or nature of the
service; and
(4) In the case of sales in the amount of one thousand
pesos (P1,000) or more where the sale or transfer is
made to a VAT-registered person, the name, business
style, if any, address and taxpayer identification number
(TIN) of the purchaser, customer or client.
Additional Requirement under #2
(a) The amount of the tax shall be shown as a separate
item in the invoice or receipt;
(b) If the sale is exempt from value-added tax, the term
"VAT-exempt sale" shall be written or printed
prominently on the invoice or receipt;
(c) If the sale is subject to zero percent (0%) value-added
tax, the term "zero-rated sale" shall be written or
printed prominently on the invoice or receipt;
(d) If the sale involves goods, properties or services some
of which are subject to and some of which are VAT zero-
rated or VAT-exempt, the invoice or receipt shall clearly
indicate the breakdown of the sale price between its
taxable, exempt and zero-rated components, and the
calculation of the value-added tax on each portion of
the sale shall be shown on the invoice or receipt:
"Provided, That the seller may issue separate invoices or
receipts for the taxable, exempt, and zero-rated
components of the sale.
Accounting Requirements
In addition to the regular accounting records
required, maintain a subsidiary sales journal and
subsidiary purchase journal on which the daily sales
and purchases are recorded. The subsidiary journals
shall contain such information as may be required by
the Secretary of Finance.
 Consequence of Issuing Erroneous Vat
Invoice or Vat Official Receipt
1) If a person who is not a VAT-registered person issues an
invoice or receipt showing his Taxpayer Identification
Number (TIN), followed by the word "VAT":
(a) The issuer shall, in addition to any liability to other percentage taxes,
be liable to:
i. The tax imposed in Section 106 or 108 without the benefit of any input tax
credit; and
ii. A 50% surcharge under Section 248 (B) of this code;
(b) The VAT shall, if the other requisite information required under
Subsection (B) hereof is shown on the invoice or receipt, be
recognized as an input tax credit to the purchaser under Section 110
of this Code.
2) If a VAT-registered person issues a VAT invoice or VAT official
receipt for a VAT-exempt transaction, but fails to display
prominently on the invoice or receipt the term "VAT-exempt
Sale", the issuer shall be liable to account for the tax
imposed in Section 106 or 108 as if Section 109 did not
apply.
Return and Payment of Value-Added Tax
Every person liable to pay the value-added tax imposed
under this Title shall file a quarterly return of the amount of
his gross sales or receipts within twenty-five (25) days
following the close of each taxable quarter prescribed for
each taxpayer: Provided, however, That VAT-registered
persons shall pay the value-added tax on a monthly basis:
Provided, finally, That beginning January 1, 2023, the filing
and payment required under this Subsection shall be done
within twenty-five (25) days following the close of each
taxable quarter. (Added by R.A. 10963)
Any person, whose registration has been cancelled in
accordance with Section 236, shall file a return and pay the
tax due thereon within twenty-five (25) days from the date
of cancellation of registration: Provided, That only one
consolidated return shall be filed by the taxpayer for his
principal place of business or head office and all branches.
Where to File the Return and Pay
the Tax?
• Except as the Commissioner otherwise permits, the
return shall be filed with and the tax paid to an
authorized agent bank, Revenue Collection Officer
or duly authorized city or municipal Treasurer in the
Philippines located within the revenue district
where the taxpayer is registered or required to
register. (Sec 114 B, R.A. 8424)
 Withholding of Value-Added Tax.
R.A. 8424 R.A. 9337 RA 10963
(C) The Government or any of its political (C) The Government or any of its political subdivisions,
subdivisions, instrumentalities or agencies, instrumentalities or agencies, including government-
including government-owned or -controlled owned or -controlled corporations (GOCCs) shall, before
corporations (GOCCs) shall, before making making payment on account of each purchase of goods
payment on account of each purchase of and services which are subject to the value-added tax
goods from sellers and services rendered by imposed in Sections 106 and 108 of this Code, deduct and
contractors which are subject to the value- withhold a final value-added tax at the rate of five
added tax imposed in Sections 106 and 108 percent (5%) of the gross payment thereof:
of this Code, deduct and withhold the Provided, That beginning January 1, 2021, the VAT
value-added tax due at the rate of three withholding system under this Subsection shall shift from
percent (3%) of the gross payment for the final to a creditable system:
purchase of goods and six percent (6%) on
gross receipts for services rendered by
contractors on every sale or installment
payment which shall be creditable against
the value-added tax liability of the seller
or contractor: Provided, however, That in
the case of government public works
contractors, the withholding rate shall be
eight and one-half percent (8.5%):
 Withholding of Value-Added Tax.
R.A. 8424 R.A. 9337 RA 10963
Provided, further, That the payment for lease Provided, further, That the payment for lease or
or use of properties or property rights to use of properties or property rights to
nonresident owners shall be subject to ten nonresident owners shall be subject to twelve
percent (10%) withholding tax at the time of percent (12%) withholding tax at the time of
payment. For this purpose, the payor or payment: Provided, finally, That payments for
person in control of the payment shall be purchases of goods and services arising from
considered as the withholding agent. projects funded by Official Development
The value-added tax withheld under this Assistance (ODA) as defined under Republic Act
Section shall be remitted within ten (10) days No. 8182, otherwise known as the Official
following the end of the month the Development Assistance Act of 1996, as
withholding was made. amended, shall not be subject to the final
withholding tax system as imposed in this
Subsection.
For purposes of this Section, the payor or
person in control of the payment shall be
considered as the withholding agent.
 Power of the Commissioner to Suspend the
Business Operations of a Taxpayer
The Commissioner or his authorized representative is hereby
empowered to suspend the business operations and temporarily
close the business establishment of any person for any of the
following violations:
(a) In the case of a VAT-registered Person. -
(1) Failure to issue receipts or invoices;
(2) Failure to file a value-added tax return as required under Section
114; or
(3) Understatement of taxable sales or receipts by thirty percent (30%)
or more of his correct taxable sales or receipts for the taxable
quarter.
(b) Failure of any Person to Register as Required under Section
236. -
The temporary closure of the establishment shall be for the
duration of not less than five (5) days and shall be lifted only
upon compliance with whatever requirements prescribed by the
Commissioner in the closure order. (R.A. 8424)
Tax on Persons Exempt from Value-Added Tax (VAT).
Sec 116, R.A. 9377 Sec 116, R.A. 10963
Any person whose sales or Any person whose sales or receipts are
receipts are exempt under exempt under Section 109 (BB) of this
Section 109 (Z) (now Sec 109 Code from the payment of value-added
(V) under R.A. 9337) of this tax and who is not a VAT-registered
Code from the payment of person shall pay a tax equivalent to
value-added tax and who is not three percent (3%) of his gross
a VAT-registered person shall quarterly sales or receipts: Provided,
pay a tax equivalent to three That cooperatives, and beginning
percent (3%) of his gross January I, 2019, self-employed and
quarterly sales or professionals with total annual gross
receipts: Provided, That sales and/or gross receipts not
cooperatives shall be exempt exceeding Five hundred thousand
from the three percent (3%) pesos (P500,000) shall be exempt from
gross receipts tax herein the three percent (3%) gross receipts
imposed. tax herein imposed.
 Tax on Persons Exempt from Value-
added Tax (VAT). —
Any person whose sales or receipts are exempt under
Section 109 (1) (BB) of the Tax Code from the payment
of value-added tax and who is not a VAT-registered
person shall pay a tax equivalent to three percent (3%)
of his gross quarterly sales or receipts: Provided,
however, that the following shall be exempt from the
payment of three percent (3%) percentage tax:
1. Cooperatives: and
2. Self-employed individuals and professionals availing
of the 8% tax on gross sales and/or receipts and
other non-operating income, under Sections
24(A)(2)(b) and 24(A)(2)(c)(2)(a) of the Tax Code, as
amended.. (SEC.4-116, R.R. 13-2018)
The End