a Chatter 8 7 Value Added Tax VAT is a tax on the v, oe esate oe pene added by every seller to the purchase eee Is of goods, property or services in the Be te chllsone Gee fe Ge oes sonal or business are subject to vat “unless exempt’. Nonetheless, if the sale is exempt from vat, it is may be subject to other percentage taxes except those transactions exempt from business taxes such as those made for subsistence or livelihood. Tae as Se Rese Pas eres urs ie uence) PA rey! Gre use nna anaes as follows: The vat exempt transactions provided in the Tax Code are | and marine food products in their ‘of a kind generally used as, oF man consumption and breeding A. "Sale or importation of agricultural original state, livestock and poultry yielding or producing foods for hu stock and genetic materials therefor. » vides that products classified under this exemption (such 2 An aaa vegetables) shall be considered in their ‘original state” even if they have undergone the simple processes of preparation ; preservation for the market, such 28 freezing, drying, satin, rong, Toasting, smoking OF stripping including those those i 9.8 oa technological means of packaging, such as ae areas : vacuum packing, tetra-pack, and other similar packaging i 245Valee ded, PR CL ETE AT Eun ‘and Marine Food es en Poully ‘Agncultural Mailno ows Fouls Polished/husked rico ae ee mh on Bulls Dueks Gruslates a 5 Goose Com ars sar&molasses | + ostar sinps | Fy i Giese vemhc Prawns, oystors 8 a Mussols, clams Shoop Trout , ools com Rabbits 9 cocks, race horsos, 200 animals ands other NOTE: Livestock or poultry does not include fightin, animals generally considered as pets. corn grits, raw cane sugar and molasses, ordinary salt and copra, as provided in Table cee shall be considered in their original state. For this purpose, notwithstanding the process/es involved in its production, “raw sugar or raw cane sugar” means sugar whose content of sucrose by weight, in the dry state, corresponds to a polarimeter reading of Jess than 99.5 degrees. [Sec. 109, NIRC] Polished and/or husked rice, VAT EXEMPT SUGAR RAW SUGAR CANE refers to sugar produced by simple process of conversion of sugar cane without need of any mechanical or similar device. Under the revised regulation, raw cane sugar refers only to muscovado sugar. Thus, only raw sugar cane is exempt from vat under the tax code (RR 4-2015). The following other definitions were also provided under RR 13-08 as amended by RR 12-2013, RR 4-2015 and RR 6-2015: Raw Sugar as sugar whose content of sucrose by weight in dry state, corresponds to a polarimeter reading of fess than 99.5°. Refined Sugar as sugar whose content of sucrose by weight in dry state, corresponds to a polarimeter reading of 99.5° and above. Sugar Refinery Mill refers to entity, natur ju ir J r h iral or juridical, engaged in the business of milling sugar cane into raw or in the refining of raw coger Cane Sugar produced from the { followin, i revenue purposes, as refined sugar, Peer cee * Product of a refining process . Product ata sugar refinery; or * luct of a ine. il a Production line of a sugar mill accredited by the BIR to Producing and/or . & reading of 99.5" and abso? °F Producing sugar with polarimeter 246Vale Med. Tae MARINATED F SALE OF MARINATED FISH (Rov. Ruling 348-14 datod Sopt 28, 2011) Sale of marin exemption from Exemption from p of the law ated fish is not exempt from vat. L ‘ax are construed strictly ayment of tax must be clearly Ws granting against the stated in the language ILLUSTRATION 4: Determine which transaction is subj ts TRANSACTION PARTICULARS Sale of copra Sale of bonsai Sale of wood Sale of barbeque Sale of tilapia Sale of roasted chicken Sale of canned pineapple chunks Sale of salted eggs Sale of smoked fish | 10 Sale of fowers | " Sale of raw sugar cane 12. Sale of muscovado 13 Sale of refined sugar ANSWER: Transactions 2, 3,7, 10 and 13 Wot eHEON= B. 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 specially feeds). (Specialty feeds refer to non-agrculural feeds or food for race horses, fighting cocks, ask h 700 animals and other animals generally considered as pets are subject to vat. For the sale or importation of certain feed ingredients (whey powder, skimmed milk powder, lactose, buttermilk powder, whole milk powder and such other feed ingredients and additives which may be hereinafter be determined by competent authority to have possible utilization for human consumption, there must be @ showing that the same is unfit for human consumption or that the ingredient cannot be used for the production of food for human consumption as cettified by the Food and Drug Administration (FDA) [RMC 55-2014 as revised by RMC 66-2014 and RMCc 78-2014]. 247Valec Added Teg transaction is subject to vat: Transaction PARTICULARS a Salelimportation of V-Mig nage z “importation of V-Mig feeds for pel hasecf local raw materials for the formulation of hagfeeds. importation of raw materials forthe formulation ofhogfeeds Importation of raw materials for the formulation of feeds for animals generally considered as pets 6 —_ Importation of fertiizers. ANSWER: Transactions 2 and 5 C. 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. ILLUSTRATION: ike retumed ftom Serbia after watching Gilas games during the 2021 Olympic Qualifying Toumament. He brought with him several personal effects (souvenirs) he bought from Serbia. (Question: Are the pergonal effects brought by Lester tothe Philippines subject to vat? + Answer: No. Personal and household effects brought from abroad by a resident ofthe Philppines are exempt from vat. D. 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 herein 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 Bereons, of arriving within a reasonable time. Provided, that the Bureau of Customs may, upon the production of satisfactory evidence at Such persons are actually coming to settle in the Philippines and 248Valee Added Toe eae goats are brought from their former place of abode, exempt an oe Is from Payment of duties and taxes: Provided, further, vehicles, vessels, aircrafts and 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 E, Services subject to Percentage Tax under Title V of the Tax Code, as é amended (Sections 116-127). Pi Pee ). Percentage Taxes are discussed in | {ILLUSTRATION 4: Determine which transaction is subject to vat: Transaction PARTICULARS whose annual gross receipts ofthe preceding year does not exceed 210,000,000 (assume non-vat registered). 40 Gross receipts of operators of cabarets night and day clubs. 4 Gross receipts of transportation contractors engaged in the transport of passengers by land, 2 Gross receipts of transportation contractors engaged in the transport of goods andlor cargoes by land | 3. Gross receipts of domestic cariers engaged in the transport of passengers by air or sea. 4 Gross receipts of domestic cariers engaged inthe transport of goods and/or cargoes by air or sea. 5 "Gross receipts of international air caries doing business in the | Philipines. { 6 Gross receipts from international fights of domestic carers: | 7 Gross receipts of Banks and non-bank entities doing business in| the Philippines. | 8 Gross receipts of radio andlor television broadcasting companies, | with annual gross receipts from the preceding year exceeding | 10,000,000. | § Gross receipts of racio andor televisién broadcasting companies | \ | | ANSWER: | Transactions 2, 3,4, 6, and 8 Transactions 1,5, 7, 9 and 10 are subject to Percentage Taxes (Refer to Chapter 9) _| 249Value Mle Tg F, SERVICES BY . a) “Agricultural contract growers’ and b) Milling for others of: * Palay into rice = Com into grits; and * Sugar cane into raw sugar - jes, that “Agricul Section 4.109-1(B)(1)0) of RR 16-05 a Soe bea inl contract growers” refer to those persons P ee inicio try, livestock or other agricultural and marine food products 0 lint original state. Its services growing of poultry. livestock or other agricultural nd marine food products into marketable poultry, livestock or other raring food products. There are agricultural contract growers which offer toll processing/toll dressing/toll manufacturing as a packaged service to its toll growing. — “Toll processing/toll. dressing/toll manufacturing’ involves procedures such as; weighing, Killing, dressing, scalding, cut-ups; and packaging. ful re-study by the Bureau, it was clarified under RR 97-2010, that “toll processing services exempt from vat” shall pertain only to services to clients from which growing of animals were contracted. As such, preparing and packaging hogs/chicken ready for delivery affer producing or growing them can be said to be within the purview of “agricultural contract growing”. However, if such ‘an activity is done independently of growing poultry, livestock or other agricultural and marine food products, the same can be considered as vatable services not covered by agricultural contract growing. However, after caref G. Medical, dental, hospital and veterinary services except those rendered by professionals. Laboratory services are exempted. If the hospital or clinic operates @ pharmacy or drugstore, the sale of drugs and medicines are subject to VAT. Hospital bills constitute medical services. The sales made by the drugstore to the in-patients which are included in tn hosp bls ar pat of medial ils exempt fom vat. Sales of fe drug store to the out-patients are taxable b ; ot part of medical services of the hospital. amen a Medical practitioners, under the af i i likewi ia forementioned regulation, ia likewise Include medical technologists, allied heath Svorkers (2. ssupatona heaps, physical heaps, speech therapist employer-emnployes ne medical practitioners who are not under 2 citer dmiar etgenateorse PW the hospital, cine or HMO ad 250Value Med Cis Pursuant to RR 16-2005, are subject to VAY 3,000,000. Other Of Professional Practitioners: AL gross professional fees exceed : such professional fees are subject to Percentage Tax under Sec, 116 of the Tax Gode, as amended rolessional P aners Professional Practitioners include, among others, the following; * Medical practitioners cr + Insurance Agents (Life & Non-lfe) + Other Pi > Other Professional Practitioners required to pass the government examination i ant ILLUSTRATION 5: CASE A: Ang was delighted after spending a well-deserved summer vacation in Palawan. However, due (0 high temperature brought about by the weather and fatigue, she suddenly oly. She consulted a doctor upon arrival in Manila. For a better assessment of her ondition, she was advised to undergo some laboratory tests and other medical procedures in a prominent hospital in Taguig. The following were incurred by Ana: Doctor's consultation fee 50,000 Various laboratory fees in the hospital 240,000 Medicines purchased from the hospital's pharmacy 120,000 REQUIRED: Determine the total amount of vat paid by Ana “+ Answer: P20,400 — computed as follows: Doctor's consultation fee (P50,000x 12%) 6,000 Medicines purchased (P120,000x 12%) _ 14,400 Total vat paid 20,400 (22 Laboratory fees are vat exempt CASE B: After a heated confrontation with Juan, Pedro suffered physical injuries requiring one (1) month hospitalization. The following were incurred by Pedro Hospital bills 250,000 Laboratory expenses exclusive of medicines 175,000 Medicines purchased from the hospital's pharmacy 60,000 Medicines purchased from a pharmacy outside of the hospital 75,000 Required: Determine the amount of vat from the foregoing expenditures + Answer: P16,200 computed as follows: Medicines purchased fom the hospita's pharmacy (P60,000 x 12%) 7,200 Medicines purchased outside of the hospital (P75,000 x 12%) 9000. | vaT 16,200 251H. "Educational services ren’ duly accredited by the Commission on Higher Ed and Skills Development Aut government “Educational services” shi vocational education provided by accredited by the DepEd, the CHI by government educational seminars, in-service training, review cl rendered by persons who are not accre and/or TESDA. (Sec. 4.109~ ‘ILLUSTRATION 6: dered by Departmen ion educational institutions. Determine which transaction is subject to vat: Transaction 1 2 PARTICULARS Value Added Ti : private eduoational institutions, it of Education (DepEd), the rion (CHED), the Technical Education thority (TESDA) and those rendered py all refer to academic, technical or private educational institutions duly ED and TESDA and those rendereq | institutions and it does not include Jasses and other similar services dited by the DepEd, the CHED 4 (B)(h), RR 16-2005] Gross receipts by ABC University, a proprietary educational institution registered under CHED. Gross receipts by Saint Mary's University, a non-stock non-profit educational institution registered under CHED. Gross receipls by XYZ primary school accredited by the Department of Education (DepEd). Gross receipts by Employ Me Now Institute, a vocational school registered under TESDA. Gross receipts by a review school offering CPA review course. Gross receipts by a tuloral schoo! offering review courses for college entrance examinations. __ANSWER: Transactions 5 and 6 relationship. not earn or derive income from the Philippines. 252 "Services rendered by individuals pursuant to an emiployer-employee . "Services rendered by Regional or Area Head e by | quarters (RHQs) established in the Philippines by multinational corporations ae act as supervisory, communications and coordinating centers for. their affiliates, subsidiaries or branches in the Asia-Pacific Region and doValue Added, Ta npt under international agreements to 2 slanatory or undor spacial iaws, except Decteo No. 529 (Potroloum Exploration fe Petroloum Act of 1949.) " tions which K, ‘Transactions v are exer which the Philippines is those under Presidential Concessionaires under th Examples (special laws): PD 1869~-PAGCOR Charter + RA9367 —Biofuels Act = RA 10072~Philippine Red Cross + RA 9994 — Expanded Senior Citizens Act of 2010 = RA10754— Magna Carta for PWDs L. "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 produc. TABLE 8-2: Sales by Agricultural eee (ieee Members Sale of cooperative's own produce Processed or at its orginal state Exempt Other than the cooperative’s own produce (le. from “traders’) Exempt Exempt if refering to agricultural food product a is original state Exempt VATS It is to be reiterated however, that sale or importation of agricultural food products in their original state is exempt from VAT irrespective of the seller and buyer thereof, pursuant to Subsection (a) [Sec. 4.109-1 (B) (I), RR 4-2007] ILLUSTRATION 7: Benguet Agri Coop is a duly registered agricultural cooperative engaged in growing abaca and production of bags made of abaca. Its also engaged inthe sale of other Kichen kits made of rattan from other cooperatives and traders. The folowing data for the yee rovided: Pee Tomembers To non-members Sale of abaca bags 6,000,000 4,000,000 Sale of kitchen kits 2,000,000 3,000,000 Question: How much is the vat payable of Benguet? Answer: P36,000; (PSM x 1 253Value Added Tig » py credit or multi. with the Cooperative only limited to the gross put also to other persons yending activities duly registered Exemption is J {o its members M. "Gross receipts from purpose cooperatives Development Authority’. receipts on loans extender who are not members. eT Unt ee kes iris vay Credit or Multi-purpose (re aU ia ___Exempt__ VAT From lending From non lending activities tric and non-credit cooperatives pment Authority, provided, does not exceed gardiess of the aggregate capital and net surplus ratably di d among the members”. non-electric and — noncredit ral, non-ele Cooperative Develo} tribution of each member N. "Sales by non-agricullu duly registered with the that the share capital con fifteen thousand pesos (P15,000) and rei istribute: Importation by — non-agricultural, cooperatives of machineries and equipment thereof, to be used by them are subject fo vat. t including spare parts accu (uae VAT VAT Table 8-2_| Table 8-2 Table 8-3 STIs eRe eee eos | Electric cooperatives | Agricultural cooperatives “Lending activlies” by lending and multi-~ | Table 8-3, purpose cooperatives Non-agricultural, non-electric, non- lending/credit cooperatives = Contribution per member $P15,000 Exempt Exempt * Contribution per member >P15,000 VAT. VAT ILLUSTRATION CASE A: Kuryente Natin, an elect cooperative provi year (net of appicabl taxes). provided the following data forthe taxable Sales PS, Purchases some Question: What is th Syl Hf fae ‘amount of be payable, if any? 254Solution: Output vat (PBEM x 12%) s) P60 Input vat (P 1,000,000 x 1294) bem) Vat Payablo 360,000 CASE B: Coop Natin is a duly registered non-agricultural, non-electic and non-credit cooperative founded and operated by he employees of Chiska Group of Companies with maximum contribution of P15,000 each, The cooperative is duly registered with the Cooperative Development Authority. The following data were provided for the taxable year (net of applicable taxes): Sales 5,000,000 Purchases 4,000,000 Question 1: What is the correct amount of vat payable, if any? 4 Answer: None. The cooperative is vat exempt. Question 2: Assume further that Coop Nalin imported equipment valued at P1M for its own use. What amount, if any should be recognized as lability for vat? “+ Answer: P120,000; (P1,000,000 x 12%) Only “agricultural cooperatives” are exempt from Importation of equipment to be used directly and exclusively in the production or processing ofthe agricultural cdoperative's produce. 0. "Export sales” by persons who are Not VAT-registered “Export sales may be exempt or subject to vat as shown in the figure below: EET BTM tee eon enced Vat Exempt By aNon Vat Reg. Export Sales Vatable @ 0% (zero-rated sales) nal discussion on zero rated sales. Refer to pages 275 to 280 for additior 255 ‘Vale Added Te —— ILLUSTRATION 9: ; , yer James Corporation provided the following data io aoa a y Export Sale (nel) om Purchases (net) 800, Question: H James is vat registred, how much isthe vat payablelrefundable? 4+ Answer: (P120,000) computed as folows: 0 ‘Output vat (P5M x 0%) input vat (P2,800,000 x 12%) — Sar Excess Inpul/Refundable —-(P336,00' how much is the vat payable/refundable? Question 2: If James is non-vat registered, + Answer: None, The sale is vat exempt : ‘0 The attrbutébe iout vat on purchases shall be recognized either as part of nse, cost or es . "SALE OF REAL PROPERTY The TRAIN Law provides that the vat exemption on sale of real property beginning January 1, 2021 shall only apply to the following: ‘a. 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 not primarily held for sale or for lease is, in general, vat exempt. However, if such property is used inthe trade or business of the sel, the sale shall be subject to VAT as an incidental transaction to the seller's main business (RR 4-2007, RR 13-2018). On the other hand, sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of fee shall be subject to vat (RR 16-2005 as amended by RR 13-2012 and RR 134 b, Sale of real property utilized for socialized housing as defined under RA No. 7279, as amended; , Socialized Housing refers to housing programs and projects covering houses and lots or home lots only that are undertaken by the government or the private sector forthe underprivileged and homeless citizens, which shall include sites and services development, fong-tem financing, liberalized terms on_ interest payments, and as such other benefits in accordance with the provisions of Republic Ac 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 projets intended for the underprivieged and homeless wherein the housing package seling 256Vole Added Ue i a hdc ie rales under the Untied Home Lending Program housing program of the Government, the private sector oF pon-government organizations. gale of House and Lot and Other Residential dwellings with selling rice of not more than Two Milin Pesos (P2,000,000)_as adjusted in 2011 using the 2010 consumer price index (CPI Based on RR 8-2021 issued b s y the BIR on June 11, 2021, the adjusted threshold to be used shall be P3,199,200. Provided, further, that every three (3) years thereafter, the amounts’state herein shall be adjusted to its present value Using the Consumer Price Index, as published by the _ Philippine Statistics Authority (PSA). NOTE: = The provision of the CREATE law, increasing the threshold for vat exempt sale of residential house and lot and other residential dwellings to P4:200,000 was VETOED by President Duterte. : = SALE OF PARKING LOT IN THE SALE OF CONDOMINIUM UNITS (RR 13-2012) Exenttion from vat doesnot include the sale of parking Jot which may oF Fray not be incuded in the sale of condominium ons The sale of parking ToL in a condominium is a separate and distinct transaction and is not covered by the rules on threshold amount not being 2 residential lot, house and lot or a residential dwelling. Thus, should be subject to VAT regardless of amount of sein pice.” (RR-13-2012) GUIDE: 1. yerty was NOT made in the ordinary course of trade or If the sale of real prop: 1 ied as capital asset, hence, not subject to usiness, the real property is cass! vat but to capital gains t@X- ithe sale was made in he ordinaty cOUSS oftrade or business: = VATEXEMPT: . jal house and lot and other ‘residential dwellings gale of resident 3% Bevided te sling pie 1 rot more than P3,199,200 (RR 82021 dated June 11, 2021); a b, Sale of real property ‘tlized for socialized housing 287Value Added Ce ae 1 and other residential dwellings ifthe = SUBJECT TO VAT: 199,200 (RR 8-2021 dated June 44, a, Sale of rsideniial selling price is MO! house and fo RE than P3, 2024); / b. Saleoreieti ES ay pt Ob exempt. ILLUSTRATION 4 Which ofthe following sales in 2024 ks 1. Sale of a parcel of land held as capital a 2. Sale ofa parcel of land not ordinarily hel in business operations. . 3. Sale of "commercial lot’ ordinari business, : 4, Sale by a realestate dealer of “residential lot" ordinarily held for sale in the | course of trade or business. 5. Sale of condominium unit for P3,199,200. 6. Sale of parking space in a condominium unit for P800,000 taxable year is subject to vat? sset. / id for sale to customers but is used ly held forsale inthe course of trade or Answer: #2, 3,4, and 6 * #1 is subject to 6% capital gains tax. It is not subject to a business tax. = #2is considered incidental transaction subject to vat. = - #3 sale of commercial lot is subject to vat. #4 beginning 2021, sale of residential fot by a real estate dealer is no longer | exempt from vat. | " _ #5is vat-exempt because the selling price is not more than the vat threshold of 3,199,200 as provided under RR 8-2021 dated June 11, 2021 = #6 is subject to vat. Itis not classified as residential house and lot and other L residential dwellings. Q. Lease of Residential Unit Lease of a residential unit with it exceeding fiteen thousand pesos P15,000 reread er unt nat ; 15,000 regardi of aggregated rentals rei gardless of the amount DOT Re 20am” eo8Hed by the lessor during the year (RR 16Lf for Valac Added. Tage The Percentage Tax rat : ymended by 'e under Section 11 a y RA 11834 (CREATE law) shall bo oe tolows. Coder 28 Prior to July 1, 2024 From July 1, 2021 to : tn Beginning July 1, aoa eee Me Lease of Residential and Commercial Units Lease of Residential Units Monthly rental is 000 Lease of commercial units Generally subjectto vat regardless of ‘monthly rental. Annual receipts of the lessor >P3M ‘Subject to OPT under Sec. 116 if lessor is non-vat Exempt from vat — bd z receipts spat Subject to Sec. 116 ‘Subject to vat {The revised Treshold of P15,000 and P3,000,000 shal apply only upon effectity of RA10963 (TRAIN Law) beginning January 1, 2018. 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 (as amended) while others are leased out for more than 215,000 per unit, his tax liability will be: (a) The gross receipts from rentals not _exceeding P15,000 per ont per unit shall be exempt from vat regardless of the aggregate annual gross receipts; and (b) The gross receipts from rentals exceeding P15,000 per month per unit shall be subject to vat if the annual gross receipts exceed 3,000,000, as amended, from said units only — not including the gross receipts from units leased out for not moreViluc Med Vy the gross receipts shall be subjec Srité of the Tax Code (RR 16. discussed in Chapter than P15,000. Otherwise, the to Percentage Tax under Sectio' ie 2011; RR 13-2018). Percentage T® 9 of this book. Residential Unit shall refer to: Apartments and houses and lots used for residential purposes; thereof used solely 2s dwelling places (e., * Buildings or parts or units dommiteres, toms, bed spaces) except motels, motel rooms, hotels and hte rooms. UNIT shall refer to: Apartment unit in case of apartments House in case of residential houses Per person in case of dormitories, boarding houses and bed spaces; and Per room in case of rooms for rent EO esis ish Dake mn SULCUS Lease of Residential Units Monthly rental is $P15,000 Monthly rental is >-P15,000 Annual receipts of the lessor >R3M (excluding {108s receipts from units with monthly rental of $P15,000) Exempt from vat ‘Subject to OPT Subject to vat 260y S fey? Value Added. Ue [LLUSTRATION 11: which of the following 2021 transactions by a property developer is subject to vat? | | | | case f. Lease of commercial units in Makati for P15,000 per unit : ye I per month, Gross ‘eveipts during the year Was P2,200,000, The developer i negwer. Subject fo vat developer is a vat rogistored entity | Boing a val restored only, tho las shal be sujet oval regardless tho aroun | of aggregate annual gross receipts, fi Since the transaction pertains to loase of | conmercil us, the amount of month rentals inalevant, | Case 2. Lease of residential units in Makati for P15,000 per unit per month. The | aggregate gross receipts of the lessor during the year was P5,000,000. | | ae Answer: Exempt from vat | | Since the monthly rental is not more than the vat threshold, it is exempt from vat \ regardless of the amount of aggregate gross receipts. | Case 3. Lease of residential units in Makati for P20,000 per unit per month. The | aggregate gross receipts of the lessor was P5,000,000. | a Answer: Subject fo vat ~ Since both the monthly rental end the aggregate annual gross receipts exceeded the applicable thresholds, the lease is subject to vat. Case 4. Lease of several residential units in Makati with the following details: Monthly Rent — Annual Gross Receipts P12,000 3,200,000 16,000 P2,800,000 4 Answer: Exempt from vat The lease of units with monthly rent of 242,000 is exempt from vat even ifthe annual gross receipts from such lease ‘exceeded the vat threshold. Likewise, the lease with monthly rental of P16,000 is also vat-exempt because although the monthly rental is more than 215,000, the annual gross receipts did not exceed the vat threshold of 3,000,000. To be subjected to vat, both the monthly rental and annual gross receipts ‘must exceed the thresholds of P15,000 and P3,000,000, respectively. The two leases ‘must be treated independently. The lease with monthly rental of 16,000, however, is subject to Percentage Tax under Section 116. Case § Lease of residential units in Makati with the following details: Monthly Rent _ Annual Gross Receipts 12,000 3,200,000 P16,000 3,800,000 “© Answer: Exempt from vat; Subject to vat {AS eiseussed in Case #4, tho lease with monthly rent of 12,000 is exempt from vat. However the lease wth monthly renal of 216,000 is subject ovat compared because the monthly rental and annual gross recelps in this particular case both exceeded the applicable vat thresholds of 215,000 and P3000,000, respective. The wo leases must be treated independent. 261 %Value Adbed te nits in Maka with the folowing deta | Case 6. Lease of commercial and a Annual Gross Rec 18 | 1,800, Commercial 12,000 Psa) 00 Residential P16,000 — Answer: Subject to vat me ustration provided under fp 1 This parteuar problem was then mr subject fo vat. On the other hand, lease R. 2018. Asa rule, lease of commer Cf residential units with monthly rent per unit, ‘of more than P15,000 will ether be subjery ic Tax Code, as amended. In hi tage Tax under Section 116 ofthe ; Sica Re et vat since bath may be subjcte | a oe aed vl tectol! of Pal. The fll gos rece fom by the i gross rae ca py a 000. Consequely, both transactions, shal be fed to vat. (As amended under CREATE Law): Sale, importation, Printing or Publication of books, and any newspaper, magazine, journal, review bulletin, or any such educational reading material covered by the United Nations Educational, Scientific and Cultural Organization (UNESCO) Agreement on the importation of educational, scientific and cultural materials, including the digital or electronic format thereof. Provided, That the materials enumerated herein are not devoted principally to the publication of paid advertisements. Provided further, That the materials enumerated herein are compliant with the . requirements set forth by the National Book Development Board pursuant to R.A. No. 8047 (RR 4-2021). Under BIR Ruling No. 083-2014, the term "book, newspaper, magazine, review and bulletin’ only covers printed matters in hard Copy, and does not apply to electronic format or versions including-but not limited to: 0 e-books 0 ejourals 9 electronic copies © online library sources © CDS and software Furthermore, the. activities. that exempt from this provision are as follows (1)sale, (2}Importation ‘Giinting and (publication of books, newspapers, magazines, reviews an buletins or any such educational reading material covered by the UNSESCO. Thus, a corporation's other transactions (such as the 2624 Value Able Tie ee ior mos: bookbinding, engraving, — stereotyping, ctectrlyping, Ithographing of various reference books, trade books, a other literary works), are subject to VAT. ‘The taxpayer is required to register its business as a VAT business entity and issue a separate VAT invoice/receipt to record such transactions. .. Transport of passengers by international carriers doing business in the Philippines. ___ Transport of passengers by international carriers doing business in the Philippines is not subject to business tax (vat and percentage tax). On the other hand, transport of cargo by international carriers is not also subject to vat, however, itis subject to percentage tax under Section 118 of the Tax Code, also known as Common Carrier's Tax on International Carriers (Refer also to Chapter 9 ~ “Other Percentage Taxes’). : GUIDE: + International Carriers (resident foreign corporations): Sono Bi Passengers Vat exempt Cargo or goods Subject o Common Carrier's Tax under Sec. 118 _| * Domestic Common Carriers: Ain Seenimele MMe aero sue) SeeeEOY Passengers = Byland Common Carrier's Tax 0% vat under Sec. 117 = Byairorsea Vat 0% vat Cargo or goods aVeleeeeeee ee 0% vat Sale, importation or lease of passenger or cargo vessels and aircraft, uiipment and spare parts thereof for domestic or international transport operations, provided, 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 rtirement program of MARINA (RR 15-2015; RR 13-2018). including engine, eq 263u Ww. Valee Added Teg . lies by persons engageq Importation of fuel, goods and SUPP ations; Provided that the it it sport oper 4 ns inerratona eer Ibe used for international shipping or aj; ies shall : Toot etn Thus, sai fuel, goods and] supplies shal be used exclusively or shall pertain to the ee ie IS and/or passenger from a port in the Philippines directly to et foreign port, or vice versa, without docking or stopping at any oll fa Port in the Philippines, unless the docking or stopping at any ei eee Philippines 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 or supplies shall be subject to 12% vat. "Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Sections 121 and 122, respectively of the Tax Code. Sale or lease of goods and services to senior citizens and persons with disabilities, as provided under RA No: 9994 (Expanded Senior Citizens Act of 2010) and RA No. 10754 (An Act Expanding the Benefits and Privileges of Persons with Disability (PWD), respectively. . Transfer of property pursuant to Section 40(C)(2) of the Tax Code, as amended (Upon effectivity of RA10963-TRAIN Law only; new provision). * '. Association dues, membership fees, and other assessments and charges collected on a purely reimbursement basis by homeowners’ associations and condominium corporations established under RA No. 9904 (Magna Carta for Homeowners’ and Homeowners Association) and RA No. 4726 (Condominium Act), respectively. This provision shall take effect only beginning January 1, 2018 or upon the effectivity of RA10963-TRAIN Law (new provision). . Sale of Gold to the Bangko Sentral ng Pilipinas (BSP). This provision shall take effect only beginning January 1, 2018 or upon the effectivity of RA10963-TRAIN Law (subject to 0% vat prior to 2018). 264~e REE Valve hh, Ti ae le ori i “for diabetes, Hon chee Seriplion drugs and modicines prosorbed ees cnn Hea typertonsion begining January 1, 2020 a tuberculosis a ’ beginning January 1, 2021 (CREATE Law, RR 4002} The exemption from VA‘ i i ‘T_under this subsection shall a ae a the sale or importation by the manufacturers, distributors, wholesalers and retailer of drugs and medicines included in the “list of approved drugs and medicines" issued by the Department of Health (DOH) for this purpose. BB. Sale or importation of the following beginnit ' December 31, 2023: wing beginning January 1, 2021 to (i) Capital equipment, its spare parts and raw materials, necessary for the production of personal protective equipment (PPE) 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; (ii) All drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of COVID-19; and (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 (DT!) 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 (i), within sixty (60) days from the effectivity of the CREATE, 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. 265items (i) and (iil) hereof, on the sale or importation of equipment, spare parts and raw materials I as the sale i yf PPE components as wel : or for the production of cor esoassay fr the production i materials Ir et ee t of COVID-19, the supplier/s or importer of drugs for the treatmen! A i shall submit for the purpose of availing the exemption, the following: Provided finally, That for 4) Certified true copy of “License to Operate", issued to the manufacturer-buyer by the DOH-FDA authorizing the manufacture of medical grade PPE components and drugs fo the treatment of COVID- 19; and f "Sworn Declaration” from the manufacturer-buyer that the items shall be used for the manufacture of the PPE components and drugs for the treatment of COVID-19. 2) The exemption claimed under this subsection shall be subject to post audit by the Bureau of Internal Revenue (BIR) or the Bureau of Customs (BOC), as may be applicable. cc. (Originally under paragraph BB). 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 23,000,000. The 3,000,000 gross annual sales shall comprise of the business’ total revenues from sale of its products, which are either goods or services, including nonrefundable advance deposits/payments for services, net of discounts; sales returns and allowances, covering the fiscal or calendar year. Sales incidental to the registered operations of the business shall also be included pursuant to Section 105 of the Tax Code, as amendedValue Mhded it COMPUTATION OF VAT PAYABL, The corresponding tia ave Mes 9 ability on value added tax is generally computed as Output Vat (Gross Sales or Gross Receipls x 12% Less Input Vat (Gross Purchases or P, Vat Payable (Excess input vat) ) ‘ayments x 12%) __() SOURCES of output vat OUTPUT vat may come from * Actual Sale * Transaction deemed sales = Zero (0%) rated sales 4. ACTUAL SALE (cash or on account) Sales where there are actual exchanges between buyer(s) and a seller(s) in the ordinary course of trade or business. BASIS of the the 12% output vat: * Sale of goods — gross selling price + Sale of services — gross receipts + Sale by a dealer in securities — gross income * Sale of real properties - the highest amount among selling price, fair value provided by the city/provincial assessor, and the zonal value provided by the CIR 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) NIRC). The term “gross receipts’ refer to the 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 tendered and advance payments actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding the vat. 267Valee Added Vy TIONS INCIDENTAL. TRANSAC’ . F 7, "In the course of trade or business: As discussed in Chapter ‘commercial or an economic it of a ‘duet or pursuit of oan means the regular conde ncidental thereto, BY, Sh Person, activity, inca er or not the person engaged TG & To 9a e ss rott private organization or govern us sick, nore 405 NIRC; Section 4.1 0543, RR 46-2005). ILLUSTRATION 12- Computation of Output Vat CASE A-—Net of vat approach tered domestic corporation, reported gross Panatag Corporat, ater of 2021. Determine the corect output sales of P5,000,000 for the 3 quarter of vat for the quarter. CASE B - Gross of vat approach Panatag Corporation, a vat fegistered domestic corporation, reported gross sales of P7,840,000 inclusive of vat for the 3° quarter of 2021. Determine the correct output vat for the quarter. ‘Answer: P&40,000 The output vat may be computed in any ofthe following approaches: Output VAT (option 1) = Gross Sales / 1.12 x 12% = P7,840,000/1.12 x 12% = P840,000 Output VAT (option 2) = Gross Sales x 3/28 = P7,840,000 x 3/28 = P840,000 Output VAT (option 3) = Gross Sales x 12/112 = P7,840,000 x 12/112= Pa40,000_ 268a Valne Added lie 2, TRANSACTIONS DEEMED saLeg apter 7 i fF ; value-added tax". Mec a 7 is that, “it is a credit-invoice method , vat di deducting the input vat ren nut lue/pavable is computed by utput vat. OUTPUT VAT Po (Vat on sale of goods, services, e Walon se , lease of properties, etc.) - (Vat on purchase of goods, services, lease of properties, et VAT PAYABLE oe) Pr In a transaction deemed sale, the input vat was already used by the seller as a credit against the output vat. However, since there was no actual sale, no output vat is actually charged to customers. Consequently, the State will be. deprived of its right to collect the output vat. To avoid a situation where a vat registered taxpayer avail of input vat credit without being liable for the corresponding output vat, certain transactions should be considered sales even in the absence of actual sale. | ILLUSTRATION 4 On May 4, 2021, Mas Smart Company (the leading mobile network in the Philippines) celebrated Labor Day by distributing free sim cards and prepaid cards to all its employees. Determine the effect for output vat purposes. | ] | Answer: | Due to the’ lack of actual sale or exchange between the company and its employees, no output vat was charged to the employees upon distribution of the cards. However, the related input vat for the production andiot acquisition ofthe cards by Mas Smart may be | availed as tax credit against the company’s total output vat. ) Obviously, only Mas Smart will benefit from the transaction because they can claim input tax credit regardless of how they dispose the cards. lt deprives the State to collect the output vat should the cards been sold in the ordinary. course of trade or business instead of giving the same to employees for free. Henoe, such transaction should be treated as a sole even inthe absence ofan actual sal, Consequently, Mas Smartis lable forthe corresponding output vat. Ce 269Valac Added Ua THE FOLLOWING TRANSACTIONS ARE CONSIDERED DEEMED SALE: a) Transfer, use or consumption not in the ordinary course of business of goods or properties ordinarily intended for sale or use ~ in the course of business (\.e., illustration #14 below), The basis in computing the applicable vat shall be the fair market value of the goods consumed. ILLUSTRATION 14: Determine which of following is transactions deemed sale: TRANSACTION PARTICULARS 1 Super Mig Corporation, manufacturer of the best beer in the world, “Beer Fab", celebrated its | centennial anniversary:a week ago.’ The company | consumed P1,000,000 worth of “Beer Fab” during | the celebration. | | | 2 Assume the same data in the preceding transaction | | except that the P1,000,000 worth of beer were sold | to the company’s customers. 3 Pure Water, the leading distributor of distilled and purified water, consumed some of its merchandise i valued at P300,000 during the company's team | | building activity. | 4 Pure Water, the leading distributor of distilled and purified water, distributed grocery goods to the “Yolanda” survivors. “Answer: Transactions 4 and 3 only . eee 2s an actual sale, not a transaction deemed sale, | "Transaction 4 involves grocery goods which are not ordinarily held for sale in the ordinary course of trade or [ business of Pure Water. Therefore, transaction #4 is a neither an actual sale nor transaction deemed sale, b) Distribution or transfer to: * Shareholders or investors as share in the profits of a VAT-registered person; and Basis: " Distribution or transfer to creditors in Market Value payment of debt or. obligation.¢) Consignments of g d) Value Adfed. Tee (60) days followin Sale Is not made within sixty Goods retumed within the gr) su" 900ds wore consigned. wihin the 60-day period are not degne don ods if actual Retir ; ‘etirement from or Cessation of status as. vat registered ct to all “goods on hand" (as of the date of , whether or not the business is ; Goods on hand 4 Goods, stock in t materials (Basis should be th ion Couples and fl 6 acquisiti lu Whichever is lower), quisition cost or market value RR 16-2005 as amende: ided above shall a intended for sale or us are existing as of the d by RR4-2007 provides that the vat Pply to goods or properties originally € in business, and capital goods which Occurrence of the following: 1. Change of business activity from VAT taxable status to VAT-exempt status. An example is a VAT-tegistered Person engaged in a taxable activity (wholesaler/retailer) who decides to discontinue such activity and engages instead in any other business not subject to VAT. 2. Approval of a request for cancellation of registration due to reversion to exempt status. 3. Approval of a request for cancellation of registration due to a desire’to revert to exempt status after the lapse of three (3) consecutive years from the time of registration by a person who voluntarily registered despite being exempt under Sec. 109 (2) of the Tax Code. ‘oval of a request for cancellation of registration of one + eee commenced business wih fe expectalion of gross, sales or receipts exceeding P3,000,000, as amended, but who failed to exceed this amount during the first twelve months of operation. 271VAT (TRANSACTION DEEME GOODS OR PROPERTIES Vibes Wed Vy 8‘ JALL NOT BE IMPOSED oy ep SALE) St OA OF THE OCCURRENCE oF ISTING AS. THE FOLLOWING: 1 en oration by the acquisition of the controting interest of such corporation by another ae om rou of h 7 s used I lose stockholders. The goods or properties a compas the stock-in-trade of the corporation, having a change in corporate control, will not be considered sold, bartered or exchangeg despite the change in the ownership interest in the said corporation, Change of contro! of a corp ILLUSTRATION 15 (Per RR 16-2005): Aloha Corporation is a merchandising concem and has an inventory of goods for Je amounting to PIM. Omega Corporation, a real estate developer, | exchanged its real estate properties for the shares of stocks of Alpha | Corporation resulting to the acquisition of corporate control. The inventory of ywned by Alpha Corporation (P10M) is not subject to output tax despite the change in corporate control because the same corporation stil owns them, s in recognition of the separate and distinct personality of the corporation | from its stockholders. However, the exchange of real estate properties held for sale or for lease, for shares of stocks, whether resulting to corporate control or not. is subject to VAT. This is an actual exchange of properties which makes the ea ble (RR 16-2008) Change in the trade or corporate name of the taxpayer. Merger or consolidation of corporations. The unused input tax of the dissolved corporation, as of the date of merger or consolidation, shall be absorbed by the new or surviving corporation. . ZERO RATED SALES (0% VAT) EXPORT SALE BY A VAT REGISTERED ENTITY. A “zero rated sale” of goods, properties and/or services by a vat registered person is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases Fl gp0ds, Groperties or services, related to such zero-rated sale, shall vailable as tax credit or refund i ith existin elevated! in accordance with existing 272Valee Added Tae Purpose of Zero-Rating: =. The zer le allowing the aun becomes internationally competitive by to export sales (CIR ak Of input taxes that are attributable No.153866, Feb, “1, 2008), eagate Technology Phils. G.R. Baton for zero rating of export sales: Barer vat system adheres to the “Cross Border paces (also known as destination principle), according to eee Shall be imposed to form part of the cost of the g estined for consumption outside of the territorial border of the taxing authority {CIR vs. Toshiba Information Equipment (Phils.), Inc., G.R. No.150154, Aug. 9,-2005]. FORMULA: Gross Sales (regardless of shipping arrangements) Prax x Vat Rate 0% OUTPUT VAT PO INPUT VAT VAT PAYABLE (REFUNDABLE) “The Input Vat attributable to zero rated (0%) sale may be: a. Refunded; or b. Claimed as deduction/tax credit against output vat on domestic sales; or c. Claimed as tax credit (TCC) against any other intemal revenue taxes. “Refund of Input Vat on zero rated (0%) sale (Gec. 122 NIRC; RR 13-2018) A vat registered person whose sales of goods, properties or services are zero-rated or effectively zero-rated may apply for the issuance of a tax refund of input vat attributable on such sales. The input vat that may be subject of the claim shall exclude the portion of the input vat that has been applied against the output vat. The application should be filed within two (2) years after the close of the taxable quarter when such sales were made. In case of zero-rated sales under Secs. 108(A)(2)(a)(1) and (3), Secs. 108(B)(1) and 2 of the Tax Code, the payments for the sales must have been made in acceptable foreign currency duly accounted for in accordance with BSP rules and regulations. 273Va fre Added Teg ayer is engaged in both zero-rated or effective 110 el tneung sales subject hal witha Vat) or exempt sales of goods, properties or services Bre ne Thou of creditable input vat due or paid cannot be directly or Draet ori led to any one of the transactions, only the proportionate fe oh Input vat allocated to zero-rated or effectively zero rated sales can laimed for refund or issuance of a tax credit certificate (TCC). in the transport of passenger and Philippines to a foreign country, the tween his zero rated sales and non. ar rate, subject to final vat In case of person engaged cargo by air or sea vessels from the input vat shall be allocated ratably be! zero rated sales (sales subject to regu withholding, and vat exempt sales). Claim for refunds shall be made with appropriate Bureau of Internal Revenue (BIR) Office [Large Taxpayers Service (LTS)], Revenue District Office (RDO) having jurisdiction over’ the principal place of business of the taxpayer. Claims for input vat refund of direct exporters shall be exclusively filed with the VAT Credit Audit Division (VCAD). EXPORT SALE BY A NON-VAT REGISTERED ENTITY Export sale by @ non-vat registered entity is a vat-exempt transaction. Under Section 109 of the Tax Code, a vat exempt sale refers to sale of goods, properties or services or the use or lease of properties that is not subject to VAT (output tax) and the seller/supplier is not allowed any tax credit of VAT (input tax) on purchases related to such exempt transaction. Gross Sales Pxx. x Vat Rate NIA __ Vat Exempt OUTPUT VAT PO INPUT VAT NIA __ Not Allowed VAT PAYABLE 5 The vat paid by non-vat registered purchasers of goods or services she be treated by the purchaser elther as part of its operating expense or cost. aes 274Valae Adfed Tae OF Goons The following sales by vat-re; ‘, -registara aye vatunder Section 106 (A}(2)a) of The Tae eae al be ube o fo, 10963, otherwise known as as the TRAIN Lay 1 omeraed by PA ection 106 (A)(2){a) of the Tax Coa d actual shi (t) Sale and ipment of goods from the Phil i g hi cay eso of ay apg rrr at yb oe ee Sat baal or determine the transfer of ownership of the aon aid for in acceptable forel f equivalent in goods or services, and accounted for in 2000 oe hat the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (ROE ea (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. (3) “**Sale of raw materials or packaging materials fo @ non-resident 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, pald for in acceptable currency, and accounted for in accordance with the rules and regulations of the BSP; . (4) “Sales to Export-Oriented enterprises which the code considers as export sales at the level of the supplier of raw materials. The sale 1S eeidered zero rated only if the sale of raw materials oF packaging materials is made to an export oriented-enterprise whose export sales exceed seventy percent (70%) of actual annual production; fr . 226, otherwise known as (5) “Export Sales under Executive Order No. 226, : the Omnibus Investment Code cof 1987 and other special laws; equipment and fuel fo persons engaged in 6 lies, (8) Sale of goods, or international ar ransport operations. international shipping or in 275Vale + Med Tag (OW SUBJE ‘4 Export Sao of 600D8 undo ms (2) (9 and (6) above ara NOW SUBJECT 70 tay N ofthe following: YATUPON SATISEA( io follow Pao Sar eun an inpraiaton of entaee n sem tat oan * rafunds of creditable ing tox wn 20 228 eat ae sn ith the BIR; The ninely (00) day per 4 esublehert of fe re CG VAT Rotund System shall only be Up 10 the date of rt on such application for VAT refund by 1 approval of the Recommendation Repor P mF Cernmissnet ot his duly authorized representative; Provided: that all claims for rofunditax credit certificate fled prior fo January 1, 2018 will be governed by the one. dred (120)-day processing period; and : b, Apna a rend vrai cs of Dec. 31, 2017 shall be fly paid in cash by Dec, 3, 2019. ‘The Bureau of Internal Revenue issued Revenue Regulation No. 9. 2021 dated June 9, 2021 stating that the transactions previously treated as zero rated (0%) sale of GOODS for vat purposes under Section 406(A)(2)(a) (3), (4) and (5) are NOW subject to 12% Vat. Gia a ee ee OU ae PUPS tenet erect cea CN (SIA =H) ak cele) SoA Tae) PESSeE Mee acalane (1) Sale and actual shipment of goods from the Philippines to a foreign country, iespective of any shipping atrangement 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). (2) Sale of goods, supplies, equipment and fuel to persons engaged in intemational shipping or international air transport operations: Provided, that the goods, supplies, equipment and fuel shall be used exclusively for international shipping or air transport operations. Apparently, subparagraph (A)(2)(a)(2) of Section 106 of the Tax Code as amended by TRAIN law was omitted in the revised list of zero rated (0%) SALE OF GOODS under RR 9-2021, causing confusion as 0 whether sale and delivery of goods to PEZA registered entities are now Subject to 12% vat or stil considered zero rated (0%) sale. Based on RR 8.2021, itis now subject to 12% vat since it was omitted in the revised list of zero rated (0%) sale of goods enumerated in Section 3 of RR 9-2021. 276Valee Mdfed Ta tion 106(A)(2)(a) (2) provigle a Paha ea (2) provides that the following shall bo subject to SALE AND DELIVERY OF GOODs To: Registered enterprises with \ | prises within a separe provided under special laws; and ate customs (erritory as Registered enterprises i i within tourism enterprise zones as ne by he, Tourism Infasructure and Enterprise Zone ject to the pri No. 9599 or The Tourism Actof 2009 ee The humble opinion of the authors on this issue is that, sale of goods to PEZA registered entities is still subject to 0% vat because the TRAIN Law clearly provided that only Sections 106(A)(2)(a) (3), (4) and (5) shall be subjected to 12% vat upon satisfaction of certain conditions described in the preceding page. However, for purposes of discussion in this book, the provisions of RR 9-2021 were applied. The Philippine Economic Zone Authority (PEZA) already wrote to Secretary Carlos Dominguez of the Department of Finance (DOF) ‘seeking clarification fin view of the confusion caused to PEZA ecozone enterprises of the issuance of RR 9-2021. As of the date of printing of this book, the DOF is yet to address the said issue. ZERO RATED) SALEJEXPORT: PS as als The following Sale of Services “performed in the Philippines” shall be subject to ZERO percent (0%) vat: Section 108 (B) of the Tax Cod: 1. “processing, manufacturing or repacking goods for other "persons doing business outside the Philippines which goods are cubsequently exported, where the services are pald for ip acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pillpinas (BSP); 277Valhe Added Te antioned In the preceding paragraph, "tin business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines whon the services are performed, the consideration for which Is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); . 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; Services other than those 1m rendered to a person engage rsons engaged in international shipping or 's, including leases of property for | be exclusive for Services rendered to pel international air transport operation: use thereof: Provided, that these services shall international shipping or air transport operations; subcontractors and/or contractors in or manufacturing goods for an .d seventy percent (70%) of *Services performed by processing, converting, enterprise whose export sales excee total annual production; . Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign country; . Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, other emerging energy sources using geothermal, ocean energy, and technologies such as fuel cells and hydrogen fuels. . 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Valte/ tdded Toe *#4¥Export sale of SERVI ICE undor item: W SUBYI y 1s (1) and (5) of the pracading pages ARE io remem UPON SATISFACTION o THE FOLLOWING - 70ns reunds of ce and implementation of an enhance refund system that application with the BIR, He inpul tax within 90 days fromm the fling of the vat refund the establishment of te ely (90) cay period to procs and decid, pending checproal of tn hy he enhanced VAT Refund System shall only be up to the date the Commissioners cormendaon Report on such appatin for VAT fund by refundhax credit oe a! San Tepresentative; Provided; that all claims for one-hundred (120) prior fo January 1, 2018 wil be governed by the lay processing period: and b a peng ‘at relund claims as of Dec. 31, 2017 shall be fully paid in cash by Dex. The Bureau of Internal Revenue is: i sued Revenue Regulation No. 9- 2021 dated om 9, 2021 stating that the transactions previously treated as zero rated SALE OF SERVICE for vat purposes under Section 108(B) (1) and (5) are NOW subject to 12% Vat. PUP ac ee co ral gal eae ae AOR MS oe cmc eased joses shall be as follow: Services other than those mentioned in the preceding paragraph, rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); 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; . Services rendered to persons engaged in international shipping or international air transport operations, including leases of property for use thereof: Provided, that these services shall be exclusive for international shipping or air transport operations; |. Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign country; Sale of power of 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. 279