Value-Added Tax

value added tax- is a type of sales tax which is levied on consumption on the sale of
goods, services or properties, as well as importation in the Philippines.

Per Republic Act 9337, also known as the Value-Added Tax Reform Act, Every person
is subject to VAT if the aggregate of his actual or expected Gross sales or gross
receipts exceeds Three Million (P3, 000,000).

Any business or business pursued by an individual where the agregate gross sale or
receipts do not exceed P100,000 during any 12 month period shall be considered
principally for subsistence or livelihood and not in the course of business.

Gross Selling Price

Gross selling price is 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 VAT.

Sales returns and allowances for which a proper credit or refund was made, and sales
discounts determined and granted at the time of sale which are expressly indicated in
the invoice, are proper deductions from gross selling price to arrive at the tax base.

Tax base and rates

There shall be levied, assessed and collected on every sale, barter or exchange of
goods or properties, a value-added tax equivalent to 12% of the gross selling price of
the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or
transferor.
VAT on Sale of Goods or Property

On sale of goods and properties - twelve percent (12%) of the gross selling price or
gross value in money of the goods or properties sold, bartered or exchanged

Goods or property shall mean all tangible and intangible objects that are capable of
pecuniary estimation and shall include:

1. Goods or property held primarily for sale to customers or held for lease in the
ordinary course of trade or business
2. The right or the privilege to use patent, copyright, design or model, plan, secret
formula or process, goodwill, trademark, trade brand or other like property or
right;
3. The right or privilege to use in the Philippines of any industrial, commercial or
scientific equipment;
4. The right or the privilege to use motion picture films, films, tapes and disc; and
5. Radio, television, satellite transmission and cable television time.

Zero-Rate Sales

 Export Sales means:

 Direct Export
 Indirect Export
 Sale of raw materials or packaging materials to an export-oriented
enterprise
 Sale of good or property to persons or entities whose exemption under
special law or international agreements to which the Philippines is a
signatory e.g., ADB and IRRI
 The sale of goods, supplies, equipment and fuel to person engaged in
international shipping or international air transport operation
 Constructively exported
A PEZA-registered export producer enterprise
 An export-producer enterprise operating a Customs Bonded
Manufacturing

Other Export Sales:

 Sale of raw materials or packaging materials to export-oriented enterprise whose

export sales exceeds 70% of the total production
 Omnibus Investments Code of 1987 and other special laws.

These two Other export sales are no longer considered export sales subject to zero
percent VAT and they are subject to 12% VAT if:

 The successful establishment and implementation of an enhanced VAT

refund system that grants refunds of creditable input tax within 90 days
from the filing of the VAT refund application with the Bureau.
 All pending VAT refund claims as of December 31, 2017 shall be fully paid
in cash by December 31, 2019

Transactions Deemed Sales

The following Transaction Deemed Sales are subject to VAT:

 Transfer, use or consumption not in the course of business of goods or property

originally intended for sale or for use in the course of business.
 Distribution or transfer to:
 Shareholders or investors as share in the profits of the VAT-registered
persons;
 Creditors in payment of debt or obligation
 Consignment of goods if actual sale is not made within 60 days following the date
such goods were consigned
 Retirement from or cessation of business, with respect to inventories of taxable
goods existing as of such retirement or cessation
 Cessation of status as a VAT-registered person.

NOTE: The rule of VAT on deemed sales of VAT-taxpayers shall apply only if:

1. The Property transferred is an ordinary asset

2. The Property transferred is a vatable property

The following transactions are not considered Transaction Deemed Sale:

 Change of control of a corporation by the acquisition of the controlling interest of

such corporation by another stockholder or group of stockholder.
 Change in the trade or corporate name of the business
 Merger or consolidation of corporations

Sale of Real Properties

Gross Selling Price on sale of real property is either “selling price stated in the sale
document or “the fair market value”. Fair market value shall mean whichever is
higher of Zonal Value or Real Property Tax Declaration.

The following sale of properties is subject to VAT:

 Sale of residential lot with gross selling price exceeding P1,919,500

 Sale of residential house and lot or other residential dwellings with gross
selling price exceeding P3,199,200 (where instrument sale is nominated
as a deed of absolute sale, deed of conditional sale or otherwise)
 Sale, transfer or disposal within 12 month of two or more adjacent
residential lots, house and lots or other residential dwellings in favor of
one buyer from the same selle, for the purpose of utilizing the lots, house
and lots or other residential dwellings as one residential area wherein the
aggregate value of adjacent properties exceeds P1,919,500 for residential
lots and P3,199,200 for residential house and lots or other residential
dwellings.
 A real estate investment trust shall be subject to VAT on its gross sales
from any disposal of real property.
 Installment sales of residential house and lot or other residential dwellings
with gross selling price exceeding P1,000,000.

Sale of real Property on Installment Plan

Formula:

VAT = Actual collection (exclusive of the VAT) x zonal Value x 12

Agreed consideration (exclusive of the VAT)

Sale of installment or on deferred Payment

Sale of real property on installment plan means the initial payment of which in
the year of sale do not exceed 25% of the Gross selling price.
 Sale of real property on a deferred payment basis means the initial payment of
which in the year of sale exceeds 25% of the Gross selling price.

Advance VAT

Advance percentage tax - Any person who is not a VAT registered person is subject to
3% percentage tax.

Advance VAT – Sale of refine sugar

Raw Cane Sugar – shall mean the natural sugar extracted from sugarcane.
Refined Sugar – product of refining process.

The business tax ( percentage or VAT) shall be paid in advance.

Base price – the base price of Advance VAT: P1,400 per 50 kg. bag of sugar.

Exemptions from the Payment of the Advance VAT:

 Withdrawal of Raw cane sugar

 Withdrawal of sugar by a duly accredited and registered Agricultural Cooperative in
Good Standing.
 Withdrawal of Sugar by a duly accredited and registered Agricultural Cooperative and
sold to another Agricultural Cooperative.

Advance VAT – Sale of Flour by Millers

Flour Miller is a person who is engaged in the milling of imported wheat.

Wheat Trader – is a person who is engaged in the importing and selling of imported wheat.

The advance VAT shall be paid prior to the release from custom’s custody of the wheat.

For Flour miller. The advance VAT shall be paid prior to the delivery of the wheat by the trader.

Basis of the advance VAT

For wheat imported by millers: - 75% of the sum of:

 a. Invoice value multiplied by the currency exchange rate on the date of payment
b. Estimated customs duties and other charges
c. 5% of the sum of a. and b.

For wheat purchased by flour millers from wheat traders: - 75% of the sum of

a. Invoice value
b. Estimated freight
c. 5% of the sum of a. and b.

Advance VAT on the transport of naturally grown and planted timber products

Basis of advance VAT

The 12% advanced VAT shall be based on per cubic meter of each species of naturally
grown timbers
Advance VAT -Sale of jewelry, gold and other metallic minerals to NRA-NETB or NRFC.

Revenue regulations 5-2013 prescribed the tax treatment of the sale of jewelry, gold
and other metallic minerals to a non-resident foreign corporation

Sellers of jewelry, gold and other metallic minerals are required to pay business tax
(VAT or percentage tax) income and excise tax, if applicable, in advance through the
assigned Revenue Collection Officers of the Revenue District Office having jurisdiction
over the place where the subject transaction occurs, regardless of whether the sellers
are duly registered with the BIR:

A. Advance payment of 12% VAT on gross selling price, percentage tax at the rate of
3% on gross sales, as the case may be;

B. Advance payment of income tax at the rate of 5% on gross payment;

C. Actual payment of 2% excise tax based on either the actual market value of the
gross output at the time of removal, in the case of those locally extracted or produced
or the value used by the Bureau of Customs in computing tariff and duties, in the case
of importations. Actual market value shall refer to the actual consideration paid by the
buyer to the seller.

The advance payments shall be credited against the actual business tax and income tax
due from such persons for the taxable period for which such advance payments were
remitted to the BIR.