 I've read in the BIR website that a taxpayer needs to apply for a VAT

zero-rating with the Audit Information, Tax examination and Incentives Division
(AITEID) under the Assessment Service of the BIR National Office to avail of the
zero-rated sale. Do we need to apply prior to the sale or can we still apply even if
the one time sale was already transacted?

Please reply...

 #1 by jhaypatts on 30 Jul, 2013 21:37

 What is a zero-rated sale?

It is a sale, barter or exchange of goods, properties and/or services subject to 0%

VAT pursuant to Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable
transaction for VAT purposes, but shall not result in any output tax. However, the
input tax on purchases of goods, properties or services, related to such zero-rated
sales, shall be available as tax credit or refund in accordance with RR No. 16-
2005.

What transactions are considered as zero-rated sales?

The following services performed in the Philippines by VAT-registered person shall

be subject to zero percent (0%) rate:

    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);
    Services other than processing, manufacturing or repacking rendered to a
person engaged in business conducted outside the Philippines or to a non-
resident person 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 air transport
operations, including leases of property for use thereof; Provided, however, that
the services referred to herein shall not pertain to those made to common carriers
by air and sea relative to their transport of passengers, goods or cargoes from one
place in the Philippines to another place in the Philippines, the same being subject
to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting Feb. 1,
2006;
    Services performed by subcontractors and/or contractors in processing,
converting, or manufacturing goods for an enterprise whose export sales exceeds
seventy percent (70%) of total annual production;
    Transport of passengers and cargo by domestic air or sea carriers from the
Philippines to a foreign country. Gross receipts of international air carriers doing
business in the Philippines and international sea carriers doing business in the
Philippines are still liable to a percentage tax of three percent (3%) based on their
gross receipts as provided for in Sec. 118 of the Tax Code but shall not be liable
to VAT; and
    Sale of power or fuel generated through renewable sources of energy such as,
but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean
energy, and other shipping sources using technologies such as fuel cells and
hydrogen fuels; Provided, however that zero-rating shall apply strictly to the sale of
power or fuel generated through renewable sources of energy, and shall not
extend to the sale of services related to the maintenance or operation of plants
generating said power . 

The following sales by VAT-registered persons shall be subject to zero percent

(0%) rate:

    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,
paid 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);
        The sale of raw materials or packaging materials to a non-resident buyer for
delivery to as resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the said
buyer's goods, paid for in acceptable foreign currency, and accounted for in
accordance with the rules and regulations of the BSP;
        The sale of raw materials or packaging materials to an export-oriented
enterprise whose export sales exceed seventy percent (70%) of total annual
production;
        Sale of gold to the BSP;
        Transactions considered export sales under Executive Order No. 226,
otherwise known as the Omnibus Investments Code of 1987, and other special
laws; and
        The sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations; Provided, that the
same is limited to goods, supplies, equipment and fuel pertaining to or attributable
to the transport of goods and passengers 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 the
mentioned in this paragraph, such portion of fuel, goods and supplies shall be
subject to twelve percent (12%) output VAT.

    Foreign Currency Denominated Sales 

        The sale to a non-resident of goods, except those mentioned in Sections 149

and 150 of the Tax Code, assembled or manufactured in the Philippines for
delivery to a resident in the Philippines, paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the BSP. 

    Sales to Persons or Entities Deemed Tax-exempt under Special Law or

International Agreement 

        Sale of goods or property to persons or entities who are tax-exempt under

special laws or international agreements to which the Philippines is a signatory,
such as, Asian Development Bank (ADB), International Rice Research Institute
(IRRI), etc.

Where will taxpayers file their applications for VAT zero-rating?

Taxpayers shall file their application directly with the Audit Information, Tax
Exemption and Incentives Division (AITEID) under the Assessment Service, or
with the LTAID I and II, BIR National Office, as the case may be.

 #2 by jhaypatts on 30 Jul, 2013 22:04

 i posted an article above about zero rate vat. dont be confuse on

application for zero rate vat. application shall be applicable only on transaction that
covers special laws. and this simply means ano po ba ang business mo. qualified
po ba o hindi. 

transaction that covers special laws are - Approval for VAT zero-rating shall be
required only for transactions which fall under the provisions of Sections 106(A)(2)
(a)(3)(5) and (6); 106(A)(2)(c);and 108(B)(3),(4) and (5) of the National Internal
Revenue Code (NIRC) of1997, as last amended by Republic Act No. 9337.

SEC. 106. Value-Added Tax on Sale of Goods or Properties. -

(A)  Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter
or exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the
gross selling price or gross value in money of the goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor.
(1)  The term 'goods' or 'properties' shall mean all tangible and intangible objects
which are capable of pecuniary estimation and shall include:
 
(a)  Real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business;

(b)  The right or the privilege to use patent, copyright, design or model, plan,
secret formula or process, goodwill, trademark, trade brand or other like
property or right;

(c)  The right or the privilege to use in the Philippines of any industrial,
commercial or scientific equipment;

(d)  The right or the privilege to use motion picture films, tapes and discs; and

(e)  Radio, television, satellite transmission and cable television time.

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.

(2)  The following sales by VAT-registered persons shall be subject to zero percent
(0%) rate:
 

(a)  Export Sales. - The term 'export sales' means:

(1)  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);

(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);

(3)  Sale of raw materials or packaging materials to export-oriented

enterprise whose export sales exceed seventy percent (70%) of total
annual production;

(4)  Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and

(5)  Those considered export sales under Executive Order NO. 226,
otherwise known as the Omnibus Investment Code of 1987, and other
special laws.
SEC. 106. Value-Added Tax on Sale of Goods or Properties. -

(A)  Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter
or exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the
gross selling price or gross value in money of the goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor.

(2)  The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

 (c)  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.

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –

(B)  Transactions Subject to Zero Percent (0%) Rate - The following services performed in the
Philippines by VAT- registered persons shall be subject to zero percent (0%) rate.

 (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;
 (4)  Services rendered to vessels engaged exclusively in international shipping; and
 (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.

Accordingly, transactions falling under the provisions of Sections 106 (A)(2)

(a)(1),(2), and (4); 106(A)(2)(b); and 108(B)(1),(2),(6) and (7) of the NIRC
which are automatically considered as zero-rated shall not be covered by
this Order.

SEC. 106. Value-Added Tax on Sale of Goods or Properties. -

(A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter
or exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the
gross selling price or gross value in money of the goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor.

(2)  The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(a)  Export Sales. - The term 'export sales' means:

(1)  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);

(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);

(4)  Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –

(B)  Transactions Subject to Zero Percent (0%) Rate - The following services performed in the
Philippines by VAT- registered persons shall be subject to zero percent (0%) rate.

(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);

(2) Services other than those mentioned in the preceding paragraph, 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);

the approval of applications for vat zero rate shall be given prospective effect,
shall take effect on the date the application was received by the aiteid and in
no case shall it be given retroactive effect. 

hope it helps

I-Entreprenuer mo!!!

PJ

SEC. 106. Value-Added Tax on Sale of Goods or Properties. -

(A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the gross selling
price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be
paid by the seller or transferor.

(2)  The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
(a)  Export Sales. - The term 'export sales' means:

(1)  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);
 (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);

(4)  Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and

SEC. 106. Value-Added Tax on Sale of Goods or Properties. -

(A)  Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the gross selling
price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be
paid by the seller or transferor.
(2)  The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(b)  Foreign Currency Denominated Sale. - The phrase 'foreign currency denominated sale' means
sale to a nonresident of goods, except those mentioned in Sections 149 and 150, assembled or
manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP).

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –

(B) Transactions Subject to Zero Percent (0%) Rate - The following services performed in the
Philippines by VAT- registered persons shall be subject to zero percent (0%) rate.

(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);

(2) Services other than those mentioned in the preceding paragraph, 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);

 #3 by jhaypatts on 30 Jul, 2013 22:05

 up!

 #4 by jhaypatts on 21 Aug, 2013 02:28

 up!

 #5 by jhaypatts on 24 Aug, 2013 23:57

 up!

 #6 by MaLourdes on 02 Dec, 2013 11:04

 Our company (corporation) is exclusively dealing with foreign clients, to

whom we're selling IT services (software development).

"Services other than processing, manufacturing or repacking rendered to a person

engaged in business conducted outside the Philippines or to a non-resident
person engaged in business who is outside the Philippines when the services are
performed," => we're offering services to foreign companies

"the consideration for which is paid for in acceptable foreign currency" => the
foreign companies pay us using their own currency (USD, EUR, ...), it's
automatically converted to PHP as it reaches our bank account

"and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);" => not sure what's to be done here

An employee of the local BIR told us we can't avail of the zero percent VAT. On
the other hand I've also read several reports saying the BIR is wrong and the law
is on our side (article from 2005, don't know if it's still
accurate https://www.punongbayan-
araullo.com/pnawebsite/pnahome.nsf/section_docs/HM974V_24-11-05 ).

Does anyone has experience in that matter?

 #7 by aseret_1010 on 25 May, 2016 13:26

 Hi.May I know the requirements in applying for Zero Rating..Not PEZA nor
BOI..Just BIR Certification..Appreciate your response.Thank you very much

 #8 by aseret_1010 on 25 May, 2016 13:28

 Just want to clarify.When is the time a zero rated company(w/ BIR Cert)
has 0% input vat on purchases?