Zero-rated sale - Seller must be a VAT-registered person.

Taxable transaction for VAT

purposes but the sale does not result in any output tax. The Input tax however, shall be
available as tax credit or refund.

Zero rated vs. VAT-exempt transactions

Zero-rated VAT Exempt

1. Refers to the export sale of good and 1. Seller shall not bill any output tax on his
supply of services. Hence, Output tax Rate sales. No Ouput Tax Rate.
is set to zero.
2. The seller of such transactions charges 2. Corollarily, seller is not allowed any
NO output tax but can claim a refund or tax credit or refund of the input taxes he paid
credit certificate for the VAT previously on his purchases.
charged by suppliers (AT&T
Communications Services Phils., Inc. V.
CIR, G.R. No. 182364, August 3, 2010)
Example: NO Output Tax
Output Tax P 0.00 NO Input Tax
Less: Input Tax 5,000.00 NO Tax credit
Excess input tax P 5,000.00

Basis Exempt Zero-rated

Nature of transaction Not taxable; removes VAT
at the exempt stage
By whom made Need not be a VAT-
registered person
Input tax Not subject to Output Tax,
thus cannot claim input tax
credit.
Tax Credit/Refund Cannot avail of tax credit.
Thus, may result in
increased prices (Partial
Relief)
Transaction is taxable for
VAT purposes although the
tax levied is 0%
Made by a VAT-registered
person
May claim input tax credit
although the transaction
resulted to zero output tax.
Can claim or enjoy tax
credit/refund (Total Relief)
Zero rated vs. Effectively Zero-rated Transactions
(G.R No. 153866, February 11, 2005)

Zero-Rated Effectively Zero-rated

Generally refer to the export sale of goods
and supply of services.
Refer to the sale of goods or supply of
services to persons or entities whose
exemption under special laws or
international agreements to which the
Philippines is signatory effectively subjects
such transaction to a zero-rate.

Effectively Zero-Rated vs. Automatic Zero-Rated

Basis Effectively Zero-rated Automatic Zero-Rated

Transaction
Nature Refer to sales to persons or
entities whose exemption
under special laws or
international agreements to
which the Philippines is a
signatory
Need to apply for zero- An application for zero-
rating rating must be filed and the
BIR approval is necessary
before the transaction may
be considered zero-rated
For whose benefit is it Intended to benefit the
intended purchaser who, not being
directly and legally liable
for the payment of VAT,
will ultimately burden of
the tax shifted by the
suppliers.
Stamping of zero-rated on Required. The buyer, as
VAT invoice or receipt shown by his address in the
sales invoice and shipping
documents is located
outside the Philippines
merely by fiction of law
Effect Results in no tax chargeable against the purchaser.
The seller can claim refund or a tax credit certificate for
the VAT previously charged by suppliers.
Transaction
Refer to export sales and
foreign currency
denominated sales
No need to file an
application form to secure
BIR approval before the
sale is considered zero-rated
Primarily intended to be
enjoyed nu the seller who is
directly and legally liable
for the VAT, making such
seller internationally
competitive by allowing the
refund or credit of input
taxes that are attributable to
export sales
Not required. The buyer, as
shown by his address in the
sales invoice and shipping
documents, is located
outside the Philippines.
VAT Computation
Basis of VAT
Nature of Transaction
Sale of Goods or Properties
Sale of Services
Importation
Tax Base
Gross Selling Price (RR No. 8-2018
Sec.2)
Gross Receipts (RR No. 8-2018 Sec.2)
Total Landed Cost
Dealers in Securities Gross Income (RR No. 8-2018 Sec.2)