Tax 102 – Business and Transfer Tax

Prepared by: Mark Paul I. Ramos

MODULE 1
Business Taxes – Value-Added Tax

INTRODUCTION
This module introduces the basic principles and foundations of Value-Added Tax.
The main topics that will be covered will include: background of value-added taxes, reforms
introduced by VAT, nature and characteristics of VAT, its scope, ang VAT threshold. This
module also discusses the exemptions from VAT, (e.g. persons or entities, transactions).
Application of VAT to Senior Citizens, and Persons with Disabilities will also be tackled in
this course. Discussions will include the changes applied in effect of the TRAIN Law.

INTENDED LEARNING OUTCOMES

ILO 1 – Demonstrate an extensive knowledge on the background, nature, scope, and
characteristics of Value-Added Tax
ILO 2 – Application of the VAT threshold and understand the exemptions relevant to VAT
ILO 3 – Understand VAT related to Senior Citizens and Persons with Disability
ILO 4 – Achieve best skills in resolving problems involving VAT

Value-Added Tax Defined

Value-Added Tax (VAT) is a form of sales tax. It is a tax on consumption levied on
the sale, barter, exchange or lease of goods or properties and services in the Philippines
and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or
passed on to the buyer, transferee or lessee of goods, properties or services.

Background of Value-Added Tax

The value-added tax became effective in the Philippines on January 1, 1988, by
virtue of Executive Order No. 273. Its imposition has replaced and eliminated certain
traditional business taxes in the Philippines.

With the approval of Republic Act Nos. 7716, 8241, 8424, 8761, 9010, 9337 and
other tax laws, more traditional business taxes were abolished and replaced by VAT.

The following taxes were abolished by the aforementioned laws:

1. Sales tax on original sakes
2. Subsequent sales tax
3. Contractor’s tax
4. Miller’s Tax
5. Broker’s Tax
6. Tax on cinematographic film owner, lessor, or distributor
7. Advance sales tax
8. Compensating tax
9. Excise taxes on matches, solvents, and video tapes
10. Tax on hotels, motels, etc.
11. Tax on dealers in securities

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12. Tax on lending investors

13. Caterer’s tax
14. Tax on insurance premiums of non-life insurance companies (except crop
insurance)
15. Tax on franchises, except radio and television broadcasting companies whose
annual gross receipts of the preceding year do not exceed P10,000,000 and gas
and water utilities

The passage of Republic Act No. 9337 has introduced the following transactions
into the value-added tax world. Thus, the following sales of goods and services are now
subject to VAT:
1. Sale of non-food agricultural, marine, and other forest products in their original
state by the primary producer or owner of the land;
2. Sale of cotton and cotton seeds in their original state;
3. Sale or importation of coal and natural gas, in whatever state or form;
4. Sale or importation of petroleum products, including raw materials for their
production;
5. Sale by the artist of his works of art, literary works, musical compositions and
similar creations, or his services performed for the production of such works;
6. Services rendered by doctors of medicine duly registered with the Professional
Regulation Commission and by lawyers duly registered with Integrated Bar of
the Philippines;
7. Common carriers by air and sea relative to their transport of passengers from
one place in the Philippines to another place in the Philippines;
8. Toll road operations;
9. Sale of electricity by generation, transmission, and distribution companies; and
10. Sale by electric cooperatives as well as importation of machines and equipments
including spare parts.

Reforms introduced by VAT

The imposition of Value-added tax has affected the following reforms:
1. Simplification of business tax system
2. Improvement of equity, and
3. Enhancement of efficiency in tax administration

Nature and Characteristics of VAT

The Value-added tax is a tax on consumption levied on the sale, barter, exchange or
lease of goods or properties and services in the Philippines and on importation of goods in
the Philippines. The seller is the one statutorily liable for the payment of tax but the amount
of the tax may be shifted or passed on to the buyer, transferee or lessee of the goods,
properties or services.

Scope of VAT
The following transactions entered into by any person are subject to VAT:
1. Any sale, barter, or exchange of goods and properties (including real properties),
or similar transactions, in the course of trade or business
2. Any sale of services, or similar transactions, in the course of trade or business

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3. Any lease of goods and properties, or similar transactions, in the course of trade
or business, and
4. Any importation of goods, whether in the course of trade or business or not.

“Persons” refers to any individual, trust, estate, partnership, corporation, joint venture,
cooperative or association.

“Taxable person” refers to any person liable for the payment of value-added tax,
whether or not registered in accordance with the provisions of the National Internal
Revenue Code.

The phrase “in the course of trade or business” means the regular conduct or pursuit of
a commercial or an economic activity, including transactions incidental thereto, by any
person regardless of whether or not the person engaged therein is a non-stock non-
profit private organization (irrespective disposition of its net income and whether or not
it sells exclusively to members or their guests), or government entity.

However, any business or businesses pursued by an individua where the aggregate

gross sales 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 trade or
business.

Non-resident persons who perform services in the Philippines are deemed to be

making sales in the course of trade or business even if the performance of services is
not regular.

Generally, the persons subject to VAT are those whose gross annual sales or receipts
during any year or in any 12-month period exceed P3,000,000 (TRAIN Law) or those
whose sales or receipts do not exceed this amount, but registered under the value-
added tax system.

A person commencing a new business becomes taxable if he expects to realize an

annual gross sales or receipts in excess of P3,000,000 from taxable transactions for
the next 12 months.

Application of the threshold

For purposes of the threshold of P3,000,000, the husband and wife shall be considered
as separate taxpayers.

However, the aggregation rule for each taxpayer shall apply; for instance, if a
professional, aside from the practice of his profession, also derives revenue from other lines
of business which are otherwise subject to VAT, the same shall be combined for purposes of
determining whether the threshold has been exceeded.

Thus, the VAT-exempt sale shall not be included in determining the threshold.

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Government and its political subdivisions

The term government consisting the three branches, namely: executive, legislative and
judiciary which undoubtedly are performing essential government function are not subject to
tax because the government should not tax itself.

However, a government entity is taxable if it sells goods or services in the course of

business. Thus, government entities and instrumentalities, including government-owned or
controlled corporations, are subject to VAT.

Excise tax, value-added tax and other percentage taxes

Persons, transactions or goods may be subject to value-added tax and excise tax at the
same time.

There is no situation, however, where a person or transaction can be subject to value-

added tax and other percentage taxes at the same time.

Thus, persons and transaction that are subject to other percentage taxes are no longer
subject to value-added tax but may, however, be subject to excise tax.

Exemptions from VAT

Exemptions from VAT may be broadly categorized into:
1. Exempt persons – Persons who are not liable to VAT
2. Exempt transactions – transactions on certain goods, properties or services which
are sold by VAT-registered or non-VAT registered person and regardless of the
annual gross sales or receipts derived therefrom.

Exempt persons or entities

There is no provision in the VAT law which expressly exempts certain persons from
payment of the VAT because indirect taxes such as value-added tax are levied on objects or
transactions.

Exempt transactions
While some value-added tax transactions are subject to 12% tax and others are zero-
rated, there are also transactions which are not subject to VAT. They are as follows:
1. Sale or importation of agricultural and marine food products in their original state,
livestock, and poultry of a kind generally used as, or yielding or producing, foods
for human consumption; and breeding stock and genetic materials;
a. Products considered in their original state:
i. Products which undergone simple processes of preparation or
preservation for the market (freezing, drying, salting, broiling,
roasting, smoking or stripping)
ii. Polished or husked rice
iii. Corn grits
iv. Raw cane sugar and molasses
v. Ordinary salt
vi. Copra

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As per RMC 53-2007, it is to be noted that sale of non-food agricultural products;

marine and forest products in their original state by the primary producer or owner of the
land where the same are produced as well as the sale of cotton and cotton seeds in their
original state are subject to VAT.

2. Sale or importation of fertilizers, seeds, seedlings and fingerlings, fish, prawn,

livestock and poultry feeds, including ingredients, whether locally produced or
imported, used in the manufacture of finished feeds (except specialty feeds for
race horses, fighting cocks, aquarium fish, zoo animals and other animals
generally considered as pets)

3. Importation of personal and household effects belonging to

a. Residents of the Philippines returning from abroad, and
b. Non-resident citizens coming to resettle from the Philippines
- Provided that such goods are exempt from customs duties

4. Importation of professional instruments and implements, tools of trade,

occupation or employment, wearing apparel, domestic animals, and personal and
household effects belonging to persons coming to settle in the Philippines or
Filipinos or their families and descendants who are now residents or citizens of
other countries, such parties hereinafter referred to as overseas Filipinos, in
quantities and of the class suitable to the profession, rank, or position of the
persons importing said items, for their own use and not for barter or sale,
accompanying such persons, or arriving within a reasonable time.
- Provided, that the Bureau of Customs may, upon the production of satisfactory
evidence that such persons are actually coming to settle in the Philippines and
that the goods are brought from their former place of abode;
- Provided further, that vehicles, vessels, aircrafts, machineries and other similar
goods for use in manufacture, shall not fall within this classification and shall
therefore be subject to duties, taxes and other charges.

5. Services subject to percentage taxes under Title V of the Tax Code, as follows:
a. Lease of goods or properties or the performance of services of non-VAT-
registered persons, other than the transactions mentioned from
paragraphs (A) to (AA) of Sec 109(1) of the Tax Code, the gross annual
sales and/or receipts of which does not exceed the amount of
P3,000,000. Provided, however that the same shall be subject to the 8%
tax on gross sales or receipts and other non-operating income under
Section 24(B) of the National Internal Revenue Code, as amended.
b. Services rendered by franchise grantees of radio and/or television
broadcasting whose annual gross receipts of the preceding year do not
exceed P10,000,000, and by franchise grantees of gas and water utilities
c. Services of proprietors, lessees or operators of cockpits, cabarets, night
or day clubs, boxing exhibitions, professional basketball games, jai-alai,
and racetracks
d. Services rendered by any person, company, or corporation (except purely
cooperative companies or association) doing life insurance business of
any sort in the Philippines

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e. Services rendered by fire, marine or miscellaneous insurance agents of

foreign insurance companies
f. Receipts on sale, barter or exchange of shares of stock listed and traded
through the local stock exchange or through initial public offering
g. Services rendered by domestic common carriers by land, for the transport
of passengers, and keepers of garages
h. Services rendered by international air or shipping carriers for the transport
of goods and cargo originating in the Philippines and going abroad, and
i. Services rendered for overseas dispatch, message, or conversation
originating from the Philippines.

6. Services by agricultural contract growers and milling for others of (1) palay into
rice, (2) corn into grits, and (3) sugar cane into muscovado and raw cane sugar.

7. Medical, dental, hospital and veterinary services, except those rendered by

professionals

8. Educational services rendered by private educational institutions duly accredited

by the (1) DepEd, (2) CHED, (3) TESDA and those rendered by (4) government
educational institutions

9. Services rendered by individuals pursuant to an employer-employee relationship

10. Services rendered by regional or area headquarters established in the Philippines

by multinational corporations which act as supervisory, communications and
coordinating centers for their affiliates, subsidiaries or branches in the Asia
Pacific Region and do not earn or derive income from the Philippines

11. Transactions which are exempt under international agreements to which the
Philippines is a signatory or under special laws except those granted under
Petroleum Exploration Concessionaires under Petroleum Act of 1949

12. Sales by agricultural cooperatives duly registered and in good standing with the
CDA to their members, as well as sale of their produce, whether in its original
state or processed form, to non-members; their importation of direct farm inputs,
machineries and equipment, including spare parts thereof, to be used directly and
exclusively in the production and/or processing of their produce

13. Gross receipts from lending activities by credit or multi-purpose cooperatives duly
registered and in good standing with the CDA

14. Sales by non-agricultural, non-electric and non-credit cooperatives duly

registered with and in good standing with the CDA; provided, that the share
capital contribution to each member does not exceed P15,000 and regardless of
the aggregate capital and net surplus ratably distributed among the members

15. Export sales by persons who are not VAT-registered

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16. Sales of real properties, as follows:

a. Sale of real properties not primarily held for sale to customers or held for
lease in the ordinary course of trade or business.

However, even if the real property is not primarily held for sale to
customers or held for lease in the ordinary course of trade or business but
the same is used in the trade or business of the seller, the sale thereof
shall be subject to VAT being a transaction incidental to the taxpayer’s
main business.

b. Sale of real properties utilized for low-cost housing as defined by RA No

7279, otherwise known as the “Urban Development and Housing Act of
1992” and other related laws, wherein the price ceiling per unit it
P750,000.

“Low-cost housing” refers to housing projects intended for homeless low-

income family beneficiaries, undertaken by the Government or private
developers, which may be either be a subdivision or a condominium
registered and licensed by the Housing and Land Use Regulatory Board
(HLURB) under BP Blg 220, PD No. 957 or any other similar law, wherein
the unit selling price is within the selling price per unit as set by the
Housing and Urban Development Coordinating Council (HUDCC)
pursuant to RA 7279 otherwise known as “Urban Development and
Housing Act of 1992” and other laws.

c. Sale of real properties utilized for socialized housing as defined under RA

No 7279 and other related laws, such as RA 7835 and RA No 8763,
wherein the price ceiling per unit is P450,000

“Socialized housing” refers to housing programs and projects covering

houses and lots or home lots only undertaken by the Government or the
private sector for the underprivileged and homeless citizens which shall
include sites and services development, long-term financing, liberated
terms on interest payments, and such other benefits in accordance with
the provisions of RA 7279, RA 7835, and RA 8763.

“Socialized housing” also refer to projects intended for the underprivileged

and homeless wherein the housing package selling price is within the
lowest interest rates under the Unified Home Lending Program (UHLP) or
any equivalent housing program of the Government, the private sector or
non-government organizations.

d. Sale of residential lot valued at P1,500,000 and below, or house and lot
and other residential dwellings valued at P2,500,000 and below where the
instrument of sale/transfer/disposition was executed on or after January 1,
2012.

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If two or more adjacent residential lots are sold or disposed in favor of one
buyer, for the purpose of utilizing the lots as one residential lot, the sale
shall be exempt from VAT only if the aggregate value of the lots do not
exceed P1,500,000. Adjacent residential lots, although covered by
separate titles and/or separate tax declarations, when sold or disposed to
one and the same buyer, whether covered by one or separate Deed of
Conveyance, shall be presumed as a sale of one residential lot.

Provided, beginning January 1, 2021, the VAT exemption shall only apply
to sale of real properties not primarily held for sale to customers or held
for lease in the ordinary course of trade or business, sale of real property
utilized for socialized housing as defined by RA 7279, sale of house and
lot, and other residential dwellings with selling price of not more than
P2,000,000.

Provided further, that every 3 years thereafter, the amounts stated herein
shall be adjusted to its present value using the Consumer Price Index, as
published by the Philippine Statistics Authority.

17. Lease of residential units with a monthly rental per unit not exceeding P15,000,
regardless of the amount of aggregate rentals received by the lessor during the
year.

Lease of residential units where the monthly rental per unit exceeds P15,000 but
the aggregate of such rentals of the lessor during the year do not exceed
P3,000,000 shall be exempt from VAT (subject to 3% Percentage Tax).

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 while others are
leased out for more than P15,000 per unit, his tax liability will be as follows:
a. The gross receipts from rentals exceeding P15,000 per month per unit
shall be exempt from VAT regardless of the aggregate annual gross
receipts. It is also exempt from the 3% percentage tax.
b. The gross receipts from rentals exceeding P15,000 per month per unit
shall be subject to VAT if the aggregate annual gross receipts from said
units only exceeds P3,000,000. Otherwise, the gross receipts will be
subject to the 3% tax imposed under Section 116 of the Tax Code

In case of mixed transactions, the above mentioned rule should be observed.

The term “residential units” shall refer to apartments and houses and lots used
for residential purposes, and buildings, or parts or units thereof used solely as
dwelling places (e.g. dormitories, rooms and bed spaces) except motels, motel
rooms, hotels and hotel rooms, lodging houses, inns, and pension houses.

The term “unit” shall mean as apartment unit in the case of apartments; house in
the case of residential houses; per person in the case of dormitories, boarding
houses and bed spaces; and per room in case of rooms for rent.

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18. Sale, importation, printing or publication of books and any newspaper, magazine,
review, or bulletin which –
a. Appears at regular intervals
b. With fixed prices for subscription, and
c. Sale of which is not devoted principally to the publication of paid
advertisements

19. Transport of passengers by international carriers doing business in the

Philippines

20. Sale, importation or lease of passenger or cargo vessels and aircraft, including
engine, equipment and spare parts thereof for domestic or international transport
operations; provided however, that the exemption from VAT on the importation
and local purchase of passenger and/or cargo vessels shall be subject to the
requirements on restriction on vessel importation and mandatory vessel
retirement program of Maritime Industry Authority (MARINA)

21. Importation of fuel, goods and supplies by persons engaged in international

shipping or air transport operations, provided, that the fuel, goods and supplies
shall be used for international shipping or air transport operations. Thus, said
fuel, goods and supplies shall be exclusively or shall pertain to the transport of
goods and/or passengers from a port of the Philippines directly to a foreign port,
or vice versa, without docking or stopping at any other port in the Philippines
unless the docking or stopping at any other Philippine port is for the purpose of
unloading passengers and/or cargoes that originated from abroad, or to load
passengers and/or cargoes bound for abroad: provided further, that if any portion
of such fuel, goods or supplies is used for purposes other than that mentioned in
this paragraph, such portion of fuel, goods or supplies shall be subject to 12%
VAT

22. 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 Secs 121 and 122, respectively,
of the Tax Code

23. Sale or lease of good and services to senior citizens and persons with disabilities,
as provided under Republic Act Nos 9994 (Expanded Senior Citizens Act of
2010) and 10754 (An Act Expanding the Benefits and Privileges of Persons with
Disability), respectively

24. Transfer of property pursuant to Section 40 (C)(2) of the Tax Code, as amended

25. Association dues, membership fees, and other assessments and charges
collected on a purely reimbursement basis by homeowners’ associations and
condominium corporations established under Republic Act No. 9904 (Magna
Carta for Homeowners and Homeowners’ Association) and Republic Act No 4726
(The Condominium Act), respectively

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26. Sale of gold to the Bangko Sentral ng Pilipinas

27. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and
hypertension to beginning January 1, 2019 as determined by the Department of
Health, and

28. 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 P3,000,000

Exemption of Senior Citizens

The term “senior citizens” or “elderly” refers to any Filipino citizen who is a resident of
the Philippines and who is 60 years old or above.

It may apply to senior citizens with “dual citizenship” status provided they prove their
Filipino citizenship and have at least 6 months residency in the Philippines.

The sale of the following goods and services shall be exempt from the value-added
tax and subject to 20% discount.

1. Medicines, including influenza and pneumococcal vaccines, and such other

essential medical supplies, accessories and equipment to be determined by the
Department of Health

On all drug stores, hospital pharmacies, medical and optical clinics and similar
establishments dispensing medicines, the discount for sales of drugs/medicines
shall be subject to the guidelines to be issued by the Bureau of Food and Drugs,
Department of Health (BFAD-DOH), in coordination with the Philippine Health
Insurance Corporation (Philhealth).

For this purpose, the term “medicines” shall refer to both prescription and
nonprescription medicines, and articles approved by the BFAD-DOH, which are
intended for use in the diagnosis, cure, mitigation, treatment or prevention of
disease in man; but do not include food and devices or their components, parts,
or accessories.

The VAT exemption shall also be granted to the purchase of vitamins and
mineral supplements which are medically prescribed by an attending physician
for prevention and treatment of diseases, illness, or injury whose prescription is in
the name of Senior Citizen.

The VAT exemption shall also apply to the purchase of eyeglasses, hearing aids,
dentures, prosthetics, artificial bone replacements like steel, walkers, clutches,
wheelchairs whether manual or electric-powered, canes/quad canes, geriatric

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diapers, and other essential medical supplies, accessories and equipment by or

for senior citizens.

2. On the professional fees of attending physician/s in all private hospitals, medical

facilities, outpatient clinics and home health care services, where the discount
shall be based on compensation for services charged from the Senior Citizen

3. On professional fees of licensed professional health workers providing home

health care services as endorsed by private hospitals or employed through home
health care employment agencies, where the discount shall be based on the fees
charged from the Senior Citizen

4. On medical and dental services, diagnostic and laboratory fees in all private
hospitals, medical facilities, outpatient clinics, and home health care services, in
accordance with the rules and regulations to be issued by the DOH, in
coordination with Philhealth

a. “Medical services” refers to hospital services, professional services of

physicians and other health care professionals and diagnostic and
laboratory tests that are necessary for the diagnosis or treatment of illness
or injury
b. “Dental services” refers to oral examination, cleaning, permanent and
temporary filling extractions and gum treatments, restoration, replacement
or repositioning of teeth, or alteration of the alveolar or periodontium
process of the maxilla and the mandible that are necessary for the
diagnosis or treatment of an illness or injury

The VAT exemption shall apply to medical and dental services, diagnostic
and laboratory tests such as but not limited to X-rays, computerized
tomography scans, and blood tests that are requested by a physician as
necessary for the diagnosis and/or treatment of an illness or injury.

c. “Home health care services” refers to health or supportive care provided

to the Senior Citizen patient at home by licensed health care
professionals to include but not limited to, physicians, nurses, midwives,
physical therapists and caregivers

5. In actual fare for land transportation travel in public utility buses (PUBs), public
utility jeepneys (PUJs), taxis, Asian utility vehicles (AUVs), shuttle services and
public railways, including Light Rail Transit (LRT), Mass Rail Transit (MRT), and
Philippine National Railways (PNR)

6. On actual transportation fare for domestic air transport services and sea shipping
vessels and the like, based on the actual fare and advanced booking.

7. On the utilization of services in hotels and similar lodging establishments,

restaurants and recreation centers

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a. For hotels and similar lodging establishments, the discount shall for room
accommodation and other amenities offered by the establishment, such
as, but not limited to hotel-based parlors and aromatherapy rooms,
workout gyms, swimming pools, Jacuzzis, KTV bars, internet facilities,
food drinks, and other services offered. The term “hotel” shall include
beach and mountain resorts.
b. For this purpose, the term “hotel/hostel” shall refer to the building, edifice
or premises of a completely independent part thereof, which is used for
the regular reception, accommodation or lodging of travelers and tourists,
and the provision of services incidental thereto, for a fee
c. “Lodging establishment” shall refer to a building, edifice, structure,
apartment or house including tourist inn, apartelle, motorist hotel and
pension house engaged in catering, leasing or providing facilities to
transients, tourists or travelers. The following are considered as lodging
establishments:
i. Tourist Inn – a lodging establishment catering to transients, which
does not meet the minimum requirement of an economy hotel
ii. Apartelle – a building or edifice containing independent and
furnished or semi-furnished apartments, regularly leased to
tourists and travelers for dwelling on a more or less long-term
basis and offering basic services to its tenants, similar to hotels
iii. Motorist hotel – any structure with several separate units, primary
located along the highway, with individual or common parking
spaces, at which motorists may obtain lodging and, in some
instance,, meals
iv. Pension house – a private, or family-operated tourist boarding
house, tourist guest house or tourist lodging house, regularly
catering to tourist and/or traveler, containing several independent
table rooms, providing common facilities, such as toilets,
bathrooms/showers, living and dining rooms and/or kitchen and
where a combination of board and lodging may be provided
d. The term lodging establishment shall also include lodging houses, which
shall mean such establishments are regularly engaged in the hotel
business, but which nevertheless, are not registered, classified and
licensed as hotels by reason of inadequate essential facilities and
services. Long term arrangement for residential purposes is not covered.
e. For restaurants, the discount and exemption shall be for the sale of food,
drinks, dessert, and other consumable items served by the
establishments, including value meals and promotional meals offered for
the consumption of the general public

For this purpose, the term “restaurant” shall refer to any establishment
offering to the public, regular and special meals or menu, fast food,
cooled food, and short orders. Such eating places may also serve coffee,
beverages and drinks. Food establishments that are not restaurants are
not covered, therefore not allowed to give the 20% discount and VAT
exemption.

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f. For recreation centers, the discount shall be for the utilization of services
in the form of fees, charges and rental for sports facilities or equipment,
including golfcart rentals and green fees, or revenues, or venues for
ballroom dancing, yoga, badminton courts, bowling lanes, table or lawn
tennis, working gyms, martial arts facilities.

8. On admission fees charged by theaters, cinema houses and concert halls,

circuses, carnivals, and other similar places of culture, leisure and amusement,
where the discount shall be on the admission fees charged by the said
establishment

9. On funeral and burial services for the death of Senior Citizens – the beneficiary or
any person who shall shoulder the funeral and burial expenses of the deceased
Senior citizen shall claim the discount upon payment and presentation of his
death certificate. Such expenses shall cover the purchase of casket or urn,
embalming, cremation cost and other related services such as viewing or wake
cost, pick-up from the hospital morgue, transport of the body to intended burial
site in the place of origin, but shall exclude obituary publication and cost of the
memorial lot.

The sale to a Senior Citizen must follow the invoicing requirements prescribed under
Revenue Regulations 16-2006. If the seller uses a Point of Sale Machine or a Cash Register
Machine in lieu of the regular sales invoice, the machine tape must properly segregate the
exempt sales from the taxable sales.

The input tax attributable to the exempt sale shall not be allowed as an input tax
credit and must be closed to cost or expense account by the seller.

The exemption herein granted will not cover other indirect taxes that may be passed
on by the seller to a Senior Citizen buyer such as percentage tax, excise tax, etc.

Persons with Disability (PWD)

PWDs are those who have long-term physical, intellectual or sensory impairments
which in interaction with various barriers may hinder their full and effective participation in
society on an equal basis with others.

Exemption from VAT of PWD

20% discount and exemption from VAT, if applicable, on the following sale of goods
and services for the executive use and enjoyment or availment of the PWD:
1. On the purchase of medicines (generic and branded) in all drugstores; medical
and dental services including diagnostic and laboratory fees; professional fees of
attending doctors in all government facilities or all private hospitals and medical
facilities

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2. On actual fare for land transportation travel such as, but not limited to,
PUBs/PUJs, taxis, AUVs, shuttle services and public railways, including LRT,
MRT and PNR and Transportation Network Vehicle Services (TNVS) such as
Grab, Uber, and the like

3. On fare for domestic air and sea transportation based on actual fare

4. Hotels and similar lodging establishments, restaurants and recreation centers

5. On admission fees charged by theaters, cinema houses, concert halls, circuses,

carnivals and other similar places of culture, leisure and amusement

6. On funeral and burial services for the death of the PWD (purchase of casket, urn,
embalming, hospital morgue, transport of the body to intended burial site in the
place of origin, but shall exclude obituary publication and the cost of memorial lot)

All goods and services sold by the foregoing establishments not included in the
enumeration expressly provided by law shall not be considered for the 20% discount
privilege notwithstanding that they are for the exclusive use and enjoyment or availment of
the PWD.

The benefit and privileges indicated may only be granted to PWD who are Filipino
citizens, upon presentation of any of the following:
1. An identification card (ID) issued by the Persons with Disability Affairs Office
(PDAO) or the City/Municipality Social Welfare Development Office (C/MSWDO)
of the place where the person with disability resides
2. The passport of the concerned PWD
3. An identification card (ID) issued by the National Council on Disability Affairs

No Double Discounts to PWD

If a commercial establishment or law offers another discount, whichever is chosen by

the PWD shall apply unless the other discount can also be availed of.

If the PWD is also a Senior Citizen, he can avail of either discount but not both.

The same benefits and privileges shall be made available to Filipinos who hold
foreign passports but are registered as dual citizens and Filipinos who have reacquired their
Filipino citizenship thru Republic Act No 9225 or the Citizenship Retention and Re-
Acquisition Act of 2003.

Reference:

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 Tax 102 – Business and Transfer Tax
Prepared by: Mark Paul I. Ramos

Ampongan, O. E. G. (2020), Transfer, Business & Local Taxation (with Practice Set) 12/e

Bureau of Internal Revenue, Value-Added Tax, https://www.bir.gov.ph/index.php/tax-

information/value-added-tax.html

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