VALUE-ADDED TAX (VAT)
VALUE-ADDED TAX Who are Required to File VAT Returns?
Value-Added Tax Description
• 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.
When is a new VAT taxpayer required to apply for registration
and pay the registration fee?
New VAT taxpayers shall apply for registration as VAT Taxpayers
and pay the corresponding registration fee of five hundred pesos
(P500.00) using BIR Form No. 0605 for every separate or distinct
establishment or place of business before the start of their
business following existing issuances on registration.
Thereafter, taxpayers are required to pay the annual registration
fee of five hundred pesos (P500.00) not later than January 31,
every year.
Who are liable or REQUIRED to register as VAT taxpayers?
Any person who, in the course of trade or business, sells, barters
or exchanges goods or properties or engages in the sale or
exchange of services shall be liable to register if:
a. His gross sales or receipts for the past twelve (12) months,
other than those that are exempt under Section 109 (A) to
(U), have exceeded Three Million Pesos (P3,000,000.00):
or
b. There are reasonable grounds to believe that his gross
sales or receipts for the next twelve (12) months, other
than those that are exempt under Section 109 (A) to (U),
will exceed Three Million Pesos (P3,000,000.00).
National Internal Revenue Code, as amended Theories
• Any person or entity who, in the course of his trade or
business, sells, barters, exchanges, leases goods or
properties and renders services subject to VAT, if the
aggregate amount of actual gross sales or receipts exceed
Three Million Pesos (Php3,000,000.00)
• A person required to register as VAT taxpayer but failed to
register
• Any person, whether or not made in the course of his trade
or business, who imports goods
Value-Added Tax Rates
• 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
• On sale of services and use or lease of properties - twelve
percent (12%) of gross receipts derived from the sale or
exchange of services, including the use or lease of
properties
• On importation of goods - twelve percent (12%) based on
the total value used by the Bureau of Customs in
determining tariff and customs duties, plus customs duties,
excise taxes, if any, and other charges, such as tax to be
paid by the importer prior to the release of such goods from
customs custody; provided, that where the customs duties
are determined on the basis of quantity or volume of the
goods, the VAT shall be based on the landed cost plus
excise taxes, if any.
• On export sales and other zero-rated sales - 0%
What is the liability of a taxpayer becoming liable to VAT and
did not register?
Any person who becomes liable to VAT and fails to register as
such shall be liable to pay the output tax as if he is a VAT-
registered person, but without the benefit of input tax credits for
the period in which he was not properly registered.
Atty. Jenica A. Aquino, CPA, JD
Who may opt to register as VAT and what will be his liability?
a. Any person who is VAT-exempt under Sec. 109 of the Tax
Code, as amended, may, in relation to Sec. 109 (2) of the
same Code, elect to be VAT-registered by registering with
the RDO that has jurisdiction over the head office of that
person, and pay the annual registration fee of P500.00 for
every separate and distinct establishment.
b. Any person who is VAT-registered but enters into
transactions which are exempt from VAT (mixed
transactions) may opt that the VAT apply to his
transactions which would have been exempt under
Section 109 of the Tax Code, as amended.
c. Franchise grantees of radio and/or television broadcasting
whose annual gross receipts of the preceding year do not
exceed ten million pesos (P10,000,000.00) derived from
the business covered by the law granting the franchise
may opt for VAT registration. This option, once exercised,
shall be irrevocable. (Sec. 119, Tax Code).
d. Any person who elects to register under optional
registration shall not be allowed to cancel his registration
for the next three (3) years.
The above-stated taxpayers may apply for VAT registration not
later than ten (10) days before the beginning of the calendar
quarter and shall pay the registration fee unless they have
already paid at the beginning of the year. In any case, the
Commissioner of Internal Revenue may, for administrative reason
deny any application for registration. Once registered as a VAT
person, the taxpayer shall be liable to output tax and be entitled
to input tax credit beginning on the first day of the month following
registration.
Instances when a VAT-registered person may cancel his VAT
registration
a. If he makes a written application and can demonstrate to
the commissioner's satisfaction that his gross sales or
receipts for the following twelve (12) months, other than
those that are exempt under Section 109 (A) to (U), will not
exceed Three Million Pesos (P3,000,000.00); or
b. If he has ceased to carry on his trade or business, and
does not expect to recommence any trade or business
within the next twelve (12) months.
c. Take Note of BIR FORM 1905
When will the cancellation for registration be effective?
The cancellation for registration will be effective from the first day
of the following month the cancellation was approved.
What is the invoicing/receipt requirement of a VAT-registered
person?
A VAT registered person shall issue:
a. A VAT invoice for every sale, barter or exchange of goods
or properties; and
b. A VAT official receipt for every lease of goods or properties
and for every sale, barter or exchange of services.
May a VAT-registered person issue a single invoice/ receipt
involving VAT and Non-VAT transactions?
Yes. He may issue a single invoice/ receipt involving VAT and
non-VAT transactions provided that the invoice or receipt shall
clearly indicate the break-down of the sales price between its
taxable, exempt and zero-rated components and the calculation
of the Value-Added Tax on each portion of the sale shall be shown
on the invoice or receipt.
May a VAT- registered person issue separate invoices/
receipts involving VAT and Non-VAT transactions?
Yes. A VAT registered person may issue separate invoices/
receipts for the taxable, exempt, and zero-rated component of its
sales provided that if the sales is exempt from value-added tax,
the term "VAT-EXEMPT SALE" shall be written or printed
prominently on the invoice or receipt and if the sale is subject to
zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be
written or printed prominently on the invoice or receipt.
How is the Value-Added Tax presented in the receipt/
invoice?
The amount of the tax shall be shown as a separate item in the
invoice or receipt.
VALUE-ADDED TAX (VAT)
Sample:
Sales Price P 100,000.00
VAT 12,000.00
Invoice Amount 112,000.00
What is the information that must be contained in the VAT
invoice or VAT official receipt?
1. Name of Seller
2. Description of the goods or properties or nature of the
service
3. Unit cost
4. Quantity
5. Date of transaction
6. TIN of buyer, if VAT- registered and amount exceeds
P1,000.00
7. Address of Buyer
8. Business Style of Buyer
9. Name of Buyer
10. Statement that the seller is a VAT-registered person,
followed by his TIN
11. Business Address of the Seller
12. Business Style of the Seller
13. Purchase price plus the VAT, provided that
o The amount of tax shall be shown as a separate
item in the invoice or receipt;
o If the sale is exempt from VAT, the term "VAT-
EXEMPT SALE" shall be written or printed
prominently on the invoice or receipt;
o If the sale is subject to zero percent (0%) VAT, the
term "ZERO-RATED SALE" shall be written or
printed prominently on the invoice receipt; and
o If the sale involves goods, properties or services
some of which are subject to and some of which are
zero-rated or exempt from VAT, the invoice or
receipt shall clearly indicate the breakdown of the
sales price between its taxable, exempt and zero-
National Internal Revenue Code, as amended Theories
rated components, and the calculation of the VAT
on each portion of the sale shall be shown on the
invoice or receipt.
14. Authority to Print Receipt Number at the lower left corner
of the invoice or receipt.
What is the liability of a VAT-registered person in the
issuance of a VAT invoice/ receipt for VAT-exempt
transactions?
If a VAT-registered person issues a VAT invoice or VAT official
receipt for a VAT-exempt transaction but fails to display
prominently on the invoice or receipt the words "VAT-EXEMPT
SALE", the transaction shall become taxable and the issuer shall
be liable to pay the VAT thereon. The purchaser shall be entitled
to claim an input tax credit on his purchase.
What is "output tax"?
Output tax means the VAT due on the sale, lease or exchange of
taxable goods or properties or services by any person registered
or required to register under Section 236 of the Tax Code.
What is "input tax"?
Input tax means the VAT due on or paid by a VAT-registered on
importation of goods or local purchase of goods, properties or
services, including lease or use of property in the course of his
trade or business. It shall also include the transitional input tax
determined in accordance with Section 111 of the Tax Code,
presumptive input tax and deferred input tax from previous
period.
What comprises "goods or properties"?
The term "goods or properties" shall mean all tangible and
intangible objects, which are capable of pecuniary estimation and
shall include, among others:
a. Real properties held primarily for sale to customers or held
for lease in the ordinary course of trade or business;
Atty. Jenica A. Aquino, CPA, JD
 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 privilege to use in the Philippines of any
industrial, commercial or scientific equipment;
d. The right or the privilege to use motion picture films, films,
tapes and discs; and
e. Radio, television, satellite transmission and cable
television time.
f.
What comprises "sale or exchange of services"?
The term "sale or exchange of services" means the performance
of all kinds of services in the Philippines for others for a fee,
remuneration or consideration, whether in kind or in cash,
including those performed or rendered by the following:
a. Construction and service contractors;
b. Stock, real estate, commercial, customs and immigration
brokers;
c. Lessors of property, whether personal or real;
d. Persons engaged in warehousing services;
e. Lessors or distributors of cinematographic films;
f. Persons engaged in milling, processing, manufacturing or
repacking goods for others;
g. Proprietors, operators or keepers of hotels, motels, rest
houses, pension houses, inns, resorts, theatres, and
movie houses;
h. Proprietors or operators of restaurants, refreshment
parlors, cafes, and other eating places, including clubs and
caterers;
i. Dealers in securities;
j. Lending investors;
k. Transportation contractors on their transport of goods or
cargoes, including persons who transport goods or
cargoes for hire and other domestic common carriers by
land relative to their transport of goods or cargoes;
l. 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;
m. Sale of electricity by generating, transmission by any entity
including the National Grid Corporation of the Philippines
(NGCP), and distribution companies including electric
cooperatives shall be subject to twelve percent (12%) VAT
on their gross receipts.;
n. Franchise grantees of electric utilities, telephone and
telegraph, radio and/or television broadcasting and all
other franchise grantees, except franchise grantees of
radio and/or television broadcasting whose annual gross
receipts of the preceding year do not exceed Ten Million
Pesos (P10,000,000.00), and franchise grantees of gas
and water utilities;
o. Non-life insurance companies (except their crop
insurances), including surety, fidelity, indemnity and
bonding companies; and
p. Similar services regardless of whether or not the
performance thereof calls for the exercise of use of the
physical or mental faculties.
The phrase "sale or exchange of services" shall likewise
include:
a. The lease of use of or the right or privilege to use any
copyright, patent, design or model, plan, secret formula or
process, goodwill, trademark, trade brand or other like
property or right;
b. The lease or the use of, or the right to use of any industrial,
commercial or scientific equipment;
c. The supply of scientific, technical, industrial or commercial
knowledge or information;
d. The supply of any assistance that is ancillary and
subsidiary to and is furnished as a means of enabling the
application or enjoyment of any such property, or right or
any such knowledge or information;
e. The supply of services by a nonresident person or his
employee in connection with the use of property or rights
belonging to, or the installation or operation of any brand,
machinery or other apparatus purchased from such non-
resident person;
f. The supply of technical advice, assistance or services
rendered in connection with technical management or
administration of any scientific, industrial or commercial
undertaking, venture, project or scheme;
VALUE-ADDED TAX (VAT)
g. The lease of motion picture films, films, tapes and discs;
and
h. The lease or the use of or the right to use radio, television,
satellite transmission and cable television time.
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 existing regulations.
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:
a. 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);
b. 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);
c. Services rendered to persons or entities whose exemption
under special laws or international agreements to which
National Internal Revenue Code, as amended Theories
the Philippines is a signatory effectively subjects the
supply of such services to zero percent (0%) rate;
d. Services rendered to persons engaged in international
shipping or air transport operations, including leases of
property for use thereof; Provided, that these services
shall be exclusively for international shipping or air
transport operations. (Thus, 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,
as amended);
e. 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;
f. Transport of passengers and cargo by domestic air or sea
carriers from the Philippines to a foreign country. (Gross
receipts of international air carriers and international sea
carriers doing business in the Philippines derived from
transport of passengers and cargo from the Philippines to
another country shall be exempt from VAT; however they
are still liable to a percentage tax of three percent (3%)
based on their gross receipts derived from transport of
cargo from the Philippines to another country as provided
for in Sec. 118 of the Tax Code, as amended); and
g. 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
Atty. Jenica A. Aquino, CPA, JD
 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:
a. Export sales
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, 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);
2. The sale of raw materials or packaging materials to a
non-resident buyer for delivery to as a 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;
3. The sale of raw materials or packaging materials to an
export-oriented enterprise whose export sales exceed
seventy percent (70%) of total annual production;
4. Transactions considered export sales under Executive
Order No. 226, otherwise known as the Omnibus
Investments Code of 1987, and other special laws; and
5. The sale of goods, supplies, equipment and fuel to
persons engaged in international 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; Provided, that the same is limited to goods,
supplies, equipment and fuel that shall be used in 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.
b. 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), subject such sales to
zero rate.
Zero-rated to Twelve-Percent VAT
Upon the successful establishment and implementation of an
enhanced VAT refund system by the Department of Finance
(DOF), what are the transactions that will now be subject to
twelve percent (12%) and no longer be subject to zero percent
(0%)?
1. The sale of raw materials or packaging materials to a 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, paid for in acceptable foreign currency,
and accounted for in accordance with the rules and
regulations of the BSP;
2. The sale of raw materials or packaging materials to an
export-oriented enterprise whose export sales exceed
seventy percent (70%) of total annual production;
3. Transactions considered export sales under Executive
Order No. 226, otherwise known as the Omnibus
Investments Code of 1987, and other special laws
4. 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
VALUE-ADDED TAX (VAT)
in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP); and
5. 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.
What transactions are considered deemed sales?
The following transactions are considered as deemed sales:
a. Transfer, use or consumption, not in the course of
business, of goods or properties originally intended for
sale or for use in the course of business. Transfer of goods
or properties not in the course of business can take place
when VAT-registered person withdraws goods from his
business for his personal use;
b. Distribution or transfer to:
o Shareholders or investors as share in the profits of the
VAT-registered person;
o Creditors in payment of debt or obligation
c. Consignment of goods if actual sale is not made within
sixty (60) days following the date such goods were
consigned. Consigned goods returned by the consignee
within the 60-day period are not deemed sold;
d. Retirement from or cessation of business, with respect to
all goods on hand, whether capital goods, stock-in-trade,
supplies or materials as of the date of such retirement or
cessation, whether or not the business is continued by the
new owner or successor. The following circumstances
shall, among others, give rise to transactions "deemed
sale";
o Change of ownership of the business. There is a
change in the ownership of the business when a single
National Internal Revenue Code, as amended Theories
proprietorship incorporated; or the proprietor of a single
proprietorship sells his entire business
o Dissolution of a partnership and creation of a new
partnership which takes over the business.
What is VAT-exempt sale?
It is a sale of goods, properties or service and the use or lease of
properties which is not subject to output tax and whereby the
buyer is not allowed any tax credit or input tax related to such
exempt sale.
What are the VAT-exempt transactions?
a. 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 therefor;
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 specialty feeds for race horses, fighting cocks,
aquarium fish, zoo animals and other animals considered
as pets);
c. Importation of personal and household effects belonging
to residents of the Philippines returning from abroad and
non-resident citizens coming to resettle in the Philippines;
Provided, that such goods are exempt from custom duties
under the Tariff and Customs Code of the Philippines;
d. Importation of professional instruments and implements,
tools of trade, occupation or employment, wearing
apparel, domestic animals, and personal and household
effects ( except vehicles, vessels, aircrafts machineries
Atty. Jenica A. Aquino, CPA, JD
 and other similar goods for use in manufacture which are
subject to duties, taxes and other charges) 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
barter or sale, accompanying such persons, or arriving
within a reasonable time; Provided, That the Bureau of
Customs may, upon the production of satisfactorily
evidence that such persons are actually coming to settle in
the Philippines and that the goods are brought from their
place of residence, exempt such goods from payment of
duties and taxes.
e. Services subject to percentage tax under Title V of the Tax
Code, as amended;
f. Services by agricultural contract growers and milling for
others of palay into rice, corn into grits, and sugar cane
into raw sugar;
g. Medical, dental, hospital and veterinary services except
those rendered by professionals;
h. Educational services rendered by private educational
institutions duly accredited by the Department of
Education (DepED), the Commission on Higher Education
(CHED) and the Technical Education and Skills
Development Authority (TESDA) and those rendered by
the government educational institutions;
i. Services rendered by individuals pursuant to an employer-
employee relationship;
j. 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;
k. Transactions which are exempt under international
agreements to which the Philippines is a signatory or
under special laws except those granted under P.D. No.
529 - Petroleum Exploration Concessionaires under the
Petroleum Act of 1949;
l. Sales by agricultural cooperatives duly registered and in
good standing with the Cooperative Development
Authority (CDA) to their members, as well as 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;
m. Gross receipts from lending activities by credit or multi-
purpose cooperatives duly registered and in good standing
with the Cooperative Development Authority;
n. Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with and in good standing
with CDA; Provided, that the share capital contribution of
each member does not exceed Fifteen Thousand Pesos
(P15,000.00) and regardless of the aggregate capital and
net surplus ratably distributed among the members;
o. Export sales by persons who are not VAT-registered;
p. (1) Sale of property not primarily held for sale to customers
or held for lease in the ordinary course of trade or
business;
(2) Real property utilized for low-cost and socialized
housing as defined by Republic Act No. 7279,
otherwise known as the 'Urban Development and
Housing Act of 1992,' and other related laws;
(3) Residential lot valued at Two million five hundred
thousand pesos (P2,500,000.00) and below,
VALUE-ADDED TAX (VAT)
(4) House and lot, and other residential dwellings valued
at Four million two hundred thousand pesos
(P4,200,000.00) and below: provided, That beginning
January 1, 2024 and every three (3) years thereafter,
the amounts herein stated shall be adjusted to present
values using the Consumer Price Index, as published
by the Philippine Statistics Authority (PSA).
q. Lease of residential units with a monthly rental per unit not
exceeding Fifteen Thousand Pesos (P15,000.00),
regardless of the amount of aggregate rentals received by
the lessor during the year; Provided, that not later than
January 31, 2009 and every three (3) years thereafter, the
amount of P10,000.00 shall be adjusted to its present
value using the Consumer Price Index, as published by the
Philippine Statistics Authority (Formerly known as NSO);
r. Sale, importation, printing or publication of books, and any
newspaper, magazine, journal, review bulletin, or any such
educational reading material covered by the UNESCO
Agreement on the Importation of Education, 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;
s. Transport of passengers by international carriers;
t. Sale, importation or lease of passenger or cargo vessels
and aircraft, including engine equipment and spare parts
thereof for domestic or international transport perations;
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 retirement
program of Maritime Industry Authority (MARINA);
National Internal Revenue Code, as amended Theories
u. Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport
operations; Provided, that the said fuel, goods and
supplies shall be used exclusively or shall pertain to the
transport of goods and/or passenger 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 form 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 that the mentioned in the paragraph, such portion of
fuel, goods and supplies shall be subject to 12% VAT;
v. 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; and
w. Sale or lease of goods 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;
x. Transfer of property in merger or consolidation (pursuant
to Section 40(C)(2) of the Tax Code, as amended);
y. Association dues, membership fees, and other
assessments and charges collected on a purely
reimbursement basis by homeowners’ associations and
condominium established under Republic Act No. 9904
(Magna Carta for Homeowners and Homeowner’s
Atty. Jenica A. Aquino, CPA, JD
 Association) and Republic Act No. 4726 (The
Condominium Act), respectively;
z. Sale of gold to the Banko Sentral ng Pilipinasn (BSP)
(previously zero-rated transaction);
aa. Sale of or importation of prescription drugs and medicines
for:
(i) Diabetes, high cholesterol, and hypertension beginning
January 1, 2020; and
(ii) Cancer, mental illness, tuberculosis, and kidney
diseases beginning January 1, 2021;
Provided, That the DOH shall issue a list of approved
drugs and medicines form this purpose within sixty (60)
days from the effectivity of this Act; and
bb. Sale or importation of the following beginning January 1,
2021 to December 31, 2023:
i. Capital equipment, its spare parts and raw
materials, necessary for the production of personal
protective equipment 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 (DTI) 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 (ii), within
sixty (60) days from the effectivity of this Act, 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: Provided, finally, That the exemption
claimed under this Subsection shall be subject to
post audit by the Bureau of Internal Revenue or the
Bureau of Customs as may be applicable.
cc. 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 Three million
(P3,000,000.00).
Tax on Persons Exempt from Value-Added Tax (VAT).
Any person whose sales or receipts are exempt under Section
109(CC) of this Code from the payment of value-added tax and
who is not a VAT-registered person shall pay a tax equivalent to
three percent (3%) of his gross quarterly sales or receipts:
Provided, That cooperatives, shall be exempt from the three
percent (3%) gross receipts tax herein imposed: Provided,
further, That effective July 1, 2020 until June 30, 2023, the rates
shall be one percent (1%).
What is the difference between a low-cost and a socialized
housing?
“Low-cost housing” refers to housing projects intended for
homeless low-income family beneficiaries, undertaken by the
Government or private developers, which may either be a
subdivision or a condominium registered and licensed by the
Housing and Land Use Regulatory Board/Housing (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 No. 7279 otherwise known as the
“Urban Development and Housing Act of 1992” and other laws.
“Socialized housing” refers to housing programs and projects
covering houses and lots or home lots only undertaken by the
Government or private sector for the underprivileged and
homeless citizens which shall include sites and services
development, long-term financing, liberated terms on interest
VALUE-ADDED TAX (VAT)
payments, and such other benefits in accordance with the
provision or RA No. 7279, otherwise known as the “Urban
Development and Housing Act of 1992” and RA No. 7835 and RA
No. 8763. It shall 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
Lending Program (UHLP) or any equivalent housing program of
the Government, the private sector or non-government
organizations.
VAT ON GOVERNMENT MONEY PAYMENTS
What is the treatment for Withholding of VAT on Government
Money Payments?
The government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or
controlled corporations (GOCCs) shall, before making payment
on account of each purchase of goods and/or services taxed at
twelve percent (12%) VAT pursuant to Sections 106 and 108 of
the Tax Code, deduct and withhold a Final VAT due at the rate of
five percent (5%) of the gross payment.
The five percent (5%) final VAT withholding rate shall represent
the net VAT payable of the seller. The remaining seven percent
(7%) effectively accounts for the standard input VAT for sales of
goods or services to government or any of its political
subdivisions, instrumentalities or agencies including GOCCs in
lieu of the actual input VAT directly attributable or ratably
apportioned to such sales.
Should actual input VAT attributable to sales to government
exceed seven percent (7%) of gross payments, the excess may
form part of the sellers' expense or cost. On the other hand, if
actual input VAT attributable to sale to government is less than
National Internal Revenue Code, as amended Theories
seven percent (7%) of gross payment, the difference must be
closed to expense or cost.
The government or any of its political subdivisions,
instrumentalities or agencies including GOCCs, as well as private
corporation, individuals, estates and trusts, whether large or non-
large taxpayers, shall withhold twelve percent (12%) VAT with
respect to the following payments:
• Lease or use of properties or property rights owned by
non-residents; and
• Other services rendered in the Philippines by non-
residents.
COMPLIANCE
In what grounds can the Commissioner of Internal Revenue
suspend the business operations of a taxpayer?
The Commissioner or his authorized representative is
empowered to suspend the business operations and temporarily
close the business establishment of any person for any of the
following violations:
a. In the case of a VAT-registered Person:
o Failure to issue receipts or invoices;
o Failure to file a value-added-tax return as required
under Section 114; or
o Understatement of taxable sales or receipts by
thirty percent (30%) or more of his correct taxable
sales or receipts for the taxable quarter.
Atty. Jenica A. Aquino, CPA, JD
Quarterly Value-Added Tax Return
BIR Form No. 2550Q - Quarterly Value-Added Tax Return
Documentary Requirements
1. Duly issued Certificate of Creditable VAT Withheld at
Source (BIR Form 2307), if applicable
2. Summary Alphalist of Withholding Agents of Income
Payments Subjected to Withholding Tax at Source
(SAWT), if applicable
3. Duly approved Tax Debit Memo, if applicable
4. Duly approved Tax Credit Certificate, if applicable
5. Previously filed return and proof of payment, for amended
return
6. Authorization letter, if return is filed by authorized
representative
Procedures
Fill-up BIR Form 2550Q in triplicate copies (two copies for the
BIR and one copy for the taxpayer)
1. If there is payment:
o File the Quarterly VAT declaration, together with the
required attachments, and pay the VAT due thereon
with any Authorized Agent Bank (AAB) under the
jurisdiction of the Revenue District Office
(RDO)/Large Taxpayers District Office
(LTDO) where the taxpayer (head office of the
business establishment) is registered.
o Accomplish and submit BIR-prescribed deposit slip,
which the bank teller shall machine validate as
evidence that payment was received by the AAB.
The AAB receiving the tax return shall stamp mark
the word "Received" on the return and machine
validate the return as proof of filing the return and
payment of the tax.
o In places where there are no AAB, file the Quarterly
VAT declaration, together with the required
attachments and pay the VAT due with the Revenue
Collection Officer (RCO)
o The RCO shall issue a Revenue Official Receipt
upon payment of the tax.
2. If there is no payment:
o File the Quarterly VAT Return, together with the
required attachments with the RDO/LTDO/Large
Taxpayers Assistance Division, Collection Agent
having jurisdiction over the registered address of
the taxpayer (head office of the business
establishment).
Reminders:
• Only one consolidated Quarterly VAT Declaration/Return
shall be filed covering the results of operation of the head
office as well as the branches for all lines of business
subject to VAT.
• The Quarterly Summary Lists of Sales and Purchases
shall be submitted in Compact Disk-Recordable
(CDR) following the format provided under Section 4.114-
3(g) of RR No. 16-2005, as amended by RR No. 1-2012.
• The Quarterly Summary Lists of Sales and Purchases
shall be submitted through electronic filing facility for
taxpayers under the jurisdiction of the Large Taxpayers
Service (LTS) and those enrolled under the eFPS.
Deadline
Within twenty five (25) days following the close of each taxable
quarter prescribed for each taxpayer.
What is "RELIEF"?
RELIEF means Reconciliation of Listing for Enforcement. It
supports the third party information program of the Bureau
through the cross referencing of third party information from the
taxpayers' Summary Lists of Sales and Purchases prescribed to
be submitted on a quarterly basis.
Who are required to submit Summary List of Sales?
VAT taxpayers with quarterly total sales/receipts (net of VAT),
exceeding Two Million Five Hundred Thousand Pesos
(P2,500,000.00) are required to submit a Summary List of Sales.
Who are required to submit Summary List of Purchases?
VAT taxpayers with quarterly total purchases (net of VAT) of
goods and services, including importation exceeding One Million
VALUE-ADDED TAX (VAT) National Internal Revenue Code, as amended Theories

Pesos (P1,000,000.00) are required to submit Summary List of

Purchases.

What are the Summary Lists required to be submitted?

• Quarterly Summary List of Sales to Regular Buyers/
Customers Casual Buyers/ Customers and Output Tax
• Quarterly Summary of List of Local Purchases and Input
tax; and
• Quarterly Summary List of Importation.

When is the deadline for submission of the above Summary

Lists?
The Summary List of Sales/Purchases, whichever is applicable,
shall be submitted on or before the twenty-fifth (25th) day of the
month following the close of the taxable quarter -- calendar
quarter or fiscal quarter.

What are the penalties for failure to submit the Summary

Lists?
• For failure to file, keep or supply a statement, list or
information required on the date prescribed shall pay and
administrative penalty of One Thousand Pesos
(P1,000.00) for each such failure, unless it is shown that
such failure is due to reasonable cause and not to willful
neglect; and
• An aggregate amount to be imposed for all such failures
during a taxable year shall not exceed Twenty-Five
Thousand Pesos (P25,000.00).

Atty. Jenica A. Aquino, CPA, JD