Business Tax: Value-Added Tax (VAT Exempt Transactions)
are exempt from custom duties under the Tariff and
VAT Exempt Sales
It is a sale of goods, properties or service and the use or
d. Importation
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.
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 therefore;
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
Customs Code of the Philippines;
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 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 Region and do not earn or derive income from the
Tax Code, as amended; Philippines;

f. Services by agricultural contract growers and milling k. Transactions which are exempt under international
for others of palay into rice, corn into grits, and sugar agreements to which the Philippines is a signatory or
cane into raw sugar; under special laws except those granted under P.D.
No. 529 - Petroleum Exploration Concessionaires
g. Medical, dental, hospital and veterinary services
under the Petroleum Act of 1949;
except those rendered by professionals;
l. Sales by agricultural cooperatives duly registered
h. Educational services rendered by private
and in good standing with the Cooperative
educational institutions duly accredited by the
Development Authority (CDA) to their members, as
Department of Education (DepED), the Commission
well as of their produce, whether in its original state or
on Higher Education (CHED) and the Technical
processed form, to non-members, their importation of
Education and Skills Development Authority (TESDA)
direct farm inputs, machineries and equipment,
and those rendered by the government educational
including spare parts thereof, to be used directly and
institutions;
exclusively in the production and/or processing of
i. Services rendered by individuals pursuant to an
their produce;
employer-employee relationship;
m. Gross receipts from lending activities by credit or
j. Services rendered by regional or area headquarters multi-purpose cooperatives duly registered and in
established in the Philippines by multinational good standing with the Cooperative Development
corporations which act as supervisory, Authority;
communications and coordinating centers for their
n. Sales by non-agricultural, non-electric and non-
affiliates, subsidiaries or branches in the Asia-Pacific
credit cooperatives duly registered with and in good
standing with CDA; Provided, that the share capital
 contribution of each member does not exceed valued at Two Million Five Hundred Thousand Pesos
Fifteen Thousand Pesos (P15,000.00) and regardless of (P2,500,000.00) and below, as adjusted using latest
the aggregate capital and net surplus ratably Consumer Price Index values. (If two or more
distributed among the members; adjacent lots are sold or disposed in favor of one
buyer, for the purpose of utilizing the lots as one
o. Export sales by persons who are not VAT-registered;
residential lot, the sale shall be exempt from VAT only
if the aggregate value of the lots do not exceed One
p. The following sales of real properties:
Million Five Hundred Thousand Pesos (P1,500,000.00).
1. Sale of real properties not primarily held for sale to
Adjacent residential lots, although covered by
customers or held for lease in the ordinary course of
separate titles and/or separate tax declarations,
trade or business.
when sold or disposed to one and the same buyer,
2. Sale of real properties utilized for low-cost housing as
whether covered by one or separate Deed of
defined by RA No. 7279, otherwise known as the
Conveyance, shall be presumed as a sale of one
"Urban Development and Housing Act of 1992" and
residential lot.)
other related laws, such as RA No. 7835 and RA No.
8763;
q. Lease of residential units with a monthly rental per unit
3. Sale of real properties utilized for specialized housing
not exceeding Fifteen Thousand Pesos (P15,000.00),
as defined under RA No. 7279, and other related laws,
regardless of the amount of aggregate rentals
such as RA No. 7835 and RA No. 8763, wherein price
received by the lessor during the year; Provided, that
ceiling per unit is Php 450,000.00 or as may from time
not later than January 31, 2009 and every three (3)
to time be determined by the HUDCC and the NEDA
years thereafter, the amount of P10,000.00 shall be
and other related laws;
adjusted to its present value using the Consumer
4. Sale of residential lot valued at One Million Five
Price Index, as published by the Philippine Statistics
Hundred Thousand Pesos (P1,500,000.00) and below,
Authority (Formerly known as NSO);
or house and lot and other residential dwellings
r. Sale, importation, printing or publication of books
and any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed prices for
subscription and sale and which is 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 operations; 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);
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 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 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 Note: Self-employed individuals and professionals
(pursuant to Section 40(C)(2) of the Tax Code, as availing of the 8% on gross sales and/or receipts and
amended); other non-operating income, under Sections 24
(A)(2)(b) and 24 (A)(2)(c)(2) of the NIRC shall also be
y. Association dues, membership fees, and other exempt from the payment of twelve (12%) VAT.
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 Association) and Republic Act No.
4726 (The Condominium Act), respectively;

z. Sale of gold to the Banko Sentral ng Pilipinas (BSP)

(previously zero-rated transaction);

aa. Sale of drugs and medicines prescribed for

diabetes, high cholesterol, and hypertension
(beginning on January 1, 2019 as determined by the
Department of Health); and
bb. Sale or lease of goods or properties or the
performance of services other than the transactions
mentioned in the preceding paragraphs, Provided,
the gross annual sales and/or receipts do not exceed
the amount of Three Million Pesos (Php 3,000,000.00).