DETERMINATION OF Business *Some Importations are automatically

Transaction subject to VAT even if not for business

APPLICABLE BUSINESS TAX
The transaction must be related to business i.e. *Use the flowchart for each transaction.
regularly sold in the course of business A taxpayer can have a mix of VAT
exempt transactions, VATable
CVGCastro 2S 2022-2023 transactions, and OPT transactions
Yes Specifically
Ex. No business tax Listed as VAT Unless a limit is specifically
Agricultural food exempt? provided, the amount does
products in original state not matter, as long as it is
Sale by cooperatives specifically listed.
No
Even if the transactions
Ex. exceed 3,000,000, they will be
Banks/quasi-banks Subject to OPT Yes Specifically
classified as VAT exempt or
Int'l carriers listed under
but never VAT OPT as applicable.
Amusement taxes OPT?
Radio franchise
Gas and water utility
No

All transactions from this point are

called VATable Transactions: VATable gross
transactions that are NOT VAT registered No No General
annual sales
specifically VAT exempt and NOT business? OPT
exceed 3M?
specifically OPT
To determine the July 1, 2020 -
Yes 3M threshold, Yes June 30, 2023: 1%
If the business exceeds 3M total ALL VATable
threshold, it MUST be registered. Transactions July 2023 onward:
(exclude 3%
Businesses may voluntarily register exempt/OPT)
even if threshold not reached
Subject to VAT

Sale to
Determine VAT
Government 12% VAT
treatment
and GOCCs
Gov't withholds 5% of base price
as Creditable Withholding VAT
Zero rated 0% VAT
output VAT
Direct export Sale to specifically
Sale to economic zones Zero rated Effectively
listed entities. Ex:
and tourism zones Export sales zero rated
Sale to persons engaged ADB
in international shipping IRRI
or air transport UN