VAT EXEMPTIONS

A. SALE OR IMPORTATION: Original state na agricultural and marine food even if

underwent simple process and packaging like bbq, salted egg, smoked fish
B. SALE OR IMPORTATION: Fertilizer, feeds (hindi special feeds and not for pets), if
ingredients may edible for human consumption, say NAH as per FDA
C. IMPORTATION: Personal (souvenir) and household effects (gamit sa balay) by resident
returning from abroad and nonresident resettling in PH, as long as exempt from custom
duties under Tariff and Customs Code PH
D. IMPORTATION: Professional instruments (except big boy gamit) of overseas Filipinos
coming to settle in PH (bureau of customs w/ satisfactory evidence), for personal use
(not for sale), exempt also sa duties
E. SERVICES subject to percentage tax (title V of tax code section 116-129)
a. Gross receipts of transportation contractors transporting passengers by land
(already taxable via common carrier’s tax - PT)
b. International air carriers (resident foreign) doing business in PH
c. Banks or non-banks doing business in PH
d. Radio/telecommunication broadcasting companies with annual gross receipts not
exceeding P10m
e. Operators of cabarets, night and day clubs
F. SERVICES by
a. Agricultural contract growers
b. Milling for others of
i. Palay into rice
ii. Corn into grits
iii. Sugar cane into raw sugar
G. Laboratory fees, health SERVICES except those rendered by professionals not under an
employer-employee relationship, exempt also are:
a. Annual gross professional fees does not exceed P3m
H. Educational SERVICES by government and private institutions accredited by DepEd,
CHED, and TESDA
I. SERVICES rendered by individuals pursuant to an employer-employee relationship
J. SERVICES by regional hq of multinational corps to supervise, communicate, coordinate
subsidiaries, RHQs who do not derive income from PH
K. Transactions exempt under SPECIAL arrangements or laws to which PH is a signatory
a. PD 1869 PAGCOR
b. RA 9376 Biofuels
c. RA 10072 PH Red Cross
d. RA 9994 Expanded Senior Citizens Act of 2010
e. RA 10754 Magna Carta for PWDs
L. SALES by agricultural cooperatives registered under Cooperative Development
Authority ; IMPORTATION of machinery and equipment to be used directly and
exclusively for production of agricultural cooperative’s own produce
 To Members To Non-Members

Sale of coop’s own Exempt Exempt

produce

Other than coop’s own Exempt VAT (unless agricultural

produce at original state)

M. Gross receipts from lending activities from credit or multipurpose cooperatives registered
under Cooperative Development Authority
To Members To Non-Members

From lending activities Exempt Exempt

From non-lending VAT VAT

activities

N. SALES by non-agricultural, non-electrical, non-credit cooperatives whose individual

membership contribution is does not exceed P15k, exempt for members and
non-members
a. Importation of machineries and equipment is VATABLE
O. EXPORT SALES by persons non-VAT registered

P. SALE of real property, only if any of the following..

a. Not held primarily for sale or not held for lease in the ordinary course of business
or not used in the trade or business operations of the seller since subject to
capital gains tax
b. Utilized for socialized housing (government housing programs)
c. Selling price not more than P3,199,200
d. Taxable via capital gains tax

VATABLE:
● Sale of parking lots in condominium units
● Commercial units
● Residential units
● Selling price of more than P3,199,200
● For sale or lease in the ordinary course of business
Q. LEASE of RESIDENTIAL units
a. EXEMPT: Gross receipts from rentals no more than P15k per month per unit
 b. EXEMPT: Gross receipts from rentals exceeding P15k per month per unit with
annual gross receipts no more than P3,000,000 (excluding annual gross receipts
from those rentals not exceeding P15k per month per unit) since subject to PT
3% according to CREATE law

Residential - apartment, house, dorm, bed spaces

Unit - apartment, house, person, room
R. SALE, IMPORTATION, PRINTING, AND PUBLICATION of books, newspapers,
magazines, reviews, bulletins, or any such educational reading material (only covers
printed matters in hard copy) covered by the UNESCO
S. TRANSPORT of passengers/cargo by international carriers (resident foreign) doing
business in the PH (3% PT)
a. Passengers not subject to business tax (VAT and Percentage)
b. Cargo subject to Percentage Tax

T. SALE, TRANSPORTATION, LEASE of vessels and aircraft including big boy equipment,
subject to requirements on restriction as per MARINA
U. IMPORTATION of fuel, goods, suppliers exclusively used for international air
shipping/transport; PH port directly to foreign port
a. No docking unless unloading passengers from abroad
b. No docking unless loading passengers bound for abroad
V. SERVICES of banks, non-bank financial intermediaries performing quasi-banking
functions, other non-bank financial intermediaries
W. SALE OR LEASE of goods and services to senior citizens and PWDs
X. TRANSFER of property pursuant to Section 40(C)(2) of the Tax Code
Y. Association dues, membership fees, and other charges collected on a purely
reimbursement basis by homeowner's associations and condominium corporations
Z. SALE of gold to BSP
AA.SALE OR IMPORTATION of medicine for diabetes, high cholesterol, hypertension,
cancer, mental illness, tuberculosis, provided, that they are included in the "list of
approved drugs and medicines" issued by the DOH
BB. SALE OR IMPORTATION of things for PPE, drugs directly used for treatment of
COVID-19, drugs approved by FDA for use in clinical trials, provided, that DTI certifies
that such are not locally available/insufficient in quantity/etc.
 CC. SALE OR LEASE of goods or properties or services other than previously listed,
with gross annual sales and/or receipts not exceeding P3,000,000

COMPUTATION OF VAT PAYABLE

Output VAT = Gross Sales/Receipts * 12%;
Less: Input VAT = Gross Purchases/Payments * 12%
VAT Payable

OUTPUT VAT

ACTUAL SALE (DOMESTIC)

TRANSACTION DEEMED SALE

○ Transaction deemed sale (sale not in the ordinary course of business, deemed
sale for the State)
■ TRANSFER, USE, OR CONSUMPTION not in the ordinary course of
business of goods or properties ordinarily intended for sale in the course
of business @ FV
■ DISTRIBUTION OR TRANSFER TO
● shareholders as share in the profits of a VAT-registered person
 ● creditors in payment of debt @ Market Value
■ CONSIGNMENT of goods if actual sale is not made within 60 days
following consignment; goods returned within 60 days are not deemed
sold
■ RETIREMENT FROM OR CESSATION OF status as VAT-registered
person with respect to all "goods on hand" @ LOWER of Acquisition Cost
and Market Value
● Goods on Hand: Capital goods, stock in trade, supplies, materials

ZERO RATED SALES

● Export sale by a VAT-registered entity
● Sale to international air carrier, provided, that such sold goods are directly and
exclusively used for international shipping or air transport
● Sales under zero rates wherein PH is a signatory
● Sales to Registered Export Enterprises in which sold goods are directly and exclusively
used for registered activities
● Transport by domestic air or sea from PH to foreign country
● Sale of power or fuel generated through renewable sources of energy

VAT related to zero rated sales can be refunded or claimed as tax credit against
domestic sales or tax credit against any other internal revenue taxes

INPUT VAT

Sources
1. Local Purchase
a. Goods for sale
b. Goods for conversion
c. Supplies
d. To be used in sale of services
e. Used in business for which depreciation or amortization is allowed
f. Real properties for which VAT has actually been paid
g. Services for which VAT has actually been paid
2. Acquisition of Capital Goods - must have depreciable life of more than 1 year

Aggregate Purchase Price

More than P1,000,000* Less than P1,000,000

Allocated evenly during the Input tax not allocated,

useful life, no more than 60 credited in the month of
 months; commences in the acquisition
calendar month of acquisition

*If more than P1M but less

than 1Y useful life, claimed in
the month of acquisition

Beginning January 1, 2022, Capital Goods will no longer be allocated.

3. Importation

4. Presumptive Input VAT (4%) on purchases of agricultural products, those allowed are:
a. Processing of: sardines, mackerel, milk
b. Manufacturing of: refined sugar, cooking oil, instant noodles
5. Transitional Input VAT (2%) on beginning inventory
a. Taxpayers who become liable to VAT
b. Taxpayers who are elects to be VAT registered

Allowable TIV is higher between (2% of Beginning Inventory) and Actual VAT
paid on such goods (12% * BI from VAT-registered suppliers)
6. Creditable Withholding VAT (5%)
a.