VALUE-ADDED TAX

Characteristics National
Indirect
Proportional
Ad valorem
Privilege/Transasctional
Business

OUTPUT VAT (VAT-subject transactions)

Persons liable ✅Any person who:
➡ ️SELLS
➡ ️BARTERS
➡ ️EXCHANGES
➡ ️LEASES GOODS OR PROPERTIES
➡ ️RENDERS SERVICES
- in the course of trade and business
**(regular conduct or pursuit of a commercial or na economic activity;
HABITUAL; FREQUENT. kasama ang incidental transactions - kahit na ang ibinenta
ay hindi yung primary purpose ng business)

✅importer of goods (no matter the purpose)

HOWEVER: importer of goods for personal use cannot claim input tax credit
✅Nonstock, nonprofit private organization or entity if engaged in transactions
involved in business

✅NRs performing services (kahit one time lang) in the Philippines shall always
be considered as being in the COTB and are subject to VAT.

Transactions deemed sale (TDS)
(SCORE CO 60)
✅goods originally intended for sale or use in the COTB but transferred, used,
consumed otherwise
✅distribution or transfer to:
➡ ️shareholders or investors as share in the profits ( property dividends - stock in
trade or property primarily held for sale or lease)
➡ ️creditors in pmt of debt (dacion en pago)
✅goods out on consignment for more than 60 days
✅cessation of/retirement from business
➡ ️change of ownership
➡ ️dissolution of p'ship in favor of a new one (will takeover the business)
➡ ️change from VAT to non-VAT registered taxpayer
> vatable ang taxable goods existing (unused supplies, materials, capital goods)
as of going out of business

❌Tax free exchange
- exempt from CGT, IT, DST, and/or VAT as the case may be
> may acquisition of control (change of ownership)
> kapag may merger or consolidation
> exchange of goods or properties including RP used in business or held for sale or
lease by the transferor for shares of stocks, resulting in corporate control
✅otherwise, VAT subject

Privilege stores (tiyangge) GR: not subject sa VAT/business tax; liable for IT
XPN: operation exceeds 15 days
PS operating for > 1 business activity in a separate venue or operates multiple BA in 1
venue, 1 BA = 1 day

VAT base ➡
️Net of VAT (VAT EXCLUSIVE) = SP x 12% = VAT
➡
️Gross of VAT ( VAT INCLUSIVE) = SP/112% x 12%

Silent: Exclusive

➡ ️ Sale of goods - Gross selling price (GSP)

- total amt of money or its equivalent (whether bayad na or hindi pa) = ACCRUAL
BASIS

Deductions:
✅Discounts (volume or trade discounts) (DIREC)
1. determined and granted at the time of sale
2. expressly indicated in the invoice
3. part of the gross sales, duly recorded in the books
4. not dependent on any future even or condition
✅SRA

↪ PRESUMED GSP
- GSP is < 30% of the actual MV of goods = CIR shall determine the appropriate tax
base
XPN: one of the parties to the transaction is the government
 ➡ ️ Sale of services - Gross receipts
- total amt of money or its equivalent = CASH BASIS
includes:
✅amt charged for mats supplied with the services
✅deposits applied as pmts for services rendered
✅advance pmts actually or constructively received
- basta may natanggap ng pera, kahit di pa na-render ng service

❌ amounts reserved for pmt to unrelated 3rd party

❌ amounts received as reimbursement for advance pmt on behalf of another; such
pmt did not redound to the benefit of the latter

➡️Lease of goods or properties - Gross receipts

Special rules (Real Property)
1. Fully paid sale - SP or FMV, higher
2. Deferred basis - SP or FMV, higher
3. Installment basis - Initial payments (DP + installments received during the year of
sale + excess of mortgage over cost) including interests and penalties (allocated ang
output VAT)

➡
️Special VAT base rules

➡️Special VAT timing rules

Non-redemption of properties sold during involuntary sales of ordinary assets:
✅VATable
📅: When the right of redemption prescribes

VAT on importation
Destination principle: Goods are taxed only in the country where they are consumed.

Begins: when the carrying vessel or aircraft enters the PH territory with the intention
to unload.
Ends: When duties, charges, and other charges have been paid or secured to be
paid; legal permit for withdrawal has been granted.
**if goods are deemed free of DTO (duties, taxes, and other charges), ends when
the goods have legally left the jurisdiction of the BOC

DUTI ni C E O = VAT base

Dutiable value: Cost, insurance, freight

Taxpayer Importer
Payable to Bureau of Customs
When Before the goods leave customs

Extended application technical importation

- goods sold by a person located in a Special Economic Zone to a customer located in
a customs territory
Freeport and special ecozones shall be managed as a special customs territory.
- treated as foreign territory by fiction of law

Zero-rated sale of goods ✅Export sales

(CUSTOM ENGINE) - sale and actual shipment from PH to FC
 - paid for in acceptable foreign currency (if local export-oriented enterprise, not
required)
- accounted for in accordance with the RR of the BSP
Documentations:
1. Invoice - evidence of sale
2. Bill of lading - proof of delivery/shipment
3. Certificate of inward remittance - proof of pmt. in foreign currency

➡
️Actual exports

➡ ️Constructive exports (as if nilabas)

✅sale of RM or packaging materials to export-oriented enterprise whose
export sales exceed 70% of total annual production
✅sale of RM or packaging materials to a non-resident buyer
- for delivery to a resident local EOE
- to be used in mfg, processing, packing/repackaging in PH of the said buyer's
(NR) goods
- paid for in acceptable foreign currency
- accounted for in accordance with the BSP RR
**constructive export ni seller of RM, thus 0%
✅sale and delivery of goods to registered enterprises w/in a separate customs
territory
- shall only apply to goods and services directly and exclusively used in the
registered project of activity by a registered business enterprise (necessary for the
project or activity to be carried out)
❌janitorial services
❌security services
❌financial services
❌consultancy services
❌marketing and promotion
❌services rendered for admin operations

➡ ️ Effectively zero-rated sales

✅goods sold to persons exempted under special laws or int'l agreements, BOTH
DIRECT AND INDIRECT TAXES
- ADB, IRRI, UN, WHO
✅sale of goods, supplies, eqpt., and fuel to persons engaged in int'l shipping or
air transport operations, where goods sold must be exclusively used for such
operations
✅sale to offshore gaming licensees and operators (POGOs), BOTH DIRECT
AND INDIRECT TAXES
✅those export sales under EO No. 226 or the Omnibus Investment Code of 1987;
(1) and (2) constructive export; (3) effectively zero-rated sale (BOEDIES)

Zero-rated sale of services ➡

️Actual exports
(ITS EXPORTINGS)

➡ ️Constructive exports
- when service is rendered to EOE (processing, converting, or mfg. goods)
- when service is rendered to reg. ents. w/in a separate customs territory (same rules
sa zero-rated sale of goods)

➡️ Effectively zero-rated sale of services

✅goods sold to persons exempted under special laws or int'l agreements, BOTH
DIRECT AND INDIRECT TAXES
- ADB, IRRI, UN, WHO (sila ang buyer)
 ✅sale of goods, supplies, eqpt., and fuel to persons engaged in int'l shipping or
air transport operations, where goods sold must be exclusively used for such
operations
✅sale to offshore gaming licensees and operators (POGOs), BOTH DIRECT
AND INDIRECT TAXES

➡
️Other zero-rated sale of services
✅transport of passengers and cargo by domestic air or sea vessels (PH to FC)
✅sale of power or fule generated to renewable sources of energy

Conditions where certain 0% transactions will be subject to 12% VAT:

K-TAPUSAN (VAT-SUBJECT)