BANTILLO, CHESKA KATE M.

CID, MANUEL LIONEL M.

 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.
 VAT Exemption and Discounts for Senior
Citizens
 Senior citizen or Elderly- refers to any
Filipino citizen who is a resident of the
Philippines, sixty (60) years old or above. It
may apply to senior citizens with “dual
citizenship” status provided they prove
their Filipino citizenship and have at least
six (6) months residency in the Philippines
(RA 9994 “Expanded senior citizens act of
2010).
The following items sold to a senior citizen are
VAT-exempt and will entitle the latter to a
minimum discount of 20%:
 Medicine and Drug Purchases including
influenza and pneumococcal vaccines and such
other essential medical supplies, accessories
and equipment.
 Professional fees of attending physicians in all
private hospitals, medical facilities, outpatient
clinics, and home health care services.
 Medical and dental services, diagnostic and
laboratory fees.
 On actual fare for land transportation travel.
 In actual fare for domestic air transport and
sea shipping vessels and the like.
 On the utilization of services in hotels and
similar lodging establishments, restaurants,
recreation centers.
 On admission fees charged by theaters, cinema
houses and concert halls, circuses, carnivals,
and other similar places of culture, leisure and
amusement.
 On funeral and burial services for senior
citizens.
The discount shall be for the sale of food, drinks,
dessert and other consumables items served by
the establishments, including value meals and
promotional meals, offered for the consumption
of the general public. The 20% discount and VAT
exemption for restaurants shall apply to:
 Dine in, take-home, drive-thru, delivery orders
(excluding bulk orders), called-in or phoned-in
orders.
 Set meals, group meals or group walk-ins
including purchases of a whole cake and pizza
orders.
 “Pasalubong” food items which are single-
serving/solo meal for the personal and exclusive
consumption of the Senior Citizen.
 Personwith Disability- refers to an
individual suffering from restrictions or
different abilities, as a result of mental,
physical or sensory impairment to
perform an activity in a manner or within
the range considered normal for human
being (RR 1-2009)
Sales Discounts which may be claimed by a
Qualified PWD under RR 5-2017.
 At least 20% discount and exemption from
the Value Added Tax (VAT), if applicable
on the following sale of goods and
services for the exclusive use and
enjoyment or availment of the PWD:
 VATon importation is imposed regardless
of whether such an importation is for
personal or business use. Although
importation is not a sale of goods, or
sometimes not even a business activity,
VAT is imposed because VAT is a
consumption tax levied on sales to be
borne by collectors and, as the origin of
importation is from a foreign seller, the
VAT is instead paid directly by the
importer.
 Persons or firms engaged in the processing of sardines, mackerel,
and milk, and in manufacturing refined sugar and cooking oil, shall be
allowed a presumptive input tax, creditable against the output tax,
equivalent to four percent (4%) of the gross value in money of their
purchases of primary “agricultural products” which are used as inputs to
their production. The term “processing” shall mean pasteurization, canning,
and activities which through physical or chemical process alter the exterior
texture or form or inner substance of a product in such manner as to prepare
it for special use to which could not have been put in its original form or
condition.
 Persons who becomes liable to value-added tax or any person who
elects to be a VAT-registered person shall, subject to the filing of an
inventory according to rules and regulations prescribed by the Secretary of
finance, upon recommendation of the Commissioner, be allowed input tax on
his beginning inventory of goods, materials, and supplies equivalent to two
percent (2%) of the value of such inventory or the actual value-added tax
paid on such goods, materials, and supplies, whichever is higher, which shall
be creditable against the output tax.

TAXPAYERS WHO CAN AVAIL TRANSITIONAL INPUT TAX:

a) Taxpayers who becomes liable to VAT

b) Taxpayers who are elects to be VAT registered
 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 to rate of five percent
(5%) of the gross payment.
 RR 2-2007 provides that, if the input tax inclusive of the input tax
carried over from the previous quarter exceeds the output tax, the excess
input tax shall be carried over to the succeeding quarter or quarters;
provided, however, that, any input tax attributable to zero-rated sales by a
VAT registered taxpayer may at his option be refunded or applied for a tax
credit certificate which may be used in the payment of internal revenue
taxes.
 As a rule, all forms of lease of properties held primarily for lease to
customers in the ordinary course of trade or business, whether real or personal, shall
be subject to VAT, unless the gross annual receipts of the lessor do not exceed
P3,000,000, as amended and is non-VAT registered.

1) LEASE OF COMMERCIAL UNITS

Gross receipts from lease of commercials units are subject to 12%
VAT if the property subject to lease is located in the Philippines regardless
of the place where the contract or lease was executed.

ADVANCED PAYMENT BY LESSEE is subject to VAT if the payment is applied to

rentals such as prepaid rent. On the other hand, advance payment is not
subject to VAT if the advance payments is not a rental payment but:

o A loan to the lessor from the lessee

o An option money for the property
o A security deposit to insure the faithful performance of certain
obligations of the lessee to the lessor.

2) RESIDENTIAL UNITS
 As a rule, sale of real property primarily held in the normal course
of business is subject to VAT. Output VAT shall be based on the highest among
selling price, fair market value and zonal value.

The sale of real property subject to VAT shall either be in cash

basis, instalment basis, or deferred payment basis.
 Pre-selling of real estate properties by real estate dealers, shall be
subject to VAT in accordance with rules as discussed above. Real Estate
Dealer includes any person engaged in the business of buying, developing,
selling, exchanging real properties as principal and holding himself out as a
full or part-time dealer in real estate.
 Transmission of a property to a trustee shall not be subject to VAT if
the property is to be merely held in trust for the trustor and/or beneficiary.
However, if the property transferred is one for sale, lease or use in the
course of trade or business and the transfer constitutes a completed gift, the
transfer is subject to VAT as deemed sale transaction. The transfer is a
completed gift if the transferor diverts himself absolutely of control over the
property (i.e. irrevocable transfer of corpus and/or irrevocable designation
of beneficiary).
 VAT on sale of services is a tax on payments for services rendered in
the exercise of profession or calling. It is an indirect tax, and, thus, may be
passed on to the client or customer. It is a tax on service and, as such, it
accrues at the time the service fee is collected (regardless of timing of
collection). Such payments may be collected in advance or after the service
is rendered.

The “sale or exchange of services” is subject to 12% VAT based on

“gross receipts” derived by any person engaged in the sale of such services
or lease of properties.
“Lease of properties” shall be subject to VAT irrespective of the place where
the contract of lease or licensing agreement was executed if the property is
leased or used in the Philippines.

The term “gross receipt” as provided for under the TRAIN Law, means, the
total amount of money or its equivalent representing the contract price,
compensation, service fee, rental or royalty, including the amount charged
for materials supplied with the services and deposits and advanced payments
actually and constructively received during the taxable period for services
performed or to be performed for another person, excluding VAT.