Vat Exempt Sales

(Section 109 NIRC, as amended under RA 10963-TRAIN Law; RR 13-2018)

The Vat exempt transactions provided in the Tax Code are follows:

1.) Agricultural and marine “food products in their original state”

2.) Livestock; and

3.) Poultry of a kind generally used as, or yielding or producing

Foods for human consumption and breeding stock and genetic materials therefore
 RR 16-2005 provides that products classified under this exemption
(such as meat, fruits and vegetables) shall be considered in their
“original state” even if they have undergone the simple processes of
preparation or preservation for the market, such as freezing, drying,
salting, broiling, roasting, smoking or stripping including those using
advanced technological means of packaging, such as shrink wrapping in
plastics, vacuum packing, tetra-pack, and other similar packaging
methods.
 Examples of Agricultural and Marine
Food Products in their original state

Agricultural Marine Livestock Poultry

Polished/husked rice Fish Cows Fowls

-Crustaceans such as: Bulls
Corn grits Calves Ducks
• Lobster, Shrimps Pigs
Raw cane sugar & • Prawns, Oysters Sheep Geese
molasses • Mussels, Clams Goats
• Trout, eels Rabbits Turkey
Copra
Illustration 1:
Determine which transaction is subjected to VAT

Transaction Particulars Sales

1 Crops
2 Bonsai
3 Wood
4 Barbeque
5 Tilapia
6 Roasted Chicken
7 Canned pineapple chunks
8 Salted eggs
9 Smoked fish
10 Flowers
11 Raw sugar cane
12 Muscovado
13 Refined sugar
Vat Exempt Not Vat Exempt
B. Sale or importation of:

a. Fertilizers

b.Seeds, seedlings and fingerlings

c. Fish, prawn, livestock and poultry feeds, including

ingredients, whether locally produced or imported,
used in manufacture of finished feeds.
 ILLUSTRATION 2:

Determine which transaction is subject to vat:

Transaction Particulars

1 Sale/importation of V-Mig hogfeeds.

2 Sale/importation of V-Mig feeds for pets
3 Purchase of local raw materials for the formulation of hogfeeds
4 Importation of raw materials for the formulation of hogfeeds
5 Importation of raw materials for the formulation of feeds for
animals generally considered as pets
6 Importation of fertilizers
 Importation of personal and household effects belonging to:

1. The residents of the Philippines returning from abroad; and

2. Nonresident citizens coming to resettle in the Philippines

Kinds of personal and household effects that may be exempt from

payment of customs duties:

1. Returned personal and household effects; and

2. Personal and household effects purchased abroad.
The term “personal effects” refers to a person's personal property, usually
items of particular significance that are carried or worn. According to the
Revised Code of Washington, personal effects normally include jewelry,
clothing, toiletries, or other such items.
ILLUSTRATION 3:

Lester returned from the United States after watching a game between
the Warriors and Cleveland. He brought with him several personal effects
(souvenirs) he brought from United States.

Question: Are the personal effects brought by Lester subject to vat?

• Answer: No. The personal and household effects brought from abroad by a resident of the Philippines
are exempt from VAT.
(C) Importation of personal and household effects belonging to the residents of the Philippines returning
from abroad and nonresident citizens coming to resettle in the Philippines: Provided, that such goods are
exempt from customs duties under the Tariff and Customs Code of the Philippines;

(D) Importation of professional instruments and implements, tools of trade, occupation or

employment, wearing apparel, domestic animals, and personal and household effects 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 for barter or sale, accompanying such persons, or arriving within a
reasonable time: Provided, That the Bureau of Customs may, upon the production of satisfactory evidence
that such persons are actually coming to settle in the Philippines and the goods are brought from their
former place of abode, exempt such goods from payment of duties and taxes: Provided, further, That the
vehicles, vessels, aircrafts, machineries and other similar goods for use in manufacture, shall not fall
within this classification and shall therefore be subject to duties, taxes and other charges;
C D
(E) Services subject to percentage tax
under Title V;