EPARTMENT OF ACCOUNTANCY

HOLY ANGEL UNIVERSITY

EXEMPT SALES OF GOODS,
PROPERTIES, & SERVICES
EXEMPT SALES
Exempt sales are exempt consumption of goods or
services from domestic sellers. Exempt sales are not
subject to VAT and percentage tax.

HENCE,
1. VAT taxpayers making exempt sale of goods,
properties or services shall not bill any output VAT to
their customers because the sale is not subject to VAT.

2. A non-VAT person making exempt sales shall

not be subject to the 3% percentage tax on sales or
receipt.
I. EXEMPT SALES OF GOODS OR PROPERTIES
MNEMONICS: SECRET Tax-free Gold
1. Sale of Goods to senior citizens and persons with disability.
This covers sale of essential goods only.
SALE OF GOODS SENIOR PWD
CITIZENS
DRUGS, VACCINES AND FOODS FOR YES YES
SPECIAL MEDIAL PUPOSES
VITAMINS AND MINERAL SUPPLEMENTS YES NO
ACCESSORIES AND EQUIPMENT BY OR FOR YES NO
SENIOR CITIZEN
CASKET OR URN YES YES
2. Sale of exempt goods.
a. Agricultural and marine food products in their original state.
b. Fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry
feeds, including ingredients used in the manufacture of finished feeds.
c. Books, newspapers, or magazines
d. Medicines prescribed for diabetes and hypertension
e. Passenger or cargo vessels and aircrafts.
3. Sales of goods by cooperatives
Sales by agricultural cooperatives duly registered in good standing with the
Cooperative Development Authority (CDA) to their members as well as sales of their
produce, whether in is original state or processed form to non-members; Their
importation of Direct Farm inputs, machineries and equipment, including spare
parts thereof to be used directly and exclusively in the production and or processing
of their produce.
 Sales of goods by cooperatives
Cooperatives which transact business with nonmembers are subject to business
tax on their sales to non-members if their accumulated reserves exceeds
P10,000,000.
4. Sales of residential properties
1. Sale of real properties utilized for low-cost housing
a. House and Lot package – P450,000
b. Residential Lots only – P180,000
2. Sale of real properties utilized for socialized housing wherein the price
ceiling per unit is P750,000
3. Sale of Residential Lot valued at P1,919,500 and below
4. Sale of residential dwelling valued at P3,199,200 and below.
*sale of adjacent lots- within 12 month period in favor of one buyer shall be treated as
one
5. Export sales by non-VAT persons
EXEMPT SALES OF GOODS OR PROPERTIES MNEMONICS: SECRET Tax-
free Gold
6. Treaty-exempt sales of goods
Sales of goods exempt under international agreement to which the
Philippines is a signatory or under special laws.
7. Tax-free exchange of property
a. The exchange of properties in pursuant to a plan of merger or
consolidation
b. The transfer of property that resulted in the initial acquisition of corporate
control.
8. Sale of gold to the Bangko Sentral ng Pilipinas (BSP)
II. EXEMPT SALES OF SERVICES MNEMONICS: SEARCHH VA TRIPS
1. Schools
Educational Services rendered by private educational institution duly accredited by
the Department of Education (DEPED), the commission on Higher Education
(CHED), and Technical Education and skills Development Authority (TESDA) and
those rendered by government educational institutions.
The exemption does not cover services rendered by educational institutions that
are not accredited by DEPED, CHED or TEDDA such as SEMINARS, TRAININGS, REVIEW
CLASSES AND OTHER SEMINAR SERVICES.

2. Employees.
Services performed by an individuals in pursuant to an employer and employee
relationship.
3. Agricultural Contract growers and millers.
Services by agricultural contract growers and milling fr others of palay into rice,
corn into corn grits, and sugar cane into raw sugar.
4. Residential Leasing
Lease of residential unit with monthly rental not exceeding P15,000.
5. Cooperative services
Gross receipts from lending activities by credit or multi purpose cooperatives duly
registered and in good standing with the Cooperative Development Authority.
6. Hospitals
Medical, dental, hospitals and veterinary services except those rendered by
professionals and sales of drugs by a hospital drug store.
7. Home owner’s association or condominium corporations
Association dues, membership fees, and other assessments and charges collected by
homeowners associations and condominium corporations.
8. Lease passenger or Cargo vessels and aircrafts including
engine equipment and spare parts thereof for domestic or
international transport operations.
9. Treaty-exempt services
Sales of goods exempt under international agreement to which the Philippines is a
signatory or under special laws.
10. Regional area headquarters
Services rendered by regional or area headquarters established in the Philippines by
multinational corporations which act as supervisory communications, and
coordinating centers for their affiliates, subsidiaries or branches in the Asia pacific
region and do not or derive income from the Philippines.
11. International carriers
Transport of passengers by international carriers.
12. Printers or publishers
1. They must appear at regular intervals with fixed prices for subscription
2. The sale must not be devoted principally to the publication of paid
advertisements.
1
13. Senior Citizens and persons with disability
Sale of basic essential services to senior citizens and persons with disability by
service establishments such as:
a. Restaurant
b. Hotels and Lodging establishment
c. recreation centers, such as theater, cinema houses, concert halls,
carnivals and such other places of leisure or amusement.
d. Hospital and clinic
e. Land, air and sea travel
f. Medical, dental, diagnostic and laboratory fees and professional
medical fees
g, Funeral and burial services for the burial of senior citizens
OTHER EXEMPT SALES OF SERVICES
1. Sales of goods or services taxed by special laws
a. Sale of goods or services by Ecozone-Locators
b. Sale of amusement service by theaters and cinemas
2. Sales by persons not engaged in businesses
3. Sale of assets held for use
INVOICING REQUIREMENT FOR EXEMPT SALES

- With respect to VAT-taxpayers, exempt sales of

goods or services must be specifically designated as
such by indicating or pre-printing the caption
“EXEMPT” on the invoice or receipt.
References
• Business and Transfer Taxation
2019 edition by Rex Banggawan
• CPA Reviewer in Taxation 2018 edition
by Enrico D. Tabag
• Reviewer in Taxation by Asser S. Tamayo
• CPAR
• RESA