TITLE IV – VALUE ADDED TAX
VAT on Sale of Goods or
DEFINITION: The value-added tax is an
indirect tax and the amount of tax may be
shifted or passed on to the buyer, transferee
or lessee of the goods, properties or services.
This rule shall likewise apply to existing
contracts of sale or lease of goods, properties
or services at the time of the effectivity of
Republic Act No. 7716
TRANSACTIONS COVERED BY VAT:
1. Sale of Commodities or Goods (in the
course of trade or business only)
2. Sale of Services (in the course of trade or
business only)
3. Exportation (in the course of trade or
business only)
4. Importation (whether or not in the course
of trade or business)
CHAPTER I – IMPOSITION OF TAX
Section 105. Persons liable
1. Sells, barters or exchanges goods or
properties in the course of trade or
business; or
2. Sells services in the course of trade or
business; or
3. Imports goods, whether or not in the
course of trade or business.
“IN THE COURSE OF TRADE OR BUSINESS”
The regular conduct or pursuit of a
commercial or an economic activity, including
transactions incidental thereto, by any person
regardless of whether or not the person
engaged therein is a non-stock, nonprofit
private organization (irrespective of the
disposition of its net income and whether or
not it sells exclusively to members or their
guests), or government entity.
 VAT is imposed on the seller, not the
buyer
Section 106.
Properties
TRANSACTIONS DEEMED SALE:
1. Transfer, use or consumption not in the
course of business of goods or properties
originally intended for sale or for use in the
course of business;
2. Distribution or transfer to:
(a) Shareholders or investors as share
in the profits of the VAT-registered
persons; or
(b) Creditors in payment of debt;
3. Consignment of goods if actual sale is not
made within sixty (60) days following the date
such goods were consigned; and
4. Retirement from or cessation of business,
with respect to inventories of taxable goods
existing as of such retirement or cessation.
Section 107. VAT on importation of Goods
 12% on the total value used by the
BOC in determining tariff and
customs duties, plus customs duties,
excise taxes, if any
Transfer of Goods by Tax-exempt Persons
 Tax-free importation of goods
transferred to non-exempt persons or
entities – purchasers, transferees or
recipients shall be considered the
importers thereof
Section 108. VAT on Sale of Services and Use
or Lease of Properties
 12% of gross receipts
Transactions Subject to “Zero Percent Rate”
1. Processing, manufacturing or
repacking goods for other persons
 doing business OUTSIDE the
Philippines which goods are
SUBSEQUENTLY EXPORTED, where
the services are paid for in acceptable
foreign currency
2. Services other than in #1, rendered to
a person OUTSIDE the Philippine or to
a non-resident person NOT ENGAGED
in business who is OUTSIDE when
services are performed, where the
services are paid for in acceptable
foreign currency
3. Exemption under special laws or
international agreements
4. Services to persons engaged in
INTERNATIONAL SHIPPING or AIR
TRANSPORT OPERATIONS. Provided
for IS or IA operations only.
5. Services by subcontractors and/or
contractors in PROCESSING,
CONVERTING or MANUFACTURING
goods for an enterprise whose
EXPORT SALES exceed 70% of the
total annual production
6. Transport passengers and cargo by
domestic air or sea vessels FROM the
Phil TO a foreign country
7. Sale of power or fuel generated
through renewable sources of energy
Section 109. Exempt Transactions
 A-BB
 BB – Sale or lease of goods or
properties or the performance of
services other than the transactions
mentioned in the preceding
paragraphs, the gross annual saes
and/or receipts do not exceed the
amoun of 3,000,000.00
 NOW exempt:
o Transfers of property based
on Sec 40(C)(2)
o Sale of gold to the BSP
o Sale of drugs and medicines
for diabetes, high cholesterol,
and hypertension
 VAT threshold is now 3,000,000
o If gross annual sales and/or
receipt do not exceed 3m, a
person NEED NOT register as
VAT-taxpayer
 Qualified self-employed individuals
and professionals availing of the 8%
income tax on gross sales and/or
receipts are exempt from 12% VAT.
Section 110. Tax Credits
 The output tax of the seller is the
input tax of the buyer
 You can only deduct input tax when
there is actual sale
 The VAT you pay on purchases is
normally called “input VAT”, while
the VAT you add on sales is normally
called “output VAT”.
 In computing the VAT due and
payable to the Bureau of Internal
Revenue (BIR), you simply compute as
follows: Output tax from sales.
Less: Creditable input taxes.
Sources of input taxes:
 Transitional input tax
 Presumptive input tax
 Input taxes on domestic purchases or
importations (VAT actually paid).
Section 111. Transitional/Presumptive Input
Tax
 Transitional Input Tax
1. Persons who can avail:
Persons who become liable to VAT
Persons who elect to be VAT-registered
2. Basis of transitional input tax – Beginning
inventory of VAT-
subject goods, materials and supplies.
3. Transitional input tax allowed – The
HIGHER between:
4. 2% of the VAT-subject beginning
inventory value for income tax purposes;
and
5. Actual VAT paid on such beginning
inventory.
 Presumptive Input Tax
1. Persons or firms who can avail:
 Processor of sardines, mackerel
and milk
 Manufacturer of refined sugar,
cooking oil and packed noodle-
based instant meal
2. Basis of presumptive input tax – Gross
value in money of purchases of
primary agricultural products used as
inputs in the processing or
manufacturing of IM MS SMC.
3. Rate of presumptive input tax – 4%
Section 112. Refunds or Tax Credits of Input
Tax
Zero-rated or Effectively Zero-rates Sales
 Within 2 years after the close of the
taxable quarter – apply for issuance of
a TAX CREDIT or TAX REFUND
 TAX CREDIT – certificate
 TAX REFUND – monetary
Period within which Refund or Tax Credit of
Input Taxes shall be made
 Within 90 days from the date of
submission of OR or invoices and
other documents in support of the
application
 In case of full denial of claim for tax
refund – appeal within 30 days from
receipt of the decision denying the
claim
 Failure of any official, agent or
employee of the BIR to act on the
application within 90 day period –
punishable under Sec 269
Chapter II – COMPLIANCE REQUIREMENTS
Section 113. Invoicing and Accounting
Requirements for VAT-Registered Persons
Invoicing Requirements
 VAT invoice for every sale, barter
exchange of goods or properties
 VAT official receipt for every lease of
goods or properties and for every
sale, barter or exchange of services
Accounting Requirements
 Maintain subsidiary sales journal and
subsidiary purchase journal on which
the daily sales and purchases are
recorded.
Consequences of Issuing Erroneous VAT
invoice or VAT Official Receipt
1. Not VAT registered
i. Tax imposes in Sec
160 or 108 without
benefit of any input
tax credit
ii. 50% surcharge
2. VAT registered
i. Fails to display on the
invoice or receipt the
term ‘VAT-exempt
sale’, the issuer is
liable to account for
the tax imposed in
Sec 106 or 108
Section 114. Return and Payment of VAT
 File quarterly return within 25 days
following the close of each taxable
quarter
 Provided, VAT-registered persons –
pay VAT on a monthly basis
  Beginning January 1, 2023 – pay and  3% of gross quarterly receipts
file within 25 days following the close  Except owners of bancas and owners
of each taxable quarter of animal-drawn two-wheeled vehicle

Withholding of VAT Section 118. Percentage Tax on International

Carriers
 Government or any of its political
subdivisions, instrumentalities or  3% of their gross quarterly receipts
agencies including GOCCS
o Before making payment on Section 119. Tax on Franchises
account of each purchase
 All franchises on radio and/or TV
which are subject to VAT
broadcasting companies – annual
deduct and withhold 5% of
gross receipts do not exceed
the gross payment
P10,000,000 – 3%
 Beginning Jan. 1, 2021 – VAT
 Gas and water utilities – 2%
withholding system shall shift from
final to a creditable system Section 120. Tax on Overseas Dispatch,
Message or Conversation Originating from the
Section 115. Power of the Commissioner to
Philippines
Suspend Business Operations of a Taxpayer
 Coverage: overseas dispatch, message
o Operation Padlock
or conversation transmitted from the
1. VAT-registered person
Phil.
a. Failure to issue receipts or
 Through : telephone, telegraph,
invoices;
telewriter exchange, wireless and
b. Failure to file a VAT return as
other communication equipment
required; or
services
c. Understatement of taxable
 10% on the amount paid for such
sales or receipts by 30% or
services.
more of his correct taxable
 Persons liable: person paying for the
sales or receipts for the
services shall pay to the person
taxable quarter
rendering the services who is required
2. Failure of any person to register as
to collect and pay the tax within 20
required under Section 236
days after end of each quarter
a. Temporary closure – not less
than 5 days Exemptions
b. Lifted only upon compliance
1. Government
TITLE V – OTHER PERCENTAGE TAXES 2. Diplomatic Services
3. International Organizations
Section116. Tax on Persons Exempt from VAT
4. News Services
 3% on his gross quarterly sales or
Section 121. Tax on Banks and Non-Bank
receipt.
Financial Intermediaries Performing Quasi-
Section117. Percentage Tax on Domestic Banking Functions
Carriers and Keeper of Garages
  On interests, commissions and division is at stake –
discounts exempt
o Maturity period is 5 years or  At least one
less – 5% contender is a
o Maturity period is more than Filipino citizen;
5 years – 1% and
 On dividends and equity shares – 0%  Promoted by a Fil.
 On royalties, rentals of property, real Citizen or by a
or personal, profits from exchange – corpo or assoc. At
7% least 60% of the
 On net trading gains – 7% capital of which is
owned by such
Section 122. Tax on Other Non-Bank Finance citizens
Intermediaries
o Professional basketball games
 Maturity period is 5 years or less – 5%
– 15%
 Maturity period is more than 5 years
o Jai-Alai and racetracks – 30%
– 1%
o
Section 123. Tax on Life Insurance Premiums
Section126. Tax on Winnings
 Every person, company or
 10% based on the actual amount paid
corporation doing life insurance
business of any sort in the Phil. – 2% Section127. Tax on Sale, Barter or Exchange of
of the total premium collected Shares of Stock Listed and Traded through the
 Except purely cooperative companies Local Stock Exchange or through Initial Public
or associations Offering
 Premiums refunded within 6 months
on account of rejection of risk or  Shares of Stock Listed and Traded
returned for other reason – not through the Local Stock Exchange –
included in the taxable receipts 6/10 of 1%
 Initial Offering
Section124. Tax on Agents of Foreign o Up to 25% - 4%
Insurance Companies o Over 25% but not over 33
1/3% - 2%
 Not authorized to transact business in
o Over 33 1/3% - 1%
the Phil
 Shall be paid by the issuing
 4%
corporation in primary offering or by
Section125. Amusement Taxes the seller in secondary offering

 Proprietor, lessee or operator Section 128. Returns and Payment of

o Cockpits – 18% Percentage Taxes.
o Cabarets – 18%
 File quarterly return
o Boxing exhibitions – 10%
 Pay within 25 days after the end of
 If World or Oriental
each taxable quarter
Championships in any
TITLE VII – DOCUMENTARY STAMP The documentary stamp taxes payable on
documents or instruments are as follows:
The documentary stamp tax is an excise tax
levied on documents, instruments, loan Documents/Instruments Tax Rate
agreements and papers evidencing the Original issue of shares PhP1.00 per
acceptance, assignment, sale or transfer of of stock (Sec. 174) PhP200, or fraction
an obligation, rights, or property incident thereof, of the par
value
thereto.
Sales, agreements to PhP0.75 per
The amount of tax is either fixed or based on sell, memoranda of PhP200, or fraction
certificates of stock thereof, of the par
the par or face value of the document or
(Sec. 175) value
instrument. The tax is paid by the person Bonds, debentures, PhP1.00 per
making, signing, issuing, accepting or certificates, or PhP200, or fraction
transferring the documents. However, indebtedness issued in thereof, of the
whenever one party to the taxable document foreign countries (Sec. face/par value
enjoys exemption from the tax, the other 176)
party thereto who is not exempt shall be the Certificates of profits or PhP0.50 per
interest in property or PhP200, or fraction
one directly liable for the tax.
accumulations (Sec. thereof, of the face
Except as otherwise provided by rules and 177) value
Bank checks, drafts, PhP1.50 per check,
regulations, the tax return shall be filed and
certificates of deposit, draft or certificate
the tax due shall be paid at the same time not bearing interest and
within 10 days after the close of the month other instruments (Sec.
when the taxable document was signed, 178)
issued, accepted or transferred. Debt instruments (Sec. PhP1.00 per
179) PhP200, or fraction
In lieu of the foregoing, the tax may be paid thereof, of the
either through purchase of DST stamp and issue price
actual affixture, or by imprinting a secured Bills of exchange or PhP0.30 per
stamp on the taxable document through the drafts (Sec. 180) PhP200, or fraction
thereof, of the face
web-based Electronic Documentary Stamp
value
Tax (eDST) System. Acceptance of bills of PhP0.30 per
exchange and others PhP200, of the face
Failure to stamp a taxable document shall not
(Sec. 181) value
invalidate the same. However, it shall not be Foreign bills of PhP0.30 per
recorded (i.e. in the Registry of Deeds) or exchange and letters of, PhP200, of the face
admitted or used as evidence in any court credit (Sec. 182) value
until the requisite stamp is affixed thereto Life Insurance Policies
and cancelled. (Sec. 183)
a. If the amount of Exempt
Furthermore, no notary or other officer insurance does not
authorized to administer oaths shall add his exceed P100,000.00
b. If the amount of Php10.00
jurat or acknowledgment to the document
insurance exceeds
unless the proper documentary stamp is
PhP100,000.00 but does
affixed thereto and cancelled. not exceed
PhP300,000.00
c. If the amount of Php25.00
insurance exceeds Certificates (Sec. 188) PhP15.00
PhP300,000.00 but does Warehouse receipts PhP15.00
not exceed (Sec. 189)
PhP500,000.00 Jai-alai and horse race PhP0.10/ticket
d. If the amount of PhP50.00 tickets, lotto or other worth PhP1.00 and
insurance exceeds authorized numbers additional PhP0.10
PhP500,000.00 but does games (Sec. 190) for each PhP1.00 in
not exceed excess of PhP1.00
PhP750,000.00 Bills of Lading or
e. If the amount of PhP75.00 receipts (Sec. 191)
insurance exceeds
PhP750,000.00 but does a. Value exceeding P100 Php 1.00
not exceed but not over
PhP1,000,000.00 b. Value exceeding Php 10.00
f. If the amount of PhP100.00 P1,000
insurance exceeds Proxies (Sec. 192) PhP15.00
PhP1,000,000.00 Powers of attorney (Sec. PhP5.00
Policies of insurance PhP0.50 on each 193)
upon property (Sec. PhP4.00, or Leases and other hiring PhP3.00 for the
184) fraction thereof, of agreements (Sec. 194) first PhP2,000, or
the amount of fraction thereof,
premium charged and additional
Fidelity bonds and other PhP0.50 on each PhP1.00 for every
insurance policies (Sec. PhP4.00, or PhP1,000 or
185) fraction thereof, of fraction thereof, in
the amount of excess of the first
premium charged PhP2,000 per year
Policies of annuities and Mortgages, pledges,
pre-need plans (Sec. and deeds of trust (Sec.
186) 195)
a. Php5,000 or less PhP20.00
Annuities PhP0.50 per
PhP200, or fraction b. On each Php5,000 or PhP10.00
thereof, of the fraction thereof in
premium or excess of Php5,000
installment Deeds of sale and
payment or conveyances of real
contract price property (Sec. 196)
collected
a. Consideration is PhP15.00
Pre-need plans PhP0.20 per PhP1,000 or less
PhP200, or faction
thereof, of the b. On each PhP1,000 or PhP15.00
premium or fraction thereof in
contribution excess of PhP1,000
collected Charter parties and
Indemnity bonds (Sec. PhP0.30 on each similar instruments
187) PhP4.00, or (Sec. 197)
fraction thereof, of
the premium a. Registered gross PhP500 and
charged tonnage of vessel does additional
not exceed 1,000 tons PhP50/month in
and duration of charter excess of 6 months
does not exceed 6 months

b. Registered gross PhP1,000 and

tonnage of vessel additional
exceeds 1,000 tons but PhP100/month in
not over does not excess of 6 months
exceed 6 months

c. Registered gross PhP1,500 and

tonnage of vessel additional
exceeds 10,000 tons PhP150/month in
and duration of charter excess of 6 months
does not exceed 6
months
Assignments and Same rate as that
renewals of certain of the original
instruments (Sec. 198) instruments
Sec. 199. Documents and Papers Not Subject
to Stamp Tax

Sec. 200. Payment of Documentary Stamp

 Pay as you file

 Within 10 days after the close of the
month when the taxable document
was made, signed, issued, accepted,
or transferred

Sec. 201. Effect of Failure to Stamp Taxable

Document

 Shall not be recorded

 Nor shall it or any copy or any record
of transfer of the same be admitted
or used in evidence in any court
UNTIL the requisite stamp have been
affixed and cancelled.
 Jurat or acknowledgement should not
be added to the document by the NP
or other officer authorized to
administer oaths.