Professional Documents
Culture Documents
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2. milling for others of palay into rice, corn into grits and sugar cane
into raw sugar;
(C) Importation of personal and household effects belonging to
1. residents of the Philippines returning from abroad and (G) Medical, dental, hospital and veterinary services except those
2. non-resident citizens coming to resettle in the Philippines: rendered by professionals;
- Laboratory services are exempted. If the hospital or clinic operates
Provided, That such goods are exempt from customs duties under the a pharmacy or drug store, the sale of drugs and medicine is subject
Tariff and Customs Code of the Philippines; to VAT.
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(M) Gross receipts from lending activities by credit or multi-purpose sale of real property utilized for socialized housing as defined by
cooperatives duly registered with the Cooperative Development Republic Act No. 7279, sale of house and lot, and other residential
Authority; dwellings with selling price of not more than Two million pesos
(PhP2,000,000):
(N) Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the Cooperative Development Provided, further, That every three (3) years thereafter, the amount
Authority: Provided, That the share capital contribution of each herein stated shall be adjusted to its present value using the Consumer
member does not exceed Fifteen thousand pesos (PhP15,000) and Price Index, as published by the Philippine Statistics Authority (PSA)
regardless of the aggregate capital and net surplus ratably distributed
among the members; (Q) Lease of a residential unit with a monthly rental not exceeding
Fifteen thousand pesos (PhP15,000);
(O) Export sales by persons who are not VAT-registered;
(R) Sale, importation, printing or publication of books and any
Rules on Export Sales newspaper, magazine, review or bulletin which appears at regular
By a non-VAT registered VAT exempt intervals with fixed prices or subscription and sale and which is not
By VAT registered Vatable at 0% devoted principally to the publication of paid advertisements;
NOTE: The reason is to encourage exporters of goods to register as a (S) Transport of passengers by international carriers;
VAT-registered person with the BIR to be able to claim unused input - The transport of cargo by international carriers doing business in the
tax in the form of refund or tax credit. Philippines shall be exempt from VAT as the same is subject to
If he is a VAT-registered person, his export sales are zero-rated. Common Carrier's Tax (Percentage Tax on International Carriers).
International carriers exempt under Sections 109(1)(S) and 109(1)(E) of
(P) Sale of real properties the NIRC, as amended, shall not be allowed to register for VAT
1. not primarily held for sale to customers or held for lease in the purposes (RR No. 15-15).
ordinary course of trade or business or real property utilized for low-
cost and socialized housing as defined by Republic Act No. 7279, 12% 0@ VAT EXEMPT
otherwise known as the Urban Development and Housing Act of 1992, Domestic transport International Transport of
and other related laws, of passengers or transport of passengers by
2. residential lot valued at One million five hundred thousand pesos cargoes by air and passengers or international air and
(PhP1,500,000) and below, sea cargoes by air or sea shipping carriers
3. house and lot, and other residential dwellings valued at Two million NOTE: If domestic NOTE: Transport NOTE: In case of
five hundred thousand pesos (PhP2,500,000) and below: transport of should be done by transport of cargoes,
passengers or domestic carriers the international air
Provided, That beginning January 1, 2021, the VAT exemption shall cargoes by land, the with international or shipping carrier
only apply to sale of real properties not primarily held for sale to common carrier is flights such as PAL, shall be subject to 3%
customers or held for lease in the ordinary course of trade or business, liable to percentage
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tax on common Cebu Pacific, etc., percentage tax on (AA) Sale of drugs and medicines prescribed for diabetes, high
carriers otherwise, exempt international carriers cholesterol, and hypertension beginning January 1, 2019; and
(T) Sale, importation or lease of passenger or cargo vessels and (BB) Sale or lease of goods or properties or the
aircraft, including engine, equipment and spare parts thereof for performance of services other than the transactions mentioned in the
domestic or international transport operations; preceding paragraphs, the gross annual sales and/or receipts do not
exceed the amount of Three million pesos (PhP3,000,000).
(U) Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations: Provided, That the NOTE: (2) A VAT-registered person may elect that Subsection (1) not
fuel, goods, and supplies shall be used for international shipping or air apply to its sale of goods or properties or services: Provided, That an
transport operations; election made under this Subsection shall be irrevocable for a period
- Fuel is exempt if imported by persons engaged in international of three (3) years from the quarter the election was made.
shipping or air transport operations. On the other hand, fuel is zero-
rated when sold to persons engaged in international shipping or Q: Is the sale of e-books and e-journals appearing at regular intervals
international air transport operations without docking or stopping at with fixed prices for subscription and sale and not devoted principally
any other port in the Philippines. to publication of paid advertisements subject to VAT?
(V) Services of bank, non-bank financial intermediaries performing No. The terms “book”, “newspaper,” “magazine”, “review” and
quasi-banking functions, and other non-bank financial “bulletin” shall refer to printed materials in hard copies and do not
intermediaries; include those in digital or electronic format or computerized versions
- Pawnshops are not liable to pay VAT as Pawnshops are not classified (RMC No. 75-2012 dated November 22, 2012)
as lending investors and therefore, they are not subject to VAT. They
are subject to percentage tax Q: Is PAGCOR’s sale of services subject to VAT?
(W) Sale or lease of goods and services to senior citizens and persons No. In PAGCOR V. CIR [MARCH 15, 2011], the Supreme Court held that
with disability, as provided under Republic Act Nos. 9994 (Expanded RA 9337 only withdrew PAGCOR’s exemption from corporate income
Senior Citizens Act of 2010) and 10754 (An Act Expanding the Benefits taxes but does not contain any provision that subjects the same to
and Privileges of Persons With Disability), respectively; VAT. PAGCOR is exempt from the payment of VAT, because
PAGCOR's charter, P.D. No. 1869, is a special law that grants it
(X) Transfer of property pursuant to Section 40(C)(2) of the NIRC, as exemption from taxes. Moreover, the exemption of PAGCOR from
amended; VAT is supported by Section 6 of R.A. No. 9337, which retained Section
(Y) Association dues, membership fees, and other assessments and 108 (B) (3) of R.A. No. 8424, thus: Services rendered to persons or
charges collected by homeowners associations and condominium entities whose exemption under special laws or international
corporations; agreements to which the Philippines is a signatory effectively subjects
the supply of such services to zero percent (0%) rate
(Z) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
CIR v. PILIPINAS SHELL [G.R. 188497, APRIL 25, 2012]
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or entity sells his/its products or services, the VAT-registered taxpayer
DOCTRINE: Oil companies are not exempt from the payment of generally becomes liable for 10% (now 12%) of the selling price as
excise tax on petroleum products manufactured and sold by them to Output VAT or output tax (CIR v. Benguet Corporation, G.R. No. 145559,
international carriers. July 14,2006).
2. Purchases of real properties for which a VAT has actually been paid; PERSONS WHO CAN AVAIL OF INPUT TAX CREDIT
3. Purchases of services in which a VAT has actually been paid (Sec.
110, NIRC); The input tax credit on importation of goods or local purchases of
4. Transactions “deemed sales”; goods, properties or services by a VAT registered person shall be
5. Presumptive input tax; creditable:
6. Transitional input tax credits allowed under the transitory and other 1. To the importer upon payment of the VAT prior to the release of the
provisions (Sec. 4.110-1 R.R. 162005). goods from the customs custody;
2. To the purchaser of the domestic goods or properties upon
Capital goods (depreciable goods) consummation of the sale; or
3. To the purchaser of the services or the lessee or the licenses upon
Capital goods are those goods or properties a. with an estimated payment of the compensation, rental, royalty or fee (R.R. 16-2005).
useful life of more than one year;
b. which are treated as depreciable under the income tax law; As long as the invoices from the suppliers are issued in the name of the
taxpayer and expenses were actually incurred by the taxpayer, then
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the input tax pertaining to such expenses must be credited to the Q: Give the three possible scenarios that may arise in computing the
taxpayer. Where the money came from to pay these expenses is VAT payable.
another matter all together but it does not change the fact that input
tax has been incurred (CIR v. Sony Philippines, Inc., G.R. No. 178697, If at the end of any taxable month or quarter:
November 17, 2010). Output tax = input tax No VAT payable
Output tax > input tax The excess shall be paid by the VAT-registered
Section 110 (B) Excess Output or Input Tax person
– If at the end of any taxable quarter the output tax exceeds the input Output tax < input tax The excess shall be carried over to the
tax, the excess shall be paid by the VAT-registered person. If the input succeeding quarter or quarters
tax exceeds the output tax, the excess shall be carried over to the
succeeding quarter or quarters: Provided, however, that any input tax Note: If input vat results from zero-rated or effectively zero-rated
attributable to zero-rated sales by a VAT-registered person may at his transactions, any excess over the output taxes shall be refunded to
option be refunded or credited against other internal revenue taxes, the taxpayer or credited against other internal revenue taxes, at the
subject to the provisions of Section 112.21 taxpayer’s option.
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5. The input taxes are not transitional input taxes
DOCTRINE: Prior payment of taxes is not required for a taxpayer to 6. The input taxes have not been applied against output taxes during
avail of the 8% transitional input tax credit. and in the succeeding quarters
7. The input taxes claimed are attributable to zero rated or effectively
Q: Who may avail of input tax credit? zero-rated sales
1. The importer upon payment of VAT prior to the release of goods 8. In certain types of zero-rated sales, the acceptable foreign
from customs custody currency exchange proceeds thereof had been duly accounted for
2. The purchaser of the domestic goods or properties upon in accordance with BSP rules and regulations [Sections 106(A)(2)(a)(1)
consummation of the sale and (2); Section 106(B); Sections 108(B)(1) and (2)]
3. The purchaser of services of the lessee or licensee upon payment 9. Where there are both zero-rated or effectively zero-rated sales and
of compensation, rental, royalty or fee 4. Purchaser of real property taxable or exempt sales, and the input taxes cannot be directly and
under cash/deferred payment basis upon consummation of the sale entirely attributable to any of these sales, the input taxes shall be
or if upon instalment basis upon every instalment payment (Section proportionately allocated on the basis of sales volume. (See INTEL
4.110-2, RR 16-2005) TECHNOLOGY PHILIPPINES V. CIR [APRIL 27, 2007])
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refund or tax credit of the unutilized creditable input VAT (Ingles, Refunds shall be made upon warrants drawn by the Commissioner or
2015). by his duly authorized representative without the necessity of being
In case the taxpayer is engaged in zero-rated and also in taxable or countersigned by the Chairman, Commission on Audit, the provisions
exempt sale, and the amount of creditable input tax due or paid of the Administrative Code of 1987 to the contrary notwithstanding:
cannot be directly and entirely attributed to any one of the Provided, That refunds under this paragraph shall be subject to post
transactions, it shall be allocated proportionately on the basis of the audit by the Commission on Audit.
volume of sales.
Section 113. Invoicing and Acounting Requirements for VAT
2. Cessation of business or VAT status - The person may, within two (2) Registered Persons
years from the date of cancellation, apply for the issuance of a tax
credit certificate for any unused input tax which may be used in Q: What are required to be issued by a VAT registered person?
payment of his other internal revenue taxes (Sec. 112(B), NIRC) 1. VAT invoice – for every sale, barter or exchange of goods or
properties
Period within which BIR Commissioner grants Tax Credit 2. VAT official receipt – for every lease of goods or properties and for
Certificates/refund for creditable input taxes every sale, barter or exchange of services.
- In proper cases, the Commissioner shall grant a refund for
creditable input taxes within ninety (90) days from the date of Note: Only VAT-registered persons are required to print their Tax
submission of the official receipts or invoices and other Identification Number (TIN) followed by the word “VAT” in their invoice
documents in support of the application filed in accordance with or official receipt, which shall be considered the VAT invoice or VAT
Subsections (A) and (B) hereof: official receipt. All purchases not covered by invoices/receipts other
than the VAT invoice or VAT official receipt shall not give rise to any
Provided, That should the Commissioner find that the grant of input tax (see Section 4.113-1(A), RR 16-2005]
refund is not proper, the Commissioner must state in writing the
legal and factual basis for the denial. Q: Is there a difference between an invoice and official receipt for
purposes of substantiation?
- In case of full or partial denial of the claim for tax refund, the
taxpayer affected may, within thirty (30) days from the receipt of In KEPCO PHILIPPINES V. CIR [NOVEMBER 24, 2010], in ruling on Kepco’s
the decision denying the claim, appeal the decision with the Court contention that an invoice and an official receipt are
of Tax Appeals: Provided, however, That failure on the part of any interchangeable, the Supreme Court stated that only a VAT invoice
official, agent, or employee of the BIR to act on the application might be presented to substantiate a sale of goods or properties,
within the ninety (90)-day period shall be punishable under while only a VAT receipt could substantiate a sale of services. The VAT
Section 269 of this Code. invoice is the seller’s best proof of the sale of the goods or services to
the buyer while the VAT receipt is the buyer’s best evidence of the
Q: What is the Manner of Giving Refunds? payment of goods or services received from the seller. Even though
VAT invoices and receipts are normally issued by the supplier/seller
alone, the said invoices and receipts, taken collectively, are
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necessary to substantiate the actual amount or quantity of goods sold to claim an input tax credit on said purchase. (see Section 4.113-4, RR
and their selling price (proof of transaction), and the best means to 16-2005)
prove the input VAT payments (proof of payment). Hence, VAT
invoice and VAT receipt should not be confused as referring to one Note: Failure or refusal to comply with the requirement that the
and the same thing. Certainly, neither does the law intend the two to amount of tax shall be shown as a separate item in the invoice or
be used alternatively receipt shall, upon conviction, for each act or omission, be punished
by a fine of not less than P1,000 but not more than P50,000 and suffer
Note: The unamended Section 113 did not distinguish between an imprisonment of not less than 2 years but not more than 4 years (RR
invoice and a receipt when used as evidence of a zero-rated 18-2011 [November 21, 2011])
transaction. Thus, in the case of transactions which took place during
the period of the unamended law, the Court could accept either or Q: What is the effect of the failure to comply with the invoicing
both of the documents as evidence of zero-rated transactions requirements on the claim for refund or credit of input VAT on
(SOUTHERN PHILIPPINES V. CIR [OCTOBER 19, 2011]; AT&T zerorated sales?
COMMUNICATIONS SERVICES PHILIPPINES V. CIR [AUGUST 3, 2010]
The claim for refund of unutilized or excess input taxes on the alleged
Q: What are the consequences of issuing erroneous VAT invoices or zero-rated sales will be denied. The invoicing requirements are
VAT official receipts? mandatory and the failure to comply is fatal in claims for a refund or
credit of input VAT on zero-rated sales. (SILICON PHILIPPINES V. CIR
1. If a person who is not VAT-registered issues an invoice or receipt [JANUARY 21, 2011].
showing his TIN, followed by the word “VAT”, the erroneous issuance
shall result to the following: See also MICROSOFT PHILIPPINES V. CIR [APRIL 6, 2011]; PANASONIC
COMMUNICATION IMAGING CORP V. CIR [FEBRUARY 8, 2010]; JRA
a) The Non-VAT person shall be liable to the: PHILIPPINES V. CIR [OCTOBER 11, 2010]; HITACHI GLOBAL STORAGE
TECHNOLOGIES PHILIPPINES CORP V. CIR [OCTOBER 20, 2010]; KEPCO
i. percentage taxes applicable ii. VAT due on the transactions without PHILIPPINES CORP V. CIR [NOVEMBER 24, 2010].
the benefit of any input tax credit iii. 50% surcharge as penalty
Q: Kepco filed a claim for refund of unutilized input VAT based on its
b) The VAT shall, if the other requisite information required is shown on zero-rated sale of power to NAPOCOR. A substantial portion of the
the invoice or receipt, be recognized as an input tax credit to the claim was denied for having been supported by VAT invoices which
purchaser. only had the TIN-VAT stamped and not printed. Is Kepco entitled to
the claim for refund?
2. If a VAT-registered person issues a VAT invoice or VAT official receipt
for a VAT-exempt transaction, but fails to display prominently on the No. In KEPCO PHILIPPINES V. CIR [NOVEMBER 24, 2010], the Supreme
invoice or receipt the term “VAT-exempt Sale,” the issuer shall be Court ruled that the requirement that the TIN be imprinted and not
liable to account for the VAT imposed. The purchaser shall be entitled merely stamped is a reasonable requirement imposed by the BIR.. The
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failure to adhere to this rule will not only expose the taxpayer to account of each purchase of goods or services subject to VAT,
penalties but should also serve to disallow the claim. deduct and withhold a final VAT equivalent to 5% of the gross
payment thereof provided that the payment for lease or use of
properties or property rights to non-resident owners shall be subject to
10% withholding tax at the time of payment. (Section 4.114-2, RR 16-
2005
Section 114. Return and Payment of VAT
Every person liable to pay the value-added tax imposed under this
Title shall file a quarterly return of the amount of his gross sales or
receipts within twenty-five (25) days following the close of each
taxable quarter prescribed for each taxpayer: Provided, however,
That VAT-registered persons shall pay the value-added tax on a
monthly basis: Provided, finally, That beginning January 1, 2023, the
filing and payment required under this Subsection shall be done within
twenty-five (25) days following the close of each taxable quarter.
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