VALUE ADDED TAX roasting, smoking, or string including those

using those advance technological means of

VAT
packaging, such as shrink wrapping in plastics,
 Tax on the value added by every seller vacuum packing, tetra pack, and other similar
to the purchase price or cost in the sale packaging methods.
or lease of goods, property or services
in the “ordinary course “of trade or
business.
 As well as on importation of goods into
the Philippines, whether for personal or
business use.

RULE: Sale of goods or services made in the

normal course of trade or business are subject
to vat "unless exempt '

Nonetheless, if the sale is exempt from vat, it is

may be subject to other percentage taxes VAT EXEMPT SUGAR RAW SUGAR CANE
except those transactions exempt from
business taxes such as those made for  refers to sugar produced by simple
subsistence or livelihood. process of Conversion of sugar cane
without need of any mechanical or
VAT EXEMPT SALES (SECTION 109 NIRC, as similar device
amended under RA 10963-TRAIN Law; RR 13-  Under the revised regulation, raw
2018) cane sugar refers only to muscovado
sugat Thus, only raw sugar cane is
The vat exempt transactions provided in the
exempt from vat under the tax code (RR
Tax Code are as follows:
4. 2015).
A. "Sale or importation of:
The following other definitions were mo
1. Agricultural and marine "food products in provided under RR 13-08 as amended by RR
their original state 12-2013, RR4-2015 and RR 6-2015: -
2. Livestock;  Raw Sugar - as sugar whose
content of sucrose by weight in dry
3. Poultry of a kind generally used as, or
state, corresponds to a a
yielding or producing foods for human
polarimeter reading of less than
consumption and breeding stock and genetic
99.5°.
materials therefore.
 Refined Sugar - as sugar whose
RR 16-2005 content of sucrose by weight in dry
state, corresponds to a polarimeter
provides that products classified under this
reading of 99.5° and above.
exemption, Such as meat, fruits and vegetables
 Sugar Refinery Mill - refers to
shall be considered in their "original state”
entity, natural or juridical, engaged
even if they have undergone the simple
in the business of milling sugar
processes of preparation or preservation for the
market such as freezing drying , salting, broiling,
 cane into raw or in the refining of other animals generally considered
raw sugar as pets are subject to vat

Cane Sugar - produced from the For the sale or importation of certain e
following shall be presumed, for ingedes uhe o şkimmed milk powder.
internal revenue purposes, as refined lactose, buttermilk powder, whole milk
sugar. powder and such other feed ingredients
and additives which may be hereinafter be
 Product of a refining process determined by competent authority to have
 Products of a sugar refinery; or possible utlization for human consumption,
 Product of a production line of there must be a showing that the same is
a sugar nill a accredited by the unfit for huma consumption or that the
BIR to be producing andlor ingredient cannot be used for the
capable of producing sugar wit production of food for human consumption
polarimeter reading of 99.5 as certified by the Food and Drug
and above Administration (FDA) IRMC 55-2014 as
revised by RMC 6-2014 and RMC 78-2014]
SALE OF MARINATED FISH (Rev. Ruling 348-11
dated Sept 28, 2011)
C. Importation of personal and household
 Sale of marinated fish is not exempt effects, belonging to:
from vat.
 The residents of the Philippines
 Laws granting Exemption from
returning from abroad;
payment of tax must be clearly stated in
 Nonresident citizens coming to
the language of the law
resettle in the Philippines.

Philippines Kinds of personal and household

effects that may be exempt from payment of
customs duties: .

 returned personal and household

effects; and
 personal and household effects
purchased abroad.

B. Sale or importation of:

1. Fertilizers
2. Seeds. seedlings and fingerlings
3. Fish, prawn , livestock and poultry
feeds, including ingredients whether
locally produced or imported used in
the manufacture of finished feeds
D. Importation of professional instruments and
Specialty feeds implements, tools of trade occupation or
 refer o nonagricultural feeds or employment, wearing apparel, domestic
food for race horses, fighting cocks animals, and personal and household effects
aquarium fish, zoo animals and
belonging to persons coming to settle in the
Philippines or Filipinos or their families and of growing poulry, livestock or ofnte agricultural
descendants who are now residents or citizens and marine fod products, the same can be
of other countries. considered as vatable services not covered by
agricultural contract growing.
E. Subject to Percentage Tax

G. Medical, dental, hospital and veterinary

services except those rendered by
professionals.

 Laboratory services are exempted. If

the hospital or clinic operates a
pharmacy services or drugstore, the
sale of the hospital medicines are
subject to VAT.
F. SERVICES BY  Hospital bills constitute medical
services. The sales made by the
a) Agricultural contract growers" drugstore to the in-patients which are
b) Milling for others of: included in n the hospital bills are part
Palay into rice of medical bills exempt from vat.
Corn into grits;  Sales of the drugs store to the out-
Sugar cane into raw sugar patients are taxable because they are
Section 4.109-1(B)(1 of RR 16-05 provides.. not of part of medical services of the
hospital.
A contract growers refer to those persons
producing for others' poultry , livestock or other RR 14-2019 provides
agricultural and marine food products in their  that hospitals and clinic shall not allow
original state. their medical practitioners to receive
"Toll processing/toll dressing/ toll payment of professional fees directly
manufacturing” involves procedures such as; from patients who were admitted and
weighing, killing, dressing, scalding, cut-ups; confined to such hospital instead, must
and packaging. include the professional fees in the total
medical bill of a patient.
However, after careful re-study by the Bureau,  Professional fees of medical
it was clarifed under RR 97-2010, that "toll practitioner rendered to inpatients
processing services exempt from vat shall should no longer be subject to vat
pertain only to services to clients from which because such fees should already be
growing of animals were contracted. As such, included in the “hospital bills” which is
preparing and packaging hogs chicken within tax exempt
the purview of agricultural contract growing  Medical practitioner must not be under
However, f su an activity is done independently employee-employer relationship
H. Educational services rendered by private production and/or processing of their produce
educational institutions, duly accredited by the (refe ea to table 8-2).
Department of Education (DepEd), the 9
It is to be reiterated however, that sale or
Commission on Higher Education (CHED), the
importation of' agricultural food products in
Technical Education and Skills Development
their original state is exempt from VAT
Authority (TESDA) and those rendered by
irrespective of the seller and buyer thereof
government educational institutions.
M. Gross receipts from "ending activities" by
 Educational services shall refer to
credit or multipurpose cooperatives duly
academic, technical or vocational
registered with the Cooperative Development
education provided by private
Authority.
educational institutions duly accredited
by the DepEd, the CHED and TESDA and  Exemption is not only limited to the
those rendered by government gross receipts on loans extended to its
educational institutons members but also to other persons who
are not members.
does not incudet seminars. in-service training,
review classes rendered by persons who are not N. Sales by non-agricultural non-electric and
accredited by the DepEd, the CHED and/or non-credit cooperatives duly registered with
TESDA. the Cooperative Development Authority
I. Services rendered by individuals pursuant to  Provided that the share capital
an employer-employee relationship. contribution of each member does not
exceed fifteen thousand pesos (P15,000)
J. Services rendered by regional or area
and regardless of the aggregate
headquarters established in n the Philippines
by multinational corporations which act as  Importation by non-agricultural non-
super communications and coordinating electric and noncredit capital and net
centers for their affiliates, subsidiaries or surplus ratably distributed among the
branches in the Asia-Pacific Region and do not members.
earn or derive income from the Philippines.  cooperatives of machineries and
equipment including spare parts
K. Transactions which are exempt under thereof, to be used by them are subject
international agreements to o which the to vat
Philippines is a signatory or under special laws,
except those under Presidential Decree No. O. Export sales by person who are not VAT
529 (Petroleum Exploration Concessionaires registered
under the Petroleum Act of 1949.) P. SALE OF:
L. Sales by agricultural cooperative duly 1) Real property not primarily held for sale to
registered with the Cooperative Development customers or held for Lease in the ordinary
Authority to their members as well as sale of course of trade or business.
their produce, whether in its original state or
processed form, t on-members, their  Sale of real property not primarily held
importation of direct farm inputs, machineries for sale or for leases in general, vat
and equipment, including spare parts thereof, exempt.
to be used directly an ne Exclusively in the
  However, if such property is used in e  refers lots to or housing as programs
trade or business of the seller, the sale that and are undertaken by the
shall be subject to VAT as an incidental government or the private sector for
transaction to the seller's main the underprivileged and homeless
business (RR4-2007 RR 13-2018). citizens which shall include sites and
 sale of real properties held primarily for services development, long-tem
sale to customers or held for lease in the financing, liberalized terms interest
ordina course of trade or business of the payments, and as such other benefits
seller shall be subject to vat RR 16-2005 in accordance with the provisions
as amended by RR 13-2012 and RR 13- Republic Act 7279 otherwise known as
2018). Urban Development and Housing Act of
1992
Real property utilized for low-cost housing and
 Socialize Housing shall also refer to
socialized housing defined by Republic Act No.
projects and privileged intended for
7279 otherwise known as Urban Development
underpreviledge homeless wherein the
and Housing Act of 1992
housing package selling price is within
Low – Cost Housing the lowest interest rate .
 Residential lot valued at P1,500,000
 refers to housing projects intended for and below beginning January 1 2018
homeless low – income family others residential dwellings valued at
beneficiaries, undertaken by P2,000,000 and below beginning
Government or private developers, January 1, 2018
which may either be a Subdivision or a
condominium, registered and licensed SALE OF ADJACENT LOTS
by the Housing and Land Use
If two or more adjacent residential lots are sold
Regulatory Board/Housing (HLURB)
or disposed in favor of one buyer, for the
under BP Big. 220, PD 957, or any other
purpose of utilizing the lots as one residential
similar law the unit price is within the
lot, the sale shall be exempt from Vat only if the
selling price per unit as set by the
aggregate value do not exceed P1,500,000 (as
Housing and Urban Development
amended).
Coordinate Council (HUDCC) pursuant
to RA 7279, otherwise known as the Adjacent residential lots, although covered by
"Urban Development and Housing Act separate titles and/or separate tax declarations,
of 1992" and other laws. when sold to one and the same buyer, whether
covered by one separate Deed of Conveyance,
3) Real property utilized for “socialized
shall be presumed as sale of one residential lot.
housing” as defined by Republic Act No.
7279, and other related laws such as RA Provided, that beginning January 1, 2021 the
No. 7835 and RA No. 8763, wherein the vat exemption shall only apply to sale of real
price ceiling per unit is P450,000 or as may properties not primarily held for sale to
from time to time be determined by customers held for lease in the ordinary course
HUDCC and the NEDA and other related of trade or business, sale of real property
laws. utilized for socialized housing as defined under
RA No. 7279, sale of house and lot and other
Socialize Housing
residential dwellings with selling price of not
moe hat two milion pesos (p2.000.00) Provided, Lease of residential units where the monthly
further, that every thee yars thereafer. the rental per unit exceeds 15,000 but the
amounts state herein shal be adjusted to is aggregate of such rental of lessor during the
pesan välue using the Consumer Pice ndex, as year do not exceed P3,000,000 as amended
pubished by the Philpe Statistics Authority under TRAIN Law; previously P1,919,500) shall
(PSA). likewise be exempt from VAT, however the
same shall be subjected to 3 % percentage tax
SALE OF PARKING LOT IN THE SALE
CONDOMINIUM UNITS (RR 13-2012) In cases where a lessor has several residential
Exemption from vat does not include the sale of units for lease
parking lot which may or may not be included in
Some are leased out for a monthly rental per
the sale condominium units.
unit of not exceeding P15,000 (as amended)
The sale of parking lot in a condominium s a while others are leased out for more than
separate and distinct transaction and is not P15,000 per unit, his tax liability will be: (a) The
covered by the rules on threshold amount not gross receipts from rentals not exceeding
being a residential lot, house and lot or a P15,000 per month per unit shall be exempt
residential dwelling. Thus. should be subject to from vat regardless of the aggregate annual
VAT regardless of amount of selling price ' (RR- gross receipts.
13-2012)
(b) The gross receipts from rentals exceeding
IMPOSITION OF VAT ON FORECLOSURE SALES P15,000 per month per unit shall be subject to
OF REAL PROP CHARACTERIZED AS ORDINARY vat if the annual gross receipts exceed
ASSET P3,000,000, as amended, from said units only-
not including the gross receipts from units
In case of non-redemption of properties sold
leased out for not more s than P15,000.
during involuntary sales, regardless of the type
Otherwise, the gross receipts shall be subject
of proceedings and case personality of
OPT (3%) percentage tax
mortgagees/selling persons or entities, if the
property is an ordinary asset, the value added Residential Unit shall refer to:
tax under Section 106 of the Tax Code (as
 Apartments and houses and lots used
amended) shall be imposed (RR16-2005).
for residential purposes
The vat shall be based on whichever is higher  Buildings or parts or units thereof used
of the consideration (bid price of the highest solely as dwelling places (i.e.
bidder) or the fair market value or the zonal dormitories, rooms, bed spaces) except
value as determined in accordance with Section motels, motel rooms, hotels and hotel
106(E) of the Tax Code. rooms.
Q. Lease of Residential Unit UNIT shall refer to:
Lease of a residential unit with a monthly rental  Apartment unit in case of apartments
per unit not exceeding fifteen thousand pesos  House in case of residential houses
P15,000 (as amended under TRAIN Law;  Per person in case of dormitories,
previously P12,800) regardless of the amount of boarding houses and bed spaces; and
aggregated rentals received by the lessor during  Per room in case of rooms for rent
the year (RR 16-2011, RR 13 2018).
Sale, Importation, printing or publication of Transport of cargo by international carriers
books and newspaper, magazine. review or doing business in the as the same is subject to 3
bulletin which appears at any intervals with percent common carrier
fixed prices for subscription and sale and which
T. Sale, importation or lease of passenger or
is rot devoted principally to the publication of
cargo vessels and aircraft, including engine,
paid advertisements
equipment and spare parts thereof for domestic
Under BIR Ruling No. 083-2014. the term “book or international transport operations, provided,
newspapers, magazine, bulletins” only covers that the exemption from vat on the
printed matters in hard Copy, and does not importation and local purchase of passenger
apply to electronic format or versions including and/or n vessels shall be subject to the
but not limited to: requirements on restriction on vessel
importation and mandatory vessel retirement
 books
program of MARINA
 e-journals
 electronic copies U. Importation of fuel, goods and supplies by
 online library sources persons engaged in international shipping or
 CDS and software air transport operation international shipping
or air transport operations:
Furthermore. The activities that exempt from
vat under this provision are as follows  Provided that the fuel goods and
supplies shall be used for international
1) Sale shipping or air transport operations.
2) Importation  Thus, said fuel, goods and supplies shall
be used exclusively or shall pertain to
3) Printing; and the transport of goods and/or
4) publication of books, newspapers, passenger from a port in the Philippines
magazines, reviews and bulletins. directly to a foreign port or vice versa,
without docking or stopping at any
Thus, a corporation's other transactions (such other port in the Philippines, unless the
as the printing of brochures, bookbinding, docking or stopping at any other port in
engraving, stereotyping, electrotyping, the Philippines is for the purpose of
lithographing of various reference books, trade unloading passengers/and or cargoes
books, journals and other literary works) are that originated from abroad, or to load
subject to VAT. passengers and/or cargoes bound for
abroad;
The taxpayer is required to register its business
 Provided, further, that if any portion of
as a VAT business entity and issue a separate
such fuel goods or supplies is used for
VAT invoice receipt to record such transactions.
purposes other than that mentioned in
Transport of passengers by international this paragraph, such portion of fuel,
carriers doing business in the Philippines goods or supplies shall be subject to 12
% vat. ,
The same shall not be subject to Other
Percentage Taxes V. "Services of banks, non-bank financial
intermediaries performing quasi-banking
functions, and other non-bank financial
intermediaries, such as money changers and Sources of OUTPUT VAT
pawnshops, subject to percentage tax
1. ACTUAL SALE (cash or on account)
W. Sale or lease of goods and services to senior  Sales where there are actual exchanges
citizens and persons with disabilities, as between buyer(s) and a seller(s) in the
provided under RA No. 9994 (Expanded Senior ordinary course of trade or business
Citizens Act of 2010 and RA No. 10754 (An Act
Basis of the the 12% output vat:
Expanding the Benefits and Privileges of
Persons with Disability (PWD), respectively  Sale of goods-gross selling price
X. Transfer of property  Sale of services - gross receipts
 Sale by a dealer in securities gross
Y. Association dues, membership and other income
assessments and charges collected on a purely  Sale of real properties- the highest
reimbursement basis by homeowners amount among selling price, fair value
associations and condominium corporations provided by the city/provincial assessor,
established under RA 9904 Magna Carta for and the zonal value provided by the CIR
Homeowners and Homeowners Association
INCIDENTAL TRANSACTIONS "In the course
Z. Sale of Gold to the Bangko Sentral ng Pilipinas of trade or business” means the regular
(BSP). This provision shall take effect only conduct or pursuit of a commercial or an
beginning January 2018 or upon the effectivity economic activity, including transactions
AA. Sale of drugs and medicines prescribed for incidental thereto, by any person regardless
diabetes, high cholesterol and hypertension of whether or not the person engaged
therein
BB. Sale or lease of goods or properties or the
performance of services other than the 2. TRANSACTIONS DEEMED SALES
transactions mentioned in the preceding  Under secion 106/) of the tax code.
paragraphs, the gross annual sales and/or certain transactions are not actually
receipts do not exceed the amount of sales because of the absence of actual
P3,000,000, as amended (previously exchange Between the buyer and the
P1,919,500) seller are considered or included in
term “sale” for VAT purposes.
 Self-Employed Individuals and  In a transaction deemed sale, the input
Professionals Self employed individuals was larady used by the seller as a credit
and professionals availing of the 8% Tax against the output vat.
on gross sales and/or receipts and other  Since no actual sale, no output vat is
non-operating income under Sections actually charged to customers
24(A2)b) and 24(A)(2)(c)(2)(a) of the Tax
Code shall also be exempt from the THE FOLLOWING TRANSACTION ARE
payment of 12% vat3 CONSIDERED DEEMED SALE:

COMPUTATION OF VAT PAYABLE A.) TRANSFER

 Use or consumption not in the
Output Vat (Sales or Receipts x.12) ordinary course of business of
Less: Input Vat (Purch of goods or service) goods or properties ordinarily
VAT PAYABLE
 intended for sale or use in the instead in any other business
course of business not subject to VAT.
 The basis in computing the
2. Approval of a request for cancellation of
applicable VAT shall be the FAIR
registration due to reversion to exempt status.
MARKET VALUE of the goods
consumed 3. Approval of a request for cancellation of
registration due to a desire to revert to exempt
Distribution or transfer to:
status after the lapse of three (3) consecutive
 Shareholders or investors as share in years from the time of registration by a person
the profits of a VAT-registered person; who voluntarily registered despite being
 Distribution or transfer to creditors in exempt under Sec. 109 (2) of the Tax Code.
Market Value payment of debt or
4. Approval of a request for cancellation of
obligation.
registration of one who commenced business
Consignments of goods with the expectation of gross sales or receipts
exceeding P3,000,000, as amended, but who
 if actual sale is not made within failed to exceed this amount during the first
sixty 60) days following the date twelve months of operation.
such goods were consigned.
 Goods returned within the 60-day VAT (TRANSACTION DEEMED SALE) SHALL NOT
period are not deemed sold. BE IMPOSED ON GOODS OR PROPERTIES
EXISTING AS OF THE OCCURRENCE OF THE
Retirement from or cessation of status as vat FOLLOWING:
registered person with respect to all “goods on
hand” whether or not the business is continued A. Change of control of a corporation by the
by new owner acquisition of the controlling interest of
such corporation by another stockholder or
 Goods on Hand refer to capital group of stockholders. The goods or
goods, stock in trade or supplies properties used in business or those
RR 16-2005 as amended by RR4-2007 Comprising the stock-in-trade of the
corporation, having a change in Corporate
 provides that the vat provided control, will not be considered sold,
above shall apply to goods or bartered or exchanged despite the change
properties originally intended interest in the said corporation
for sale or use in business, and B. Change in the trade or corporate name of
capital goods which are existing the taxpayer
as of the occurrence of the C. Merger or consolidation of corporations
following:
A. Change of business activity from VAT
taxable status to VAT-exempt status. 3. ZERO RATED SALES (0% VAT)
 An example is a VAT-registered
person engaged in a taxable EXPORT SALE BY A VAT REGISTRED ENTITY
activity (wholesaler retailer)  A “zero rated sale" of goods,
who decides to discontinue properties and/or service by a
such activity and engages vat registered person is a
 taxable transaction for VAT d) Goods for use in trade or
purposes but shall not result in business for which depreciation or
any output tax. amortization is allowed (Capital
 However, the input tax on Goods).
purchase of goods, properties
INPUT VAT ON CAPITAL GOODS
or services, related to such
zero-rated sale. shall be  Capital Goods refer to goods or
available as tax credit or refund properties with estimated useful life of
greater than 1 year and which are
EXPORT SALE BY A NON VAT REGISTERED
treated as depreciable asset under tax
ENTITY
code
 Export sale by a non vat entity is vat  RR 16-2006 provides that input taxes in
exempt transaction purchase of capital goods by a vat
 VAT EXEMPT SALE – refers to sale of registered person shall be allowed as a
good properties or services that is not tax credit against output tax
subject to VAT and the seller is not
IMPORTATION
allowed any tax credit
 Vat on importation is imposed
regardless of whether such importation
INPUT VAT is for personal or business use
 Importer refers to any person who
 Input vat means the vat due on or paid
bring the goods into the Philippines
by a VAT-registered taxpayer on
whether or no made in course of trade
importation of goods or local purchase
and business
of goods, properties or services,
including lease or use of property in the PRESUMPTIVE INPUT TAX OF 4% ON SALE OF
course of his trade or business. GOODS

SOURCES OF INPUT VAT  Persons or firm engaged in the

processing of sardines, mackerel and
 Local Purchase of goods and services
milk shall be allowed to presumptive
 Acquisition of capital goods
tax, creditable against output tax
 Importation equivalent to 4% of the gross value in
 Presumptive input vat money of their purchase of primary
 Transitional input vat “agriculture products” which are used
 Standard input vat as inputs in production
1. Local Purchase of goods or services  Processing shall mean pasteurization,
such as purchase or acquisition : canning and actibities which through
a) Goods for sale physical or chemical process alter the
b) Goods for conversion into finish exterior texture or form
product (including packaging TRANSITION INPUT TAX
materials).
 Person who becomes liable to value-
c)Goods for use as materials added tax or any person who elects to
supplied in the sale of services be a VAT-registered person shall subject
 to the filing of an inventory according to LEASE OF REAL PROPERTY
rules and regulations prescribed by the
 As a rule, all forms of lease of
allowed input tax on his beginning
properties held primarily for lease
inventory of goods, materials and
to customers in the ordinary course
supplies equivalent to two percent (2%
of trade or business, whether real
of the value of such inventory or the
or personal, shall be subject to vat,
actual value-added tax paid on such
unless the gross annual receipts of
goods, materials and supplies,
the lessor do not exceed
whichever is higher, which shall be
P3,000,000, as amended and is
creditable against the output tax.
non-v registered
TAXPAYERS WHO CAN AVAIL 1) Lease of Commercial Units Gross
TRANSITIONAL INPUT VAT: receipts from lease of commercial
units are subject to 12% vat if the
a) Taxpayers who becomes liable to vat
property subject to lease is located
b) Taxpayers who are elects to be vat
in the Philippines regardless of the
registered
place where the contract of lease
STANDARD INPUT TAX was executed.

 The government or any of its political ADVANCE PAYMENT BY THE LESSEE

subdivisions, instrumentalities Or
 subject to vat if the payment is
agencies, including government-owned
agplied to rerntals such as prepaid
or controlled corporations (GoCCs)
rent On the other hand, advance
shall, before making payment on
payment s not subject to vat f the
account of each purchase of goods
advance payment is not a rental
and/or services taxed at twelve percent
payment but: A loan to the lessor
(12%) vat pursuant to Sections 106 and
from the lessee An option money
108 of the Tax Code, deduct and
for the property A security
withhold a Final VAT due at the rate of
depositto insure the faitful
five percent (5%) of the gross payment
pertformance of certain obligations
(RR 4-200
of the lessee to the lessor.
 CARRY-OVER of Excess Input Vat RR 2-
2) Residential Units (Refer to
2007 provides that, if the input tax
discussions on vat exempt sales)
inclusive of the input tax carried over
from the previous quarter exceeds the SALE OF REAL PROPERTY
output tax, the excess input tax shall be
 As a rule, sale of real property
carried over to the succeeding quarter
primarily held in the normal course
or quarters
of business is subject to value
 However any input tax attributable to
added tax.
zero-rated sales by a vat registered
 Output vat shall be based on the
taxpayer may at his option be refunded
highest among selling price, fair
or applied for a tax dit certificate which
market value and zonal value.
may be used in the payment of internal
revenue taxes.  The sale of real property subject to
vat shall either be in cash basis,
 installment basis, or deferred the seller, in which case the
payment basis excess" shall be considered
part of the initial payments.
Installment and Deferred Payment
Basis Pre-Selling of Real Estate Properties

 In case of sale of real  Pre-selling of real estate properties by

properties on the installment real estate dealers shall be subject to
plan, the real estate dealer value added tax in accordance with
shall be subject to VAT on the rules as discussed above.
installment payments,  Real Estate Dealer includes any person
including interest and engaged in the business of buying,
penalties, actually and/or developing, selling, exchanging real
constructively received by the properties as principal and holding
seller (Starting February 1, himself out as a full or part-time dealer
2006). in real estate Property in-trust and
 The sale is considered  Transaction Deemed Sale Transmission
"installment Sale" if the "Initial of a property to a trustee shall not be
Payments" does not exceed subject to vat if e property is to be
25% of the selling price. merely held in trust for the trustor
Correspondingly, the buyer of and/or beneficiay. However, if the
the property can claim the property transferred is one for sale,
input vat in the same period as lease or use in the Course of trade or
the seller recognizes the business and the transfer constitutes a
output tax (RR 4-2007). completed gift, the transfer is subject
 Initial Payments pertain to all to vat as a deemed sale transaction.
payments which the seller The transfer is a completed gift if the
receives on or before the transferor divests himself absolutely of
execution of the instrument of control over e property .irrevocable
sale, including cash or transfer of corpus and/or irrevocable
property received, other than resignation of beneficiary)
the purchaser's evidence of
ON-LIFE INSURANCE
indebtedness (exclude notes
or other evidence of  Only the transactions entered into by
indebtedness issued by the persons in the course of non-life
purchaser to seller at the time insurance business are subject to value
of sale) during the taxable year added tax. They include marine, fire
when the real property was and casualty insurance, surety, fidelity,
sold. indemnity bonding companies and
 Also excluded from the initial mutual BENefit associations.
payment is the amount of  They are not subject to Premiums Tax
mortgage on the real property under Section 123 of the Tax Code.
sold except when such Nonresident foreign persons rendering
mortgage exceeds the cost or nor-life insurance services in the
other basis of the property to PHILIPPINES are also subject to 12% vat.
RANCHISE GRANTEEs their Filipino citizenship and have at
least six senior Citizens Act of 2010 and
The following services of franchise grantees are
its related revenue regulations/
subject to vat
circulars RR7-2010,
a) On electric utilities  Resident Philippine Citizen shall include
one, - a Filipino Citizen with
b) On telephone and telegraph permanent/ legal residence in the the
c) On toll road operations philippines with a finite intention to
reside therein, and whose immigrant
d) On radio and television broadcasting, except visa has been surrendered to the
franchise grantees of radio and television foreign government.
broadcasting companies whose annual gross
receipts of the preceding year do not exceed Grant of 5% Special Discount (Section 5, RR 7-
P1OM because they are subject to a Franchise 2010 as amended by RR 8-2010 and RMC 38-
Tax of 3% 2012).

.DEALERS IN SECURITIES AND LENDING  A special discount of five percent (5%)

INVESTORS of the regular retail price of basic
necessities and prime commodities as
 Dealer in securities means a merchant defined under Section 2 of the joint DT-
of stocks or securities (RR 7-95): a) with DA Administration Order No. 10-02,
an established place of business. series of 2010, shall be granted to
Regularly engaged in the purchase of Senior Citizens on their purchases
securities and their resale to customers, thereof, taking into consideration that
that is, one who as merchant buys said purchases shall be for the personal
securities and sells them to customers. and excusive consumption and/or
c) With a view to the gains and profits enjoyment of the Senior Citizen
that may be derived therefrom. (Section 3, Joint DT-DA Administrative
MILLERS Order No. 10-02, Series of 2010). Basic

 The millers subject to VAT are those Necessities

engaged in milling for others, EXCEPT  Rice;
millers of:  Corn;
 Palay into rice Corn into corn grits  Bread excluding pastries and cakes
 Sugar cane into raw sugar Fresh, dried and canned fish and other
the miler is paid in cash, vat shall be marine products
based on gross receipts for during the  Fresh pork, beef and poultry meet
month or quarter. Fresh eggs
VAT EXEMPTION and Discounts FOR SENIOR  Fresh and processed mik
CITIZENS  Fresh vegetables including root crops
Coffee and coffee creamer
 refers to any Filipino citizen who is a  Sugar;
resident of the Senior citizen or Elderly-  Cooking oil; Salt .
may apply to SENIOR CITIZEN with dual  Powdered, liquid, bar laudry and
citizenship status provided they prove detergent soap
 Firewood; Charcoal; Candles