Vat Exempt Sales

VALUE-ADDED TAX
VAT EXEMPT SALES

A. SALE or IMPORTATION OF:
i. AGRICULTURAL and MARINE “FOOD PRODUCTS IN THEIR ORIGINAL STATE”
ii. LIVESTOCK
iii. POULTRY OF A KIND GENERALLY USED AS, or YIELDING or PRODUCING FOODS FOR HUMAN
CONSUMPTION and BREEDING STOCK and GENETIC MATERIALS THEREFORE.
 Products classified under this exemption 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
 Advance technological means of packaging, SHRINK WRAPPING IN PLASTICS, VACUUM
PACKING, TETRA-PACK, and other similar packaging methods.
AGRICULTURAL MARINE LIVESTOCK POULTRY
Polished/Husked Rice Fish Cows Fowls
Corn Grits Crustaceans such as: Bulls Ducks
Raw cane sugar &  Lobsters, shrimps Calves Geese
molasses  Prawns, oysters Pigs Turkey
Copra  Mussels, clams Sheep
 Trout, eels Goat
Rabbit
 Livestock or poultry DOES NOT include:

 FIGHTING COCKS, RACE HORSES, ZOO ANIMALS and OTHER ANIMAL GENERALLY
CONSIDERED AS PETS.
 Raw sugar or raw cane sugar means sugar whose content of sucrose by weight in dry state,
corresponds to a polarimeter reading of LESS THAN 99.5o
 Sale of marinated fish is NOT EXEMPT from VAT.
B. SALE or IMPORTATION OF:

i. FERTILIZERS
ii. SEEDS, SEEDLINGS and FINGERLINGS
iii. FISH, PRAWN, LIVESTOCK AND POULTRY FEEDS, including INGREDIENTS, whether locally produced or
imported, USED IF THE MANUFACTURE OF FINISHED FEEDS.
 SPECIALTY FEEDS are non-agricultural feeds or foods for RACE HORSES, FIGHTING COCKS, AQUARIUM
FISH, ZOO ANIMALS and other animals generally considered as PETS are SUBJECT TO VAT
C. IMPORTATION OF PERSONAL and HOUSEHOLD EFFECTS BELONGING TO:

i. THE RESIDENTS OF THE PHILIPPINES RETURNING FROM ABROAD; and
ii. NON-RESIDENT CITIZENS COMING TO RESETTLE IN THE PHILIPPINES
 Provided, that such goods are EXEMPT from custom duties.

 Personal and household effect that may be exempt from custom duties:
1. Returned personal and household effects; and
2. Personal and household effects purchased abroad
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 of other countries, in quantities and of the class suitable to the PROFESSION, RANK or POSITIONS of
the persons importing said items, FOR THEIR OWN USE and NOT FOR BARTER or SALE.
 VEHICLES, VESSELS, AIRCRAFTS and MACHINERIES and other similar goods for use in manufacture
shall be SUBJECT TO DUTIES,TAXES and OTHER CHARGES
E. SERVICES SUBJECT TO OPT
F. SERVICES BY:
i. AGRICULTURAL CONTRACT GROWERS and
ii. MILLING FOR OTHER of:
a) Palay into rice
b) Corn into grits, and
c) Sugar cane into raw sugar
 Agricultural Contract Growers are those persons producing for others’ poultry, livestock or other
agricultural and marine food products in their ORIGINAL STATE.
 Toll processing/Toll dressing/Toll manufacturing involves procedures such as: WEIGHING, KILLING,
DRESSING, SCALDING, CUT-UPS, and PACKAGING
i. IF PERFORMED as a PACKAGED SERVICE to TOLL GROWING: VAT EXEMPT
ii. If Performed INDEPENDENTLY: SUBJECT TO 12% VAT
G. MEDICAL, DENTAL, HOSPITAL and VETERINARY SERVICES except those rendered by professionals.
 LABORATORY services are EXEMPTED.
 Sales made by the drugstore to the IN-PATIENTS which are INCLUDED in the HOSPITAL BILLS are part
of medical bills EXEMPT from VAT.
 However, if hospitals or clinic operates a pharmacy or drugstore, the sale of drugs and
medicines are SUBJECT TO VAT.
 Sales of the drug store to the OUT-PATIENTS are TAXABLE because they are not part of
medical services of the hospitals.
 Professional fees of medical practitioners rendered to IN-PATIENTS should NO longer be subject to
VAT because such fees should be included in the hospital bills which is tax exempt.
H. EDUCATIONAL services rendered by PRIVATE EDUCATION INSTITUTIONS duly accredited by DepEd, CHED,
TESDA and those rendered by government educational institutions.
 It does NOT include SEMINARS, IN-SERVICE TRAINING, REVIEW CLASSES and other similar services
rendered by persons who are NOT accredited by DepEd, CHED, and/or TESDA.
I. SERVICES rendered by INDIVIDUALS pursuant to an EMPOYER-EMPLOYEE relationship.
J. SERVICES rendered by REGIONAL or AREA HEADQUARTERS established in the Philippines by MULTINATIONAL

corporation which act as supervisory, communications and coordinating centers for their affiliates,
subsidiaries or branches in the Asia-Pacific and DO NOT earn or derived income from the Philippines.
K. Transactions which are EXEMPT under INTERNATIONAL AGREEMENTS to which the Philippines is a signatory or
under special laws, except those under PD No. 529 (Petroleum Exploration Concessionaries under the
Petroleum Act of 1949)
L. SALES by AGRICULTURAL COOPERATIVES duly registered with CDA
 Their importation of direct farm inputs, machineries and equipment, including spare parts to be used
directly and exclusively In the production and/or processing of their produce is EXEMPT FROM VAT.
SALES BY AGRICULTURAL COOPERATIVES TO MEMBERS TO NON - MEMBERS
Sale of cooperative’s own produce (Processed or at its EXEMPT EXEMPT
original state)
Other than the cooperative’s own produce EXEMPT VAT
M. GROSS RECEIPTS from “LENDING ACTIVITIES” by credit or multi-purpose cooperatives duly registered with the
CDA.
Gross Receipts TO MEMBERS TO NON - MEMBERS
From “LENDING ACTIVITIES” EXEMPT EXEMPT
From Non-lending Activities VAT VAT
N. SALES by non-agricultural, non-electric and noncredit cooperatives duly registered with the CD, provided that
the share capital contribution of each member DOES NOT exceed P15,000 and regardless of the aggregate
capital and net surplus ratably distributed among the members.
 Importation by non-agricultural, non-electric and noncredit cooperatives of machiniries &

equipment including spare part to be used by them are SUBJECT TO VAT.
Gross Receipts TO MEMBERS TO NON - MEMBERS
Contribution per member ≤ P15,000 EXEMPT EXEMPT
Contribution per member > P15,000 VAT VAT
O. EXPORT SALES by persons who are NOT VAT-registered.
EXPORT SALES
a) By a Non-VAT Registered - VAT EXEMPT
b) By a VAT Registered - ZERO RATED SALES
P. SALE OF:
i. REAL PROPERTY NOT primarily held for dale to customers or held for lease in the ordinary course of
business,
ii. REAL PROPERTY utilized for low-cost housing and socialized housing.
iii. RESIDENTIAL LOT valued at P1,500,000 and below.
iv. RESIDENTIAL HOUSE and LOT and OTHER RESIDENTIAL DWELLINGS valued at P2,500,000 and below.
 if 2 or more ADJACENT RESIDENTIAL LOTS are SOLD or disposed in favor of one buyer, for the
purpose of utilizing lots as one residential lot, the sale shall be EXEMPT from VAT only if the
aggregate value DO NOT exceed P1,500,000.
 Adjacent residential lots, although covered by separate titles and/or separate tax
declarations, when sold to one and the same buyer shall be presumed as sale of one
residential lot.
 SALE of Parking lots in the sale of Condominium units is SUBJECT TO VAT.
 Imposition of VAT on foreclosure sales of real property characterize as ORDINARY ASSET.
 VAT shall be based in whichever is higher of the consideration or the FMV or the zonal value.
 Said tax shall be paid to the BIR by the VAT registered owner/mortgagor on or before 20 th
or 25th day, whichever is applicable, of the month following the month when the right of
redemption prescribes.
Q. LEASE OF RESIDENTIAL UNIT

R. SALE, IMPORTATION, PRINTING or PUBLICATION of books and any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed prices for subscription and sale and which is NOT devoted
principally to the publication of paid advertisements.
 Does NOT apply to electronic format or versions.

 Taxpayer is required to register its business as VAT business entity and issue a separate VAY
invoice/receipt to record such transactions.
S. TRANSPORT of PASSENGERS by international carriers doing business in the Philippines.
 Transport of CARGO by international carriers doing business in the Philippines is subject to 3%

common carrier’s tax.
T. SALE, IMPORTATION or LEASE of passenger or cargo vessels and aircraft, including engine and equipment and
spare parts for domestic or international transport operations.
 Provided, that the exemption shall be subject to the requirements on restrictions on vessel
importation and mandatory vessel retirements program of MARINA.
U. IMPORTATION of fuel, goods and supplies by persons engaged in INTERNATIONAL shipping or air transport
operations.
 Said fuel, goods and supplies shall be used EXCLUSIVELY or shall pertain to the transport of goods
and/or passenger from a port in the Philippines DIRECTLY to a foreign port, or vice versa, without
docking or stopping at any port in the Philippines.
 If any portion of such fuel, goods and supplies is used for purposed other than that mentioned in this
paragraph shall be subject to VAT.
V. SERVICES of banks, non-banks FINANCIAL INTERMEDIARIES performing quasi-banking functions, and other
non-bank financial intermediaries, SUBJECT TO OPT.
W. SALE or LEASE of goods and services to SENIOR CITIZENS and persons with disabilities.
X. TRANSFER of property
Y. Association dues, membership fees, and other assessments and charges collected on a PURELY
reimbursement basis by HOMEOWNERS ASSOCIATIONS and CONDOMINIUM corporations.
Z. SALE of GOLD to the BSP

AA. SALE of drugs and medicines prescribed for DIABETES, HIGH CHOLESTEROL, and HYPERTENSION
BB. SALE or lease of goods or properties or the performance of SERVICES which gross annual sales/receipts DO
NOT exceed P3,000,000

Vat Exempt Sales

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VALUE-ADDED TAX

VAT EXEMPT SALES

 Livestock or poultry DOES NOT include:

B. SALE or IMPORTATION OF:

C. IMPORTATION OF PERSONAL and HOUSEHOLD EFFECTS BELONGING TO:

 Provided, that such goods are EXEMPT from custom duties.

D. IMPORTATION OF PROFESSIONAL INSTRUMENTS and IMPLEMENTS, TOOLS OF TRADE, OCCUPATION or

E. SERVICES SUBJECT TO OPT

I. SERVICES rendered by INDIVIDUALS pursuant to an EMPOYER-EMPLOYEE relationship.

J. SERVICES rendered by REGIONAL or AREA HEADQUARTERS established in the Philippines by MULTINATIONAL

L. SALES by AGRICULTURAL COOPERATIVES duly registered with CDA

 Importation by non-agricultural, non-electric and noncredit cooperatives of machiniries &

O. EXPORT SALES by persons who are NOT VAT-registered.

Q. LEASE OF RESIDENTIAL UNIT

 Does NOT apply to electronic format or versions.

S. TRANSPORT of PASSENGERS by international carriers doing business in the Philippines.

 Transport of CARGO by international carriers doing business in the Philippines is subject to 3%

Z. SALE of GOLD to the BSP

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