What is an ECOZONE and a Customs Territory?

• An ECOZONE or a Special Economic Zone has been described as selected areas with
highly developed or which have the potential to be developed into agro-industrial, industrial,
tourist, recreational, commercial, banking, investment and financial centers. An ECOZONE
may contain any or all of the following: Industrial Estates (IEs), Export Processing Zones
(EPZs), Free Trade Zones, and Tourist/Recreational Centers. (Sec. 4a, RA 7916)

• Customs territory is referred to as the national territory of the Philippines outside of the
proclaimed borders of the ECOZONE.

• Section 8 of RA 7916 mandates that PEZA shall manage and operate the ECOZONES as a
separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory.
As a result, sales made by a supplier in the Customers Territory to a purchaser in the
ECOZONE shall be treated as exportation from the Customs Territory while sales made by
a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered
as an importation into the Customs Territory.
VAT implication of sales made by a supplier from the
Customs Territory to an ECOZONE enterprise.
SECTION 3 of RMC 74-99. Tax Treatment Of Sales Made By A VAT Registered Supplier From
The Customs Territory, To A PEZA Registered Enterprise. —

(1) If the Buyer is a PEZA registered enterprise which is subject to the 5% special tax regime, in lieu of
all taxes, except real property tax, pursuant to R.A. No. 7916, as amended:

(a) Sale of goods (i.e., merchandise). — This shall be treated as indirect export hence,
considered subject to zero percent (0%) VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC and
Sec. 23 of R.A. No. 7916, in relation to ART. 77(2) of the Omnibus Investments Code.

(a) Sale of service. — This shall be treated subject to zero percent (0%) VAT under the "cross
border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 dated Nov. 5, 1998.
VAT implication of sales made by a supplier from the
Customs Territory to an ECOZONE enterprise.
SECTION 3 of RMC 74-99. Tax Treatment Of Sales Made By A VAT Registered Supplier From
The Customs Territory, To A PEZA Registered Enterprise. —

(2) If Buyer is a PEZA registered enterprise which is not embraced by the 5% special tax regime,
hence, subject to taxes under the NIRC, e.g., Service Establishments which are subject to taxes
under the NIRC rather than the 5% special tax regime:

(a) Sale of goods (i.e., merchandise). — This shall be treated as indirect export hence,
considered subject to zero percent (0%) VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC and
Sec. 23 of R.A. No. 7916 in relation to ART. 77(2) of the Omnibus Investments Code.
(b) (b) Sale of Service. — This shall be treated subject to zero percent (0%) VAT under the
"cross border doctrine" of the VAT System, pursuant to VAT Ruling No. 032-98 dated Nov. 5,
1998.
In zero-rated sales to an ECOZONE enterprise, can
the seller claim refund of its input VAT?
• Sales of goods, properties, and services by a VAT-registered supplier from
the Customs Territory to an ECOZONE enterprise shall be treated as
export sales and thus subject to a VAT at zero percent. In zero-rated
transactions, the VAT-registered supplier shall not pass on any output VAT
to the ECOZONE enterprise, and at the same time, shall be entitled to
claim tax credit/refund of its input VAT attributable to such sales.

• Sales of goods, properties, and services by a non-VAT or unregistered

supplier from the Customs Territory to an ECOZONE enterprise would only
be exempt from VAT and the supplier shall not be able to claim
credit/refund of its input VAT.
 Exempt Transactions (Sec. 109)
VAT-exempt transactions refer to the sale of goods or properties and/or
services and the use or lease of properties that is not subject to VAT (output
tax) and the seller is not allowed any tax credit of VAT (input tax) on
purchases.
• The person making the exempt sale of goods, properties or services shall
not bill any output tax to his customer because the said transaction is not
subject to VAT.
• The seller does not charge VAT and he cannot claim exemption from what
has been passed to him.
 Exempt Person v. Exempt Transactions
• Exempt Persons – are persons or entity granted VAT
exemption under the Tax Code, as a special law or an
international agreement to which the Philippines is a signatory,
and by virtue of which its taxable transactions become exempt
from VAT.

• Exempt Transaction – involves goods or services which, by

their nature, are specifically listed in and expressly exempted
from the VAT under the Tax Code, without regard to the tax
status – VAT exempt or not – of the party to the transaction.
Exempt Transactions under Section 109 of the Tax
Code
 Section 109(A)

Sale or importation of:

➢agricultural and marine “food”
products in their original state
➢ livestock and poultry of a kind
generally used as, or yielding or
producing foods for human
consumption; and breeding stock
and genetic materials thereof.
 Section 109(A)
Meaning of “original state”

Products classified under this paragraph 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 including
those using advanced means of packaging, such as
shrink wrapping in plastics, vacuum packing, tetra pack,
and other similar packaging methods.
Sale or importation of agricultural and marine
food products
Question: What is the rule on tax liability for agricultural
products?

Answer: The sale of agricultural non-food products in their

original state is exempt from VAT only if the sale is made by the
primary producer or owner of the land from which the same are
produced, sales made by dealers or traders, is not exempt from
VAT. While sale of agricultural food products in their original
state is exempt from VAT at all stages of production or distribution
regardless of who the seller is. (Misamis Oriental Association of Coco Traders,
Inc v. DOF, G.R. No. 108524, Nov. 10, 1994)
Sale or importation of agricultural and marine
food products
Question: Is copra an agricultural food product, thus exempt from
VAT.

Answer: Copra per se is not food, that is, it is not intended for
human consumption. Hence, copra being an agricultural non-
food product, the sale of which in their original state is
exempt from VAT only if the sale is made by the primary
producer or owner of the land from which the same are
produced, sales made by dealers or traders, is not exempt from
VAT.
 Section 109(B)
Sale or importation of:
➢ Fertilizers
➢ Seeds, seedlings and fingerlings; fish, prawn,
livestock and poultry feeds, including
ingredients, whether locally produced or imported,
used in the manufacture of finished feeds except
specialty feeds for race horses, fighting cocks,
aquarium fish, zoo animals and other animals
generally considered as pets.

Specialty feeds refer to non-agricultural feeds or

food for race horses, fighting cocks, aquarium
fish, zoo animals and other animals generally
considered as pets are subject to VAT.
 Section 109(C)
Importation of personal and
household effects belonging to:
➢ the residents of the Philippines
returning from abroad; and
➢nonresident citizens coming to settle
in the Philippines:

Provided, That such goods are

exempt from customs duties
under the Tariff and Customs
Code of the Philippines.
 Section 109(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 (citizens or alien, not limited to citizens) or
➢ Filipinos or their families and descendants who are now residents or citizens of other
countries (naturalized citizens), such parties hereinafter referred to as overseas Filipinos

– in quantities and of the class suitable to the profession, rank or position of

the persons importing said items, for their own use and not for barter or
sale, accompanying such persons, or arriving within a reasonable time.
 Section 109(D)
Provided, That the Bureau of Customs may, upon the production
of satisfactory evidence that such persons are actually coming to
settle in the Philippines and that the goods are brought from their
former place of abode, exempt such goods from payment of
duties and taxes.

Provided, further, That vehicles, vessels, aircrafts,

machineries and other similar goods for use in manufacture,
shall not fall within this classification and shall therefore be
subject to duties, taxes and other charges.
 Section 109(E)

Services subject to percentage tax under Title V

 Section 109(F)

Services by:
➢ Agricultural contract growers; and

➢ Milling for others of:

• palay into rice

• corn into grits; and

• sugar cane into raw sugar;

 Section 109(F)

“Agricultural Contract Growers” refer to those persons

producing for others’ poultry, livestock, or other agricultural and
marine food products in their original state. Its services growing
of poultry, livestock or other agricultural and marine food
products into marketable poultry, livestock or other marine food
products. (RMC 97-2010)
 Section 109(G)

Medical, dental, hospital and veterinary services except those

rendered by professionals.
➢ Examples: hospital confinement, x-rays, laboratory tests, CT scan, hospital
bill from the the use of private rooms and etc. – these are hospital services
exempt from VAT.
➢ Laboratory Services are exempted but if the hospital or clinic operates a
pharmacy or drug store, the sale of drugs and medicine is subject to VAT.
➢ A health care company which merely provides and arranges for the provision
of pre-need health care services to its members is not VAT-exempt as it
merely arranges for medical service and does not provide the medical
services. (CIR v. Philippine Health Care Providers Inc., G.R No. 168129, April 24, 2007)
 Section 109(G)

➢ Sale of medicines by the hospital pharmacy to in-patients is

exempt from VAT, but sale to out-patients is subject to12% VAT.
(St. Luke’s Medical Center v. CTA and CIR, 1998)

➢ Sales made by the drugstore to the in-patients which are included in

the hospital bills are part of the medical bills exempt from VAT.

➢ Sales of the drugstore to the out-patients are taxable because they

are not part of medical services of the hospital.
 Section 109(H)

Educational services rendered by private educational institutions, duly

accredited by the Department of Education (DepEd), the Commission on Higher
Education (CHED), the Technical Education and Skills Development Authority
(TESDA) and those rendered by government educational institutions.

Educational services shall refer to academic, technical, or vocational education

provided by private educational institutions duly accredited by the DepEd, the
CHED, and TESDA and those rendered by government educational institutions and
it does not include seminars, in-service training, review classes and other similar
services rendered by persons who are not accredited by the DepEd, the CHED,
and/or TESDA. [Sec.4.109-1(B)(h), RR 16-2005]
 Section 109(I)

Services rendered by individuals pursuant to an employer-

employee relationship.
➢ A person employed is not rendering services in the ordinary course of
trade or business hence services rendered by individuals pursuant to
an employer-employee relationship is VAT exempt.
 Section 109(J)

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 earn or derive income from the
Philippines;
 Section 109(J)

➢ An RHQ undertakes activities that shall be limited to acting as

supervisory, communication and coordinating center for its
subsidiaries, affiliates, and branches in the Asia-Pacific region.

➢ It acts as an administrative branch of a multi-national

corporation engaged in international trade.

➢ It does not derive income from sources within the Philippines

and does not participate in any manner in the management of
any subsidiary or branch office it might have in the Philippines.
 Section 109(K)

Transactions which are exempt under international agreements to which the Philippines is a
signatory or under special laws, except those under Presidential Decree No. 529 or the Petroleum
Exploration Concessionaires under Petroleum Act of 1949.

Examples:

• PD 1869 – PAGCOR Charter

• RA 9367 – Biofuels Act

• RA10072 – Philippine Red Cross

• RA 9994 – Expanded Senior Citizens Act of 2010

• RA 10754 – Magna Carta for PWD’s

 Section 109(L)

Sales by agricultural cooperatives duly registered with the

Cooperative Development Authority to their members as well as
sale of their produce, whether in its 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;
 Section 109(L)

➢ Sale by agricultural cooperatives to non-members can only be

exempt from VAT if the producer of the agricultural
products sold is the cooperative itself. If the cooperative is
not the producer (or is acting like a trader), then only those
sales to its members shall be exempt from VAT. (R.R. 4-2007)
 Section 109(L)

To enjoy VAT exemption, the cooperative must:

• Be registered with the CDA; and

• Sell exclusively to its members; or

• Sells to both members and non-members, the sale must be of

its produce, whether in its original or processed state.
 Section 109(M)

Gross receipts from lending activities by

credit or multipurpose cooperatives
duly registered with the Cooperative
Development Authority;
 Section 109(N)

Sales by non-agricultural, non-electric and non-credit

cooperatives duly registered with the Cooperative Development
Authority: Provided, that the share capital contribution of
each member does not exceed Fifteen thousand pesos
(PhP15,000) and regardless of the aggregate capital and net
surplus ratably distributed among the members;
 Section 109(O)

O. Export sales by persons who are not VAT-registered;

➢ Export sales by persons who are VAT-registered is zero-rated, while export
sales by non VAT-registered is exempt.
 Section 109(P)

Sale of real properties:

➢ not primarily held for sale to customers or held for lease in the ordinary course of
trade or business or

➢ real property utilized for low-cost and socialized housing as defined by Republic Act
No. 7279(Urban Development and Housing Act of 1992), and other related laws,

➢ residential lot valued at P 1,919,500 (as adjusted in 2011 by R.R. 3-2012) and below,

➢ house and lot, and other residential dwellings valued at P 3,919,200 (as adjusted in
2011 by R.R. 3-2012) and below:
 Section 109(P)

Provided, That beginning January 1, 2021, the VAT exemption shall only apply to:

➢ sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business

➢ sale of real property utilized for socialized housing as defined by Republic Act No. 7279,

➢ sale of house and lot, and other residential dwellings with selling price of not more than
Two million pesos (PhP2,000,000)

➢ Provided, further, That every three (3) years thereafter, the amount herein stated shall
be adjusted to its present value using the Consumer Price Index, as published by the
Philippine Statistics Authority (PSA);
 Section 109(P)

➢ If two or more adjacent lots, house and lots or other residential

dwellings are sold or disposed in favor of one buyer from the
same seller, for the purpose of utilizing the lots, house and lots
or other residential dwellings as one residential area, the sale
shall be exempt from VAT only if the aggregate value of the lots
do not exceed the threshold.
 Section 109(Q)

Lease of a residential unit with a monthly rental not exceeding

Fifteen thousand pesos (PhP15,000);
 Section 109(R)

Sale, importation, printing or publication of books and any

newspaper, magazine, review or bulletin which appears at
regular intervals with fixed prices or subscription and sale and
which is not devoted principally to the publication of paid
advertisements;
 Section 109(S)

Transport of passengers by international carriers

➢ Transport of passengers by international carriers doing business in
the Philippines. The same shall not be subject to Other Percentage
Taxes as amended under RA 10378(the Act Recognizing Reciprocity
as basis for the Grant of Tax Exemptions to International Carriers).

➢ Transport of cargo by international carriers doing business in the

Philippines, as the same is subject to 3% common carrier’s tax as
amended under RA 10378 and RR 15-2005.
 Section 109(T)

Sale, importation or lease of passenger or cargo vessels and

aircraft, including engine, equipment and spare parts thereof for
domestic or international transport operations;
➢ Provided that the exemption from VAT on the importation and local
purchase of passenger and/or cargo vessels shall be subject to the
requirements on restriction on vessel importation and mandatory
vessel retirement program of MARINA. (RR 15-2015; RR 13-2018)
 Section 109(U)

Importation of fuel, goods and supplies by persons engaged in international shipping or air
transport operations: Provided, That the fuel, goods, and supplies shall be used for
international shipping or air transport operations;

➢ Thus, 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 vise
versa, without docking at any port in the Philippines unless the docking or stopping at any
other port in the Philippines is for the purpose of unloading passengers and/or cargoes
that originated from abroad, or to load passengers and/or cargoes bound for abroad;
Provided further that if any portion of such fuel, goods, or supplies is used for purposes
other than that mentioned in this paragraph, such fuel, goods, or supplies shall be subject
to 12% VAT.
 Section 109(V)

Services of bank, non-bank financial intermediaries performing

quasi-banking functions, and other non-bank financial
intermediaries;
➢ Such institutions are subject to percentage tax hence, exempt from
VAT.
 Section 109(W)

Sale or lease of goods and services to senior citizens and

persons with disability, as provided under Republic Act Nos. 9994
(Expanded Senior Citizens Act of 2010) and 10754 (An Act
Expanding the Benefits and Privileges of Persons With
Disability), respectively;
 Section 109(W)
List of Senior Citizen Discounts and VAT Exemptions
• Medicines: Generic and branded medicines, vitamins, and mineral supplements (with doctor’s prescription)
• Medical supplies and equipment: Hearing aids, eyeglasses, wheelchairs, crutches, dentures, etc.
• Medical and dental services in private facilities: Lab tests such as blood tests, x-rays, etc.
• Professional fees of attending physicians and licensed health workers
• Domestic air and sea travel fares
• Public land transportation fares: Jeepneys, buses, taxis, shuttle services, MRT, LRT, PNR, etc.
• Hotels: Accommodation and amenities in hotels, beach resorts, mountain resorts, etc.
• Restaurants: Food, beverages, dessert, and other consumables for dine-in, take-out, drive-thru, and delivery
orders
• Recreation centers: Rental and other fees for sports facilities such as gyms, badminton courts, tennis courts,
ballroom dancing studios, bowling lanes, etc.
• Places of leisure: Cinemas, museums, parks, theaters, concert halls, etc.
• Funeral and burial services for deceased senior citizens: hospital morgue, embalming, casket or urn,
cremation, etc.
 Section 109(X)

Transfer of property pursuant to Section 40(C)(2) of the NIRC, as

amended
➢ Tax-free exchanges refer to those instances enumerated in Section
40(C)(2) of the NIRC are not subject to Income Tax, Capital Gains Tax,
Documentary Stamp Tax and/or Value Added Tax, as the case may be.
 Section 109(X)

Section 40(C)(2) of the NIRC:

(a) A corporation, which is a party to a merger or consolidation, exchanges property

solely for stock in a corporation, which is a party to the merger or consolidation; or

(b) A shareholder exchanges stock in a corporation, which is a party to the merger or

consolidation, solely for the stock of another corporation also a party to the merger or
consolidation; or

(c) A security holder of a corporation, which is a party to the merger or consolidation,

exchanges his securities in such corporation, solely for stock or securities in another
corporation, a party to the merger or consolidation.
 Section 109(Y)

Association dues, membership fees, and other assessments and

charges collected by homeowners associations and
condominium corporations;
 Section 109(Z)

Sale of gold to the Bangko Sentral ng Pilipinas (BSP);

 Section 109(AA)

Sale of drugs and medicines prescribed for diabetes, high

cholesterol, and hypertension beginning January 1, 2019
 Section 109(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 sales and/or receipts do not
exceed the amount of Three million pesos (PhP3,000,000).
 Transitional Input Tax Credit

Sec. 111 (A) – A person who becomes liable to value-added tax or any
person who elects to be a VAT-registered person shall, subject to the filing of
an inventory according to rules and regulations prescribed by the Secretary
of Finance, upon recommendation of the Commissioner, be allowed input
tax on his beginning inventory of goods, materials and supplies
equivalent to two percent (2%) of the value of such inventory or the
actual value-added tax paid on such goods, materials and supplies,
whichever is higher, which shall be creditable against the output tax.
 Transitional Input Tax Credit

Three instances where a person may claim transitional input tax:

1. When he becomes liable to VAT for the first time under a new legislation
or when his taxable transactions exceed the VAT-registration threshold;

2. When he elects to register as a VAT-registered person, provided he is

eligible (Sec. 236[I], NIRC); and

3. If he is already a VAT-registered person and also deals in goods or

properties, the sale of which is exempt, but it becomes a taxable
transaction under a new or amendatory law.
 Transitional Input Tax Credit

➢ During that period of transition from non-VAT to VAT status, the

transitional input tax credit serves to alleviate the impact of the
VAT on the taxpayer. (Fort Bonifacio Development Corp. v. CIR,
G.R. No. 158885, April 2, 2009)
Presumptive Input Tax Credits [Section 111(B)]
Persons or firms engaged in the:

➢ processing of sardines, mackerel and milk, and

➢ in manufacturing refined sugar and cooking oil and packed noodle-based instant
meals

shall be allowed a presumptive input tax, creditable against the output tax, equivalent to
four percent (4%) of the gross value in money of their purchases of primary
agricultural products which are used as inputs to their production.

The term ‘processing’ shall mean pasteurization, canning and activities which through
physical or chemical process alter the exterior texture or form or inner substance of a
product in such manner as to prepare it for special use to which it could not have been put
in its original form or condition.
 VAT refunds/credit

Three instances where one can avail of a VAT refund:

1. Zero-rated and effectively zero-rated sales

2. Cessation of business or

3. Cessation from VAT-status

 Zero-rated and effectively zero-rated

➢ The application for tax credit certificate for zero-rated and

effectively zero-rated sales of goods, properties, or services
should be filed within two (2) years from after the close of
the taxable quarter when the sales were made. Sec.112(A)
Cessation of Business or cessation of VAT-
status

➢ The application for tax credit certificate for cessation of

business, a VAT-registered person whose registration has been
cancelled due to retirement from or cessation of business, or
due to cessation of VAT-status, may within two (2) years from
the date of cancellation. Sec.112(C)
 Administrative claim for VAT refund

General Rule: The administrative claim must be filed within the

two-year prescriptive period. The reckoning date of the
prescriptive period is the close of the taxable quarter when the
relevant sales were made.

Exception: Except for the period June 8, 2007 to September

12, 2008 which follows the Atlas doctrine that the reckoning date
is the filing of the VAT return and the payment of the tax.
 Judicial claim for VAT refund

The taxpayer can appeal in two ways:

1. File the judicial claim within thirty (30) days after the CIR
denies the claim within the 90-day period, or

2. File the judicial claim within thirty days from the expiration of
the 90-day period if the CIR does not act within the 90-day
period.

Note: The 30-day period always applies, whether there is a

denial or inaction on the part of the CIR.
 Judicial claim for VAT refund

General Rule: The 30-day period to appeal is both mandatory and

jurisdictional, i.e., if you do not follow the 30-day period, your claim for
refund will be dismissed by the CTA.

Exception: For the premature filings between December 10, 2003 to

October 5, 2010 where BIR Ruling No. DA-489-03 was still in force.

Note: The two-year prescriptive period only applies to the filing of

administrative claim. The filing of the judicial claim follows the 90-30 day
period.
 90-day waiting period

Failure to comply with the 120-day (now 90-day) waiting period violates a
mandatory provision of law. It violates the doctrine of exhaustion of
administrative remedies and renders the petition premature and thus
without a cause of action, with the effect that the CTA does not acquire
jurisdiction over the taxpayer’s petition. (CIR v. San Roque Power
Corporation, G.R. No. 187485)
 30-day period for appeal

Section 112(A) and (C) must be interpreted according to its clear, plain, and
unequivocal language. The taxpayer can file his administrative claim for
refund or credit at any time within the two (2) year period. If he files the
claim on the last day of the two-year prescriptive period, his claim is still filed
on time. The Commissioner will have 120 days (now 90 days) from such
filing to decide the claim. If the Commissioner decides the claim on the 90th
day, or does not decide it on that day, the taxpayer still has 30 days to file
his judicial claim with the CTA.
 Bar Question
Gangwam Corporation (GC) filed its quarterly tax returns for the calendar year 2012 as follows:

1st Quarter – April 25, 2012

2nd Quarter- July 23, 2012

3rd Quarter – October 25, 2012

4th Quarter – January 27, 2013

On December 22, 2013, GC filed with the BIR an administrative claim for refund of its unutilized input VAT for the calendar year
2012. After several months of inaction by the BIR on its claim for refund, GC decided to elevate its claim directly to the CTA on April
22, 2014. In due time, the CTA denied the tax refund relative to the input VAT of GC for the first quarter of 2012, reasoning that the
claim was filed beyond the 2-year prescriptive period.

a.) Is the CTA correct?

b.) Assuming that GC filed its claim before the CTA on February 22, 2014, would your answer be the same?
 Bar Question
1. No. The CTA is not correct. Jurisprudence provides that the administrative claim must be filed
within 2-years from the close of the taxable quarter when the relevant sales were made. In this
case, the administrative claim which was filed on December 22, 2013, which is well within two
years from the close of the first quarter. GC has until April 25, 2014 to file for administrative claim
for refund of its first quarter of 2012.

2. No. If GC filed its claim before the CTA on February 22, 2014, its claim should be dismissed for
prematurity. Jurisprudence provides that for judicial claims of refund for unutilized input VAT, the
taxpayer must wait for the 90-day period (for the CIR to decide) to expire before elevating its claim
to the CTA. It is only upon the expiration of the 90-day period can the taxpayer file its claim within
30 days to the CTA. The 30-day period is mandatory and jurisdictional. Filing on February 22, 2014
is premature because it is still within the 90-day period for the CIR to decide. GC can file his
appeal on March 22, 2013 which is the 90th day given to the CIR to decide.
Compare excess input VAT and excessively
collected VAT
The term excess input VAT simply means that the input VAT available as
credit exceeds the output VAT, not that the input VAT is excessively
collected because it is more than what is legally due. Thus, the taxpayer
who legally paid the input VAT cannot claim for refund or credit of the input
VAT as “excessively collected” under Section 229. (CIR v. San Roque)

Under Section 110(B), a taxpayer can apply his input VAT only against his
output VAT. The only exception is when the taxpayer is zero-rated or
effectively zero-rated under the law. Thus, a non-zero-rated VAT-registered
taxpayer who has no output VAT because he has no sales cannot claim a
tax refund or credit of his unused input VAT under the VAT system.
 Bar Question
a.) Explain the procedure for claiming refunds or tax credits of input VAT for
zero-rated or effectively zero-rated sales under Section 112 of the NIRC
from the filing of application with the CIR up to the CTA.

ANSWER: To claim for refunds or tax credits for zero-rated sales, the
taxpayer must first file an administrative claim with the CIR within two (2)
years from the end of the taxable quarter when the relevant sales were
made. The CIR has 90 days to rule on the claim. The taxpayer then has 30
days, from the decision of the CIR or from the expiration of the 90-day
period, to file a judicial claim with the CTA, even if this is beyond the 2-year
period. This 90-30 day rule is mandatory and jurisdictional.
 Bar Question
b.) Explain the procedure for claiming refunds of tax erroneously or illegally
collected under Section 229 of the NIRC from the filing of the claim for
refunds with the CIR up to the CTA.

ANSWER: To claim for refunds for erroneously or illegally collected taxes,

the taxpayer must file both the administrative and the judicial claim within
two (2) years from the payment of the tax. The administrative claim is
mandatory and the CTA will dismiss the case without it.
Invoicing Requirements
 Invoicing Requirements Sec.113(A)

A. Invoicing Requirements. – A VAT-registered person shall issue:

(1) A VAT invoice for every sale, barter or exchange of goods or

properties; and

(2) A VAT official receipt for every lease of goods or properties, and for
every sale, barter or exchange of services.
Information contained in the VAT Invoice or VAT
Official Receipt
(1) A statement that the seller is a VAT-registered person, followed by his Taxpayer’s Identification
Number (TIN);

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the value-added tax: Provided, That:

(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from value-added tax, the term ‘VAT-exempt sale’ shall be written or
printed prominently on the invoice or receipt;

(c) If the sale is subject to zero percent (0%) value-added tax, the term ‘zero-rated sale’ shall
be written or printed prominently on the invoice or receipt;
Information contained in the VAT Invoice or VAT
Official Receipt
(d) If
the sale involves goods, properties or services some of which are subject to and some
of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate
the breakdown of the sale price between its taxable, exempt and zero-rated
components, and the calculation of the value-added tax on each portion of the sale
shall be shown on the invoice or receipt: Provided, That the seller may issue separate
invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of
the service; and

(4) In the case of sales in the amount of one thousand pesos (PhP1,000) or more where the sale or
transfer is made to a VAT-registered person, the name, business style, if any, address and
Taxpayer’s Identification Number (TIN) of the purchaser, customer or client.
Information contained in the VAT Invoice or VAT
Official Receipt
 Invoicing Requirements Sec.113(A)
Question: What is the importance of issuing VAT invoice and VAT
official receipt?

ANSWER: VAT invoice and VAT official receipt is needed by the

taxpayer as evidence for claiming tax refund/credit.
➢ Similarly, when the official receipts issued by the taxpayer engaged in zero-
rated sales do not have “zero-rated” stamped or printed on its official
receipts, then the taxpayer cannot claim for input tax pertaining to such sales.
(Western Mindanao Power Corp. v. CIR, G.R. No. 181136.
 Accounting Requirements
Section 113(C) – Notwithstanding the provisions of Section 233,
all persons subject to the value-added tax under Sections 106
and 108 shall, in addition to the regular accounting records
required, maintain a subsidiary sales journal and subsidiary
purchase journal on which the daily sales and purchases are
recorded. The subsidiary journals shall contain such information
as may be required by the Secretary of Finance.
 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.
 Where to file the return and pay the tax
Except as the Commissioner otherwise permits, the return shall be filed
with and the tax paid to:
➢ an authorized agent bank

➢ Revenue Collection Officer; or

➢ duly authorized city or municipal Treasurer in the Philippines located within the
revenue district where the taxpayer is registered or required to register.
 Power of the Commissioner to suspend
business operations
The Commissioner or his authorized representative is hereby empowered to suspend the business
operations and temporarily close the business establishment of any person for any of the following
violations:

1. In case of VAT-registered person:

a. Failure to issue receipts or invoices

b. Failure to file a VAT return as required under Section 114; or

c. Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct
taxable sales or receipts for the taxable quarter.

2. Failure of any Person to Register as Required under Section 236- The temporary closure of the
establishment shall be for the duration of not less than five (5) days and shall be lifted only upon
compliance with whatever requirements prescribed by the Commissioner in the closure order.