INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE

1st Sem
Department of Accountancy 2021-2022
BUSINESS TAXATION

MODULE 4 – VALUE ADDED TAX

VALUE ADDED TAX

VAT is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and
services in the Philippines and on importation of goods into the Philippines.
NATURE AND CHARACTERISTICS OF VAT
General rule: The seller is the one statutorily liable for the payment of the tax but the amount of the tax
may be shifted* or passed on* to the buyer, transferee or lessee of goods, properties or services.
Exception: In the case of importation, the importer is the one liable for the VAT.

*As to incidence of taxation, VAT is an indirect tax. Shifting is one way of escaping the payment of tax.
PERSONS LIABLE TO VAT:
1. Seller of goods (Accrual)
2. Seller of service (Cash)
3. Lessor of goods or properties (Cash)
4. Importer
REGISTRATION
1. VAT Registration, in General. – Any person who, in the course of trade or business, sells, barters,
exchanges goods or properties, or engages in the sale of services subject to VAT, shall register
the VAT tax type with the BIR district office having jurisdiction over the Head Office.
2. Mandatory VAT Registration. - Any person who, in the course of trade or business, sells, barters
or exchanges goods or properties or engages in the sale or exchange of services shall be liable to
register the VAT tax type if:
a. His gross sales or receipts for the past twelve (12) months, other than those that are
exempt under Section 109 of the Code, as amended, have exceeded Three Million Pesos
(Php 3,000,000.00); or
b. There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109 of the Code, as
amended, will exceed Three Million Pesos (Php 3,000,000.00).
Moreover, franchise grantees of radio and television broadcasting, whose gross annual receipt
for the preceding calendar year exceeded Php 10,000,000.00, shall register as VAT taxpayer
within thirty (30) days from the end of the taxable year
3. Optional Registration of VAT for VAT-Exempt Persons. –
a. Any person who is VAT-exempt and whose sale or lease of goods or properties or the
performance of services other than the transactions mentioned in Section 109, the gross
annual sales and/or receipts do not exceed the amount of Three Million Pesos
(P3,000,000.00) not otherwise required to register for VAT may elect to be VAT-
registered by registering with the BIR district office that has jurisdiction over the Head
Office of that person.
b. Any person who is VAT-registered but enters into transactions which are exempt from
VAT (mixed transactions) may opt that the VAT apply to his transactions which would
have been exempt under Section 109 (1) of the Code, as amended.
c. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of
the preceding year do not exceed Ten Million Pesos (P10,000,000.00) derived from the
business covered by the law granting the franchise may opt for VAT registration. This
option, once exercised, shall be irrevocable.

Any person who elects to register under a and b above shall not be allowed to cancel his
VAT registration for the next three (3) years. Once registered as a VAT person, the
taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the
first day of the month following registration.

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BUSINESS TAXATION

PLACE OF REGISTRATION
1. Head Office – RDO which has jurisdiction over the place of Head Office
2. Branch - RDO which has jurisdiction over the place of Branch
TAXPAYER IDENTIFICATION NUMBER (TIN)
1. Head Office TIN: 123-456-789-0000
2. Branch TIN: 123-456-789-0001
REGISTRATION FEE/ANNUAL REGISTRATION FEE
A Registration Fee or Annual Registration Fee in the amount of Five Hundred Pesos (Php 500.00) for
every Head Office and/or branch shall be paid upon registration and every year thereafter on or before
January 31.

Form to Use:
Initial Registration: Form 1901 (Self-Employed) or Form 1903 (Non-Individual)
Succeeding: Annual Registration Fee payment (Payment Form 0605)

Note: Even if the registration is Non-VAT (i.e. subject to Percentage Tax), the registration fee is still Php
500.
EFFECT OF FAILURE TO REGISTER
Every person who becomes liable to VAT mandatorily shall register with the BIR district office which has
jurisdiction over his Head Office. If he fails to register, he shall be liable to pay the output tax under
Sections. 106 and/or 108 of the Code, as amended, as if he were a VAT-registered person, but without
the benefit of input tax credits for the period in which he was not properly registered.
IN THE COURSE OF TRADE OR BUSINESS
The phrase means the regular conduct or pursuit of a commercial or an economic activity including
transactions incidental thereto, by any person regardless of whether or not the person engaged therein
in a non-stock, non-profit private organization (irrespective of the disposition of its net income and
whether or not it sells exclusively to members or their guests), or government entity.

Non-residents who perform services in the Philippines are deemed to be making sales in the course of
trade or business, even if the performance is not regular.
GOODS OR PROPERTIES
- refers to all tangible and intangible objects which are capable of pecuniary estimation and shall
include, among others:

a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade
or business
b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or process,
goodwill, trademark, trade brand or other like property or right
c. The right or the privilege to use any industrial, commercial or scientific equipment
d. The right or the privilege to use motion picture films, films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.
Sale or exchange services - means the performance of all kinds of services in the Philippines for others
for a fee, remuneration or consideration, whether in kind or in cash, including those performed or
rendered by:
a. Construction and service contractors
b. Stock, real estate, commercial, customs and immigration brokers
c. Lessors of property, whether personal or real
d. Persons engaged in warehousing services
e. Lessors or distributors of cinematographic films
f. Persons engaged in milling, processing, manufacturing, or repacking goods for others

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g. Proprietors, operator or keepers of hotels, motels, resthouses, pension houses, inns, resorts,
theatres and movie houses
h. Proprietors, operators of restaurants, refreshment parlors, cafes and other eating places, including
clubs and caterers
i. Dealers in securities
j. Lending investors
k. Transportation contractors on their transport of goods or cargoes including persons who transport
goods or cargoes for hire and other domestic common carriers by land, relative to their transport of
goods or cargoes
l. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from
one place in the Philippines to another place in the Philippines
m. Sales of electricity by generation, transmission, and/or distribution
n. Franchise grantees of electric utilities, telephone and telegraph, radio and/or television
broadcasting and all other franchise grantees, except franchise grantees of radio and/or television
broadcasting whose annual gross receipts of the preceding year do not exceed P10,000,000, and
franchise grantees of gas and water utilities
o. Non-life insurance companies (except their crop insurance), including surety, fidelity, indemnity and
bonding companies
p. Similar services regardless of whether or not the performance thereof calls for the exercise or use
of the physical or mental facilities.
GROSS SALES VS GROSS RECEIPTS
Sale of goods and properties Sale or lease of properties
GROSS SELLING PRICE (SALES INVOICES) GROSS RECEIPTS (OFFICIAL RECEIPTS)
total amount of money or its equivalent which total amount of money or its equivalent
the purchaser pays or is obligated to pay to the representing the contract price, compensation,
seller in consideration of the sale, barter or service fee, rental or royalty, including the
exchange of the goods or properties, excluding amount charged for materials supplied with the
VAT. The excise tax, if any, on such goods or services and deposits applied as payments for
properties shall form part of the gross selling services rendered and advance payments actually
price or constructively received during the taxable
period for the services performed or to be
Allowable deductions from GSP: performed for another person, excluding VAT,
a. discounts determined and granted at the except those amounts earmarked for payment to
time of sale, which are expressly indicated unrelated third (3rd ) party or received as
in the invoice, the amount thereof reimbursement for advance payment on behalf of
forming part of the gross sales duly another which do not redound to the benefit of
recorded in the books of accounts the payor.
b. sales discounts indicated in the invoice at
the time of sale, the grant of which is not Constructive receipt occurs when the money
dependent upon the happening of a consideration or its equivalent is placed at the
future event, may be excluded from the control of the person who rendered the service
gross sales within the same without restrictions by the payor. The following
month/quarter it was given are examples of constructive receipts:
c. Sales returns and allowance for which a 1. deposits in banks which are made
proper credit or refund was made during available to the seller of services without
the month or quarter to the buyer for restrictions
sales previously recorded as taxable sales 2. issuance by the debtor of a notice to
offset any debt or obligation and
acceptance thereof by the seller as
payment for services rendered; and
3. transfer of the amounts retained by the

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payor to the account of the contractor.

GROSS RECEIPTS AND SPECIFIC RULES ON SELECTED SERVICES
1. Millers
Type of Miller Treatment
Subject to 12%:
Engaged in milling for others • If miller is paid in case, the VAT is based on gross
(not milling palay into rice, receipts.
corn into corn grits, and sugar • If miller receives a share of the milled products instead
cane into raw sugar) of cash, VAT is based on the actual market value of his
share in the milled products
• Sale by the owner or the miller of his shared milled
products (except rice, corn grits and raw sugar) are
subject to VAT.
Engaged in milling palay into VAT-exempt
rice, corn into corn grits, and
sugar cane into raw sugar

2. Common carriers refer to persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both by land, water, or air, for compensation,
offering their services to the public and shall include transportation contractors
Domestic Common Carrier Treatment
By Air and Sea Subject to 12% VAT on their gross receipts from their
transport of passengers, goods or cargoes from one place in
the Philippines to another place in the Philippines.
By Land Subject to Other Percentage Tax (Sec. 117 of Tax Code) on
gross receipts from transport of passengers

3. Generation, transmission and distribution companies

Type of Company Treatment
Generation companies refer to persons or entities authorized Subject to 12% based on total
by the Energy Regulatory Commission to operate facilities amount charged for the sale
used in the generation of electricity. Generation of electricity of electricity and related
is the production of electricity under R.A. 9316 or the EPIRA ancillary services
Law. Generation companies include all Independent Power
Producers (IPPs) and NPC/PSALM-owned generation facilities.
Transmission companies refer to any person or entity that Subject to 12% based on total
owns or conveys electricity through high voltage backbone amount charged for
system and/or subtransmission assets (NPC or TRANSCO). transmission of electricity and
related ancillary services
Distribution companies refer to persons or entities which Subject to 12% based on total
operate a distribution system. These include electric amount charged by
cooperatives. Distribution system is the system of wires and distribution companies and
associated facilities belonging to a franchised distribution electric cooperatives for
utility extending between the delivery points in the distribution and supply of
transmission or generator connection and the point of electricity and related electric
connection to the premises of the end-users. service.
Note: The universal charge passed
on is not part of gross
receipts.
Generation, transmission and distribution companies selling Subject to 0% VAT
power or fuel generated through renewable energy such as

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biomass, solar, wind, hydro-power, geothermal, ocean

energy and other emerging energy sources using
technologies such as fuel cells and hydrogen fuels

4. Dealers in securities and lending investors

Type of Company Treatment
Dealer in securities means a merchant of stocks or securities,
whether an individual, partnership or corporation, with an
established place of business, regularly engaged in the Subject to 12% based on
purchase of securities and their resale to customers, that is, Gross Receipts.
one who as a merchant buys securities and sells them to
customers with a view to the gains and profits that may be Gross receipts is gross selling
derived therefrom price less cost of the securities
Lending investor includes all persons other than banks, non- sold
bank financial intermediaries, finance companies and other
financial intermediaries not performing quasi-banking
functions who make a practice of lending money for
themselves or others at interest
Lending activities by credit or multi-purpose cooperatives VAT-exempt
duly registered and in good standing with the Cooperative
Development Authority

5. Franchise grantees
Type of Company Treatment
Telephone and telegraph:
• gross receipts from telephone, telegraph, telewriter • Subject to 12% VAT
exchange, wireless and other services
• gross receipts from overseas dispatch from the • Subject to Overseas
Philippines Communication Tax of
10%
Radio and/or television whose gross receipts exceeded P
10M • Subject to 12% VAT
Toll road operations
All other franchise grantees
Radio and/or TV broadcasting whose receipts does not • VAT-exempt
exceed Php 10 Million • Subject to 3% franchise
tax
Gas and water utilities • VAT-exempt
• Subject to 2% franchise
tax
Philippine Amusement and Gaming Corporation (PAGCOR), • VAT-exempt
its licensees, or franchisees • Subject to 5% franchise
tax on its gaming
operations
• Subject to RCIT on
income from other
related services

6. Non-life insurance companies including surety, fidelity, indemnity and bonding companies shall
include individuals, partnerships, associations, or corporations including professional reinsurers,

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mutual benefit associations, engaging in the business of property insurance.

Type of Insurance Companies Treatment
Non-life • Gross receipts are subject to 12% VAT

• Gross receipts mean total premiums collected

whether paid in money, notes, credits or any
substitute for money

• Insurance and Reinsurance commissions are subject to

12% VAT

• Non-life REINSURANCE premiums are VAT-exempt

Life (insurance on human • VAT-exempt
lives, health or accident) • Subject to 2% gross receipts tax (OPT)
Foreign reinsurance company • Subject to 12% VAT withholding (payment to non-
resident)

7. Pre-need companies are corporations registered with the Securities and Exchange Commission
and authorized/licensed to sell or offer for sale pre-need plans, whether a single plan or multi-
plan. They are engaged in business as seller of services providing services to plan holders by
managing funds provided by them and making payments at the time of need or maturity of the
contract.

As service providers, the compensation for their services is the premiums or payments received
from the plan holders.

8. Health Maintenance Organizations (HMOs) are entities licensed by the appropriate government
agency which arranges for coverage or designated managed care services needed by plan
holders/members for fixed prepaid membership fees and for a specified period of time.

HMO’s gross receipts shall be service fee charged to companies or members only and does not
include the amount earmarked for medical utilization. The service fee and the earmarked
amounts should be separately indicated.
ALLOWABLE DEDUCTIONS FROM GSP UNDER ANTI-HOSPITAL DEPOSIT LAW
Basic emergency care to poor and indigent patients provided by the hospital or medical clinic not
reimbursed by PhilHealth and PCSO shall be deductible from gross sales/receipts.

Basic Emergency Care — the response to a situation where there is urgently required medical care and
attention, and shall include procedures required for initial diagnosis, use of equipment and supplies in
sufficiently addressing the emergency situation, considering the welfare of the patient. It also includes
the necessary medical procedures and treatment administered to a woman in active labor to ensure the
safe delivery of the newborn.
TYPE OF ORDINARY SENIOR SPECIAL PWD NATIONAL
DISCOUNT SALES CITIZEN DISCOUNT ON ATHLETES,
DISCOUNT SC/PWD ON COACHES,
PRIME TRAINERS
COMMODITIES
Rate Discretionary 20% 5% 20% 20%
Threshold None None P1,300.00/week None None
Treatment Deduction from Deduction Deduction from Deduction Deduction
Gross Sales from GI Selling Price from GI from GI

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VAT Trans 12% VAT-Exempt 12% VAT-Exempt 12%

BASIC AND PRIME COMMODITIES (SC and PWD)
1. Basic Necessities – are goods vital to the needs of consumers for their sustenance and existence.
2. Prime Commodities – are goods not considered as basic necessities but are essential to
consumers

Notes: 5% Special Discount not applicable when made to food courts, food carts, food vendors and sari-
sari stores with a capitalization of less than One Hundred Thousand Pesos (PhP100, 000.00), public and
private wet markets, “talipapa” and cooperative stores.
Basic Commodities Prime Commodities
1. All kinds and variants of rice 1. Flour
2. Corn 2. Dried, processed and canned pork, beef and
3. All kinds of bread (Pastries and cakes not poultry meat
included) 3. Dairy products not falling under Section 1(a)
4. Fresh, dried and canned fish and other marine of this Order
products (including frozen and in various 4. Onions and Garlic
modes of packaging) 5. Vinegar, patis and soy sauce
5. Fresh pork, beef and poultry meat 6. Toilet/Bath soap
6. All kinds of fresh eggs (excluding quail eggs) 7. Fertilizer
7. Potable water in bottles and containers 8. Pesticides
8. Fresh and processed milk (excluding milk 9. Herbicides
labelled as foods supplement) 10. Poultry feeds, livestock feeds and fishery
9. Fresh vegetables including root crops feeds
10. Fresh fruits 11. Veterinary products
11. Locally manufactured instant noodles 12. Paper, school supplies
12. Coffee and coffee creamer 13. Nipa shingle
13. All kinds of sugar (excluding sweetener) 14. Sawali
14. All kinds of cooking oil 15. Cement, clinker, GI sheets
15. Salt 16. Hollow blocks
16. Powdered, liquid, bar laundry and detergent 17. Plywood
soap 18. Ply Board
17. Firewood 19. Construction nails
18. Charcoal 20. Batteries (excluding cellphone and
19. All kinds of candles automotive batteries)
20. Household liquefied petroleum gas, not more 21. Electrical supplies and light bulbs
than 11kgs. LPG content once every five (5) 22. Steel wires
months) bought from LPG dealers
21. Kerosene, not more than 2 liters per month
TYPES OF SALES
1. Sales Subject to VAT or VATable sales:
a. 12% of gross selling price or gross receipts
• Regular sales
• Sale to government
• Deemed sales based from FMV as of the time of occurrence of the transactions
b. Zero-rated (0%) sale
2. VAT-exempt Sale
REGULAR SALES (12%)
Domestic sale, transfer, barter or exchange of goods or services. Stated otherwise, VATable sales subject
to 12% are sales not otherwise subject to 0% nor exempt from VAT.
DEEMED SALES OR CONSTRUCTIVE SALES (12%)
1. Transfer, use or consumption not in the ordinary course of business of goods or properties

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originally intended for sale or for use in the ordinary course of business (e.g. withdrawal of goods
for personal use)
EXCEPTIONS:
❖ Bayanihan to Heal as One Act, donations of the following are not deemed sale:
• Donations of all critical or needed healthcare equipment or supplies in
combatting COVID-19
• Relief Goods
❖ Bayanihan to Recover as One Act (R.A. 11494), donations of the following are not
deemed sale:
• Donations of personal computers, laptops, tablets, or similar equipment (i.e.
mobile phone, printer) for use in teaching and learning in public schools (based on
actual cost or carrying value). However, input tax is creditable against output tax.

2. Distribution or transfer to:

i. Shareholders or investors share in the profits of Vat-registered person (e.g. property
dividends based on zonal or assessed value whichever is higher)
ii. Creditors in payment of debt or obligation

3. Consignment of goods if actual sale is not made within 60 days following the date such goods
were consigned. Consigned goods returned by the consignee within the 60-day period are not
deemed sold.

4. Retirement from or cessation of business with respect to all goods on hand, whether capital
goods, stock in trade, supplies or materials, as of the date of such retirement or cessation –
based on acquisition cost or current market price whichever is lower
i. Change in business ownership – i.e.: incorporation of a sole proprietorship and sale of
a business.
ii. Dissolution of a partnership and formation of another to take over the business

Notes:
• The Commissioner of Internal Revenue shall determine the appropriate tax base in cases where a
transaction is deemed a sale, barter or exchange of goods or properties, or where the gross selling
price is unreasonably lower than the actual market value. The gross selling price is unreasonably
lower than the actual market value if it is lower by more than 30% of the actual market value of the
same goods of the same quantity and quality sold in the immediate locality on or nearest the date
of sale.
• If one of the parties in the transaction is the government as defined and contemplated under the
Administrative Code, the output VAT on the transaction shall be based on the actual selling price.
PAYMENTS TO NON-RESIDENTS
Withholding of 12% VAT shall be made with respect to the following payments to non-residents:
1. Lease or use of properties or property rights owned by non-residents
2. Services rendered to local insurance companies with respect to reinsurance premiums payable
to non-residents
3. Other services rendered in the Philippines by non-residents

VAT on rental and/or royalties payable to NRFCs or owners for the sale of services and use or lease of
properties in the Philippines shall be based on the contract price agreed by the licensor and the
licensee. The licensee shall be responsible of the payment of VAT on such rentals and/or royalties on
behalf of the NRFC or owner.
Notes:
1. The payor/withholding agent shall withhold the passed-on VAT and remit the same on behalf of

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the non-resident
2. The payor/withholding agent can claim the input tax if payor is VAT-registered. If payor is Non-
VAT, the input tax is treated as an asset or expense whichever is applicable
3. The VAT withheld is remitted within 10 days following the month the withholding was made
CROSS-BORDER DOCTRINE / DESTINATION PRINCIPLE
Cross Border Doctrine
1. no VAT shall be imposed to form part of the cost of goods destined for consumption outside the
territorial border of the taxing authority (Philippines)
2. Actual export of goods and services from the Philippines to a foreign country must be free of VAT
3. This principle is achieved through application of VAT-zero rating of products exported from the
Philippines*

Destination Principle
4. Goods and services are taxed only in the country where these are consumed
5. Goods destined for use or consumption within the Philippines shall be imposed with VAT

The destination of the goods determines taxation or exemption from tax

- Examples:
1. Export sales are subject to 0% rate because consumption of goods will be made outside the
Philippines
2. Importation is generally subject to 12% rate because consumption is within the Philippines

In service, consumption is presumed to take place where the services were performed (situs of service)
ZERO-RATE SALES (0%)
The following remains as zero-rated transactions due to deferment of implementation of RR 9-2021:
ZERO-RATED SALE OF GOODS ZERO-RATED SALE OF SERVICE
1. The sale and actual shipment of goods 1. Processing, manufacturing or repacking
from the Philippines to a foreign goods for other persons doing business
country, irrespective of any shipping outside the Philippines which goods are
arrangement, paid for in acceptable subsequently exported, where the
foreign currency or its equivalent in services are paid for in acceptable foreign
goods or services, and accounted for in currency and accounted for in
accordance with the rules and accordance with the rules and
regulations of the Bangko Sentral ng regulations of the Bangko Sentral ng
Pilipinas (BSP). Pilipinas (BSP)

Requisites: Requisites:
• Actual shipment from Phils to • Service was rendered to non-
abroad residents
• Paid for in acceptable foreign • Paid for in acceptable foreign
currency currency
• Currency accounted by the BSP • Currency accounted by the BSP

Note: Subject to 12% under RR 9-2021.

However, this was deferred under RR 15-2021.
2. Sale of raw materials or packaging 2. Services other than those mentioned in
materials to a nonresident buyer for the preceding paragraph, rendered to a
delivery to a resident local export- person engaged in business conducted
oriented enterprise to be used in outside the Philippines or to a
manufacturing, processing, packing or nonresident person not engaged in
repacking and paid for in acceptable business who is outside the Philippines

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foreign currency and accounted for in when the services are performed, the
accordance with the rules and consideration for which is paid for in
regulations of the Bangko Sentral ng acceptable foreign currency and
Pilipinas (BSP).* accounted for in accordance with the
rules and regulations of the Bangko
Requisites: Sentral ng Pilipinas (BSP)
• Goods sold to non-residents
• Paid for in acceptable foreign Requisites:
currency • Service was rendered to non-
• Currency accounted by the BSP residents
• Paid for in acceptable foreign
Note: Subject to 12% under RR 9-2021. currency
However, this was deferred under RR 15-2021. • Currency accounted by the BSP
3. Sale of raw materials or packaging 3. Services rendered to persons or entities
materials to export-oriented enterprise whose exemption under special laws or
whose export sales exceed seventy international agreements to which the
percent (70%) of total annual Philippines is a signatory effectively
production.* subjects the supply of such services to
zero percent (0%) rate
Note: Subject to 12% under RR 9-2021,
However, this was deferred under RR 15-2021.
4. Export sales under EO 226 – in addition 4. Services rendered to persons engaged in
to actual export* international shipping or international air
a. Sale of export producer to another transport operations, including leases of
export producer or to an export property for use thereof: provided, that
trader that subsequently export the these services shall be exclusively for
same international shipping or air transport
b. Even without actual exportation operations
1. Sales to bonded manufacturing
warehouses of export-oriented Note: Exclusive transport operations only
manufacturers
2. Sales to export processing zones
(BOI-registered manufacturers
or producers)
3. sales to registered export
traders operating bonded
trading warehouses supplying
raw materials in the
manufacture of export products
4. sales to diplomatic missions and
other agencies and or
instrumentalities granted tax
immunities, of locally
manufactured, assembled or
repacked products whether paid
for in foreign currency or not

Note: Subject to 12% under RR 9-2021.

However, this was deferred under RR 15-2021.
5. The sale of goods, supplies, equipment 5. Services performed by subcontractors
and fuel to persons engaged in and/or contractors in processing,

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international shipping or international converting, or manufacturing goods for

air transport; provided, that the goods, an enterprise whose export sales exceed
supplies, equipment and fuel have been seventy percent (70%) of total annual
sold and used for international shipping production.
or air transport operation
Note: Subject to 12% under RR 9-2021.
However, this was deferred under RR 15-2021.
6. Transport of passengers and cargo by
domestic air or sea vessels from the
Philippines to a foreign country

Note: Gross Receipts derived from transport of

cargo from the Philippines to another country is
subject to 3% percentage tax
7. Sale of power or fuel generated through
renewable sourced of energy such as but
not limited to biomass, solar, wind,
hydropower, geothermal, ocean energy,
and other emerging energy sources using
technologies such as fuel cells and
hydrogen fuels.
6. Sales to persons or entities whose
exemption under special laws or
international agreements to which the
Philippines is a signatory effectively
subjects such sales to zero rate.

Examples: Asian Development Bank and

International Rice Research Institute
NOTE: Some zero-rated sales under TRAIN Law became subject to the 12% VAT and are no longer
be considered export sales subject to 0% VAT due to satisfaction of the following conditions:
✓ There is a successful establishment and implementation of an enhanced VAT refund system
that grants refunds of creditable input tax within 90 days from the filing of the VAT refund
application with the Bureau.
✓ All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by
December 31, 2019.

Source: Revenue Regulations No. 9-2021 dated June 9, 2021 which became effective June 27, 2021
provided for 12% imposition. However, implementation of RR 9-2021 was deferred under RR 15-
2021. Hence, the zero-rated transactions which were later subject to 12% remained as zero-rate.
VAT-EXEMPT TRANSACTIONS
a. Sale or importation of:
1. agricultural and marine food products in their original state.
Agricultural and marine food products 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

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• Stripping
• Including those using advanced technological means of packaging such as shrink wrapping in
plastics, vacuum packing, tetra-pack and other similar packaging methods.

Note: sale of roasted meat products without undergoing process is VAT-exempt. However, sale
thereof in a facility where the roasted chickens are offered as a menu to customers who would dine-
in are subject to 12% VAT.

2. livestock and poultry of a kind generally used as, or yielding or producing foods for human
consumption; and
3. breeding stock and genetic materials

Examples:
Agri Food Products Marine Livestock Poultry
Polished/husked rice Fish Cows Fowls
Corn grits Crustaceans such as: Bulls Ducks
Raw cane sugar Lobsters Calves Geese
Molasses Shrimps Pigs Turkey
Ordinary salt Prawns Sheep
Copra Oysters Goats
Mussels Rabbits
Clams
Trout Does not include:
Eels Fighting cocks
Race horses
Zoo animals
Other animals generally
considered as pets

Notes:
Other VAT-exempt Food Products
• Meat
• Fruit
• Vegetables
Bagasse (bagaso or natirang himaymay in Filipino) is not included in the exemption hence taxable
b. Sale or importation of:
VAT-Exempt Subject to 12% VAT
Fertilizers, seeds, seedlings and Specialty feeds for racehorses, fighting
fingerlings cocks, aquarium fish, zoo animals
and other animals generally
considered as pets
fish, prawn, livestock and poultry feeds, Feeds capable of human consumption.
including ingredients, whether Products must have certification
locally produced or imported, used from Food and Drugs Administration
in the manufacture of finished feeds that it is NOT fit for human
consumption.
c. Importation of personal and household effects
• belonging to residents of the Philippines returning from abroad and
• non-residing citizens coming to resettle in the Philippines
• Provided, that such goods are exempt from custom duties under the Tariff and Customs
Code of the Philippines as repealed by Customs Modernization and Tariff Act (CMTA)

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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 or citizens of other countries, 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: 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:

Exception: Subject to 12% VAT duties, taxes and other charges are vehicles, vessels, aircrafts,
machineries and other similar goods for use in manufacture
e. Services subject to percentage tax under Title V of the Tax Code:
• Seller of goods or service whose gross annual sales/receipts does not exceed Php 3 Million
(subject to 1% (old rate 3%) percentage tax)
• Domestic common carriers (subject to common carriers tax)
• Services rendered by international air/shipping carriers (subject to gross receipts tax)
• Services by franchise grantees of radio and/or TV broadcasting whose receipts does not
exceed Php 10 Million and by franchise grantees of gas and water utilities (subject to
franchise tax)
• Services rendered by overseas dispatch from Philippines (subject to overseas communication
tax)
• Insurance services (subject to gross receipts tax)
• Services of amusement places (cockpit, cabaret, clubs, boxing exhibitions, professional
basketball games, Jai-Alai and race tracks (subject to amusement tax)
• Services by stock brokers (subject to stock transaction tax)
f. Services by agricultural contract growers (persons producing for others poultry, livestock or other
agricultural and marine food products in their original state) and milling for others of palay into rice,
corn into grits and sugar cane into raw sugar

General Rule:
A miller engaged in milling for others are subject to 12% VAT.
Exception: Miller engaged in milling palay into rice, corn into corn grits, and sugar cane into raw
sugar.
g. Medical, dental, hospital and veterinary services, except those rendered by professionals

Laboratory services are exempted. Hospital bills constitute medical services.

If the hospital or clinic operates a pharmacy or drugstore, the sale of drugs and medicines are:
1. Sales made by the drugstore to the in-patients which are included in the hospital bills are part
of medical bills exempt from VAT.
2. Sales of the drug store to the out-patients are subject to VAT, because they are not part of
medical services of the hospital.
h. Educational services rendered by private educational institutions, duly accredited by:
• Department of Education (DepEd)
• Commission on Higher Education (CHED) and
• Technical Education and Skills Development Authority (TESDA)

and those rendered by government educational institutions

i. Services rendered by individuals pursuant to an employer-employee relationship

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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
k. Transactions which are exempt:
• under international agreement to which the Philippines is a signatory or
• under special laws except those granted under PD No. 529, Petroleum Exploration
Concessionaries under Petroleum Act of 1949;
l. Sales by agricultural cooperatives duly registered and in good standing 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

Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer of
the agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g.,
trader), then only those sales to its members shall be exempted from VAT. It is to be reiterated
however, that sale or importation of agricultural food products in their original state is exempt from
VAT irrespective of the seller and buyer thereof, pursuant to Subsection (a) hereof.

Agricultural cooperative refers to a primary cooperative which or whose members are

involve/engaged in raising/culture of plants, animals, fungi, and other living organism for productive
and economic purpose and in related activities that lead to the reduction of cost and/or value
addition of outputs.

Summary:
Type by agri cooperative Sale to members Sale to non-members
Producer Exempt Exempt
Non-producer Exempt 12% VAT
Note: Sale of agricultural food products in original state is exempt
m. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and
in good standing with the Cooperative Development Authority

Credit Cooperative is one that promotes and undertakes savings and lending services among its
members. It generates a common pool of funds in order to provide financial assistance to its
members for productive and provident purposes.
Multi-purpose Cooperative refers to a cooperative, which combines two or more business/economic
activities.

Notes:
1. Lending Investors – gross receipts are subject to 12% VAT
2. Micro-Finance NGOs – gross receipts are subject to 2% gross receipts tax
n. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered and in good
standing with the Cooperative Development Authority; 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

Note: Importation by non-agricultural, non-electric and on-credit cooperatives of machineries and

equipment including spare parts thereof to be used by them are subject to 12% VAT.
o. Export sales by persons who are not VAT registered

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p. The following sales of real properties are exempt from VAT, namely: (CASH-HL)
1. Sale of real property not primarily held for sale to customer or held for lease in the ordinary
course of trade or business.
However, even if the real property is not primarily for sale to customers or held for lease in the
ordinary course of trade or business but the same is used in the trade or business of the seller,
the sale thereof shall be subject to VAT being a transaction incidental to the taxpayer’s main
business
2. Sale of real property utilized for low-cost (Subject to 12% VAT beginning January 1, 2021)
“Low-cost housing” refers to housing projects intended for homeless low-income family
beneficiaries, undertaken by the Government or private developers, which may either be a
subdivision or a condominium registered and licensed by the Housing and Land Use Regulatory
Board/Housing (HLURB) under BP Blg. 220, PD No. 957 or any other similar law, wherein the unit
selling price is within the selling price per unit as set by the Housing and Urban Development
Coordinating Council (HUDCC) pursuant to RA No. 7279 otherwise known as the “Urban
Development and Housing Act of 1992” and other laws.
3. Sale of real property utilized for socialized housing
“Socialized housing” refers to housing programs and projects covering houses and lots or home
lots only undertaken by the Government or private sector for the underprivileged and homeless
citizens which shall include sites and services development, long-term financing, liberated terms
on interest payments, and such other benefits in accordance with the provision or RA No. 7279,
otherwise known as the “Urban Development and Housing Act of 1992” and RA No. 7835 and RA
No. 8763. It shall also refer to projects intended for the underprivileged and homeless wherein
the housing package selling price is within the lowest interest rates under the Unified Lending
Program (UHLP) or any equivalent housing program of the Government, the private sector or
non-government organizations.
4. Sale of residential lot valued at P1,919,500 and below and house and lot and other residential
dwellings valued at P3,199,200 and below. (Note: Sale of residential lot is subject to 12% VAT
beginning January 1, 2021)

If two or more adjacent residential lots are sold or disposed in favor of one buyer, for the purpose of
utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value
of the lots do not exceed Php 1,500,000.00. Adjacent residential lots, although covered by separate
titles and/or separate tax declarations, when sold or disposed to one and the same buyer, whether
covered by one or separate Deed of Conveyance, shall be presumed as a sale of one residential lot.
(No longer applicable due to taxability of the sale of residential lot)

Notes:
Sale of parking lot:
1. If seller is a realtor, developer or lessor, sale is subject to 12% VAT regardless of amount
2. If seller is not engaged in business, the parking lot is a capital asset subject to CGT and is VAT-
exempt

Beginning January 1, 2021:

The VAT exemption shall not anymore apply to:
- Sale of low-cost housing
- Sale of residential lot
The threshold selling price amount for sale of house and lot, and other residential dwellings shall be
Php 3,199,200 (Old rate is P2,000,000.00).

Every 3 years, the threshold amount shall be adjusted to its present value using the Consumer Price
Index, as published by the Philippine Statistics Authority (PSA).

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q. Lease of:
• residential units
• with a monthly rental not exceeding P15,000
• regardless of the amount of aggregate rentals received by the lessor during the year.

Lease of Residential Units

Monthly Rental Annual Receipts Treatment
Monthly rental ≤P15,000 > P3,000,000 VAT and PT exempt
Monthly rental ≤ P15,000 ≤ P3,000,000 VAT and PT exempt
Monthly rental > P15,000 > P3,000,000 VAT
Monthly rental > P15,000 ≤ P3,000,000 PT

In lease contract, the advance payment by the lessee may be the following:
1. a loan to the lessor from the lessee
2. an option money for the property
3. a security deposit to ensure faithful performance of certain obligations of the lessee to the
lessor
4. pre-paid rental
Subject to VAT Not subject to VAT
Pre-paid rent (advance payment) Loan to the lessor
Security deposit (applied to rental) Option money
Security deposit (not applied to rental)

Notes:
1. Lease of commercial units, regardless of the amount of monthly rental is subject to VAT
unless the lessor is non-VAT registered and annual gross receipts is less than P3,000,000.
2. In cases where a lessor has several residential units for lease, some are leased out for a
monthly rental per unit of not exceeding P15,000.00 while others are leased out for more
than P15,000.00 per unit, his tax liability will be as follows:
• The gross receipts from rentals not exceeding P15,000.00 per month per unit shall be
exempt from VAT regardless of the aggregate annual gross receipts. It is also exempt
from the 3% percentage tax.
• The gross receipts from rentals exceeding P15,000.00 per month per unit shall be subject
to VAT if the aggregate annual gross receipts from said units only exceeds P3,000,000.00.
Otherwise, the gross receipts will be subject to the 3% tax imposed under Section 116 of
the Tax Code.
In case of mixed transactions, the abovementioned rule should be observed.
3. The term ‘residential units’ shall refer to apartments and houses and lots used for residential
purposes, and buildings or parts or units thereof used solely as dwelling places (e.g.,
dormitories, rooms and bed spaces) except motels, motel rooms, hotels and hotel rooms,
lodging houses, inns and pension houses.
The term ‘unit’ shall mean an apartment unit in the case of apartments, house in the case of
residential houses; per person in the case of dormitories, boarding houses and bed spaces;
and per room in case of rooms for rent.
r. Sale or importation of books, newspaper, magazine, review bulletin
Old Rule CREATE Law
Sale, importation, printing or Sale, importation, printing or
publication of books and any publication of books and any
newspaper, magazine, review or newspaper, magazine, review (or)
bulletin which appears at regular bulletin, OR ANY SUCH

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intervals with fixed prices for EDUCATIONAL READING MATERIAL

subscription and sale and which is COVERED BY THE UNITED NATIONS
not devoted principally to the EDUCATIONAL, SCIENTIFIC AND
publication of paid advertisements CULTURAL ORGANIZATION
(UNESCO) AGREEMENT ON THE
IMPORTATION OF EDUCATIONAL,
SCIENTIFIC AND CULTURAL
MATERIALS, INCLUDING THE
DIGITAL OR ELECTRONIC FORMAT
THEREOF.

Conditions:
1. THE MATERIALS ENUMERATED
THEREIN ARE not devoted principally
to the publication of paid
advertisements.
2. THE MATERIALS ENUMERATED HEREIN
ARE COMPLIANT WITH THE
REQUIREMENTS SET FORTH BY THE
NATIONAL BOOK DEVELOPMENT
BOARD PURSUANT TO R.A. 8047.

Effectivity: April 11, 2021

Note: Prior to CREATE Law, if in electronic form, subject to 12% VAT. Under CREATE Law, VAT
exempt.
s. The transport of passengers by international carriers
Type of carrier Treatment
International (to outside Philippines) VAT-exempt
Domestic (to outside Philippines) Zero-rate
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, however,
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 Maritime Industry Authority (MARINA).
u. Importation of fuel, goods and supplies by persons engaged in international shipping and air
transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or
shall pertain to the transport of goods and/or passengers from a port in the Philippines directly to
a foreign port, or vice-versa, without docking or stopping at any other port in the Philippines
unless the docking or stopping at any other Philippine port 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 and supplies shall be
subject to 12% VAT.
v. Services of banks, non-bank financial intermediaries performing quasi-banking functions, and
other non-bank financial intermediaries, such as money changers and pawnshops, subject to
percentage tax under Secs. 121 and 122, respectively, of the Tax Code
(w) Sale or lease of goods and services to senior citizens and person with disabilities
(x) Transfer of property under Section 40(C)(2) of the NIRC (Tax-free exchange)

Notes:
Kinds of tax-free exchanges:

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1. transfer to a controlled corporation; and,

2. merger or consolidation
3. transfer of a property to a corporation by a person in exchange for stock or unit of
participation in such a corporation
(y) Association dues, membership fees, and other assessments and charges collected by
homeowners associations and condominium corporations.

Note: Charges normally include maintenance of Common Use Service Area (CUSA)
(z) Sale of gold to the BSP.

Note: Sale of gold other than to BSP is subject to 12% VAT

(aa) Sale or importation of prescription drugs and medicines prescribed for:
Beginning January 1, 2020:
1. diabetes
2. high cholesterol, and
3. hypertension

Beginning January 1, 2021*: (Due to CREATE Law the exemption was made earlier)
1. cancer
2. mental illness
3. tuberculosis
4. kidney diseases

Beginning January 1, 2021 until December 31, 2023:

1. Drugs and vaccines prescribed and directly used for COVID-19 treatment
2. Medical devices directly used for COVID-19 treatment

Note: Prior to CREATE Law, effectivity of exemption is January 1, 2023. Under CREATE Law the
exemption was moved to January 1, 2021.
(bb) Sale or importation of the following beginning January 1, 2021 to December 31, 2023:
i. Capital equipment, its spare parts and raw materials, necessary for the production of
personal protective equipment (PPE) components such as coveralls, gown, surgical cap,
surgical mask, n-95 mask, scrub suits, goggles and face shield, double or surgical gloves,
dedicated shoes, and shoe covers for COVID-19 prevention
ii. All drugs, vaccines and medical devices specifically prescribed and directly used for the
treatment of COVID-19
iii. Drugs for the treatment of COVID-19 approved by the Food and Drug Administration (FDA)
for use in clinical trials, including raw materials directly necessary for the production of such
drugs
Provided, that the DTI shall certify that such equipment, spare parts or raw materials for
importation are not locally available or insufficient in quantity, or not in accordance with the
quality or specification required.

Note: For items (i) and (iii), the supplier or importer shall submit:
1. License to Operate issued to manufacturer and by DOH-FDA
2. Sworn Declaration from the manufacturer/buyer that the items shall be used for the
manufacture of the PPE Components and drugs for the treatment of COVID-19

ILLUSTRATION:
ABC Corp is a VAT-registered entity and a holder of License to Operate issued by FDA to
manufacture medical-grade PPE components such as coveralls, gown, surgical cap, mask, scrub suits,

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goggles and face shield, gloves shoes and shoe covers for COVID-19 prevention.

During the period of April to June 2021, the company had the following transactions:

Transaction Amount Treatment Explanation

Importation of raw materials not Exempt Not locally available
Php 2M
locally available
Importation of capital equipment Exempt Importation of capital
equipment for use in
Php 25M
production of PPE is VAT-
exempt
Importation of locally available Subject to 12% Locally available
Php 1M
raw materials VAT
Sale or transfer of raw materials to Exempt Sale of PPE raw materials
an affiliated company which is also is VAT-exempt
Php 1M
a holder of License to Operate
issued by the FDA

Effectivity: April 11, 2021

(cc). Sale or lease of goods or properties or the performance of services other than the transactions
mentioned in the preceding paragraphs, the annual gross sales and/or receipts do not exceed the
amount of P3 Million.

FOR PURPOSES OF THESE REGULATIONS, THE Php 3 MILLION GROSS ANNUAL SALES SHALL
COMPRISE OF THE BUSINESS’ TOTAL REVENUES FROM SALES OF ITS PRODUCTS, WHICH ARE EITHER
GOODS OR SERVICES, INCLUDING NON-REFUNDABLE ADVANCE DEPOSITS/PAYMENTS FOR SERVICES,
NET OF DISCOUNTS, SALES RETURNS AND ALLOWANCES, COVERING THE CALENDAR OR FISCAL
YEAR. SALES INCIDENTAL TO THE REGISTERED OPERATIONS OF THE BUSINESS SHALL ALSO BE
INCLUDED PURSUANT TO SECTION 105 OF THE TAX CODE, AS AMENDED.

Note: Re-numbered from (bb) to (cc)

TAX ON PERSONS EXEMPT FROM VALUE-ADDED TAX (VAT)
Any person whose sales or receipts are exempt under Section 109 (1) (CC) of the Tax Code from the
payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to
three percent* (3%) of his gross quarterly sales or receipts: Provided, however, that the following
shall be exempt from the payment of three percent* (3%) percentage tax:
1. Cooperatives: and
2. Self-employed individuals and professionals availing of the 8% tax on gross sales and/or
receipts and other non-operating income

Note: *The rate under CREATE Law is 1% from July 1, 2020 to June 30, 2023
BAYANIHAN TO RECOVER AS ONE ACT (R.A. 11494)
1. In case of foreign donation, the importation of personal computers, laptops, tablets, or
similar equipment by the Department of Education (DEPED), or Commission on Higher
Education (CHED), or TESDA, shall be EXEMPT from value added tax (VAT) (Note: Under RR
26-2020, donation period is September 15-December 19, 2020)
2. VAT exemption on importation from June 25, 2020 to December 19, 2020 of personal
protective equipment such as gloves, gowns, masks, goggles, and face shields;-surgical
equipment and supplies; laboratory equipment and its reagents; medical equipment and
devices; support and maintenance for laboratory and medical equipment, surgical
equipment and supplies; medical supplies, tools, and consumables such as alcohol,

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sanitizers, tissue, thermometers, hand soap, detergent, sodium hypochlorite, cleaning

materials, povidone iodine, common medicines e.g., paracetamol tablet and suspension,
mefenamic acid, vitamins tablet and suspension, hyoscine tablet and suspension, oral
rehydration solution, and cetirizine tablet and suspension); testing kits, and such other
supplies or equipment as determined by the Department of Health (DOH) and Department
of Trade and Industry (DTI). However, SALE thereof is subject to 12% VAT.
20% DISCOUNT/VAT EXEMPTION ON SALE TO SENIORS, PWDs and ATHLETES COACHES and TRAINERS
Senior Citizens/Elderly Persons With Disabilities National Athletes and
Coaches
Resident Filipino citizen or Dual Who have long-term physical, Filipino citizens who are
Citizen (with six months residency) mental, intellectual or sensory members of the national
who is sixty (60) years old or above impairments which in interaction training pool or
with various barriers may hinder coach/trainer of national
their full and effective athlete recognized and
participation in society on an accredited by Phil Olympic
equal basis with others. Committee and the Phil
Sports Commission

Athletes with disability are

included.
Prescription or non-prescription Essential drugs/medicines; foods Generic and branded
medicines on all drug stores, for special medical purposes medicines including
hospital pharmacies, medical and (special dietary uses) vaccine, vitamins and
optical clinics (does not include mineral supplements
food and devices)
Sports equipment
purchases.
Professional fees of physicians, Medical, dental, laboratory fees
medical and dental services, and professional fees of
diagnostic and laboratory fees in all attending doctors
private hospitals, medical facilities,
outpatient clinics and home health
care services
Actual fare for land transportation Actual fare for land Domestic air, sea and land
travel, domestic air transport and transportation travel, domestic transportation including
sea shipping vessels air transport and sea shipping baggage allowance
vessels
Hotels and similar lodging Lodging establishments (apartel, Hotels, resorts and other
establishments like hostel, tourist dormitory, motel, pension house, similar lodging
inns, apartels, motorist hotel tourist inn, recreation centers establishments, restaurants
(motel), pension houses, (internet café, video games),
restaurants/eating places and restaurants
recreation centers (including room
accommodation, barbershops, Does not include:
gyms, KTV bars massage parlor, • homestay or
sauna bath, food, drinks, and other • an alternative tourism
services offered) where tourist stays with
the host’s family
• gambling
establishment
Admission fees charged by theaters, Admission fees charged by Admission fees charged by

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cinema houses and concert halls, theaters, cinema houses and theaters, cinema houses
circuses, carnivals and other similar concert halls, circuses, carnivals and concert halls, circuses,
places of culture, leisure and and other similar places of carnivals and other similar
amusement culture and leisure places of culture, leisure
and amusement like theme
parks
Funeral and burial services for Funeral and burial services
death of the senior citizens (present (exclude obituary publication and
death certificate) cost of the memorial lot)
Notes: Notes: Notes:
1. No cap on discount (always 20%) 1. Educational assistance in o20% Discount applies to
2. 20% Discount applies to primary, secondary, tertiary, (generally on personal
(generally on personal or tech-voc in private or public or exclusive
exclusive enjoyment on): with minimum admission enjoyment on):
• Set meals (if shared with requirements • dine-ins or take
non-SC, compute share of 2. Express lanes for PWDs in outs
SC only) commercial and government • Delivery orders
• dine-ins or take outs establishments • Most expensive
• group meals (share of SC 3. No double discounts meal combination
only) 1. Does not apply to:
• most expensive meal • children meals
combination (MEMC) • pre-contracted
• pasalubong (solo meal) party packages
• phone-in orders (SC • bulk orders
share only) 2. Process separately
• cakes/pizza (SC share 3. Separate books
only) required
• delivery fees/charges (SC 4. No double
share only discounts
• alcoholic products
(single serving, yes; if in
bulk or in buckets or in
cases, no)
• taxi, bus, jeeps, UVs
3. Does not apply to:
• bulk orders (include pre-
contracted or pre-
arranged group meals or
packages
• Set orders (happy meal
or kiddie meals)
• Pasalubong not for SC
• Cigars and cigarettes
• Toll fees
• Promotional
discounts/privilege cards
(should be higher than
20% SC discount e.g. 30%
or 50% promo. Notes: (1)
discount to SC must NOT

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be less than 20% ; (2) If

the SC opted promotional
discount, the sale is still
VAT exempt
4. Discount based on social
legislation (entails moral
obligation upon the society
to contribute on the policies
of the State)
5. If seller is NON-VAT, SC is NOT
exempt if percentage tax is
passed on
6. Separate books of accounts on
sale to SCs
7. No double discounts
8. Seller MUST NOT CLAIM OSD

ACCOUNTING ENTRIES
ILLUSTRATION:
ABC Corp. sold items to Nicanor (senior citizen or person with disability) in the amount of Php 1,000.

1. What is the entry in the books of ABC Corp. assuming it is a VAT-registered taxpayer?
2. What is the entry in the books of ABC Corp. assuming it is a Non-VAT-registered taxpayer?

VAT
Transaction Debit Credit
Debit – Cash 800
Debit – SC or PWD Discount Expense 200
Credit - Sales 1,000

Non-VAT
Transaction Debit Credit
Debit – Cash 896
Debit – SC or PWD Discount Expense 224
Credit - Sales 1,120

Transaction Debit Credit

Debit – Percentage Tax Due 26.88
Credit – Tax Payable 26.88
Note: 1% under CREATE Law

REQUIREMENTS FOR AVAILMENT

1. Presentation of Identification Document for availment of discounts
• Senior Citizen – Identification Card issued by Office of Senior Citizen’s Affairs (OSCA) in the city or
municipality where the elderly resides, or Philippine passport or any government issued ID which
reflects on its face the name, picture, date of birth and nationality of the senior citizen
• PWD – Identification Card issued by the Office of Persons with Disability Affairs (PDAO) or the
City/Municipal Social Welfare and Development Office of the place where the PWD resides or
the passport of the PWD concerned with apparent disability or an ID issued by the National
Council on Disability Affairs (NCDA)
• National Athlete and Coach – Philippine National Sports Team Identification Card and Booklet

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(PNSTM ID) issued by the Chairman of the Philippine Sports Commission (PSC)
2. Keeping of separate books of accounts – recording of names and ID no. gross sales/receipts, sales
discount granted, date of transactions and invoice number for every sales transactions. If book has
no record of such, the discounts will be disallowed as an expense
Required Subsidiary books of accounts:
• Senior Citizen’s Book
• Persons With Disability Book
• Record of sales for National Athletes and Coaches
COMPUTATION OF VAT
Output tax xxx
Less: Creditable/Allowable input taxes:
Input tax carried-over from previous period xxx
Input tax deferred from capital goods >1M xxx
Transitional input tax xxx
Presumptive input tax xxx
Add: Input tax from current period:
Purchase of capital goods <P1M xxx
Purchase of capital goods >P1M xxx
Domestic purchases of goods xxx
Domestic purchases of service xxx
Importation xxx xxx
Total available input tax xxx
Less: Deductions from input tax:
Deferred input tax on Cap Goods xxx
Input tax attributable to exempt sale xxx
Input tax on government sale* xxx
Input tax applied for TCC xxx
Input tax refund xxx xxx
Creditable/Allowable input tax xxx
VAT Payable xxx
Less: Input Tax and other tax credit xxx
VAT Still Payable (Overpayment) xxx

Note: *Input tax on gov’t sale was removed due to shift in creditable tax system beginning January 1,
2021.
OUTPUT TAX
Output tax means the 12% value-added tax on sale, transfer, barter exchange or lease of taxable goods
or properties or services by any person registered or required to register.
INPUT TAX
Input tax – is the value- added tax due on or paid by a VAT registered person on importation of goods or
local purchases of goods, properties or services, including lease or use of properties in the course of his
trade or business. Generally, input tax attributable to regular purchases, deemed sale transaction,
transitional and presumptive input taxes is creditable against output tax.

Note: Purchases not qualified for input tax or purchases made from Non-VAT taxpayers are accounted in
the VAT return even if no input tax has been paid.
SUBSTANTIATION OF INPUT TAX CREDITS
Source of input tax Required proof
Importation of goods Import entry or other equivalent
document showing actual payment
of VAT on the imported goods

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Domestic purchase of goods and properties Invoice with complete information

Purchase of real property Deed of Absolute Sale of Deed of
Conditional Sale. Contract to Sell
together with VAT invoice
Purchase of services Official receipt with complete
information
Transitional input tax Inventory list submitted to the BIR
Input tax on “deemed sale”
• Withdrawal for personal use Memorandum entry
• Transfer to shareholders or Invoice
creditors Invoice
• Consignment (over 60 days) Inventory list submitted to the BIR
• Cessation AND Invoice
o If business is to be continued
by new owners – input tax is
creditable
o If business is to be liquidated
Input tax from payments made to non- Monthly Remittance Return of VAT
residents Withheld (Form 1600)
Advance payment of sugar Payment Order showing payment
of the advance VAT
Note: Thermal or tape receipts constitute valid proof of credit only if it shows the
information as required by rules.
VAT PAYABLE (EXCESS OUTPUT) or OVERPAYMENT (EXCESS INPUT)
a. If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid
by the VAT-registered person

Output tax 100

Less: Input tax 60
VAT Payable 40

b. If the input tax exceeds the output tax, there is overpayment.

Output tax 100

Less: Input tax 300
Overpayment (200)

Excess can be:

• Carried over to succeeding quarter/s
• Applied tax credit certificate
• Refunded upon cessation of registration
COMPOSITION OF TOTAL AVAILABLE INPUT TAXES
1. Input tax carried-over from previous period – the excess input tax from previous period (year or
quarter)

2. Transitional input tax – input tax from transition from Non-VAT to VAT. Transitional input tax is 2% of
Beginning Inventory on hand or actual VAT paid on such goods, materials and supplies whichever is
higher

3. Presumptive input tax – is input tax presumed given to specific taxpayers. Presumptive input tax is
4% of gross value in money of their primary agricultural products which are used as inputs to their

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production:

Processing of the following: Manufacturing of the following:

• Sardines • Packed noodle-based instant meals
• Mackerel • Refined sugar
• Milk • Cooking oil

4. Input tax from purchase or importation of capital (depreciable goods) - purchase or importation of
depreciable goods with aggregate acquisition cost (excluding VAT) in a calendar month exceeds Php
1 Million shall be claimed as credit against the output tax in the following manner:
• If the estimated useful life of a capital good is five (5) years or more - The input tax shall be
spread evenly over a period of sixty (60) months and the claim for input tax credit will
commence in the calendar month when the capital good is acquired. The total input taxes on
purchases or importations of this type of capital goods shall be divided by 60 and the
quotient will be the amount to be claimed monthly
• If the estimated useful life of a capital good is less than five (5) years — The input tax shall be
spread evenly on a monthly basis by dividing the input tax by the actual number of months
comprising the estimated useful life of the capital good. The claim for input tax credit shall
commence in the calendar month that the capital goods were acquired
Note: The amortization of the input VAT shall only be allowed until December 31, 2021 after
which taxpayers with unutilized input VAT on capital goods purchased or imported shall be
allowed to apply the same as scheduled until fully utilized.

5. Input tax from domestic purchase of goods and services

6. Input tax from importation

• In general. VAT is imposed on goods brought into the Philippines, whether for use in business or
not. The tax shall be based on the total value used by the BOC in determining tariff and customs
duties, excise tax if any and other charges prior to the release of the goods from customs
custody. In case the valuation used by the BOC in computing customs duties is based on volume
or quantity, the landed cost shall be the basis for computing the VAT. No VAT shall be collected
on imported goods which are expressly exempted.
• The VAT on importation shall be paid by the importer prior to release of such goods from
customs custody.
• Sale, transfer or exchange of imported goods by tax-exempt persons. In case tax exempt persons
imports goods which are exempt and which are subsequently sold, transferred or exchanged to
non-exempt persons, the latter (buyer) shall considered the importers thereof and shall be liable
for VAT due on such importation. The tax due on importation shall constitute a lien on the
goods, superior to all charges/or liens, irrespective of the possessor of said goods.
DEDUCTION FROM INPUT TAX
1. Input tax on purchase of capital goods exceeding Php 1 Million deferred to the succeeding period –
this is deducted from input tax because the input tax is not creditable outright and subject to
amortization
2. Input tax allocable or attributable to VAT exempt sale – this is deducted from input tax because the
input tax is part of cost of goods sold or expense.
Note: In Bayanihan to Heal as One Act and Bayanihan to Recover as One Act, input taxes on exempt
donations are chargeable against output tax
3. Input tax applied refund (attributable to zero-rated sales or due to erroneous payment or closure) –
this is deducted because the herein input tax is claimed for refund hence cannot be used against
output tax
4. Input tax applied for tax credit certificate – this is deducted because the herein input tax is already

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claimed for TCC thus cannot be used against output tax

Note: Input taxes on sale to government closed to expense are no longer considered as a deduction
from input tax due to shift in creditable system beginning January 1, 2021.
APPORTIONMENT OF INPUT TAX ON MIXED TRANSACTIONS
A VAT-registered person who is also engaged in transactions not subject to VAT shall be allowed
to recognize input tax credit on transactions subject to VAT as follows:
1. All the input taxes that can be directly attributed to transactions subject to VAT may
be recognized for input tax credit
2. If any input tax cannot be directly attributed to either a VAT taxable or VAT-exempt
transaction, the input tax shall be pro-rated to the VAT taxable and VAT-exempt
transactions and only the ratable portion pertaining to transactions subject to VAT
may be recognized for input tax credit.

Note: Apportionment of input tax on sale to government applies to regular sales

SPECIAL TREATMENT OF INPUT TAX
1. VAT for Construction in Progress
• Construction in progress (CIP) is the cost of construction work which is not yet completed. CIP
is not depreciated until the asset is placed in service. Normally, upon completion, a CIP item is
reclassified and the reclassified asset is capitalized and depreciated.
• CIP is considered, for purposes of claiming input tax, as a purchase of service, the value of
which shall be determined based on the progress billings. Until such time the construction
has been completed, it will not qualify as capital goods as herein defined, in which case, input
tax credit on such transaction can be recognized in the month the payment was made
provided, that an official receipt of payment has been issued based on the progress billings.
2. VAT for Labor Contractors
• In case of contract for the sale of service where only the labor will be supplied by the
contractor and the materials will be purchased by the contractee from other suppliers, input
tax credit on the labor contracted shall still be recognized on the month the payment was
made based on a progress billings while input tax on the purchase of materials shall be
recognized at the time the materials were purchased.
Once the input tax has already been claimed while the construction is still in progress, no additional
input tax can be claimed upon completion of the asset when it has been reclassified as a depreciable
capital asset and depreciated.
3. VAT ON SALE OF REAL PROPERTY
GROSS SELLING PRICE
In the case of sale, barter or exchange of real property subject to VAT, gross selling price shall mean the
consideration stated in the sales document or the fair market value whichever is higher. If the VAT is not
billed separately in the document of sale, the selling price or the consideration stated therein shall be
deemed to be inclusive of VAT.

The term ‘fair market value’ shall mean whichever is higher of: 1) the fair market value as determined by
the Commissioner /zonal value, or 2) the fair market value as shown in schedule of values of the
Provincial and City Assessors (real property tax declaration).

In the absence of zonal value/fair market value as determined by the Commissioner, gross selling price
refers to the market value shown in the latest real property tax declaration or the consideration,
whichever is higher.

If the gross selling price is based on the zonal value or market value of the property, the zonal or market
value shall be deemed exclusive of VAT. Thus, the zonal value/market value, net of the output VAT,

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should still be higher than the consideration in the document of sale, exclusive of the VAT.

If the sale of real property is on installment plan where the zonal value/fair market value is higher than
the consideration/selling price, exclusive of the VAT, the VAT shall be based on the ratio of actual
collection of the consideration, exclusive of the VAT, against the agreed consideration, exclusive of the
VAT, appearing in the Contract to Sell/Contract of Sale applied to the zonal value/fair market value of
the property at the time of the execution of the Contract to Sell/Contract of Sale at the inception of the
contract. Thus, since the output VAT is based on the market value of the property which is higher than
the consideration/selling price in the sales document, exclusive of the VAT, the input VAT that can be
claimed by the buyer shall be the separately-billed output VAT in the sales document issued by the
seller. Therefore, the output VAT which is based on the market value must be billed separately by the
seller in the sales document with specific mention that the VAT billed separately is based on the market
value of the property

RULES IN DETERMINING WHEN TO PAY VAT

Sale of real properties held primarily for sale to customers or held for lease in the ordinary course of
trade or business of the seller shall be subject to VAT.

• Sale of residential lot - subject to 12% (old ruling: exempt if gross selling price does not exceed
Php 1,500,000.00)
• Sale of residential house and lot or other residential dwellings - with gross selling price exceeding
Php 3,199,200 (old is 2,500,000.00) is subject to 12% output VAT. Hence, VAT-exempt if below
threshold

SALE OF REAL PROPERTY ON INSTALLMENT PLAN (INSTALLMENT BASIS)

Sale of real property on installment plan means sale of real property by a real estate dealer, the initial
payments of which in the year of sale do not exceed twenty-five (25%) of the gross selling price.

In case of installment sale, the seller shall be subject to output VAT on the installment payments
received, including the interests and penalties for late payment, actually and/or constructively received.
Correspondingly, the buyer of the property can claim the input tax in the same period as the seller
recognized the output tax.

Installment payments, including interests and penalties, actually and/or constructively received shall be
subject to twelve percent (12%) output VAT.

Summary:
1. Output tax is based on whichever is higher of GSP or FMV (higher of BIR or Local Assessor
valuation)
2. If total payments do not exceed 25% in the YEAR OF SALE, output tax is based on every
payments/collections including succeeding periods.

CASH OR DEFERRED BASIS

SALE OF REAL PROPERTY BY A REAL ESTATE DEALER ON A DEFERRED PAYMENT BASIS NOT ON THE
INSTALLMENT PLAN means sale of real property, the initial payments of which in the year of sale exceed
twenty-five percent (25%) of the gross selling price.

In the case of sale of real properties on a deferred-payment basis not on the installment plan, the
transaction shall be treated as cash sale which makes the entire selling price taxable in the month of
sale. Output tax shall be recognized by the seller and input tax shall accrue to the buyer at the time of
the execution of the instrument of sale.

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Payments subsequent to “initial payments” shall no longer be subject to output VAT, in the case of sale
on a deferred payment basis.

“Initial payments” means payment or payments which the seller receives before or upon execution of
the instrument of sale and payments which he expects or is scheduled to receive in cash or property
(other than evidence of indebtedness of the purchaser) during the taxable year when the sale or
disposition of the real property was made. It covers any down payment made and includes all payments
actually or constructively received during the year of sale, the aggregate of which determines the limit
set by law.

Initial payments do not include the amount of mortgage on the real property sold except when such
mortgage exceeds the cost or other basis of the property to the seller, in which case the excess shall be
considered part of the initial payments. Also excluded from the initial payments are notes or other
evidence of indebtedness issued by the purchaser to the seller at the time of the sale.

PRE-SELLING
Pre-selling of real estate properties by real estate dealers shall be subject to VAT in accordance with the
rules prescribed above.

Summary:
1. Output tax is based on whichever is higher of GSP or FMV (higher of BIR or Local Assessor
valuation)
2. If total payments exceed 25% in the YEAR OF SALE, output tax is collectible in full

Real estate dealer includes any person engaged in the business of buying, developing, selling,
exchanging real properties as principal and holding himself out as a full or part-time dealer in real
estate. Transmission of property to a trustee shall not be subject to VAT if the property is to be merely
held in trust for the trustor and/or beneficiary. However, if the property transferred is one for sale, lease
or use in the ordinary course of trade or business and the transfer constitutes a completed gift, the
transfer is subject to VAT as a deemed sale transaction. The transfer is a completed gift if the transferor
divests himself absolutely of control over the property, i.e., irrevocable transfer of corpus and/or
irrevocable designation of beneficiary.
CANCELLATION OF VAT REGISTRATION
A VAT-registered taxpayer may cancel his registration for VAT if:
• Gross sales or receipts do not exceed Php 3 Million
• Cessation or termination of business
• Change of ownership, in the case of single proprietorship
• Dissolution of partnership or corporation
• Merger or consolidation with respect to the dissolved corporation/s
• A person who has registered prior to planned business commencement, but failed to actually
start his business
CHANGE OR CESSATION OF STATUS AS VAT-REGISTERED PERSON
a. Subject to output tax
The VAT shall apply to goods or properties originally intended for sale or use in business and
capital goods which are existing as of the occurrence of the following
1. Change of business activity from VAT taxable status to VAT-exempt status
2. Approval of a request for cancellation of registration due to reversion to exempt status
3. Approval of request for cancellation of registration due to a desire to revert to exempt of
status after the lapse of three (3) consecutive years from the time of registration by a
person who voluntarily registered despite being exempt

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4. Approval of a request for cancellation of registration of one who commenced business

with the expectation of gross sales or receipts exceeding Php 3 Million, but who failed to
exceed this amount during the first twelve months of operation.
5. The exchange of goods or properties including the real estate properties used in business
or held for sale or for lease by the transferor, for shares of stocks, whether resulting in
corporate control or not, is subject to VAT.
b. Not subject to output tax
The VAT shall not apply to goods or properties which are originally intended for sale or use in the
course of business existing as of the occurrence of the following:
1. Change of control of a corporation by acquisition of the controlling interest of such
corporation by another stockholder (individual or corporate) or group of stockholders.
2. Change in the trade or corporate name of the business
3. Merger or consolidation of corporations. The unused input tax of the dissolved
corporation, as of the date of merger or consolidation, shall be absorbed by the surviving
new corporation.
TRANSITION FROM VAT TO NON-VAT
Goods or properties originally intended for sale or use in business, including capital goods, disposed of
or existing as of the date of change of status of a taxpayer from VAT to Non-VAT are subject to VAT
imposed under Section 106(A) of the Tax Code of 1991, as amended. Hence, taxpayers are required to
file the quarterly VAT return covering the period when the change of status transpired and pay the
corresponding VAT due thereon.
PRESCRIPTIVE PERIODS ON CLAIMS FOR REFUND
• Period to File Administrative Claim – two (2) years
• Reckoning period of two (2) years:
1. Refund of zero-rated sale – from the close of taxable quarter of zero-rating sale
2. Cancellation or closure or cessation – from the date of issuance of clearance (old rule:
date of stamping of Form 1905 in application for closure)
3. Erroneous payment of taxes – from the date of erroneous or excessive payment
• Time Frame of BIR to process and grant VAT refunds from zero-rated sale – ninety (90) days from
the date of submission of the complete documents
• It is the taxpayer who determines when complete documents have been submitted for the
purpose of commencing and continuing the running of the period
• old rule in processing refunds is 120 days
• Remedies:
1. If denied, taxpayer can appeal to CTA by filing petition for review
2. In case of inaction, appeal to the CTA after the lapse of the 90 (old rule 120) days
VENUE OF FILING OF REFUNDS
Jurisdiction/Venue:
1. Direct exporters – VAT Credit Audit Division (VCAD)
2. Other zero-rating – RDO or Large Taxpayer Service (LTS)
3. Closure or cessation of business – RDO or Large Taxpayer Service (LTS)
VAT REFUND CENTER
The Department of Finance shall establish a VAT refund center in the BIR and BOC that will handle the
processing and granting of cash refunds of creditable input tax.
AUTOMATIC APPROPRIATION
An amount equivalent to five percent (5%) of the total VAT collection of the BIR and the BOC shall be
automatically appropriated annually and shall be treated as a special account in the general fund or as
trust receipts for the purpose of funding claims for VAT refund.
REMEDY IN CASE OF DENIAL
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 the decision denying the claim, appeal the decision with the Court of Tax

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Appeals.
Old Rule: The taxpayer can file an appeal in one of two ways:
1. file the judicial claim within thirty days after the Commissioner denies the claim within the 120-
day period, or
2. file the judicial claim within thirty days from the expiration of the 120-day period if the
Commissioner does not act within the 120-day period.
CONSEQUENCES OF ISSUING ERRONEOUS VAT INVOICE OR VAT OFFICIAL RECEIPT
1. Issuance of a VAT invoice/receipt by a non-VAT person. The non-VAT person shall be liable to:
i. The percentage tax applicable to the transaction
ii. VAT due on the transaction WITHOUT the benefit of input tax
iii. 50% surcharge
Notes:
• The input tax shall be recognized as credit to the purchaser/buyer.
• If 50% surcharge is imposed, there is no compromise penalty.

2. Issuance of a VAT invoice/receipt on an exempt transaction by a VAT-registered person. If there

is failure to display prominently on the invoice or receipt the words “VAT-exempt sale”, the
transaction shall become taxable and the issuer shall be liable thereon.
Note: The input tax shall be recognized as credit to the purchaser/buyer.
SUSPENSION OF BUSINESS OPERATIONS
The Commissioner of Internal Revenue or his duly authorized representative may order suspension or
closure of a business establishment for a period of not less than five (5) days for any of the following
violations:
1. Failure to issue receipts and invoices
2. Failure to file VAT return/s
3. Understatement of taxable sales or receipts by 30% or more of his correct taxable sales/receipts
for the taxable quarter (Note: No provision on expenses if overstated by 30% or more)
4. Failure to register as VAT, if required (see mandatory registration)
Notes:
BIR programs related to VAT (Mission Orders and/or e-Letters of Authority are issued):
1. Oplan Kandado (Closure of Business) thru:
• Stock-Taking
• Surveillance
• Tax Compliance Verification Drive (Tax Mapping Operations)
2. RATE (Run After Tax Evaders)
ACCOUNTING REQUIREMENTS
INVOICING
1. VAT Invoice – for every sale, barter or exchange of goods or properties
2. VAT Official Receipt – for every lease of goods or properties and for every sale, barter or
exchange of services
Note:
Information Contained in VAT invoice or official receipt:
o A statement that seller is VAT-registered followed by TIN
o Total amount with VAT separately indicated
➢ If sale is VAT-exempt – the term “VAT-exempt sale” shall be written or printed
prominently on the invoice or receipt. If not, the transaction is subject to 12% VAT.
➢ If sale is subject to 0-rate – the term “zero-rated sale” shall be written or printed
prominently on the invoice or receipt. If not, the transaction is subject to 12% VAT.
➢ If mixed, breakdown of sales price subject to 12%, 0% or VAT-exempt. Separate
invoice or official receipt is allowed
➢ If sales is Php 1,000 or more, the name, business style, if any, address, and TIN of

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buyer/customer shall be indicated in addition to the information required

o Serial Number and Date
BOOKKEEPING (in addition to regular books of accounts)
1. Subsidiary Sales Journal
2. Subsidiary Purchases Journal
3. Subsidiary record in ledger form for acquisition, purchase of depreciable assets
4. Senior Citizens Book, if applicable
5. Persons With Disability Book, if applicable
VAT RETURNS
Period Form or Return Deadline
Monthly VAT declaration 2550M th
20 day after close of month*
Quarterly VAT return 2550Q 25th day after close of month
Notes:
1. Attachment to the Quarterly VAT returns: on-line submission (e-Submission) of Summary List of
Sales (SLS) and Summary List of Purchases (SLP)
2. Consolidated filing (Head Office and Branches)
3. In cases of error or mistake in filing, remedy is to file an amended return.
4. VAT will become quarterly only beginning January 1, 2023
5. *For eFPS Filers:
• Group A – 25th day following the end of the month
• Group B – 24th day following the end of the month
• Group C – 23rd day following the end of the month
• Group D – 22nd day following the end of the month
• Group E – 21st day following the end of the month
6. If deadline falls on weekends or holidays, the return may be filed the next business/working day.
7. In case of system downtime or unavailability of the system, taxpayer must present written advise
(advisory) by the BIR
8. Due to community extensions, deadlines are extended by the BIR thru an issuance
COVID-19 VACCINATION PROGRAM (R.A. 11525)
Not subject to VAT, Excise tax and Donor’s Tax
1. Procurement
2. Importation
3. Donation
Including the following service providers:
4. Storage
5. Transport
6. Deployment
7. Administration
By the following:
1. National government through the Department of Health and the National Task Force Against
COVID19
2. Any of the political subdivisions of the State
3. Private entities and international humanitarian organizations such as the Philippine Red Cross
Note: Subject to VAT and donor’s tax if the vaccines are for resale or other commercial use
END

References:
1. National Internal Revenue Code of 1997, as amended
2. R.A. 9337
3. R.A. 10963 or the Tax Reform for Acceleration and Inclusion Act
4. R.A. 11534 or the CREATE Law

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