BUSTAX

CH1 Discussion Questions

1. What is consumption?
Consumption occurs when one acquires good or services by purchase, exchange, or other means

2. Compare consumption tax to income tax

Income tax is consistent with the ability to pay theory because it taxes those who are capable to pay
while consumption tax effectively taxes everyone. Income tax also applies when you earn money such
as wages, interest, and dividends. Consumption taxes apply at the time goods and services are
purchased and sold.

3. What are the types of consumption? Which type pays tax?

The types of consumption are domestic consumption and foreign consumption. Domestic consumption
is the type that pays tax and is subjected to Philippine taxation

4. Discuss the nature of business tax

Business tax is a tax imposed upon the sales of goods or receipts from rendering the services of the
seller, but the tax burden is shifted to the buyer which applies the principle of administrative feasibility. It
is only imposed if the seller is regularly engaged in business

5. Enumerate and describe the nature of each type of business tax

a. Value added tax – tax imposed and collected from the seller upon the sale of goods, properties or
services, or lease of properties; it is an indirect tax which could be passed on to the buyer
b. Percentage tax – tax imposed upon the gross sales or gross receipts of non-VAT taxpayers
c. Excise tax – tax imposed, in addition to VAT or percentage tax, on certain commodities produced or
imported in the Philippines for domestic sale or consumption

6. Compare the VAT on importation to the business tax

VAT on importation is imposed on the total purchase cost regardless of whether the seller is a business
or not while business tax is only imposed upon the sales or receipts if the seller is a business. Tax
burden with regards to business tax is also shifted by the business to the buyer which makes it an
indirect tax wherein VAT on importation is a direct tax.

7. Discuss the characteristics of the VAT on sales

VAT is an indirect tax that is imposed on sales or receipt in business based on value-added amount in
different stages of production and distribution. It follows a tax credit method wherein a VAT of 12% is
imposed on sales and reduced by VAT paid by the business on its purchases. The VAT on sales is
required by law to be included in the price of the goods as a top-up which will be billed to the
customers. The amount billed will include both the selling price and the VAT and is explicitly disclosed
in the invoice or official receipt of the seller. The VAT return is filed quarterly but is paid on a monthly
basis.

8. Compare the direct method to the tax credit method in VAT computation
The direct method is computed by applying the VAT rate to the difference of the selling price and
purchase while the tax credit method is imposed upon the sales or receipts (output) of the business.
The output VAT is then reduced by the VAT paid by the business on its purchases (input). The excess
of the Output VAT over the Input VAT is the VAT due or payable.

9. Discuss the characteristics of the percentage tax

The total amount due from the buyer is considered sales or gross receipts and percentage tax is
computed from this amount. It is presented as an expense deductible against sales or gross receipt
which gives the impression of being a direct tax of the seller. Percentage tax passes to the buyer by
inclusion to the selling price but the same is not separately presented in the invoice hence, not
 disclosed to the buyer. The percentage tax is payable monthly for most percentage taxpayers and
quarterly for certain taxpayers

10. Discuss the nature of excise tax

Excise tax is imposed on specific goods manufactured or imported in the Philippines for domestic sale
or consumption. These include as alcohol, tobacco, petroleum, non-essential goods, and services, etc.
It is levied at the point of production or importation

11. Compare VAT on sales, percentage tax, and excise tax

VAT on sales is based on value-added while percentage tax is based on sales or receipts and excise
tax is based on the sales value of excisable goods. Both VAT on sales and percentage tax are levied
upon sales or collection while excise tax is levied upon production or importation. The tax rate for VAT
is 12% and is generally paid by bigger businesses while percentage tax is generally 3% and is paid by
smaller business. Excise tax has various ad valorem tax rates and specific taxes and is generally paid
by both big or small businesses.

CH2 Discussion Questions

1. What is importation?
Importation is the purchase of goods or services by Philippine residents from non-resident sellers

2. Is VAT on importation a business tax? Explain

VAT on importation is not a business tax because business taxation refers to the taxes that businesses
must pay as a normal part of business operations. In the case of VAT on importation, its nature is a
direct consumption tax meaning that consumption tax is levied without regard to the purpose of the
importation whether it is for business, personal or charity use.

3. What is the nature and scope of the VAT on importation

VAT on importation is a direct consumption tax wherein consumption tax is imposed upon the total cost
of importation regardless of whether the purpose of the importation is for business or personal use.

4. Enumerate the list of exempt importations

a. Importation of exempt goods
b. Importation by VAT-exempt persons
c. Quasi-importation
d. Importation which are exempt under special laws and international agreement

5. What is meant by the phrase “in original state”?

It means that goods must be in their raw form or goods that underwent simple processing such as acts
of preparation for the market, acts of preservation, and acts of packaging. Goods are considered “in
original state” if it does not alter the nature of the products

6. What is landed cost?

Landed cost consists of all costs of importation (dutiable value, invoice amount, customs duties, freight,
insurance, and other charges) prior to the withdrawal of the goods from the warehouse of the BOC

7. Distinguish dutiable value from landed cost

Dutiable value is the total value used by the BOC in determining customs duties. Dutiable value is the
price you paid for the goods and the costs incurred in bringing the goods up to the Philippine port and
prior to any in-land costs of import. On the other hand, landed cost includes dutiable value
Dutiable value is included in landed cost and consists of all costs of importation prior to the withdrawal
of the goods from the warehouse of the BOC

8. Discuss technical importation

 Technical importation is when there is sale of goods by a PEZA-registered enterprise to a buyer in the
Philippines (i.e., domestic sales). It refers to the purchase of non-Ecozone Philippine residents from
Philippine Ecozone-registered enterprises which is subject to VAT on importation.

9. Enumerate the current and existing ecozones in the Philippines

Agrotex Gensan Economic Zone SRC Calumpang Economic Development Zone

AJMR Agro-Industrial Economic Zone Valencia Special Economic Zone

Balo-i Agro-Industrial Economic Zone

Aurora Pacific Economic Zone and Freeport

Carmen Cebu Gum Industrial Zone

Alviera Industrial Park

CIIF Agro-Industrial Park - Davao

Cagayan Special Economic Zone[3]

DADC Economic Zone

Freeport Area of Bataan

Ecofuel Agro-Industrial Ecozone

Cavite Economic Zone

Kamanga Agro-Industrial Economic Zone

Clark Freeport Zone

New Jubilee Agro-Industrial Economic Zone

Subic Bay Freeport Zone

Philippine Packing Agricultural Export Processing

Zone Poro Point Freeport Zone[4]

Samar Agro-Industrial Economic Zone Baguio City Economic Zone

San Carlos Ecozone Mactan Export Processing Zone

Sarangani Agro-Industrial Eco Zone Zamboanga City Special Economic Zone

Authority[5]

Sarangani Economic Development Zone

Polloc Free Port and Economic Zone

SRC Allah Valley Economic Development Zone

https://en.wikipedia.org/wiki/List_of_special_economic_zones_in_the_Philippines#Agro-
industrial_economic_zones
 10. Discuss the final withholding VAT, its scope and nature
Final withholding VAT is when the resident buyer is obligated to “withhold” the VAT and to remit the
same to the government. It views this as a. business tax and presumes that non-resident sellers are
engaged in business even if their sales transaction are merely casual.

11. Discuss the treatment of the VAT on importation and the final withholding VAT
- If the resident purchaser is a VAT-registered business, it can claim VAT on importation or
withholding VAT as input VAT creditable against output VAT
- If the resident purchaser is a non-VAT business, the VAT on importation or final withholding VAT is
part of the cost of purchase of goods or services and shall be treated as asset or expense
- If the purchaser is not engaged in business, the VAT on importation is added to the costs of the
goods imported

CH3 Discussion Questions

1. What is a business?
Business refers to a habitual engagement in a commercial activity involving the sale of goods or
services for a profit

2. What are the 2 essential requisites of a business?

a. Habitual engagement – there should be regularity in transactions and should be manifested by
registration with the appropriate government agencies as a dealer of as a service provider
b. Commercial activity – engagement in the sales of goods or services for a profit

3. Discuss the exceptions to the Regularity rule

a. Sales of services of non-resident persons are presumed made in the course of business without
regard if the sale is regular or isolated; subjected to final withholding tax
b. Business principally for subsistence or livelihood – gross sales/ receipts not exceeding P100k
(marginal income earners)

4. What is a taxable person in business taxation?

- A taxable person is any person who independently carries out an economic activity, irrespective of
the purpose or results of that activity. This definition relates to a business, or economic activity,
rather than registration for VAT.
- includes any individual, trust, estate, partnership, corporation, joint venture, cooperative or
association

5. Discuss the registration requirements for businesses

VAT-registered business
- If gross sales or receipts for the past 12 months exceeded P3M
- There are reasonable grounds to believe that gross sales or receipts for the next 12 months will
exceed P3M
- 12% VAT
Non-VAT business
- Did not exceed VAT threshold
- 3% percentage tax

General threshold: P3,000,000

- Applicable to all other taxpayers except franchise grantees of radio or TV

Special threshold: P10,000,000

- Franchise grantees are mandatorily required to register to the VAT system when their annual
receipts exceed P10M
 6. What are the 2 business classifications as to activities? What is the tax base on each type of business
classification?
a. Sale or exchange of goods or properties
- All tangible and intangible objects which are capable or pecuniary estimation
Includes:
- Real properties held for sale/lease or used in the ordinary course of business
- Patent, copyright, design or model, plan, trademark, etc.
- Any industrial, commercial, or scientific equipment
- Motion picture films, films, tapes, and discs
- Radio, TV, satellite transmission and cable TV time
b. Sale or exchange of services or lease of properties
- Performance of all kin of services in the PH for others for a fee whether in kind od in cash

7. Explain the concept of “gross selling price” and the concept of “gross receipts”
a. Gross selling price
- total amount of money or its equivalent which is the purchaser pays or is obligated to pay to the
seller in consideration of the sale

b. Gross receipts
- Total amount of money representing the contract price including the amount charged for
materials supplied with the services and deposits applied as payments for services, rendered
and advanced payments excluding VAT

8. Discuss the VAT threshold

General threshold: P3,000,000
- Applicable to all other taxpayers except franchise grantees of radio or TV

Special threshold: P10,000,000

- Franchise grantees are mandatorily required to register to the VAT system when their annual
receipts exceed P10M

9. What is the accounting period for businesses? Discuss the rules on the business accounting period
Length of accounting period for business taxes is one quarter (taxable quarter) wherein it is composed
of 3 months which is synchronized with the taxable year (calendar or fiscal) of the taxpayer for the
purposes of income tax
Rules:
- Individuals are limited to use only the calendar accounting period
- Corporate taxpayers may opt for either calendar year or fiscal year accounting period

10. Describe the scope of the VAT and the Percentage Tax

- The VAT applies, in general, to all persons who sell, barter, exchange or lease goods or properties,
or render services in the course of trade or business whose annual gross sales or receipts exceed
the VAT threshold and those who import goods, whether for business or otherwise.

- Percentage tax is based on gross sales, receipts, or earnings within the Philippines.
- Certain businesses in the Philippines that sell, or lease goods, properties or services can be treated
under the Percentage Tax system. This may depend, for example, on the value of sales generated
in a year (VAT threshold) or the business model and industry.
- Business (non-VAT) that does not exceed the VAT threshold is subject to 3% percentage tax

11. What is meant by the term “vatable”?

Sale is subject to VAT if the taxpayer is VAT-registered or a VAT registrable person but to a 3%
percentage tax if the taxpayer is non-VAT taxpayer

CH4 Discussion Questions

1. What is a VAT-exempt sale?
Exempt consumption of goods or services from domestic sellers that is not subject to VAT and % tax

2. Enumerate the list of VAT-exempt sales

Exempt Sales of Goods or Properties
a. Sale of goods to senior citizens and PWDs
b. Sales of exempt goods
c. Sales of goods by cooperatives
d. Sales of residential properties
e. Export sales by non-VAT persons
f. Treaty-exempt sales of goods
g. Tax-free exchange of property
h. Sale of gold to the Bangko Sentral ng Pilipinas (BSP)

Exempt Sales of Services

a. Schools
b. Employees
c. Agricultural contract growers and millers
d. Residential leasing
e. Cooperative services
f. Hospitals
g. Homeowner’s association or condominium corporations
h. Lease passenger or Cargo vessels and aircrafts, including engine, equipment and spare parts for
domestic or international transport operations
i. Treaty-exempt services
j. Regional area headquarters
k. International carriers
l. Printers or publishers
m. Senior citizens and PWDs

Other exempt sales of goods or services

a. Sales of goods or services taxed by special laws
b. Sales by persons not engaged in businesses
c. Sale of assets held for use

3. Discuss the exemption criteria for the ff:

a. Agricultural or marine products
- Should be in their original state including those that have undergone the simple process or
preparation or preservation for the market including advanced technological means of packaging
is exempt

b. Health services
- Medical, dental, hospital, and veterinary services except those rendered by professionals and
sales of drugs by hospital drugstores
- Applies to all health services whether rendered by a private, non-profit or government hospital
- health services rendered by professionals and the sale of drugs are vatable

c. Schools
- Education is a necessity = law exempts school fees from business taxes
- Covers government and private schools, proprietary or non-profit, as long as they have
accreditation
The exemption does not cover services rendered by educational institutions that are not accredited
such as:
 Seminars
 In-service trainings
  Review classes
 Other similar services

d. Real properties
By non-dealer
- Sale of real properties not primarily held for sale to customers or held for lease in the ordinary
cause of business is exempt from business tax
- Real property classified as capital assets of VAT taxpayers
- Any real properties of non-VAT taxpayers
- Any real properties of persons not engaged in business

By dealer
- Sales of residential properties within the price ceilings are considered reasonable human
necessity and hence exempt
- Exempt if they comply with the statutory or regulatory price ceilings:
Sale of real properties utilized for socialized housing units:
- House and lot package – P450K
- Residential lots only – P180K
Sale of real properties utilized for low-cost housing wherein the price ceiling per unit is P750K
Sale of residential lot valued at P1,919,500/unit and below
Sale of residential dwelling value at P3,199,200/unit and below

e. Transport services of international carriers

- Receipts from the transport of passengers by international carriers originating from the PH going
abroad is exempt from business tax
- International carriers: air carriers or shipping carriers owned by resident foreign corporations
doing business in the PH
- Airliners and shipping carriers are subject to VAT because their receipts are normally above the
VAT threshold
The ff summarizes the business tax treatment:
a. Receipts from outgoing flights (foreign consumption, service rendered within) – 0% VAT
b. Receipts from incoming flights (foreign consumption, service rendered abroad) - exempt
c. Receipts from domestic flights (domestic consumption) – 12% VAT

4. Discuss the concept of “in original state”

It means that goods must be in their raw form or goods that underwent simple processing such as acts
of preparation for the market, acts of preservation, and acts of packaging. Goods are considered “in
original state” if it does not alter the nature of the products
- Unprocessed
- Undergone simple processing if the state is not altered

5. Who is an agricultural contract grower?

Persons producing for others, poultry, livestock, or other agricultural and marine food products in their
original state

6. Enumerate those entities with indirect tax exemption

- PEZA registered enterprises ?
- Asian Development Bank (ADB)
- International Rice Research Institute (IRRI)
- PH National Red Cross
- Embassies of foreign governments
- The PH Amusement and Gaming Corporation
- United States Agency for International Development (USAID)
- United Nation (UN) and its various organizations
a. World Health Org
b. UNICEF
 7. What is the tax treatment of sales to entities with indirect tax exemptions?
- Sales to exempt entities are exempt from VAT and exempt from the scope of the 3% percentage
tax
- For VAT taxpayers, this VAT exemption is effected by means of a 0-rating treatment

8. What is the invoicing requirement on exempt sales?

For VAT taxpayers, exempt sales of goods or services must be specifically designated as such by
indicating or pre-printing the caption “EXEMPT” on the invoice or receipt
- Failure to comply with this requirement shall make the sale vatable
 subject to VAT = VAT-registered taxpayer
 subject to 3% percentage tax = non-VAT registered taxpayer

CH6 Discussion Questions

1. Describe the scope of vatable sales
Sales of goods, properties, services, or lease of properties, other than those exempt and specifically
subject to % tax is vatable (VAT or % tax)

2. Enumerate those VAT-exempt transactions under the NIRC

a. Sale of goods to senior citizens and PWDs
b. Sales of exempt goods
 Agricultural and marine food products in their original state
 Fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry feeds, including
ingredients used in the manufacture of finished feeds
 Books, newspapers, or magazines
 Medicines prescribed for diabetes and hypertension
 Passenger or cargo vessels and aircrafts
c. Sales of goods by cooperatives
 Sales by agricultural cooperatives duly registered in good standing with Cooperative
Development Authority (CDA) to their members, as well as sales of their produce, whether in
its original state or processed form, to non-members
 Importation of direct farm inputs, machineries and equipment, including spare parts, to be used
directly and exclusively in the production and/or processing of their produce
d. Sales of residential properties
 Sale of real properties utilized for low-cost housing
 Sale of real properties utilized for socialized housing
 Sale of residential lot valued at P1,919,500 and below and other residential dwelling valued at
P3,199,200 and below
e. Export sales by non-VAT persons
f. Treaty-exempt sales of goods
 Sales of goods exempt under internation agreement to which the PH is a signatory or under
special laws
g. Tax-free exchange of property
 Exchange of properties in pursuant to a plan of merger or consolidation or the transfer of
property that resulted in the initial acquisition of corporate control
h. Sale of gold to the Bangko Sentral ng Pilipinas (BSP)

Exempt Sales of Services (SEARCH2 VA TRIPS)

a. Schools
b. Employees
- Services performed by individuals in pursuant to an employer and employee relationship
c. Agricultural contract growers and millers
- Services by agricultural contract growers and milling for others of palay into rice, corn into corn
grits, and sugar cane into raw sugar
d. Residential leasing
 - Lease of residential unit with monthly rental not exceeding P15,000
e. Cooperative services
- Gross receipts from lending activities by credit pr multi-purpose cooperatives duly registered and in
good standing with CDA
f. Hospitals
- Medical, dental, hospitals, and veterinary services except those rendered by professionals and
sales of drugs by a hospital drug store
g. Homeowner’s association or condominium corporations
- Association dues, membership fees, and other assessments and charges collected by
homeowner’s associations and condominium corporations
h. Lease passenger or Cargo vessels and aircrafts, including engine, equipment and spare parts for
domestic or international transport operations
i. Treaty-exempt services
- Transactions which are exempt under international agreement to which the PH is a signatory or
under special laws
j. Regional area headquarters
- Services rendered by regional, or area headquarters established in the PH by multinational
corporations which acts as supervisory, communications, and coordinating centers for their
affiliates, subsidiaries or branches in the Asia Pacific region and do not or derive income from the
PH
k. International carriers
- Transport of passengers by international carriers
l. Printers or publishers
- Sale, printing or publication of books and any newspaper, magazine, review, or bulletin which
appears at regular intervals with fixed prices for subscription and sale and which is not devoted
principally to the publication of paid advertisements
m. Senior citizens and PWDs
- Sales of basic essential services to senior citizens and persons with disability by service
establishments such as:
 Restaurants
 Hotels and lodging establishments
 Recreation centers, such as theater, cinema houses, concert halls, carnivals and such other
places of leisure or amusement

Other exempt sales of goods or services

a. Sales of goods or services taxed by special laws
 Subject to tax by special laws and are not subject to national business taxes such as VAT or % tax
- Sales of goods or services by Ecozone locators
- Sale of amusement service by theaters and cinemas
b. Sales by persons not engaged in businesses
 Sale goods, real properties, or services by persons not engaged in business
c. Sale of assets held for use

3. Discuss the applicability of the VAT on sales

VAT applies to practically all sales of services and imports, as well as to the sale, barter, exchange, or
lease of goods or properties (tangible or intangible). The tax is equivalent to a uniform rate of 12%,
based on the gross selling price of goods or properties sold, or gross receipts from the sale of services.

4. What are the two VAT threshold? Discuss the rule on registration for each threshold
VAT Threshold Amount Covered taxpayers
General Applicable to all taxpayers other
Threshold P3,000,000 than franchise grantees of
radio/TV
Special Applicable to only franchise
P10,000,000
Threshold grantees of radio/TV
Any person who, in the course of trade or business or engages in the sale or exchange of services shall be
liable to register to VAT if:
1. His gross sales or receipts for the past 12 months exceeded P3M
2. There are reasonable grounds to believe that his gross sales or receipts for the next 12 months will
exceed P3M

Optional VAT Registration

- Below the VAT threshold: option to register as VAT taxpayer – irrevocable for 3 years
- For TV or radio franchise grantees, option is perpetually irrevocable

5. Illustrate the application of the VAT threshold to persons who exceed the VAT threshold during the year
- 12-month totals of monthly receipt from the current month until 12 months back shall be monitored if
it exceeds the P3M VAT threshold
- If exceeded, required to update his registration from non-VAT to VAT taxpayer on or before the end
of the succeeding month when the business exceeded VAT threshold

6. Enumerate other instances of vatable sales

Other exempt sales of goods or services
a. Sales of goods or services taxed by special laws
 Subject to tax by special laws and are not subject to national business taxes such as VAT or %
tax
- Sales of goods or services by Ecozone locators
- Sale of amusement service by theaters and cinemas
b. Sales by persons not engaged in businesses
 Sale goods, real properties, or services by persons not engaged in business
c. Sale of assets held for use

7. What are the classifications of vatable sales? How do they compare in terms of treatment of output VAT
and input VAT?
Types of sales Output VAT Input VAT VAT due
Exempt sales None None None
Zero-rated sales Actual if not claimed as credit or
Zero Negative
refund
Sales to 12% of sales/
7% of sales/receipts None
government receipts
Regular sales 12% of sales/
Actual input VAT paid Positive or negative
receipts

a. Sale of goods destined to a non-resident buyer abroad is a zero-rated sale even if it involves exempt
goods
b. Sale of vatable goods or services in the PH is normally a regular vatable sale, except when the sale
is:
 Made to the government or GOCC – subject to final withholding VAT
 Considered an export pr effectively zero-rated such as sales to VAT-exempt persons - subject to
0% VAT
c. Sale of exempt goods and services to the government or GOCC is still exempt sales

8. Illustrate the reporting of the value added tax in each taxable quarter
Period Covered BIR Form Deadline
1st month of the quarter 2550M 20 days from end of month
2nd month of the quarter 2550M 20 days from end of month
For the quarter 2550Q 20 days from end of quarter
- VAT is paid quarterly but is paid monthly as follows
- If Input VAT > Output VAT = input VAT carry-over
- Negative VAT payable: no VAT is to be paid
 9. Discuss the invoicing requirement of VAT-registered taxpayers
- For VAT taxpayers, exempt sales of goods or services must be specifically designated as such by
indicating or pre-printing the caption “EXEMPT” on the invoice or receipt
- Failure to comply with this requirement shall make the sale vatable
 subject to VAT = VAT-registered taxpayer

CH7 Discussion Questions

1. Briefly discuss the tax base of the output VAT on the sales of goods
- subject to 12% VAT based on gross selling price, unless unreasonably lower wherein gross selling
price is lower by more than 30% of the actual market value of the goods sold
- if government is involved, output VAT will be based on actual selling price

2. Briefly discuss the tax base of the output VAT on the sales of services
- Subject to 12% VAT based on the gross receipts

3. Discuss the tax base of the output VAT on the sales of properties
- Subject to VAT on the gross selling price
Under the regulations, gross selling price means the higher of the:
a. Consideration or selling price
b. Fair value of the property
Under the NIRC, the fair value of real property is the higher between the:
a. Zonal value; and
b. Fair value per assessor’s office

4. Enumerate the transactions deemed sales

a. Transfer, use, or consumption not in the course of business of goods or properties originally
intended for sale or for use in the course of business
b. Distribution or transfer to:
- Shareholders or investors share in the profits of VAT-registered persons
- Creditors in payment of debt or obligation
c. Consignment of goods if actual sale is not made within 60 days following the date such goods were
consigned
d. 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 cessation, whether or not the business is
continued by the new owner or successor
e. Cessation of status as a VAT-registered person

5. Illustrate the computation of VAT if the price is agreed upon as exclusive or inclusive of VAT
- Inclusive
Sales (Pxxx / 1.12)
Plus: Output VAT (Pxxx x 12/112)
Invoice Price
- Exclusive
Sales (exclusive of VAT)
Plus: Output VAT (Pxxx x 12%)
Invoice Price

CH8 Discussion Questions

1. Discuss the difference between VAT exemption and zero-rating
VAT-exempt sales Zero-rated sales
Output VAT No output VAT No output VAT
Input VAT treatment Deductible against gross income Creditable or refundable
Extent of tax relief Partial relief Total relief
 - Input VAT in the case of exempt sales is non-creditable and nonrefundable; can only be claimed as
deductions in the income tax return
2. Enumerate the sales of goods or properties subject to zero-rated VAT
Types of zero-rated sales of goods:
a. Export sales
- Direct export
- Sale to economic zones and tourism enterprise zones
- Sale of goods or properties, supplies, equipment, and fuel to persons engaged in international
shipping or international air transport operations
b. Effectively zero-rate sales

3. Enumerate the sales of goods considered export

- Direct export
- Sale to economic zones and tourism enterprise zones
- Sale of goods or properties, supplies, equipment, and fuel to persons engaged in international
shipping or international air transport operations

Sales under the Internal Export Program of the Government

- Sales of locally manufactured goods for household and personal use of Filipinos abroad and other
non-residents of the PH as well as returning overseas Filipinos under the Internal Export Program
of the government
- Paid for in convertible foreign currencies
- Accounted in BSP
- Considered export sales

EO 226
a. Philippine FOB value of export products exported directly by an export producer
b. Net selling price of export products sold by a registered export producer to another export producer
c. Net selling price of export products sold by a registered export producer to an export trader that
subsequently exports the same
d. Even without actual exportation, the following shall be considered constructively exported:
- Sales to bonded manufacturing warehouses of export-oriented enterprises
- Sales to export processing zones in pursuant to RA 7916, 7903, 7922 and other similar export
processing zones
- Sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority
- Sales to registered export traders operating bonded manufacturing warehouses supplying raw
materials in the manufacture of export products
- Sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of
locally manufactured, assembled, or repacked products whether or not paid for in foreign currencies
- Sale of goods, properties or services to a BOI-registered manufacturer or producer

4. Enumerate the services subject to zero-rated VAT

a. Sale of services to non-residents
b. Effectively zero-rated sales of services
c. Services rendered to persons engaged in international shipping or international air transport
operations including leases of properties thereof
d. Transport of passengers and cargoes by domestic air or sea carriers from the PH to a foreign
country
e. Sale of power or fuel generated from renewable sources of energy
f. Services rendered to ecozones or tourism enterprise zones

5. Enumerate the sales of goods and sales of services which are effectively zero-rated
Sales of service
a. Sale of services to non-residents
b. Effectively zero-rated sales of services
 c. Services rendered to persons engaged in international shipping or international air transport
operations including leases of properties thereof
d. Transport of passengers and cargoes by domestic air or sea carriers from the PH to a foreign
country
e. Sale of power or fuel generated from renewable sources of energy
f. Services rendered to ecozones or tourism enterprise zones

Sales of goods
a. Export sales
b. Effectively zero-rate sales

6. Discuss the requirements for foreign currency denominated sales and effectively zero-rated sales

Foreign Currency Denominated Sale

- Sale to non-residents of goods except export of automobiles and non-essential commodities
- Manufactured in the PH for delivery to a resident in the PH
- Paid for in acceptable foreign currency
- In accordance with BSP

Effectively Zero-Rated Sales

- Exemption is under special laws or international agreements
- Subjects such sales to zero rate