Tax 302 – Business and Transfer Tax

Prepared by: Mark Paul I. Ramos

MODULE 3
Classification of VAT Transactions
VAT on Sale of Services and Use or Lease of Properties
VAT on Importation of Goods

INTRODUCTION
This module tackles the application of Value-Added Taxes on certain transactions, in
particular VAT on sale of services and use or lease of properties. This will define services that
are subject or exempted from VAT, kinds of VAT treatments applicable, its output taxes on the
side of the seller and its input taxes on the side of the buyer. It shall also define the rules to
apply in the case of use or lease of properties.

INTENDED LEARNING OUTCOMES

ILO 1 – Be knowledgeable on the VAT on sale of services and use or lease of properties and
on importation of goods
ILO 2 – Understanding of VAT principles on certain transactions, and rules on output tax, input
tax and VAT payable
ILO 3 – Application of those VAT principles in computing and problem solving

Requirements of taxability of services

To be subject to VAT, the following requirements must be satisfied:

1. The service must be performed in the course of trade or business.

The phrase “in the course of trade or business” 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 is
a nonstock nonprofit 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 (Sec 105, NIRC).

Thus, a transaction shall be considered as in the course of trade or business if it is

regularly conducted (including transactions incidental thereto) and undertaken in
pursuit of a commercial or economic activity.

“Course of business “or “doing business” connotes regularity of activity.

2. It must be performed in the Philippines.

To be subject to VAT, the service must be rendered in the Philippines. Those
rendered abroad are not taxable because the place where the service is performed
determines the jurisdiction to impose the VAT. Thus, the place of payment is
immaterial.

3. Consideration must be received actually or constructively.

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The VAT accrues upon actual or constructive receipt of the consideration. Thus,
whether the receipt consists of delayed payments or even deposit or advance
payments, the same constitutes gross receipts subject to VAT.

4. The transaction is not exempt under the Code, special laws or international
agreements.
No matter how regular is the occurrence of the transaction, if it is exempt under the
Code or in other special laws, such transaction shall be exempt from VAT.

Meaning of “sale or exchange of services”

Prior to the effectivity of RA 11976 or the EOPTA, vat on sale of service is a tax on
payments for services rendered in the exercise of profession or calling. However, as
discussed, RA 11976 or the EOPTA already amended the basis of vat on sale of services.
The "sale or exchange of services is subject to 12% vat based on "gross sales" under the
EOPTA, derived by any person engaged in the sale of such services or lease of properties.

Section 108(A) of the Tax Code as amended by 10963 (TRAIN Law), the term "sale or
exchange of services" means performance of all kind of services in the Philippines for others
for a fee, remuneration or consideration, including those performed by:
1. Construction and service contractors,
2. Stock, real estate, commercial and immigration brokers,
3. Lessors of property, whether real or personal,
4. Persons engaged in warehousing services
5. Lessors or distributors of cinematographic films
6. Persons engaged in milling, processing, manufacturing or repacking goods for
others,
7. Proprietors, operators, or keepers of hotels, motels, rest houses, pension houses,
inns, resorts, theatres, and movie houses,
8. Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating
places, including clubs and caterers,
9. Dealers in securities,
10. Lending investors,
11. Transportation contractors on their transport of goods or cargoes, including persons
who transport goods or cargoes for hire, and other domestic carriers by land to their
transport of goods or cargoes
12. Common carriers by air or sea relative to their transport of passengers, goods or
cargoes from one place in the Philippines to another place in the Philippines,
13. Sales of electricity by generation, transmission, and/or distribution companies,
including electric cooperatives
14. 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 companies whose annual gross receipts of
the preceding year do not exceed P10,000,000 and franchise grantees of gas and
water utilities
15. Non-life insurance companies (except crop insurance), including surety, fidelity,
indemnity, and bonding companies.
16. Similar services regardless of whether or not performance thereof calls for the
exercise or use of the physical or mental faculties (Rev Reg 16-2005).

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The term "sale or exchange of service" shall likewise include:

1. The lease or use of or the right or privilege to use any copyright, patent, design
or model, plan, secret formula or process, goodwill, trademark, trade brand or
other like property or right.
2. The lease of or the use of, or the right to use of any industrial, commercial or
scientific equipment.
3. The supply of scientific, technical, industrial or commercial knowledge or
information.
4. The supply of any assistance that is ancillary and subsidiary to and is furnished
as a means of enabling the application or enjoyment of any such property or
right as is mentioned subparagraph (2) or any such knowledge or information
as is mentioned subparagraph (3).
5. The supply of services by a non-resident person or his employee in connection
with the use of property or rights belonging to, or the installation or operation of
any brand, machinery, or other apparatus purchased from such non-resident
person.
6. The supply of technical advice, assistance or services rendered in connection
with technical management or administration of any scientific, industrial or
commercial undertaking, venture, project or scheme.
7. The lease of motion picture films, tapes and discs; and
8. The lease of or use of, or the right to use radio, television, satellite transmission
and cable television time.

"Lease of properties" shall be subject to vat irrespective of the place where the contract
of lease or licensing agreement was executed if the property is leased or used in the
Philippines.

Broker
A broker is one whose occupation is to bring parties together or to bargain for them in
matters of trade, commerce or navigation for a fixed or regular compensation.

A customs broker is one who is engaged in transporting with hired trucks for delivery
of goods of customers from the customs premises to their place of establishment for a fee
(BIR Ruling 299-92).

A real estate broker is one who engaged in selling, leasing, mortgaging, etc. of real
property of others for a fee.

Examples of commercial brokers are the following:

a. Fish brokers who sell fish and other marine fresh water products brought or shipped
by traders, producers, shippers from different provinces to public markets in
Divisoria, Malabon, Navotas Fish Port Complex on whose basis to the amount of
sales of the first and other products sold which are basically owned or produced by
the traders, producers, or shippers
b. A person who acts as a sales agent of publishing companies for a commission, but
if he purchases outright the publication he sells, he is considered a merchant or an
ordinary book dealer and not a commercial dealer

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c. Agents and/or salesman acting for a domestic company in the buying and selling
of securities paid solely on commission basis.

Warehousing services
Warehousing service means rendering personal services by a warehouseman, such
as:
a. Engaging in the business of receiving and storing goods for others for
compensation or profit
b. Receiving goods and merchandise to be stored in his warehouse for hire
c. Keeping and storing goods for others, as a business and for use

Millers
The millers subject to VAT are those engaged in milling for others except millers of
palay into rice, corn into corn grits, and sugarcane into raw cane sugar.

If the miller is paid in cash for his services, VAT shall be based on his gross sales for
services during the month or quarter.

If he receives a share of milled products instead of cash, the VAT shall be based on
the actual market value of his share in the milled product (except rice, corn grits and raw cane
sugar).

Operators of hotels and restaurants

The following persons or entities engaged in hotel and restaurant business are subject
of VAT:
1. Proprietors, operators or keepers of hotels, motels, resthouses, pension houses,
inns, apartelles, and resorts,
2. Proprietors or operators of restaurants, refreshment parlors, cafes, and other
eating places,
3. Proprietors or operators of bars and clubs,
4. Caterers,
5. Nonstock, nonprofit organizations, government-owned and controlled corporations
and cooperatives engaged in the hotel and restaurant business,
6. Other similar establishments.

The term “gross sales” in hotel and restaurant operators shall include, among others,
charges for rooms, laundry and valet services, food and beverages consumption, corkage,
handling charges for providing telephone, telex, cable, or fax services, cake shop sales, lease
to concessionaires, compensation and other services.

It does not include the following:

1. Service charges billed separately and actually distributed to waiters and employees
2. Actual cost of long-distance and overseas telephone calls, fax, cable, telex, and
charges of the telecommunication companies collected by establishment for the
customer/clients for the concerned telecommunication companies, such as PLDT,
which are earmarked for payment to the latter
3. VAT passed on to customers
4. Local taxes charged

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Dealers in securities and lending investors

Dealer in securities means a merchant of stocks or securities:
1. With an established place of business
2. Regularly engaged in the purchase of securities and their resale to customers, that
is, one who as a merchant buys securities and sells them to customers
3. With a view to the gains and profits that may be derived therefrom

Lending investors include all persons other than banks, non-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.

Sale of electricity by generation, transmission and distribution companies

Generation companies refers to persons or entities authorized by Energy Regulatory
Commission (ERC) to operate facilities in the generation of electricity.

For this purpose, generation of electricity refers to the production of electricity by a

generation company or a co-generation facility pursuant to the provisions of the RA 9136 or
Electric Power Industry Reform Act (EPIRA). They shall include all Independent Power
Producers (IPPs) and NPC/Power Sector Assets and Liabilities Management Corporation
(PSALM) – owned generation facilities.

Transmission companies refers to any person or entity that owns and conveys
electricity through the high voltage backbone system and/or subtransmission assets, e.g. NPC
or TRANSCO.

Subtransmission assets shall refer to the facilities related to the power delivery service
below the transmission voltages and based on the functional assignment of asset including,
but not limited to step-down transformers used solely by load customers, reactive
compensation equipment to improve power factor, overhead lines, and the land where such
facilities/equipment are located.

These include NPC assets linking the transmission system and the distribution
systems which are neither classified as generation or transmission.

Distribution companies refers to persons or entities which operate a distribution system

in accordance with the provisions of the EPIRA.

They shall include any distribution utility such as an electric cooperative organized
under RA 6938 or as otherwise provided in the EPIRA, a private corporation, or a government-
owned utility or existing local government unit which has an exclusive franchise to operate a
distribution system in accordance with the EPIRA.

For purposes of VAT, a distribution system refers to the system of wires and associated
facilities belonging to a franchised distribution utility extending between the delivery points on
the transmission or subtransmission system or generator connection and the point of
connection to the premises of the end-users.

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Gross sales of these companies shall refer to the following:

1. Total amount charged by generation companies for the sale of electricity and
related ancillary services, and/or
2. Total amount charged by transmission companies for transmission of electricity
and related ancillary services, and/or
3. Total amount charged by distribution companies and electric cooperatives for
distribution and supply of electricity, and related electric service. The universal
charges passed on and collected by distribution companies and electric
cooperatives shall be excluded from the computation of gross receipts.

VAT on transportation contractors

Transportation contractors subject to VAT refer to domestic common carriers by land,
air and sea who transport goods or cargoes, and to domestic air or water carriers on their
transport of passengers.

Transportation contractors who transport passengers for hire by land (domestic or

international), are not subject to VAT because they are subject to Common Carrier’s Tax of
3% based on gross sales.

Transports of passengers and cargoes by domestic air or sea vessels from the
Philippines to a foreign country or carriers are subject to 0% VAT.

ILLUSTRATION
Safe Transport Company is engaged in the carriage of passengers from Luzon to
Visayas and/or Mindanao, and vice versa. It is also engaged in the domestic carriage of goods
or cargo. During the period, it had the following data:
Sales from carriage of passengers 560,000
Sales from carriage of goods or cargo 336,000
Purchases of goods subject to VAT 168,000
Purchases of goods not subject to VAT 80,000

Required: Compute the VAT payable if Safe Transport Company is a:

1. Domestic common carrier by air or sea
2. Domestic common carrier by land. (Assume that the gross receipts on
carriage of passengers amount to P500,000).
ANSWER
1. Domestic common carrier by air or sea
Passengers (560,000 x 3/28) 60,000
Goods or cargo (336,000 x 3/28) 36,000
Output VAT 96,000
Less: Input VAT (168,000 x 3/28) 18,000
VAT payable 78,000

2. Domestic common carrier by land

Output VAT (336,000 x 3/28) 36,000
Less: Input VAT (168,000 x 3/28) 18,000

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Allocation of Input tax

Passengers 500,000
Goods or cargo (336,000/112%) 300,000
Total 800,000
Input tax attributable to goods or cargo
(300,000/800,000) x 18,000 6,750
VAT Payable 29,250

NOTE: 1. Common carriers by air and/or sea are VATable on gross sales from the
transport of passengers and goods/cargoes from one place in the Philippines
to another place in the Philippines.
2. Common carriers by land are subject to VAT only on gross sales from the
transport of goods or cargoes. The sales on carriage of passengers are subject
to common carrier’s tax.

VAT on franchise grantees

The following services of franchise grantees are subject to VAT:
1. On telephone and telegraph
2. On toll road operations
3. On radio and television broadcasting, except franchise grantees of radio and
television broadcasting companies whose annual gross sales of the preceding year
do not exceed P10,000,000 because they are subject to Franchise Tax of 3%
4. All other franchise grantees (except gas and water utilities)

PAGCOR, although a franchise grantee, is exempt from VAT.

Non-life insurance companies

Only the transactions entered into by persons in the course of non-life insurance
business are taxable. They include the following: marine, fire, and casualty insurance, surety,
fidelity, indemnity; bonding companies and mutual benefit associations; including nonresident
foreign person rendering non-life insurance services in the Philippines.

VAT is not imposed on gross sales derived from the payment of premiums on life
insurance.

Pre-need companies
Pre-need companies are companies 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 a seller of services providing services to
plan holders by managing the 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.

Health Maintenance Organizations (HMOs)

HMOs are entities, organized in accordance with the Corporation Code of the
Philippines and 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.

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HMOs' gross sales shall be the amount of money or its equivalent representing the
service fee actually or constructively received during the taxable period for the services
performed for another person, excluding the vat. The compensation for their services
representing their service fee, is presumed to be the total amount received as enrollment fee
from their members plus other charges received.

Recreational Clubs
Gross sales of recreational clubs or clubs which are organized and operated
exclusively for pleasure, recreation, and other non-profit purposes including but not limited to
membership fees, assessment dues, rental income, and service fees are subject to vat (RMC
35-2012).

Rate and base of tax

There shall be levied, assessed and collected a VAT equivalent to 12% of gross sales
derived from the sale or exchange of services, including the use or lease of properties.

Gross sales means the total amount of money or its equivalent representing the
contract price, compensation, service fee, rental or royalty, including the amount charged for
materials supplied with the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services performed or to be
performed for another person, excluding VAT,

Constructive receipt occurs when the money consideration or its equivalent placed in
the control of the person who conducted the service without restriction by the payor such as
depositing the money in the bank which are available to the payee without restriction.

ILLUSTRATION Dely Hensia is a building contractor. Its records in the month of

February 2025 show the following:

Bldg A – Contract price P2,200,000

Payment received for work done 1,792,000
Receivable 448,000

Bldg B – Contract price P4,000,000

Payment received for work done 2,240,000
Advances for work to be done 1,120,000

Bldg C – (Finished last year)

Contract price P2,500,000
Receivables last year (collected February) 392,000

Payments made:
For services of VAT subcontractor 1,568,000
Purchases of construction materials subject to VAT 694,400
Wages of employees 450,000
Purchases of supplies from VAT suppliers 56,000

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REQUIRED: Compute the VAT Payable

ANSWER
Output Tax
Bldg A – Gross sales 1,792,000
Bldg B – Payments received 2,240,000
Bldg C – Receipts from receivables 392,000
Total 4,424,000
Multiply by 3/28 474,000
Less: Input tax
Subcontractors 1,568,000
Materials 694,400
Supplies 56,000
Total 2,318,400
Multiply by 3/28 248,400
VAT Payable 345,600

Transactions subject to zero percent (0%) rate

A zero-rated sale of service (by a VAT-registered person) is a taxable transaction for
VAT purposes but shall not result in any output tax. However, the input tax on purchases of
goods, properties or services related to such zero-rated sale shall be available as tax credit or
refund.

The following services performed in the Philippines by a VAT-registered person shall

be subject to zero percent (0%) VAT rate:

1. Processing, manufacturing or repacking goods for other persons doing business

outside the Philippines, which goods are subsequently exported, where the
services are paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP

2. Services other than processing, manufacturing or repacking rendered to a person

engaged in business conducted outside the Philippines or to a nonresident person
not engaged in business who is outside the Philippines when the services are
performed, the consideration for which are paid for in accordance with the rules
and regulations of the BSP

3. Services rendered to persons or entities whose exemption under special laws or

international agreements to which Philippines is a signatory effectively subjects the
supply of such services to zero percent (0%) rate

4. Services rendered to persons engaged in international shipping or air transport

operations, including leases of property for use thereof, provided that these
services shall be exclusively for international shipping or air transport operations
Thus, services referred to herein shall not pertain to those made to common
carriers by air and sea relative to their transport of passengers, goods or

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cargoes from one place in the Philippines to other place in the Philippines, the
same shall be subject to 12% VAT

5. Services performed by subcontractors and/or contractors in processing, converting

or manufacturing goods for an enterprise whose export sales exceed 70% of the
total annual production

6. Transport of passengers and cargo by domestic air or sea vessels from the
Philippines to a foreign country
Gross receipts of international air or shipping carriers doing business in the
Philippines derived from transport of passengers and cargo from the
Philippines to another country shall be exempt from VAT, however they are still
liable to a percentage tax of 3% based on their gross receipts derived from
transport of cargo from the Philippines to another

7. Sale of power or fuel generated through renewable sources of energy such as, but
not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean
energy, and other emerging sources using technologies such as fuel cells and
hydrogen fuels. Provided, however that zero-rating shall apply strictly to the sale
of power or fuel generated through renewable sources of energy, and shall not
extend to the sale of services related to the maintenance or operation of plants
generating said power.

Provided, that subparagraphs 1 and 5 abovementioned shall be subject to the 12%

VAT and no longer be subject to zero percent (0%) VAT rate upon satisfaction of the following
conditions:
1. The successful establishment and implementation of an enhanced VAT refund
system that grants and pays refunds of creditable input tax within 90 days from the
filing of the VAT refund application with the Bureau. Provided that to determine the
effectivity of item number one, all applications filed from January 1, 2018 shall be
processed and decided within 90 days from the filing of the VAT refund application.
The 90-day period to process and decide, pending the establishment of the
enhanced VAT refund system shall only be up to date of approval of the
recommendation report on such application for VAT refund by the Commissioner
or his duly authorized representative.
However, all claims for refund/tax credit certificate file prior to January 1 2018
shall still be governed by the 120 day processing period. the secretary of
finance shall provide transitory rules for the grant of refund under the enhanced
VAT refund system after the determination of the fulfillment of the condition by
the Commissioner of Internal Revenue as provided in item one paragraph one
hereof; and

2. All pending VAT refund claims as of December 31, 2017, shall be fully paid in cash
by December 31 2019. That the Department of Finance shall establish a VAT
refund center in the BIR and in the Bureau of Customs that will handle the
processing and granting of cash refunds of creditable input tax.

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Lease of properties
In general, all forms of lease of properties held primarily for list of customers in the
ordinary course of trade or business, whether real or personal, shall be subject to VAT unless
the gross annual sales of the lessor do not exceed P3,000,000.

Lease of property shall be subject to VAT regardless of the place where the contract
of lease was executed if the property leased is located in the Philippines. However, the
following leases of residential units shall be exempt from value added tax:
1. those with a monthly rental not exceeding P15,000 per unit regardless of the
amount of aggregate rentals received by the lessor during the year
2. those whose aggregate rentals of the lessor during the year do not exceed P3
million, even if the monthly rental per unit exceeds P15,000

ILLUSTRATION Are the following sales from a lease subject to VAT, 3%, non-VAT
exempt from business tax?

Monthly Aggregate
Rental Annual Rental ANSWER
Case 1 12,000 2,000,000 Exempt
Case 2 17,500 2,100,000 3%
Case 3 14,000 3,360,000 Exempt
Case 4 16,000 3,264,000 12% VAT

To be subject to VAT, the monthly rental from lease of real property must exceed the
amount of P15,000 per unit, and the aggregate annual rental must be more than P3 million.

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
(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
space; and per room in case of rooms for rent.

Advance payment by the lessee

In a lease contract, the advance payment by the lessee may be:
a. a loan to the lessor from the lessee
b. An option money for the property
c. a security deposit to insure the faithful performance of certain obligations off the
lessee to the lessor
d. prepaid rental

Payments falling under A, B & C are not subject to VAT. However, a security deposit
that is applied to rental shall be subject to VAT.

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If the advance payment is, in fact, a prepaid rental, then such payment is taxable to
the lessor in the month or quarter when received regardless of the accounting methods used.

VAT on Importation of Goods

Definition
Importation is the act of bringing goods and merchandise into a country from a foreign
country.

It is deemed complete when the duties upon the merchandise have been paid or
returned to be paid at a port of entry and the legal permit for withdrawal shall have been
granted or in case such merchandise is free of duty, until it has left the jurisdiction of customs.

Importer refers to any person who brings goods into the Philippines, whether or not
made in the course of trade or business. It includes non-exempt persons or entities who
acquired tax-free imported goods from exempt persons, entities or agencies.

Transactions subject
There shall be levied, assessed, and collected on every importation of goods a value
added tax whether the importation is for sale, for use in business, or for personal use.

Tax rate and tax base

The tax to be imposed shall be 12% based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus custom duties, excise tax, if any, and
other charges, such as postage, commission, and similar charges prior to the release of the
goods from customs custody.

The payment of tax shall be made by the importer prior to the release of such goods
from customs custody.

Where the customs duties are determined on the basis of the quantity or volume of the
goods, the VAT shall be based on the landed cost plus excise tax, if any.

Landed cost consists of invoice amount, customs duties, freight insurance and other
charges. If the goods imported are subject to excise tax, the excise tax shall form part of the
tax base.

ILLUSTRATION Joyce imported goods from Japan. The following are the data relative
to such importation:
For sale Own use
Invoice amount ($1 = P52) $9,500 $3,000
Dutiable value P11,200 P5,200
Customs duties P10,500 P3,100
Freight P6,000 P2,800
Insurance P8,000 P2,500
Other Charges P12,500 P4,000
Facilitation fee P10,000 -
Freight from customs house to warehouse, net of VAT P6,000 P2,300

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After 20 days, the goods intended for sale were sold to Robin for P812,000.

Compute the VAT Payable on the:

1. Importation if the tariff and customs duties were based on volume or quantity
2. Sale if the input tax is based on quantity of goods imported

ANSWER
1.
For sale Own use
Invoice amount 494,000 156,000
Customs duties 10,500 3,100
Freight 6,000 2,800
Insurance 8,000 2,500
Other Charges 12,500 4,000
Landed cost 531,000 168,400
Rate Tax 12% 12%
VAT Payable 63,720 20,208

2.
Output Tax (812,000 x 3/28) 87,000
Less Input Tax
On importation 63,720
Freight (6,000 x 12%) 720 64,440
VAT Payable 22,560

Transfer of goods by tax exempt persons

In the case of goods imported in the Philippines by VAT exempt persons, entities or
agencies which are subsequently sold, transferred or exchanged in the Philippines to non-
exempt persons or entities, the latter shall be considered the importers thereof and shall be
liable for the VAT due on such importation.

The tax due on such importation shall constitute a lien on the goods superior to all
charges or liens on the goods, irrespective of the possessor thereof.

ILLUSTRATION Papa Libre, a tax-exempt person, imported goods from Japan. Later,
he sold them to Mina Malas, a non-exempt person. Who shall be liable to pay the tax?

ANSWER In buying the imported goods from tax exempt persons, Mina Malas,
shall be considered as the importer, and shall be required to pay the VAT due on such
importation.

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MODULE EXERCISES

TRUE or FALSE

1. Transactions treated as sales due to the absence of actual exchanges are subject to
value added tax.
2. The Output value-added tax is computed by multiplying the gross selling price by 12%,
or multiplying the total amount indicated in the invoice by 12/112 if vat inclusive.
3. An importation of goods by a non-profit charitable organization shall not be subject to
the value-added tax.
4. In the case of importation, the importer is not the one liable for the VAT but the person
who shall buy the imported goods.
5. Input vat for the acquisition of capital goods with aggregate acquisition cost of not more
than P1,000,000 for the year should be allocated based on the life of the related asset
but not to exceed sixty (60) months.
6. Vat on importation is imposed regardless of whether such importation is for personal
or business use
7. Facilitation expense shall be included in the determination of applicable input vat on
importation.
8. Persons or firms engaged in the processing of sardines, mackerel and milk, and in
manufacturing refined sugar and cooking oil, shall be allowed a presumptive input tax
of two percent (2%) of the gross value in money of their purchases of primary
agricultural products which are used as inputs to their production
9. Gross sales from lease of commercial units are subject to 12% vat regardless of the
place where the property is located.
10. Withholding of vat is done when the buyer is the government or any of its political
subdivisions.
11. On installment sale by a real estate dealer, the installment VAT is allowed only if the
initial payments on the sale do. not exceed twenty-five percent (25%) of the gross
selling price.
12. Initial payments do not include notes or other evidences of indebtedness issued by the
purchaser to the seller at the time of sale.
13. Services subject to other percentage taxes are also subject to vat.
14. A nonresident foreign lessor or licensor who is not vat registered is subject to vat.
15. Persons whose transactions are exempt from value added tax under Section 109
because their gross sales/and or receipts do not exceed P3,000,000, as amended,
may voluntarily apply for registration under the VAT system.

Reference:

Tabag, E.D and Garcia, E. J. (2024), Transfer & Business Taxation

Ampongan, O. E. G. (2021), Transfer, Business & Local Taxation (with Practice Set) 13/e

Bureau of Internal Revenue, Value-Added Tax, https://www.bir.gov.ph/index.php/tax-information/value-

added-tax.html

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