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TITLE IV VALUE-ADDED TAX
CHAPTER I IMPOSITION OF TAX
105 Persons Liable
106 Value-added Tax on Sale of Goods or Properties
(A) Rate and Base of Tax
(B) Transactions Deemed Sale
(C) Changes in or Cessation of Status of a VAT-registered Person(D) Determination of the Tax
107 Value-added Tax on Importation of Goods
(A) In General
(B) Transfer of Goods by Tax-exempt Persons
108 Value-added Tax on Sale of Services and Use or Lease of Properties(A) Rate and Base of Tax
(B) Transactions Subject to Zero Percent (0%) Rate(C) Determination of the Tax
109 Exempt Transactions
110 Tax Credits
(A) Creditable Input Tax
(B) Excess Output or Input Tax
(C) Determination of Creditable Input Tax
111 Transitional/Presumptive Input Tax Credits
(A) Transitional Input Tax Credits
(B) Presumptive Input Tax Credits
112 Refunds or Tax Credits of Input Tax
(A) Zero-rated or Effectively Zero-rated Sales
(B) Capital Goods
(C) Cancellation of VAT Registration(D) Period within which Refund or Tax Credit of Input Taxes shall be Made
(E) Manner of Giving Refund
CHAPTER II COMPLIANCE REQUIREMENTS
113 Invoicing and Accounting Requirements for VAT-Registered Persons
(A) Invoicing Requirements(B) Accounting Requirements
114 Return and Payment of Value-added Tax
(A) In General(B) Where to File the Return and Pay the Tax
(C) Withholding of Creditable Value-added Tax
115 Power of the Commissioner to Suspend the Business Operations of a
Taxpayer
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1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95
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Section 105 Persons liable
1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95
CHAPTER I IMPOSITION OF TAXCOVERAGE, NATURE, BASIS AND
RATE OF VALUE-ADDED TAX (VAT)
SECTION 105 PERSONS LIABLE
Any person who, in the course of trade or business,
sells, barters, exchanges, leases goods or properties,renders services, and any person who imports goods
shall be subject to the value-added tax (VAT)imposed in Sections 106 to 108 of this Code.
SECTION [4.99-1] 4.105-1PERSONS LIABLE
Any person who, in the course of his trade or
business, sells, barters, exchanges or leases goods orproperties, or renders services, and any person who
imports goods shall be liable to VAT imposed inSections 100 to 102 of the Code.
However, in the case of importation of taxable
goods, the importer, whether an individual or
corporation and whether or not in the course of his
trade of business, shall be liable to VAT imposed in
Section 101 of the Code.
Person refers to any individual, trust, estate,
partnership, corporation, joint venture, cooperative
or association.
Taxable personrefers to any person liable for the
payment of value-added tax, whether or not
registered in accordance with Section 107.
SECTION [4.99-2] 4.105-2 VALUE-ADDED
TAX: NATURE AND CHARACTERISTICS (re-
ordered)
The value-added tax is an indirect tax and theamount of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties
or services. This rule shall likewise apply to existing
contracts of sale or lease of goods, properties or
services at the time of the effectivity of Republic
Act No. 7716.
VAT is an indirect tax and the amount of the taxmay be shifted or passed on to the buyer, transferee
or lessee of the goods, properties or services.
These rules shall likewise apply to existing contracts
of sale or lease of goods, properties or services atthe time of the effectivity of the R.A. 7716.
SECTION [4.99-1] 4.105-1-1PERSONS LIABLE
( cont)
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.
In the course of trade or business means the
regular conduct or pursuit of a commercial or
economic activity, including transactions incidental
thereto, by any person regardless of whether or not
the person engaged therein is a non-stock, non-profit
private organization (irrespective of the dispositionof its net income and whether or not it sells
exclusively to members or their guests), or
government entity.
However, any business or businesses pursued by an
individual where the aggregate gross sales or
receipts do not exceed P100,000.00 during any 12-month period shall be considered principally for
subsistence or livelihood and not in the course of
trade or business.1
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Section 105 Persons liable
1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95
The rule of regularity, to the contrary
notwithstanding, services as defined in this Code
rendered in the Philippines by nonresident foreignpersons shall be considered as being rendered in the
course of trade or business.
The rule of regularity to the contrary
notwithstanding, services rendered in the
Philippines by non-resident foreign persons shall beconsidered as being rendered in the course of trade
or business.
SECTION 4.99-2 VALUE-ADDED
TAX: NATURE AND
CHARACTERISTICS shifted from
here.
1SECTION 4.112-2 TRANSACTIONS EXEMPT FROM VAT AND FROM PERCENTAGE
TAX: Any individual engaged in business or businesses where the aggregate gross sales or receipts do
not exceed P100,000.00 during any 12-month period shall be exempt from the payment of VAT and
from any percentage tax imposed under the NIRC.
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Section 106 Value-added tax on sale of goods or properties
1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95
SECTION 106 VALUE-ADDED TAX ON
SALE OF GOODS OR PROPERTIES
(A) Rate and Base of Tax
These shall be levied, assessed and collected onevery sale, barter or exchange of goods or
properties, a value-added tax equivalent to tenpercent (10%) of the gross selling price or gross
value in money of the goods or properties sold,
bartered or exchanged, such tax to be paid by the
seller or transferor.
SECTION [4.100 1] 4.106-1VALUE-ADDED
TAX ON SALE OF GOODS OR PROPERTIES
VAT is imposed and collected on every sale, barter
or exchange or transactions deemed sale of
taxable goods or properties at the rate of 10% of the
gross selling price.
Re-ordered text follows:
(1) The term goods or propertiesshall mean all
tangible and intangible objects which are
capable of pecuniary estimation and shallinclude:
(a) Real properties held primarily for saleto 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 in the
Philippines of 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.
Goods or properties refer to all tangible and
intangible object which are capable of pecuniary
estimation and shall include:
1. Real properties held primarily for sale to
customers or held for lease in the ordinarycourse of trade or business;
2. 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;
3. The right or the privilege to use in the
Philippines any industrial commercial or
scientific equipment;
4. The right or the privilege to use motion
picture films, film tapes and discs; and
5. Radio, television, satellite transmission andcable television time.
Sale of real properties held primarily for sale to
customers or held for lease in the ordinarily courseof trade or business of the seller shall be subject to
VAT.
In the case of sale of real properties on the
installment plan, the real estate dealer shall be
subject to VAT on the installment payments,
including interest and penalties, actually and/orconstructively received on or after January 1, 1996.
Sale of real property on the 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 percent (25%) of the gross
price.
However, in the case of sale of real properties on the
deferred-payment basis, not on the installment plan
before January 1, 1996, the subsequent payments of
the balance of the gross selling price on or after
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Section 106 Value-added tax on sale of goods or properties
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January 1, 1996 shall no longer be subject to VAT
considering that the transactions is treated as cash.
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.
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 evidence of indebtedness of the
purchaser) during the year when the sale or
disposition of the real property was made. It covers
any downpayment made and includes all payments
actually or constructively received during the year
of sale, the aggregate of which determines the limitset by law.
Initial payments do not include the amount ofmortgage 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 initial payments are notes or
other evidences of indebtedness issued by the
purchaser to the seller at the time of the sale.
Pre-selling of real estate properties by real estate
dealers shall be subject to VAT in accordance with
rules prescribed above.
Real estate dealerincludes 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.
The term gross selling price means the total
amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange of the
goods or properties, excluding the value-added tax.The excise tax, if any, on such goods or properties
shall form part of the gross selling price.
Gross selling price means the total amount of
money or its equivalent which the purchaser pays or
is obligated to pay to the seller in consideration of
the sale, barter or exchange of the goods or
properties, excluding the value-added tax. Theexcise tax, if any, on such goods or properties shall
form part of the 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
zonal value whichever is higher. Provided however,
in the absence of zonal value, gross selling pricerefers to the market value shown in the latest
declaration or the consideration whichever is higher.
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Section 106 Value-added tax on sale of goods or properties
1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95
Taxable sale refers to the sale, barter, exchange
and/or lease of goods or properties, including
transactions deemed sale and the performance ofservice for a consideration, all of which are subject
to tax under Sections [100 and 102] 106 and 108 of
the Code.
Any person otherwise required to register for VAT
purposes who fails register shall be liable to VAT on
his sale of taxable goods or properties as defined in
the preceding paragraph. The sale and importation
of goods subject to excise taxes imposed under TitleVI of the Code are also subject to VAT, except coal
and natural gas in whatever form or state, and
manufactured petroleum products (other than
lubricating oil, processed gas, grease, wax and
petroleum).
Definition of goods or properties
shifted from here.
(2) The following sales by VAT-registered
persons shall be subject to zero percent (0%)
rate:
SECTION [4.100-2] 4.106-2 ZERO-RATED
SALES
A zero-rated sales by a VAT-registered person,which is a taxable transaction for VAT purposes,
shall not result in any output tax. However, the input
tax on his purchases of goods, properties or services
related to such zero-rated sale shall be available as
tax credit or refund in accordance with these
regulations.2
The following sales by VAT-registered persons
shall be subject to 0%:
(a) Export Sales
The term export salesmeans:
(1) The sale and actual shipment
of goods from the Philippinesto a foreign country,
irrespective of any shipping
arrangement that may be
agreed upon which may
influence or determine the
transfer of ownership of the
goods so exported and paid for
in acceptable foreign currencyor its equivalent in goods or
services, and accounted for in
(a) Export sales
Export Salesshall mean:
(1) The sale and actual shipment of goods
from the Philippines to a foreigncountry, irrespective of any shipping
arrangement that may be agreed upon
which may influence or determine the
transfer of ownership of the goods so
exported paid for in acceptable
foreign currency or its equivalent in
goods or services, and accounted for
in accordance with the rules andregulations of the Bangko ng Pilipinas
(BSP);
2Note section 4.107-1(d) Application for effective zero-rating:
Except for actual export sale, other cases of zero-rated sales in Sec. 4.100-3 and Sec. 4.102-2 (c)
shall require prior application with the Revenue District Office for effective zero-rating. Without an
approved application for effective zero-rating, the transaction otherwise entitled to zero-rating shall be
considered exempt.
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accordance with the rules and
regulations of the Bangko
Sentral ng Pilipinas (BSP);
(2) Sale of raw materials or
packaging materials to a
nonresident buyer for delivery
to a resident local export-oriented enterprise to be used
in manufacturing, processing,
packing or repacking in the
Philippines of the said buyers
goods and paid for in
acceptable foreign currencyand accounted for in
accordance with the rules and
regulations of the Bangko
Sentral ng Pilipinas (BSP);
(3) Sale of raw materials or
packaging materials to export-oriented enterprise whose
export sales exceed seventy
percent (70%) of total annual
production;
(4) Sale of gold to the Bangko
Sentral ng Pilipinas (BSP); and
(5) Those considered export sales
under Executive Order No.
226, otherwise known as the
Omnibus Investment Code of
1987, and other special laws.
(2) The sale of raw materials or
packaging materials to a non-residentbuyer for delivery to a resident local
export oriented enterprise to be used
in manufacturing, processing, packing
or repacking in the Philippines of thesaid buyers goods and paid for in
acceptable foreign currency and
accounted for in accordance with the
rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
(3) The sale of raw materials or
packaging material to an export-
oriented enterprise whose export sales
exceed seventy percent (70%) of total
annual production;
Any enterprise whose export sale
exceed 70% of the total annualproduction of the preceding taxable
year shall be considered an export-
oriented enterprise upon accreditation
as such under the provisions of the
Export Development Act (R.A. 7844)
and its implementing rules andregulations.
(4) Sale of gold to the Bangko Sentral ng
Pilipinas (BSP); and
(5) Those considered export sales under
Articles 23 and 77 of Executive Order
No. 226, otherwise known as theOmnibus Investments Code of 1987,
and other special laws, e.g. Republic
Act No. 7227, otherwise known as the
Bases Conversion and Development
Act of 1992.
Considered export sales under
Executive Order No. 226shall mean
the Philippine port F.O.B. value
determined from invoices, bills of
lading, inward letters of credit,
landing certificates, and other
commercial documents, of export
products exported directly by aregistered export producer or the net
selling price of export products sold
by a registered export producer toanother export producer, or to an
export trader that subsequently
exports the same; Provided, That sales
of export products to another producer
or to an export trader shall only be
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deemed export sales when actually
exported by the latter, as evidenced by
landing certificates or similar
commercial documents: Provided,
further, That without actualexportation the following shall be
considered constructively exported forpurposes of these provisions: (1) sales
to bonded manufacturing warehouses
of export-oriented manufacturers; (2)
sales to export processing zones; (3)
sales to registered export traders
operating bonded trading warehouses
supplying raw materials in the
manufacture of export products underguidelines to be set by the Board in
consultation with the Bureau of
Internal Revenue and the Bureau of
Customs; (4) sales of foreign military
cases, diplomatic missions and other
agencies and/or instrumentalities
granted tax immunities, or locally
manufactured, assembled or repackedproducts whether paid for in foreign
currency or not: Provided, further, that
export sales of registered export
traders may include commission
income: and Provided, finally, that
exportation of goods on consignment
shall not be deemed export sales until
the export products consigned are infact sold by the consignee.
(b) Foreign Currency Denominated Sale
The phrase foreign currency
denominated sale means sale to a
nonresident of goods, except those
mentioned in Sections 149 and 150,assembled or manufactured in the
Philippines for delivery to a resident
in the Philippines, paid for in
acceptable foreign currency and
accounted for in accordance with the
rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).
(b) Foreign currency denominated sale, those
mentioned in Sections 149 and 150 of the
Code.
Foreign currency denominated sale
means the sale to a non-resident of goods,except those mentioned in Section 149 and
150 of the Code, assembled or manufactured
in the Philippines for delivery to a resident in
the Philippines, paid for in acceptable foreign
currency and accounted for in accordance
with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).
Sales of locally manufactured or assembledgoods for household and personal use to
Filipinos abroad and other non-residents of
the Philippines as well as returning Overseas
Filipinos under the Internal Export Program
of the government paid for in convertible
foreign currency and accounted for in
accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP) shall
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Section 106 Value-added tax on sale of goods or properties
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also be considered export sales.
(c) 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.
(c) Sales to persons or entities whose exemption
under special laws, e.g. R.A. No. 7227 duly
registered and accredited enterprises with
Subic Bay Metropolitan Authority (SBMA)
and Clark Development (CDA), RA. No.7916, Philippine Economic Zone Authority
(PEZA), or international agreements, e.g.
Asian Development Bank (ADB),
International Rice Research Institute (IRRI),
etc. to which the Philippines is signatory
effectively subject such sales to zero-rate.
SECTION 4.106-2 EFFECTIVELY ZERO-
RATED SALE OF GOODS AND PROPERTIES
Effectively zero-rated sales of goods and properties
shall refer to the sale by a VAT-registered person to
a person or entity who was granted indirect tax
exemption under special laws, e.g. RA 7227 orinternational agreements, e.g. ADB, IRRI. Underthese Regulations, effectively zero-rated
transactions shall cover local sale of goods and
properties to persons or entities who enjoy
exemptions from indirect taxes under par. (a) no (3),
pars, (b) and (c) of the preceding section.
(B) Transactions Deemed Sale
The following transactions shall be deemed sale:
(1) Transfer, use or consumption not in the
course of trade or business of goods or
properties originally intended for sale or foruse in the course of business;
(2) Distribution or transfer to:
(a) Shareholders or investors as share in
the profits of the VAT-registered
persons; or
(b) Creditors in payment of debt;
(3) Consignment of goods if actual sale is not
made within sixty (60) days following the
date such goods were consigned; and
(4) Retirement from or cessation of business,with respect to inventories of taxable goods
existing as of such retirement or cessation.
SECTION [4.100-4] 4.106-4 TRANSACTIONS
DEEMED SALE
(a) The following transactions shall be deemed
sale pursuant to Section [100] 106 (b) of
the Code:(A) Transfer, use or consumption not in
the course of business of goods orproperties originally intended for sale
or for use in the course of business.
Transfer of goods or properties not in
the course of business can take place
when the VAT-registered person
withdraws goods from his business
for his personal use;
(B) Distribution or transfer to:
(1) Shareholders or investors are
share in the profits of theVAT-registered person;
Property dividends whichconstitute stocks in trade or
properties primarily held for
sale or lease declared out of
retained earnings on or after
January 1, 1996 and distributed
by the company to its
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Section 106 Value-added tax on sale of goods or properties
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shareholders shall be subject to
VAT based on the zonal value
or fair market value at the time
of distribution, whichever is
applicable.
(2) 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.
Consigned goods returned by theconsignee within the 60-day period is
not deemed sold;
(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 thedate of such retirement or cessation,
whether or not the business iscontinued by the new owner or
successor. The following
circumstances shall, among others,
give rise to transactions deemed
sale for purposes of this Section;
(i) Change of ownership of thebusiness; and
(ii) Dissolution of a partnership
other than a general
professional partnership and
creation of a new partnership
which takes over the business.
SECTION [4.100-5] 4.106-5 CHANGES IN OR
CESSATION OF STATUS AS A VAT-
REGISTERED PERSON(re-ordered)
(C) Changes in or Cessation of Status of a
VAT-registered Person
The tax imposed in Subsection (A) of this Section
shall also apply to goods disposed of or existing as
of a certain date if under circumstances to be
prescribed in rules and regulations to be
promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, the status ofa person as a VAT-registered person changes or is
terminated.
(a) Subject to tax
The value-added tax provided for in Sections [100]
106 and [102] 108 of the Code shall apply to
services, goods, or properties originally intended for
sale or for use in business and capital goods which
are existing as of the occurrence of the following:
(1) Change of business activity from value-added status to exempt status. An example is
a VAT-registered person engaged in a
taxable activity like wholesaler or retailer
who decides to discontinue such activity and
engages instead in life insurance business or
in any other business not subject to VAT;
(2) Approval of a request for cancellation of
registration due to reversion to exempt status.
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(3) Approval of a request for cancellation of
registration due to a desire to revert to
exempt status after the lapse of two (2)consecutive years from the time of
registration by a person who voluntarily
registered inspite of being exempt under
Section [103] 109 (a), (b), (c) and (d) of theCode with respect to his export sales only,
and Section [103(t)] 109 (u) of the Code.
(4) Approval of a request for cancellation of
registration of one who commenced business
with the expectation of gross sales or receipts
exceeding P500,000.00 but who failed to
exceed this amount during the first twelve
months of operation.
(b) Not subject to output tax
The VAT shall not apply to goods or properties
existing as of the occurrences of the following:
(1) Change of control of a corporation by the
acquisition of the controlling interest of such
corporation by another stockholder or groupof stockholder, Example: transfer of property
to a corporation in exchange for its shares of
stock under Section [34] 40 (c)(2)and(6)(c)
of the Code.
(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 consolidated shall
be absorbed by the surviving or new
corporation.
SECTION [4.100-6] 4.106-6 COMPUTATION
OF OUTPUT TAX (re-ordered)
(D) Determination of the Tax
(1) The tax shall be computed by multiplying the
total amount indicated in the invoice by one-eleventh (1/11).
(2) Sales Returns, Allowances and Sales
Discounts
The output tax on the sale of goods or properties
during the month or quarter shall be computed by
multiplying the total amount indicated in the invoice
by 1/11. In taxable sales of real property where the
zonal value/market value applies, output tax shall becomputed by multiplying the zonal value or market
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Section 106 Value-added tax on sale of goods or properties
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The value of goods or properties sold and
subsequently returned or for which allowances were
granted by a VAT-registered person may bededucted from the gross sales or receipts for the
quarter in which a refund is made or a credit
memorandum or refund is issued. Sales discount
granted and indicated in the invoice at the time ofsale and the grant of which does not depend upon
the happening of a future event may be excluded
from the gross sales within the same quarter it was
given.
value, as the case may be, by 1/11.3
Output taxmeans the value-added tax due on the
sale or lease of taxable goods or properties or
services by any person registered or required to
register under Section [107] 236.
Where the gross selling stated in the invoice isunreasonably lower than the actual market value, the
Commissioner shall be regulations determine the
appropriate tax base.
In computing the taxable base during the month or
quarter, the following shall be allowed as deduction
from gross selling price:
(A) Discounts determined and granted at the time
of sale which are expressly indicated in the
invoice, and the amount thereof forming part
of the gross sales duly recorded in the books
of accounts.
Sales discount indicated in the invoice at the
time to sale and the grant of which does not
depend upon the happening of a future event
may be excluded from the gross sales within
the same month/quarter it was given.
(B) Sales returns and allowances for which a
proper credit or refund was made during the
month or quarter to the buyer for salespreviously recorded as taxable sales.
(b) On transactions deemed sale
The output tax equivalent to 10% based on the
market value of the goods deemed sold shall beimposed as of the occurrence of the transactions
enumerated in Section 4.[100]106-4 (A), (B) and
(C) of these Regulations. However, in the case of
retirement from or cessation of business under
Section 4.[100]106-4(D) of these Regulations, the
tax base shall be the acquisition cost or the current
market price of the goods, whichever is lower.
(c) Basis of tax arising from changes in or
3 Note Regulation 8-99 (26 April 1999):
SECTION 1. Scope. All VAT-registered taxpayers who are required under Section 237 of
the 1997 Tax Code to issue receipts or sales or commercial invoices are no longer allowed to separately
bill the value-added tax corresponding thereto. The amount appearing in the sales invoices/receipts isthus deemed inclusive of the value-added tax due thereon.
SECTION 2. Penalty. Failure or refusal to comply with the requirement in Section 1 hereofshall, upon conviction, for each act or mission, be punished by a fine of not less than One thousand
pesos (P1,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less
than two (2) years but not more than four (4) years.
SECTION 3. Repealing Clause. All existing rules and regulations or parts thereof which
are inconsistent with the provisions of this regulation are hereby revoked.
SECTION 4. Effectivity This Regulation shall take effect fifteen (15) days after
publication in any newspaper of general circulation.
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cessation of status of a taxpayer as a VAT-
registered person
The output tax on goods or properties originally
intended for sale or for use in business, including
capital goods, existing as of the time of the changes
in or cessation of the status of a taxpayer as a VAT-
registered person, shall be based on the acquisitioncost or the current market price of the goods,
whichever is lower.
Any unused input taxes as of the retirement, change
or cessation of status as VAT-registered person shall
be allowed as credit against any output tax resulting
therefrom. The balance, if any, shall, subject to the
filing of an application within two years from date
of retirement, cessation or change of status, beissued a tax credit certificate which can be used a
payment of any internal revenue tax due from him
or a tax refund, if he has no pending internal
revenue tax liability.
SECTION [4.100-4] 4.106-4 TRANSACTIONS
DEEMED SALE ( cont)
(3) Authority of the Commissioner to Determine
the Appropriate Tax Base
The Commissioner shall, by rules and
regulations prescribed by the Secretary ofFinance, determine the appropriate tax base
in cases where a transaction is deemed a sale,
barter or exchange of goods or properties
under Subsection (B) hereof, or where the
gross selling price is unreasonably lower
than the actual market value.
(b) The Commissioner shall, by regulations,
determine the appropriate tax base in cases
where a transaction is deemed a sale, barter
or exchange of goods or properties under
paragraph (B) hereof, or where the gross
selling price is unreasonably lower than theactual market value.
SECTION 4.110-5CHANGES INOR CESSATION OF STATUS AS
A VAT-REGISTERED PERSON
shifted from here.
SECTION 4.110-6
COMPUTATION OF OUTPUT
TAX shifted from here.
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Section 107 Value-added tax on importation of goods
1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95
SECTION 107 VALUE-ADDED TAX ON
IMPORTATION OF GOODS
(A) In General
There shall be levied, assessed and collected on
every importation of goods a value-added tax
equivalent to ten percent (10%) based on the totalvalue used by the Bureau of Customs in determining
tariff and customs duties, plus customs duties,
excise taxes, if any, and other charges, such tax tobe paid by the importer prior to the release of such
goods from customs custody:
Provided, That where the customs duties are
determined on the basis of the quantity or volume of
the goods, the value-added tax shall be based on the
landed cost plus excise taxes, if any.
SECTION [4.101-1] 4.107-1 VALUE-ADDED
TAX ON IMPORTATION OF GOODS
(a) In general
The VAT is imposed on goods and properties
brought into the Philippines, whether for use in
business or not. The tax shall be based on the totalvalue, used by the Bureau of Customs in
determining tariff and customs duties, plus customs
duties, excise tax, if any, and other charges prior tothe release of the goods or properties from customs
custody such as postage, commissions, and similar
charges.
In case the valuation used by the Bureau of Customs
in computing customs duties is by volume or
quantity, the landed cost shall be the basis forcomputing the value added tax. Landed cost consists
of the invoice amount, customs duties, freight,
insurance and other charges. If the goods importedare subject to excise tax, the excise tax shall form
part of the tax base.
Importation of petroleum products and the raw
materials to be used by the importer himself in the
manufacturer thereof, subject to excise tax underTitle VI of the Code, shall be exempt from VAT.
However, VAT shall be collected from the importer
of lubricating oil, processed gas, grease, wax and
petrolatum and the raw materials to be used in the
manufacture thereof.
(B) Transfer of Goods by Tax-exempt Persons
In the case of tax-free importation of goods into the
Philippines by persons, entities or agencies exempt
from tax where such goods are subsequently sold,
transferred or exchanged in the Philippines to non-
exempt persons or entities, the purchasers,
transferees or recipients shall be considered the
importers thereof, who shall be liable for any
internal revenue tax on such importation. The taxdue on such importation shall constitute a lien on
the goods superior to all charges or liens on the
goods, irrespective of the possessor thereof.
(b) Applicability and Payment
The rates prescribed under Section [101] 107 (a)
shall be applicable to all importations withdrawn
from custom custody.
The value-added tax or importation shall be paid by
the importer prior to the release of such goods from
customs custody.
Importerrefers to any person who brings goods
into the Philippines, whether or not made in the
course of his trade or business. It includes non-
exempt persons or entities who acquire tax-free
imported goods from exempt persons, entities or
agencies.
(c) Sale, transfer or exchange of imported
goods by tax-exempt persons
In the case of goods imported into 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, thelatter shall be considered the importers thereof who
shall be liable for VAT on such importation.
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SECTION 108 VALUE-ADDED TAX ON
SALE OF SERVICES AND USE OR LEASE OF
PROPERTIES
(A) Rate and Base of Tax
There shall be levied, assessed and collected, a
value-added tax equivalent to ten percent (10%) ofgross receipts derived from the sale or exchange of
services, including the use or lease of properties.
The phrase sale or exchange of services means
the performance of all kinds of services in the
Philippines for others for a fee, remuneration or
consideration, including those performed or
rendered by construction and service contractors;stock, real estate, commercial, customs and
immigration brokers; lessors of property, whether
personal or real; warehousing services; lessors or
distributors of cinematographic films; persons
engaged in milling, processing, manufacturing orrepacking goods for others; proprietors, operators or
keepers of hotels, motels, resthouses, pension
houses, inns, resorts; proprietors or operators of
restaurants, refreshment parlors, cafes and other
eating places, including clubs and caterers; dealersin securities; lending investors; 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, air and water relative to their transport of
goods or cargoes; services of franchise grantees of
telephone and telegraph, radio and television
broadcasting and all other franchise grantees exceptthose under Section 119 of this Code; services of
banks, non-bank financial intermediaries and
finance companies; and non-life insurance
companies (except their crop insurances), including
surety, fidelity, indemnity and bonding companies;
and similar services regardless of whether or not the
performance thereof calls for the exercise or use of
the physical or mental faculties.
SECTION [4.102-1] 4.108-1 VALUE-ADDED
TAX ON THE SALE OF SERVICES AND USE
OR LEASE OF PROPERTIES
(a) Sale or exchange of services, as well as the
use or lease of properties, as defined in
Section [102] 108 (a) of the Code shall besubject to VAT.
Sale or exchange or services means the
performance of all kind of services in thePhilippines for others for a fee, remuneration
or consideration, including those performed
or rendered by the following:
(1) construction and service contractors;
(2) stock, real estate, commercial,
customs and immigration brokers;
(3) lessors of property, whether personal
or real;(4) warehousing services;4
(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, resthouses, pension
houses, inns, resorts;
(8) proprietors or operators of restaurants,
refreshment parlors, cafes and othereating places, including clubs andcaterers;
(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;
(12) other domestic common carriers by
land, air and water relative to their
transport of goods or cargoes;
(13) franchise grantees of 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 thepreceding year does not exceed Ten
4 Defined at end of section.
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Million Pesos (P10,000,000.00), and
franchise grantees of electric gas and
water utilities;
(14) banks, non-bank financial
intermediaries and finance companies
and other financial intermediaries not
performing quasi-banking functions;
(15) non-life insurance companies (except
their crop insurances), including
surety, fidelity, indemnity and
bonding companies; and
(16) similar services regardless of whether
or not the performance thereof calls
for the exercise or use of the physical
or mental faculties.
The phrase sale or exchange of services shall
likewise include:
(1) The lease or the 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 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 meansof enabling the application or enjoyment of
any such property, or right as is mentioned in
subparagraph (2) or any such knowledge or
information as is mentioned in subparagraph
(3);
(5) The supply of services by a nonresident
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 nonresident person;
(6) The supply of technical advice, assistance orservices 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, films,
tapes and discs; and
(8) The lease or the use of or the right to use
radio, television, satellite transmission and
The phrase sale or exchange of services
shall likewise include:
(1) The lease or the use of or the right
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 or the use of, or the right to
use any industrial, commercial or
scientific equipment.
(3) The supply of scientific, technical
industrial or commercial knowledgeor information;
(4) The supply of any assistance that isancillary and subsidiary to and is
furnished as a means of enabling the
application or enjoyment of any such
property, or right as is mentioned in
subparagraph (2) hereof or any such
knowledge or information as ismentioned in subparagraph (3) hereof;
or
(5) The supply of services by a non-
resident person or his/its employee in
connection with the use of property or
rights belongings to, or the installation
or operation of any brand, machineryor other apparatus purchased from
such nonresident person;
(6) The supply of technical advice,
assistance or services rendered in
connection with technical
management or administration of any
scientific, industrial or commercialundertaking, venture, project or
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cable television time.
Lease of properties shall be subject to the tax herein
imposed irrespective of the place where the contractof lease or licensing agreement was executed if the
property is leased or used in the Philippines.
The term gross receiptsmeans the total amount ofmoney 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 duringthe taxable quarter for the services performed or to
be performed for another person, excluding value-
added tax.
scheme;
(7) The lease of motion picture films
tapes and discs;
(8) The lease or the use of or the right to
use, television, satellite transmission
and cable television time.Real estate lessor includes any person
engaged in the business of leasing or
subleasing real property.
Lease of property shall be subject to VAT
regardless of the place where the contract of
lease or licensing agreement was executed if
the property leased or used is in the
Philippines.
(b) The VAT on rental and/or royalties payable
to non-resident foreign corporations or
owners for the sale of services and use or
lease of properties in the Philippines shall bebased on the contract price agreed upon by
the licensor and the licensee. The licensee
shall be responsible for the payment of VAT
on such rentals and/or royalties in behalf of
the non-resident foreign corporation or ownerby filing a separate VAT declaration/return
for this purpose. They duly validated VAT
declaration/return is sufficient evidence in
claiming input tax credit by the licensee.
Non-resident lessor/owner refers to any
person, natural or juridical, an alien, or acitizen who establishes to the satisfaction of
the Commissioner the fact of his physical
presence abroad with a definite intention to
reside therein, and who owns/leases
properties, real or personal, whether tangible
or intangible, located in the Philippines.
(c) In a lease contract, the advance payment by
the lessee may be:
(i) a loan to the lessor from the lessee, or
(ii) an option money for the property, or
(iii) a security deposit to insure the faithful
performance of certain obligations of
the lessee to the lessor, or
(iv) pre-paid rental.
If the advance payment is actually a loan to
the lessor, or an option money for the
property, or a security deposit for the faithful
performance of certain obligations of the
lessee, such advance payment is not subject
to VAT.
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However, a security deposit that is applied to
rental shall be subject to VAT.
If the advance payment is, in fact, a pre-paidrental, then such payment is taxable to the
lessor in the month or quarter when received
regardless of the accounting methods used.
(d) Non-life insurance companies including
surety, fidelity, indemnity and bonding
companies are now subject to VAT. They are
no longer liable to the payment of the
premium tax under Section [121] 123 of theCode.
Non-life insurance companies including
surety, fidelity, indemnity and bonding
companies shall include all individuals,
partnerships, associations, or corporations,
including professional reinsurers defined inSection 280 of PD 612, otherwise known as
The Insurance Code of the Philippines,mutual benefit associations and government-
owned or controlled corporations, engaging
in the business of property insurance, as
distinguished from insurance on human lives,
health, accident and insurance appertaining
thereto or connected therewith.
Reinsurance premiums are subject to VAT.
The VAT due from the foreign reinsurance
company is to be withheld by the local
insurance company and to be remitted to the
BIR by filing a separate VAT
declaration/return.
Commissions of insurance agent and/or
brokers are subject to VAT.
The gross receipts on non-life insurance
companies shall mean total premiumscollected, whether paid in money, notes,
credits or any substitute for money.
Gross receiptsrefer to 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 advance paymentsactually or constructively received during
taxable quarter for the services performed or
to be performed for another person,
excluding VAT. It shall likewise refer to
gross income as defined under Section [28]
32 (A) of the Code, whenever applicable.
Constructive receipt occurs when the
money consideration or its equivalent is
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placed at the control of the person who
rendered the service without restrictions by
the payor. The following are examples of
constructive receipts.
(1) deposit in banks which are made
available to the seller of services
without restrictions.
(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
contractee to the account of the
contractor.
(e) Dealers in securities and lending investorsshall be subject to VAT on the basis of the
gross income they derive, respectively, from
their sale or exchange of securities or theirlending activities.
Dealer in securities means a merchant of
stock or securities, whether an individual
partnership or corporation, with an
established place of business, regularlyengaged in the purchase of securities and
their resale to customers, that is, one who as
a merchant buys securities and sells them to
customers with a view to the gains and
profits that may be derived therefrom.
Lending investorinclude all persons otherthan 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.
In the case of pre-need companies, they shall
be considered as dealers in securities and
their gross receipts shall mean actual receipts
on contract price minus contributions to the
trust funds to be set up independently as
mandated by the Securities and Exchange
Commission.
(f) Services of franchise grantees of telephoneand telegraph, radio and/or television
broadcasting and all other franchise grantees,
except electric, gas and water utilities, shall
be subject to VAT. However, franchise
grantees of radio and/or television
broadcasting whose annual gross receipts of
the preceding year does not exceed Ten
Million Pesos (P10,000,000.00) shall not be
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subject to VAT, but to the three percent (3%)
franchise tax imposed under Sec. [117] 119
of the Code, subject to the optional
registration provisions under Sec. [4.107]
9.236-1(c) of Rev. Regs. No. 7-95, asamended by these Regulations.
Likewise, franchise grantees of electric, gasand water utilities shall be subject to two
percent (2%) franchise tax on their, gross
receipts derived from the business covered
by me law granting me franchise pursuant to
Sec. [117] 119 of the Code.
Provided, further, That all franchise grantees
not falling under Section [117] 119 of the
Code are also no longer subject to me
franchise tax on their gross receipts derived
from their franchised operations under their
respective charters.
Franchise grantees of telephone andtelegraph shall be subject to VAT on their
gross receipts derived from their telephone,
telegraph, telewriter exchange, wireless and
other communication equipment services.
However, amounts received for overseas
dispatch, message, or conversationoriginating from the Philippines are still
subject to the percentage tax under Section .118 [120] of the Code.
(g) A person engaged in milling for other (except
palay into rice, corn into corn grits, and
sugarcane into raw sugar) is subject to VAT
on sale of services. If the miller is paid in
cash for his services, the VAT shall be basedon his gross receipts during the month or
quarter. If he received a share of the milled
products, instead of cash, the VAT shall be
based on the actual market value of his share
in the milled products. Sale by the owner or
the miller of his share of the milled product
(except rice, corn grits and raw sugar) shall
be subject to VAT on sale of goods.
(h) All receipts from service, hire, or operating
lease of transportation equipment not subject
to the percentage tax on domestic commoncarriers and keepers of garages imposed
under Section [115] 117 of the Code shall be
subject to VAT.
Common carrier 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
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services to the public and shall include
transportation contractors.
Operators of taxicabs, utility cars for rent orhire driven by the lessees (rent-a-car
companies), and tourist buses used for the
transport of passengers are subject to the
percentage tax imposed under Section [115]117 of the Code, and not to VAT.
Warehousing service means rendering
personal services of a warehouseman such
as:
1. engaging in the business of receiving
and storing goods of others for
compensation or profit;
2. receiving good and merchandise to bestored in his warehouse for hire;
3. keeping and storing goods for other,
as a business and for use.
(B) TRANSACTIONS SUBJECT TO ZERO
PERCENT (0%) RATE
The following services performed in the Philippines
by VAT-registered persons shall be subject to zero
percent (0%) rate:
(1) Processing, manufacturing or repacking
goods for other persons doing business
outside the Philippines which goods are
subsequently exported, where the servicesare paid for in acceptable foreign currency
and accounted for in accordance with therules and regulations of the Bangko Sentral
ng Pilipinas (BSP);
(2) Services other than those mentioned in the
preceding paragraph, the consideration forwhich is paid for in acceptable foreign
currency and accounted for in accordance
with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
(3) Services rendered to persons or entities
whose exemption under special laws orinternational agreements to which the
Philippines is a signatory effectively subjectsthe supply of such services to zero percent
(0%) rate;
SECTION [4.102-2] 4.108-2 ZERO-RATING
(a) In general
A zero-rated sale by a VAT registered person, which
is a taxable transaction for VAT purposes, shall not
result in any output tax. However, the input tax on
his purchases of goods, properties or services related
to such zero-rated sale shall be available as tax
credit or refund in accordance with these
regulations. 5
(b) Transactions Subject to Zero Percent
(0%) Rate
The following services performed in the Philippines
by VAT-registered persons shall be subject to zeropercent (0%) 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 currencyand accounted for in accordance with the
rules and regulations of the Bangko Sentral
ng Pilipinas (BSP);
(2) Services other than processing,
manufacturing or repacking for other persons
doing business outside the Philippines of
5Note section 4.107-1(d) Application for effective zero-rating:
Except for actual export sale, other cases of zero-rated sales in Sec. 4.100-3 and Sec. 4.102-2 (c)
shall require prior application with the Revenue District Office for effective zero-rating. Without an
approved application for effective zero-rating, the transaction otherwise entitled to zero-rating shall be
considered exempt.
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(4) Services rendered to vessels engaged
exclusively in international shipping; and
(5) Services performed by subcontractors and/orcontractors in processing, converting, or
manufacturing goods for an enterprise whose
export sales exceed seventy percent (70%) of
total annual production.
goods which are subsequently exported, as
well as services by a resident to a non-
resident foreign client, such as project
studies, information services, engineering
and architectural designs and other similarservices, the consideration for which is paid
for in acceptable foreign currency andaccounted for in accordance with the rules
and regulations of the BSP.
(3) Service rendered to persons or entities whose
exemption under special laws or international
agreements to which the Philippines is a
signatory effectively subjects the supply ofsuch services to zero percent (0%) rate;
(4) Services rendered to vessels engaged
exclusively in international shipping;
(5) Services performed by subcontractors and/orcontractors duly accredited by either the
Board of Investments or the ExportDevelopment Council in processing,
converting, or manufacturing goods for an
enterprise whose export sales exceed seventy
percent (70%) of the total annual production.
(c) Effectively zero-rated sale of services
Effectively zero-rated sales of services shall refer to
the sale by a VAT-registered person to a person or
entity who was granted indirect tax exemption under
special laws, or international agreements. Under
these Regulations, effectively zero-rated
transactions shall be limited to the local sale of
services to persons or entities who enjoy exemptionsform indirect taxes under subparagraph (b) Nos. (3)
(4) and (5) of this section.
(C) Determination of the Tax
The tax shall be computed by multiplying the total
amount indicated in the official receipt by one-
eleventh (1/11).
SECTION 109 EXEMPT TRANSACTIONS
The following shall be exempt from the value-added
tax:
SECTION [4.103-1] 4.109-1 EXEMPTIONS -
(A) In general
An exemptions means that the sale of goods or
properties and/or services and the use or lease ofproperties is not subject to VAT (output tax) and the
seller is not allowed any tax credit on VAT (input
tax) previously paid.
The person making the exempt sale of good,
properties or services shall not bill any output tax to
his customers because the said transaction is notsubject to VAT. On the other hand, a VAT-
registered purchaser of VAT-exempt
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goods/properties or services which are exempt from
VAT is not entitled to any input tax on such
purchase despite the issuance of a VAT invoice or
receipt.
(B) Exempt transactions
The following shall be exempt from the VAT:
(a) Sale of nonfood agricultural products; marine
and forest products in their original state by
the primary producer or the owner of theland where the same are produced;
(b) Sale of cotton and cotton seeds in their
original state; and copra;
(a) Sale of nonfood agricultural, marine and
forest products in their original state by the
primary producer or the owner of the landwhere the same are produced. In the hands of
a subsequent seller, the sale shall be subject
to VAT.
(b) Sale of cotton and cotton seeds in their
original state; and copra;
(c) Sale or importation of agricultural andmarine food products in their original state,
livestock and poultry of a kind generallyused as, or yielding or producing foods for
human consumption; and breeding stock and
genetic materials therefor.
Products classified under this paragraph andparagraph (a) shall be considered in their
original state even if they have undergone thesimple processes of preparation or
preservation for the market, such as freezing,
drying, salting, broiling, roasting, smoking or
stripping. Polished and/or husked rice, corn
grits, raw cane sugar and molasses, and
ordinary salt shall be considered in their
original state:
(c) Sale or importation of agricultural andmarine food products in their original state,
livestock and poultry of a kind generally usedas, or yielding or producing foods for human
consumption; and breeding stock and genetic
materials therefor.
Livestock shall include cows, bulls andcalves, pigs, sheep, goats and rabbits. Poultry
shall include fowls, ducks, geese and turkey.(It does not include fighting cocks, race
horses, zoo animals and other animals
generally considered as pets.)
Marine food products shall include fish and
crustaceans, such as, but not limited to, eels,
trout, lobster, shrimps, prawns, oysters,mussels and clams.
Meat, fruit, fish, vegetable and other
agricultural and marine food products shall
be considered in their original date even if
they have undergone the simple processes of
preparation or preservation for the market,such as freezing, drying, salting, broiling,
roasting, smoking or stripping, including
those using advanced technological means of
packaging, such as shrink wrapping in
plastics, vacuum packing, tetra-pack, and
other similar packaging methods.
Polished and/or husked rice, corn grits, raw
cane sugar and molasses and ordinary saltshall be considered as agricultural food
products in their original state.
Raw cane sugar refers to crystallized or
solidified juice of sugarcane, distinctly
brown in color resulting from the simple and
primary milling process such as treating the
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juice with lime to remove impurities, boiling
and spinning the syrup to force out the
molasses. It does not include cane sugar
commonly known as washed sugar,
plantation washed sugar and blancodirecto sugar, which are, for purposes of
this exemption, considered as refined sugar.Bagasse are not also covered by the
exemption.
(d) Sale or importation of fertilizers; seeds,
seedlings and fingerlings; fish, prawn,
livestock and poultry feeds, including
ingredients, whether locally produced orimported, used in the manufacture of finished
feeds (except specialty feeds for race horses,
fighting cocks, aquarium fish, zoo animals
and other animals generally considered as
pets);
(d) Sale or importation of fertilizers, seeds,
seedlings and fingerlings, fish, prawn,
livestock and poultry feeds, including
ingredients, whether locally produced orimported, used in the manufacture of finished
feeds (except specialty feeds for race horses,
fighting cocks, aquarium fish, zoo animals
and other animals generally considered as
pets);
Specialty feeds refer to non-agriculturalfeeds or food for race horses, fighting cocks,
aquarium fish, zoo animals and other animalsgenerally considered as pets.
(e) Sale or importation of coal and natural gas,
in whatever form or state, and petroleum
products (except lubricating oil, processed
gas, grease, wax and petrolatum) subject to
excise tax imposed under Title VI;
(f) Sale or importation of raw materials to be
used by the buyer or importer himself in the
manufacture of petroleum products subject to
excise tax, except lubricating oil, processed
gas, grease, wax and petrolatum;
(g) Importation of passenger and/or cargovessels of more than five thousand tons
(5,000), whether coastwise or ocean-going,
including engine and spare parts of said
vessel to be used by the importer himself as
operator thereof;
(h) Importation of personal and householdeffects belonging to the residents of the
Philippines returning from abroad and
nonresident citizens coming to resettle in the
Philippines: Provided, That such goods areexempt from customs duties under the Tariff
and Customs Code of the Philippines;
(i) Importation of professional instruments and
implements, wearing apparel, domesticanimals, and personal household effects
(except any vehicle, vessel, aircraft,
machinery, other goods for use in the
manufacture and merchandise of any kind in
(e) Sale or importation of coal and natural gas, in
whatever form or state, and petroleum
products (except lubricating oil, processed
gas, grease, wax and petrolatum) subject to
the excise taxes imposed under Title VI ofthe Code;
(f) Sale or Importation of raw materials to be
used by the buyer or importer himself in the
manufacture of petroleum products subject to
excise tax, except lubricating oil, processed
gas, grease, wax and petrolatum;
(g) Importation of passenger and/or cargo vessel
of more than five thousand tons, whether
coastwise or ocean going, including engine
and spare parts of said vessel to be used by
the importer himself as operator thereof;
(h) Importation of personal and householdeffects belonging to residents of the
Philippines returning from abroad and non-
resident citizens coming to resettle in the
Philippines: Provided, that such goods areexempt from customs duties under the Tariff
and Customs Code of the Philippines;
(i) Importation of professional instruments and
implements, wearing apparel, domesticanimals, and personal household effects
(except any vehicle, vessel, aircraft,
machinery and other goods for use in the
manufacture and merchandise of any kind in
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commercial quantity) belonging to persons
coming to settle in the Philippines, for their
own use and not for sale, barter or exchange,
accompanying such persons, or arriving
within ninety (90) days before or after theirarrival, upon the production of evidence
satisfactory to the Commissioner, that suchpersons are actually coming to settle in the
Philippines and that the change of residence
is bona fide;
commercial quantity) belonging to persons
coming to settle in the Philippines, for their
own use and not for sale, barter or exchange,
accompanying such persons, or arriving
within ninety (90) days before or after theirarrival, upon the production of evidence
satisfactory to the Commissioner of InternalRevenue, that such persons are actually
coming to settle in the Philippines and that
the change of residence is bonafide;
(j) Services subject to percentage tax under Title
V;
(j) Services subject to percentage tax under Title
V of the Code, such as:
(1) Sale or lease of goods or properties or
the performance of services of non-
VAT-registered persons, other than
the transactions mentioned in
paragraphs (a) to (y) of Section [103]
109 of the Code, the gross annual
sales and/or receipts of which doesnot exceed the amount of FIVE
HUNDRED FIFTY THOUSANDPESOS (P550,000.00): Provided, That
not later than January 31, 1988 and
each calendar year thereafter, the
amount of P550,000.00 shall be
adjusted to its present value using the
Consumer Price Index, as published
by the National Statistics Office (NO)
(Section [112] 116 of the Code);
(2) Services rendered by domestic
common carriers by land, air or water
for the transport of passengers and
keepers of garages (Section [115] 118
of the Code);
(3) Services rendered by international air
and shipping carriers doing business
in the Philippines (Section [115-A]
118 of the Code);
(4) Services rendered by franchise
grantees of radio and/or television
broadcasting whose annual grossreceipts of me preceding year does not
exceed Ten Million Pesos
(P10,000,000.00), and by franchisegrantees of electric, gas and water
utilities (Section [117] 119 of the
Code);
(5) Overseas dispatch, messages or
communications originating from the
Philippines (Section [118] 120,
NIRC).
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(6) Services rendered by any person,
company or corporation (except
purely cooperative companies or
associations) doing life insurance
business of any sort in the Philippines(Section [121] 123 of the Code);
(7) Services rendered by fire, marine ormiscellaneous insurance agents of
foreign insurance companies (Section
[122] 124 of the Code);
(8) Services of proprietors, lessees oroperators of cockpits, cabarets, night
or day clubs, boxing exhibitions,
professional basketball games, Jai-
Alai and race tracks (Section [123]
125 of the Code); and
(9) Receipts on sale, barter or exchangeof shares of stock listed and traded
through the local stock exchange orthrough initial public offering.
(Section [124-A] 127 of the Code).
(k) Services by agricultural contract growers and
milling for others of palay into rice, corn into
grits and sugar cane into raw sugar;
(k) Services by agricultural contract growers and
milling for others of palay into rice, corn into
grits, and sugar cane into raw sugar;
Agricultural contract growers refer to
those persons producing for others poultry,
livestock or other agricultural and marine
food products in their original state. The term
agricultural contract growers shall also
include reforestation contractors pursuant to
the Government Reforestation Program.
(l) Medical, dental, hospital and veterinary
services subject to the provisions of Section
17 of Republic Act No. 7716, as amended;
(l) Medical, dental, hospital and veterinary
services, subject to the provisions of Section
15 of these Regulations.i
Laboratory services are also exempted. If the
hospital or clinic operates a pharmacy or
drug store, the sale of drugs and medicine issubject to VAT.
(m) Educational services rendered by private
educational institutions, duly accredited by
the Department of Education, Culture andSports (DECS) and the Commission on
Higher Education (CHED), and those
rendered by government educational
institutions;
(m) Educational services rendered by private
educational institutions duly accredited by
me Department of Education, Culture andSports (DECS) and/or the Commission on
Higher Education (CHED) and those
rendered by government educational
institutions;
Educational services shall refer to
academic, technical or vocational education
provided by private educational institutions
duly accredited by the DECS and/or the
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CHED and those rendered by government
educational institutions and it does not
include seminars, in-service training, review
classes and other similar services rendered by
persons who are not accredited by the DECSand/or the CHED;
(n) Sale by the artist himself of his works of art,
literary works, musical compositions and
similar creations, or his services performed
for the production of such works;
(n) Sale of works of art, literary works, musical
compositions and similar creations, or
services performed for the production of such
works, if sold by the artist himself, are
exempt from VAT. If sold by other persons
in the course of business, they shall be
subject to VAT;
(o) Services rendered by individuals pursuant to
an employer-employee relationship;
(p) Services rendered by regional or area
headquarters established in the Philippines
by multinational corporations which act assupervisory, communications andcoordinating centers for their affiliates,
subsidiaries or branches in the Asia-Pacific
Region and do not earn or derive income
from the Philippines;
(o) Services rendered by individual pursuant to
an employer-employee relationship;
(p) Services rendered by regional or area
headquarters established in the Philippines by
multinational corporations which act assupervisory, communications andcoordinating centers for their affiliates,
subsidiaries or branches in the Asia Pacific
Region and do not earn or derive from the
Philippines;
(q) Transactions which are exempt under
international agreements to which the
Philippines is a signatory or under special
laws, except those under Presidential DecreeNos. 66, 529 and 1590;
(q) Transactions which are exempt under
international agreements to which the
Philippines is a signatory or under special
laws except those granted under thefollowing laws:
(1) PD No. 66 Export Processing ZoneAuthority (EPZA)-registered firms;
(2) PD No. 529 Petroleum ExplorationConcessionaires under the Petroleum
Act of 1949; and
(3) PD 1590 Philippine Air Lines
(PAL) relative to domestic transport
of goods or cargoes;
(r) Sales by agricultural cooperatives duly
registered with the Cooperative Development
Authority to their members as well as sale oftheir produce, whether in its original state or
processed form, to non-members; theirimportation 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;
(s) Sales by electric cooperatives duly registeredwith the Cooperative Development Authority
or National Electrification Administration,
(r) Sales by agricultural cooperatives duly
registered with the Cooperative Development
Authority (CDA) to their members, as wellas 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;
(s) Sales by electric cooperatives duly registeredwith the CDA or National Electrification
Administration (NEA), relative to the
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relative to the generation and distribution of
electricity as well as their importation of
machineries and equipment, including spare
parts which shall be directly used in the
generation and distribution of electricity;
(t) Gross receipts from lending activities by
credit or multi-purpose cooperatives dulyregistered with the Cooperative Development
Authority whose lending operation is limited
to their members;
generation and distribution of electricity, as
well as their importation of machineries and
equipment, including spare parts, which shall
be directly used in the generation and
distribution of electricity.
(t) Gross receipts from lending activities by
credit or multi-purpose cooperatives dulyregistered with the CDA, whose lending
operation is submitted to their members;
(u) Sales by non-agricultural, non-electric andnon-credit cooperatives duly registered with
the Cooperative Development Authority:
Provided, That the share capital contribution
of each member does not exceed Fifteen
thousand pesos (P15,000) and regardless of
the aggregate capital and net surplus ratably
distributed among the members;
(u) Sales by non-agricultural, non-electric andnon-credit cooperatives duly registered with
the CDA; Provided, That the share capital
contribution of each member does not exceed
Fifteen Thousand Pesos (P15,000.00) and
regardless of the aggregated capital and net
surplus ratably distributed among the
members:
Importation by non-agricultural, non-electricand non-credit, cooperatives of machineries
and equipment, including spare parts thereof,
to be used by them are subject to VAT.
(v) Export sales by persons who are not VAT-
registered;
(v) Export sales by persons who are not VAT-
registered;
(w) Sale of real properties not primarily held forsale to customers or held for lease in the
ordinary course of trade or business or real
property utilized for low-cost and socialized
housing as defined by Republic Act No.7279, otherwise known as the Urban
Development and Housing Act of 1992, and
other related laws, house and lot and other
residential dwellings valued at One millionpesos (P1,000,000) and below: Provided,
That not later than January 31st of the
calendar year subsequent to the effectivity of
this Act and each calendar year thereafter,
the amount of One million pesos
(P1,000,000) shall be adjusted to its present
value using the Consumer Price Index, as
published by the National Statistics Office
(NSO);
(w) The following sales of real properties areexempt from VAT, namely:
(1) Sale of real properties not primarily
held for sale to customers or held for
lease in the ordinary course of trade orbusiness:
(2) Sale of real properties utilized for
low-cost housing under BP Blg. 220,
PD No. 957 or RA No. 7279,
otherwise known as the Urban and
Development Housing Act of 1992
and other related laws, wherein the
price ceiling per unit is P375,000.00,
or as may from time to time be
determined by the House and LandUse Regulatory Board (HLURB) and
other related laws;
Low-cost housingrefers to housing
projects intended for home-less low-
income family beneficiaries,
undertaken by the Government orprivate developers, which may either
be a subdivision or a condominium
registered and licensed by the
Housing and Land Use Regulatory
Board/Housing and Urban
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Development Coordinating Council
(HLURB/HUDCC) under BP Blg.
220, PD No. 957 or any other similar
law, wherein the unit selling price is
within the selling price ceiling perunit under RA No. 7279, otherwise
known as the Urban Developmentand Housing Act of 1992 or as
determined from time to time by the
HLURB/HUDCC.
(3) Sale of real properties utilized for
socialized housing as defined under
RA No. 7279, wherein the priceceiling per unit is P150,000 or as may
from time to time be determined by
the HLURB and other related laws.
Socialized housing refers to
housing programs and projects
covering houses and lots or homelotsonly undertaken by the Government
or the 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 provisions of RA No. 7279,otherwise known as the Urban
Development and Housing Act of
1992. Socialized housing shall also
refer to projects intended for the
underprivileged and homeless wherein
the housing package selling price iswithin the lowest interest rates under
the Unified Home Lending Program
(UHLP) or any equivalent housing
program of the Government, theprivate sector or non-government
organizations.
(4) Sale by real dealers and/or lessors of
house and lot and other residentialdwellings valued at One Million
Pesos (P1,000,000.00) and below:
Provided, That not later than January
31, 1998 and each calendar yearthereafter, the amount of One Million
Pesos (P1,000,000.00) shall be
adjusted to its present value using the
Consumer Price Index, as published
by the National Statistics Office
(NSO);
(x) Lease of a residential unit with a monthly (x) Lease of residential units with a monthly
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rental not exceeding Eight thousand pesos
(P8,000): Provided, That not later than
January 31st of the calendar year subsequentto the effectivity of Republic Act No. 8241
and each calendar year thereafter, the amount
of Eight thousand pesos (P8,000) shall be
adjusted to its present value using theConsumer Price Index as published by the
National Statistics Office (NSO);
rental per unit not exceeding Eight Thousand
Pesos (P8,000.00, regardless of the amount
of aggregate rentals received by the lessorduring the year, Provided, That the
exemption likewise applies to lease of
residential units where the monthly rental per
unit exceeds Eight Thousand Pesos but theaggregate rentals of the lessor during the year
do not exceed P550,000. Provided finally
that not later than January 31, 1998 and each
calendar year thereafter, the amount of
P8,000.00 shall be adjusted to its present
value using the Consumer Price Index, aspublished by the NSO;
The term residential units shall refer to
apartments, houses and/or lands on which
anothers dwelling is located, used for
residential purposes and shall include not
only buildings, parts or units thereof usedsolely as dwelling places (e.g., dormitories,
rooms and bed spaces) except motels, motel
rooms, hotels and hotel rooms. Residential
units shall also include apartments, houses,
building, parts or units thereof used for home
industries, retail stores or other business
purposes, if the tenant thereof and his family
actually live therein and use them principallyfor dwelling purposes.
The term unitshall mean