Consolidated VAT

TITLE IV VALUE-ADDED TAX
CHAPTER I IMPOSITION OF TAX

105 106 Persons Liable 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 Value-added Tax on Importation of Goods (A) In General (B) Transfer of Goods by Tax-exempt Persons 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 Exempt Transactions Tax Credits (A) Creditable Input Tax (B) Excess Output or Input Tax (C) Determination of Creditable Input Tax Transitional/Presumptive Input Tax Credits (A) Transitional Input Tax Credits (B) Presumptive Input Tax Credits 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
107 108
109 110
111 112
CHAPTER II COMPLIANCE REQUIREMENTS

113 114 Invoicing and Accounting Requirements for VAT-Registered Persons (A) Invoicing Requirements (B) Accounting Requirements 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 Power of the Commissioner to Suspend the Business Operations of a Taxpayer
115
1997 National Internal Revenue Code
Consolidated Revenue Regulations 07-95
Section 105 Persons liable

1997 National Internal Revenue Code CHAPTER I IMPOSITION OF TAX
SECTION 105 PERSONS LIABLE
Consolidated Revenue Regulations 07-95 COVERAGE, NATURE, BASIS AND RATE OF VALUE-ADDED TAX (VAT)
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 or properties, or renders services, and any person who imports goods shall be liable to VAT imposed in Sections 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 person refers 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 (reordered)
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.
The value-added tax is an indirect tax and the amount 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 tax may 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 at the 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 disposition of 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 12month period shall be considered principally for subsistence or livelihood and not in the course of trade or business.1
Section 105 Persons liable

The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons 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 be considered as being rendered in the course of trade or business. SECTION 4.99-2 VALUE-ADDED TAX: NATURE AND CHARACTERISTICS shifted from here.
SECTION 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.
Section 106 Value-added tax on sale of goods or properties

SECTION 106 VALUE-ADDED TAX SALE OF GOODS OR PROPERTIES (A) Rate and Base of Tax ON

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.
These shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (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.
Re-ordered text follows: (1) The term goods or properties shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: (a) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; 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; The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment; The right or the privilege to use motion picture films, films, tapes and discs; and 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 ordinary course of trade or business; 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; The right or the privilege to use in the Philippines any industrial commercial or scientific equipment; The right or the privilege to use motion picture films, film tapes and discs; and Radio, television, satellite transmission and cable television time.
2.
(b)
3.
(c)
4. 5.
(d)
(e)
Sale of real properties held primarily for sale to customers or held for lease in the ordinarily course of 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/or constructively 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

1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95
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 limit set by law. Initial payments do not include the amount of mortgage on the real property sold except when such mortgage exceeds the cost or other basis of the property to the seller, in which case, the excess shall be considered part of the initial payments. Also excluded from 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 dealer includes any person engaged in the business of buying, developing, selling, exchanging real properties as principal and holding himself out as a full or part-time dealer in real estate. Transmission of property to a trustee shall not be subject to VAT if the property is to be merely held in trust for the trustor and/or beneficiary. 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. The excise 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 price refers to the market value shown in the latest declaration or the consideration whichever is higher.

Taxable sale refers to the sale, barter, exchange and/or lease of goods or properties, including transactions deemed sale and the performance of service 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 Title VI 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 sales means: (1) The sale and actual shipment of goods from the Philippines to 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 currency or its equivalent in goods or services, and accounted for in (a) Export sales Export Sales shall mean: (1) The sale and actual shipment of goods from the Philippines to 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 paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko ng Pilipinas (BSP);
Note 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.

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 exportoriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said 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); Sale of raw materials or packaging materials to exportoriented enterprise whose export sales exceed seventy percent (70%) of total annual production; Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws. (4) (5)

(2) The sale of raw materials or packaging materials to a non-resident 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 currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); The sale of raw materials or packaging material to an exportoriented enterprise whose export sales exceed seventy percent (70%) of total annual production; Any enterprise whose export sale exceed 70% of the total annual production of the preceding taxable year shall be considered an exportoriented enterprise upon accreditation as such under the provisions of the Export Development Act (R.A. 7844) and its implementing rules and regulations. Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and Those considered export sales under Articles 23 and 77 of Executive Order No. 226, otherwise known as the Omnibus 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. 226 shall 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 a registered export producer or the net selling price of export products sold by a registered export producer to another 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
(3)
(3)
(4) (5)

deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents: Provided, further, That without actual exportation the following shall be considered constructively exported for purposes 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 under guidelines 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 repacked products 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 in fact 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 assembled goods 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

(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.

also be considered export sales. (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 ZERORATED 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 or international agreements, e.g. ADB, IRRI. Under these 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) (1) Transactions Deemed Sale Transfer, use or consumption not in the course of trade or business of goods or properties originally intended for sale or for use in the course of business; Distribution or transfer to: (a) Shareholders or investors as share in the profits of the VAT-registered persons; or Creditors in payment of debt; (B) 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 or properties 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; Distribution or transfer to: (1) Shareholders or investors are share in the profits of the VAT-registered person; Property dividends which constitute 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
The following transactions shall be deemed sale:
(2)
(b) (3)
Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned; and Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.
(4)

shareholders shall be subject to VAT based on the zonal value or fair market value at the time of distribution, whichever is applicable. (2) (C) Creditors in payment of debt or obligation.
Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period is not deemed sold; Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock-intrade, supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or successor. The following circumstances shall, among others, give rise to transactions deemed sale for purposes of this Section; (i) (ii) Change of ownership of the business; and Dissolution of a partnership other than a general professional partnership and creation of a new partnership which takes over the business.
(D)
SECTION [4.100-5] 4.106-5 CHANGES IN OR CESSATION OF STATUS AS A VATREGISTERED PERSON (re-ordered) (C) Changes in or Cessation of Status of a VAT-registered Person (a) Subject to tax
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 of a person as a VAT-registered person changes or is terminated.
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 valueadded 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; Approval of a request for cancellation of registration due to reversion to exempt status.
(2)

(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 the Code with respect to his export sales only, and Section [103(t)] 109 (u) of the Code. 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. Not subject to output tax
(4)
(b)
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 group of 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. Change in the trade or corporate name of the business; 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.
(2) (3)
SECTION [4.100-6] 4.106-6 COMPUTATION OF OUTPUT TAX (re-ordered) (D) (1) Determination of the Tax The tax shall be computed by multiplying the total amount indicated in the invoice by oneeleventh (1/11). Sales Returns, Discounts Allowances and Sales 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 be computed by multiplying the zonal value or market
(2)

The value of goods or properties sold and subsequently returned or for which allowances were granted by a VAT-registered person may be deducted 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 of 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 quarter it was given.

value, as the case may be, by 1/11.3 Output tax means 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 is unreasonably 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 sales previously recorded as taxable sales. On transactions deemed sale
(b)
The output tax equivalent to 10% based on the market value of the goods deemed sold shall be imposed 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)
3
Basis of tax arising from changes in or
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 is thus deemed inclusive of the value-added tax due thereon. SECTION 2. Penalty. Failure or refusal to comply with the requirement in Section 1 hereof shall, 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.

cessation of status of a taxpayer as a VATregistered 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 VATregistered person, shall be based on the acquisition cost 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, be issued 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 of Finance, 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 the actual market value. SECTION 4.110-5 CHANGES IN OR CESSATION OF STATUS AS A VAT-REGISTERED PERSON shifted from here. SECTION 4.110-6 COMPUTATION OF OUTPUT TAX shifted from here.
Section 107 Value-added tax on importation of goods

SECTION 107 VALUE-ADDED IMPORTATION OF GOODS (A) In General TAX ON

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 total value, used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise tax, if any, and other charges prior to the 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 for computing the value added tax. Landed cost consists of the 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. Importation of petroleum products and the raw materials to be used by the importer himself in the manufacturer thereof, subject to excise tax under Title 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.
There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be 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.
(B)
Transfer of Goods by Tax-exempt Persons
(b)
Applicability and Payment
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 nonexempt 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 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.
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. Importer refers to any person who brings goods into the Philippines, whether or not made in the course of his trade or business. It includes nonexempt 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, the latter shall be considered the importers thereof who shall be liable for VAT on such importation.
Section 109 Exempt transactions

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%) of gross 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 or repacking 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; dealers in 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 except those 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 be subject to VAT. Sale or exchange or services means the performance of all kind of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by the following: (1) (2) (3) (4) (5) (6) construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services;4 lessors or distributors cinematographic films; of
persons engaged in milling, processing, manufacturing or repacking 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; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire; other domestic common carriers by land, air and water relative to their transport of goods or cargoes; 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 the preceding year does not exceed Ten
(7)
(8)
(9) (10) (11)
(12)
(13)
Defined at end of section.

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; 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.
(15)
(16)
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; The lease or the use of, or the right to use of any industrial, commercial or scientific equipment; The supply of scientific, technical, industrial or commercial knowledge or information; 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 in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3); 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; 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; The lease of motion picture films, films, tapes and discs; and 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. The lease or the use of, or the right to use any industrial, commercial or scientific equipment. The supply of scientific, technical industrial or commercial knowledge or information; 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 in subparagraph (2) hereof or any such knowledge or information as is mentioned in subparagraph (3) hereof; or The supply of services by a nonresident person or his/its employee in connection with the use of property or rights belongings to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person; 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
(2)
(2)
(3) (4)
(3)
(4)
(5)
(5)
(6)
(6)
(7) (8)

cable television time. Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines. The term gross receipts 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 valueadded tax. (b) (7) (8)

scheme; The lease of motion picture films tapes and discs; 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. 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 be based 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 owner by 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 a citizen 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) (ii) (iii) a loan to the lessor from the lessee, or an option money for the property, or a security deposit to insure the faithful performance of certain obligations of the lessee to the lessor, or pre-paid rental.
(iv)
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.

However, a security deposit that is applied to rental shall be subject to VAT. If the advance payment is, in fact, a pre-paid rental, 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 the Code. Non-life insurance companies including surety, fidelity, indemnity and bonding companies shall include all individuals, partnerships, associations, or corporations, including professional reinsurers defined in Section 280 of PD 612, otherwise known as The Insurance Code of the Philippines, mutual benefit associations and governmentowned 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 premiums collected, whether paid in money, notes, credits or any substitute for money. Gross receipts refer 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 payments actually 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

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. 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 transfer of the amounts retained by the contractee to the account of the contractor.
(2)
(3)
(e)
Dealers in securities and lending investors shall be subject to VAT on the basis of the gross income they derive, respectively, from their sale or exchange of securities or their lending activities. Dealer in securities means a merchant of stock or securities, whether an individual partnership or corporation, with an established place of business, 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 with a view to the gains and profits that may be derived therefrom. Lending investor 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. 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 telephone and 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

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, as amended by these Regulations. Likewise, franchise grantees of electric, gas and 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 and telegraph 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 conversation originating 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 based on 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. All receipts from service, hire, or operating lease of transportation equipment not subject to the percentage tax on domestic common carriers 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
(h)

services to the public and shall include transportation contractors. Operators of taxicabs, utility cars for rent or hire 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; receiving good and merchandise to be stored in his warehouse for hire; keeping and storing goods for other, as a business and for use.
2. 3. (B) TRANSACTIONS SUBJECT 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 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 services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;
(2)
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 services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); Services other than processing, manufacturing or repacking for other persons doing business outside the Philippines of
(3)
(2)
Note 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.

(4) (5) Services rendered to vessels engaged exclusively in international shipping; and Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production. (3)

goods which are subsequently exported, as well as services by a resident to a nonresident foreign client, such as project studies, information services, engineering and architectural designs and other similar services, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. 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 of such services to zero percent (0%) rate; Services rendered to vessels engaged exclusively in international shipping; Services performed by subcontractors and/or contractors duly accredited by either the Board of Investments or the Export Development Council in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of the total annual production. Effectively zero-rated sale of services
(4) (5)
(c)
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 exemptions form 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 oneeleventh (1/11). SECTION 109 EXEMPT TRANSACTIONS 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 of properties 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 not subject to VAT. On the other hand, a VATregistered purchaser of VAT-exempt
The following shall be exempt from the value-added tax:

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 the land where the same are produced; Sale of cotton and cotton seeds in their original state; and copra; (b) (c) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor. Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked rice, corn grits, raw cane sugar and molasses, and ordinary salt shall be considered in their original state: (c) (a) Sale of nonfood agricultural, marine and forest products in their original state by the primary producer or the owner of the land where the same are produced. In the hands of a subsequent seller, the sale shall be subject to VAT. Sale of cotton and cotton seeds in their original state; and copra; Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor. Livestock shall include cows, bulls and calves, 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 salt shall 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
(b)

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 blanco directo 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 or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets); (d) Sale or importation of fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets); Specialty feeds refer to non-agricultural feeds or food for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets. (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; 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; Importation of passenger and/or cargo vessels 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; Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines; Importation of professional instruments and implements, wearing apparel, domestic animals, 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 of the Code; 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; 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; Importation of personal and household effects belonging to residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided, that such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines; Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery and other goods for use in the manufacture and merchandise of any kind in
(f)
(f)
(g)
(g)
(h)
(h)
(i)
(i)

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 their arrival, upon the production of evidence satisfactory to the Commissioner, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide; (j) Services subject to percentage tax under Title V; (j)

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 their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bonafide; 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 nonVAT-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 does not exceed the amount of FIVE HUNDRED FIFTY THOUSAND PESOS (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); 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); Services rendered by international air and shipping carriers doing business in the Philippines (Section [115-A] 118 of the Code); Services rendered by franchise grantees of radio and/or television broadcasting whose annual gross receipts of me preceding year does not exceed Ten Million Pesos (P10,000,000.00), and by franchise grantees of electric, gas and water utilities (Section [117] 119 of the Code); Overseas dispatch, messages or communications originating from the Philippines (Section [118] 120, NIRC).
(2)
(3)
(4)
(5)

(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); Services rendered by fire, marine or miscellaneous insurance agents of foreign insurance companies (Section [122] 124 of the Code); Services of proprietors, lessees or operators of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, JaiAlai and race tracks (Section [123] 125 of the Code); and Receipts on sale, barter or exchange of shares of stock listed and traded through the local stock exchange or through initial public offering. (Section [124-A] 127 of the Code).
(7)
(8)
(9)
(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 is subject to VAT.
(m)
Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports (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 and Sports (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

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 DECS and/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; Services rendered by individual pursuant to an employer-employee relationship; Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia Pacific Region and do not earn or derive from the Philippines; Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws except those granted under the following laws: (1) (2) PD No. 66 Export Processing Zone Authority (EPZA)-registered firms; PD No. 529 Petroleum Exploration Concessionaires under the Petroleum Act of 1949; and PD 1590 Philippine Air Lines (PAL) relative to domestic transport of goods or cargoes;
(o) (p)
Services rendered by individuals pursuant to an employer-employee relationship; Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines; Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and 1590;
(o) (p)
(q)
(q)
(3)
(r)
Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce, whether in its original state or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce; Sales by electric cooperatives duly registered with 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 well as sale of their produce, whether in its original state or processed form, to nonmembers; 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; Sales by electric cooperatives duly registered with the CDA or National Electrification Administration (NEA), relative to the
(s)
(s)

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 duly registered with the Cooperative Development Authority whose lending operation is limited to their members; Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the Cooperative Development Authority: Provided, That the share capital contribution of each member does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate capital and net surplus ratably distributed among the members; (t)

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. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the CDA, whose lending operation is submitted to their members; Sales by non-agricultural, non-electric and non-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-electric and non-credit, cooperatives of machineries and equipment, including spare parts thereof, to be used by them are subject to VAT.
(u)
(u)
(v) (w)
Export sales by persons who are not VATregistered; Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, 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 million pesos (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);
(v) (w)
Export sales by persons who are not VATregistered; The following sales of real properties are exempt 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 or business: 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 Land Use Regulatory Board (HLURB) and other related laws; Low-cost housing refers to housing projects intended for home-less lowincome family beneficiaries, undertaken by the Government or private developers, which may either be a subdivision or a condominium registered and licensed by the Housing and Land Use Regulatory Board/Housing and Urban
(2)

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 per unit under RA No. 7279, otherwise known as the Urban Development and 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 price ceiling 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 homelots only 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 is within the lowest interest rates under the Unified Home Lending Program (UHLP) or any equivalent housing program of the Government, the private sector or non-government organizations. (4) Sale by real dealers and/or lessors of house and lot and other residential dwellings valued at One Million Pesos (P1,000,000.00) and below: Provided, That not later than January 31, 1998 and each calendar year thereafter, 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

rental not exceeding Eight thousand pesos (P8,000): Provided, That not later than January 31st of the calendar year subsequent to 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 the Consumer 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 lessor during the year, Provided, That the exemption likewise applies to lease of residential units where the monthly rental per unit exceeds Eight Thousand Pesos but the aggregate 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, as published 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 used solely 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 principally for dwelling purposes. The term unit shall mean an apartment unit in the case of apartments, house in the case of residential houses; per person in me case of dormitories, boarding houses and bed spaces; and per room in case of rooms for rent.
(y)
Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements; and Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of Five hundred fifty thousand pesos (P550,000): Provided, That not later than January 31st of the calendar year subsequent to the effectivity of Republic Act No. 8241 and each calendar year thereafter, the amount of Five hundred fifty thousand pesos
(y)
Sale, importation, printing or publication of books and any newspaper including periodical), magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements; Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts does not exceed the amount of P550,000.00: Provided That not later than January 31, 1988 and each calendar year thereafter, amount of P550,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the
(z)
(z)

(P550,000) shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO). The foregoing exemptions to the contrary notwithstanding, any person whose sale of goods or properties or services which are otherwise not subject to VAT, but who issues a VAT invoice or receipt therefor shall, in addition to his liability to other applicable percentage tax, if any, be liable to the tax imposed in Section 106 or 108 without the benefit of input tax credit, and such tax shall also be recognized as input tax credit to the purchaser under Section 110, all of this Code.

NSO.
The foregoing exemptions to the contrary notwithstanding, any person, whose sale of goods, properties or services which are otherwise not subject to VAT, but who issues a VAT invoice or receipt therefor, shall, in addition to his liability to other applicable percentage tax, if any, be liable to the tax imposed in Sec. [100] 106 or [102] 108 without the benefit of input tax credit, and such tax shall [not] also be recognized as input tax credit to the purchaser under Section [104] 110, all of the Code.
Section 110 Tax credits

1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95 TAX CREDITS

SECTION 110 TAX CREDITS (A) (1) Creditable Input Tax Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: (a) Purchase or importation of goods: (i) (ii) For sale; or For conversion into or intended to form part of a finished product for sale including packaging materials; or For use as supplies in the course of business; or For use as materials supplied in the sale of service; or For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts.

SECTION [4.104-1] 4.110-1 CREDITS FOR INPUT TAX Input tax means the value-added tax due from or paid by a VAT-registered person on importation of goods or local purchases of goods or services, including lease or use of property, from another VAT-registered person in the course of his trade or business. It shall also include the transitional or presumptive input tax determined in accordance with Section [105] 111 of the Code. It includes input taxes which can be directly attributed to transactions subject to the value-added tax plus a ratable portion of any input tax which cannot be directly attributed to either the taxable or exempt activity. Any input tax evidenced by a VAT invoice or official receipt issued by a VAT-registered person in accordance with Section [108] 113 of the Code, on the following transactions, shall be creditable against the output tax: (a) Purchase or importation of goods 1. 2. For sale; or For conversion into or intended to form part of a finished product for sale, including packaging materials; or For as supplies in the course of business; or For use as raw materials supplied in the sale of services; or For use in trade or business for which deduction for depreciation or amortization is allowed under the Code, except automobiles, aircraft and yachts. Automobile as contemplated in this section, shall mean a 4-wheeled luxury motor vehicle, which is used in the trade or business of the VAT taxpayer, propelled by any motive fuel with engine displacement of 2,000 cc or more, and specially designed for the transport of persons and not use primarily for the carrying of freight or merchandise; Provided, however, that the definition shall not apply to those required in the trade or business of the VAT taxpayer, such as hotel limousines, funeral hearse, ambulances and similar vehicles. (b) Purchase of real properties for which a VAT
(iii) (iv) (v)
(b)
Purchase of services on which a value-added tax has been actually paid.
3. 4. 5.
(2)
The input tax on domestic purchase of goods or properties shall be creditable. (a) To the purchaser upon consummation of sale and on importation of goods or properties; and To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs.
(b)
However, in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. (3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows: (a) Total input tax which can be directly attributed to transactions subject to value-added tax; and

Section 111 Transitional/presumptive input tax credits

SECTION 111 TRANSITIONAL/ PRESUMPTIVE INPUT TAX CREDITS (A) Transitional Input Tax Credits A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an inventory according to rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to eight percent (8%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax.

SECTION [4.105-1] 4.111-1 TRANSITIONAL/ PRESUMPTIVE INPUT TAX CREDITS (a) Transitional Input Tax Beginning Inventories Credits on
Taxpayers who became VAT-registered persons upon exceeding the minimum turnover of P550,000.00, or who voluntarily register even if their turnover does not exceed P550,000.00 (except franchise grantees of radio and television broadcasting whose threshold is P10,000,000.00) shall be entitled to a transitional input tax on the inventory on hand as of the effectivity of their VAT registration, on the following: (1) (2) goods purchased for resale in their present condition; materials purchased for further processing, but which have not yet undergone processing; goods which have been manufactured by the taxpayer; goods in process and supplies, all of which are for sale or for use in the course of the taxpayers trade or business as a VATregistered person.
(3) (4)
The transitional input tax shall be eight percent (8%) of the value of the beginning inventory or actual VAT paid on such, goods, materials and supplies, whichever is higher, which amount may be allowed as tax credit against the output tax of the VATregistered person. The value allowed for income tax purposes on inventories shall be the basis for the computation of the 8% transitional input tax, excluding goods that are exempt from VAT under Section [103] 109 of the Code. The threshold amount of P550,000.00 applies only for the calendar year 1997. However, not later than the 31st day of January of each calendar year thereafter, the said amount shall be adjusted to its present value using the Consumer Price Index as published by the NSO. (B) (1) Presumptive Input Tax Credits 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, creditable against the output tax, equivalent to one and one-half percent (1%) of the gross value in money of their purchases of (b) (1) Presumptive Input Tax Credits 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, creditable against the output tax, equivalent to one and one half percent (1.5%) of the gross value in money of their purchases of
Section 111 Transitional/presumptive input tax credits

primary agricultural products which are used as inputs to their production. As used in this Subsection, the term processing shall mean pasteurization, canning and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product in such manner as to prepare it for special use to which it could not have been put in its original form or condition. (2) Public works contractors shall be allowed a presumptive input tax equivalent to one and one-half percent (1%) of the contract price with respect to government contracts only in lieu of actual input taxes therefrom. (2)

primary agricultural products which are used as inputs to their production. As used in this paragraph, the term processing shall mean pasteurization, canning and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product in such manner as to prepare it for special use to which it could not have been put in its original form or condition. Public works contractors shall be allowed a presumptive input tax equivalent to one and one-half percent (1.5%) of the contract price with respect to government contracts only in lieu of actual input taxes therefrom.
Only VAT-registered persons shall be entitled to the transitional and presumptive input tax credits.
Section 112 Refunds or tax credits of input tax

SECTION 112 REFUNDS OR TAX CREDITS OF INPUT TAX (A) Sales Zero-rated or Effectively Zero-rated

SECTION [4.106-1] 4.112-1 REFUNDS OR TAX CREDITS OF INPUT TAX (a) Zero-rated sales of goods or properties or services
Any VAT-registered person, whose sales are zerorated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. (B) Capital Goods A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made. (C) Cancellation of VAT Registration A person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Section 106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax which may be used in payment of his other internal revenue taxes. (D) Period within which Refund or Tax Credit of Input Taxes shall be Made
Only a VAT-registered person may be given a tax credit certificate or refund of VAT paid corresponding to the zero-rated sales of goods, properties or services, excluding the presumptive input tax and to the extent that such input tax has not been applied against the output tax. The application should be made within two (2) years after the close of the taxable quarter when the sales were made. However, where the taxpayer is engaged in both zero-rated or effectively zero-rated sales and in taxable or exempt sales of goods, properties or services, and where the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transaction, only the proportionate share of input taxes allocated to zerorated or effectivity zero-rated sales can be refunded or issued a tax credit certificate. (b) Capital Goods Only a VAT-registered person may apply for issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased. The refund shall be allowed to the extent that such input taxes have not been applied against output taxes. The application should be made within two (2) years after the close of the taxable quarter when the importation or purchase was made. Refund of input taxes on capital goods shall be allowed only to the extent that such capital goods are used in VAT taxable business. If it is also used in exempt operations; the input tax refundable shall only be ratable portion corresponding to the taxable operations. Capital goods or properties refer to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section [29 (f)] 34(F), used directly or indirectly in the production or sale of taxable goods or services. (c) Land Only a VAT-registered person may apply for issuance of a tax credit certificate or refund of input taxes on land purchased to the extent that such input tax has not been applied to output tax. The application should be made within two (2) years after the close of the taxable quarter when the purchase was made. Refund of input taxes on land shall be allowed only
In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty
Section 113 Invoicing and accounting requirements for VAT-registered persons

1997 National Internal Revenue Code Consolidated Revenue Regulations 07-95 INVOICING REQUIREMENTS
SECTION 113 INVOICING AND ACCOUNTING REQUIREMENTS FOR VATREGISTERED PERSONS (A) Invoicing Requirements A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt: (1) A statement that the seller is a VATregistered person, followed by his taxpayers identification number (TIN); and The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. SECTION [4.108-1] REQUIREMENTS 4.113-1 INVOICING
All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. 2. 3. 4. the name, TIN and address of seller; date of transaction; quantity, unit cost and description of merchandise or nature of service; the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client; the word zero rated imprinted on the invoice covering zero-rated sales; and the invoice value or consideration.
(2)
5. 6.
In the case of sale of real property subject to VAT and where the zonal or market value is higher than the actual consideration, the VAT shall be separately indicated in the invoice or receipt. Only VAT-registered persons are required to print their TIN followed by the word VAT in their invoice or receipts and this shall be considered as a VAT Invoice. All purchases covered by invoices other than VAT Invoice shall not give rise to any input tax. If the taxable person is also engaged in exempt operations, he should issue separate invoices or receipts for the taxable and exempt operations. A VAT Invoice shall be issued only for sales of goods, properties or services subject to VAT imposed in Sections 100 and 102 of the Code. The invoice or receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. SECTION [4.108-2] 4.113-2 INVOICING AND RECORDING DEEMED SALE TRANSACTIONS In the case of Section 4.[100] 106-a (A) of these Regulations, a memorandum entry in the subsidiary sales journal to record withdrawal of goods for personal use is required. In the case of Section 4. [100]106-4(B) and (C) of these Regulations, an
Section 113 Invoicing and accounting requirements for VAT-registered persons

invoice shall be prepared at the time of the occurrence of the transaction, which should include, all the information prescribed in Section 4.[108]1131. The data appearing in the invoice shall be duly recorded in the subsidiary sales journal. The total amount of deemed sale shall be included in the return to be filed for the month or quarter. In the case of Sec. 4.[100]106-4(D) an inventory shall be prepared and submitted to the Revenue District Officer who has jurisdiction over the taxpayers principal place of business not later than 30 days after retirement or cessation from business. An invoice shall be prepared for the entire inventory, which shall be the basis of the entry into the subsidiary sales journal. The invoice need not enumerate the specific items appearing in the inventory, but it must show the total amount. It is sufficient to just make a reference to the inventory regarding the description of the goods. However, the sale invoice number should be indicated in the inventory filed and a copy thereof shall form part of this invoice. If the business is to be continued by the new owners or successors, the entire amount of output tax on the amount deemed sold shall be allowed as output taxes. If the business is to be liquidated and the goods in the inventory are sold or disposed of to VAT-registered buyers, an invoice or instrument of sale or transfer shall to prepared citing the invoice number wherein the tax was imposed on the deemed sale. At the same time the tax paid corresponding to the goods sold should be separately indicated in the instrument of sale. (B) Accounting Requirements SECTION [4.108-3] 4.113-3 ACCOUNTING REQUIREMENTS Notwithstanding the provisions of Section 233, all persons subject to VAT under Sections [100] 106 and [102] 108 of the Code shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journal shall contain such information as may be required by the Commissioner of Internal Revenue.
Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.
Section 114 Return and payment of value-added tax

SECTION 114 RETURN AND PAYMENT OF VALUE-ADDED TAX (A) In General Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis. Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and pay the tax due thereon within twenty-five (25) days from the date of cancellation of registration: Provided, That only one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches. (B) Where to File the Return and Pay the Tax Except as the Commissioner otherwise permits, the return shall be filed with and the tax paid to an authorized agent bank, Revenue Collection Officer or duly authorized city or municipal Treasurer in the Philippines located within the revenue district where the taxpayer is registered or required to register.

SECTION [4.110-1] 4.114-1 FILING RETURN AND PAYMENT OF VAT (A) Filing of Return OF
Every person liable to pay VAT shall file a quarterly return of the amount of his gross sales or receipts within twenty (20) days following the close of taxable quarter using the latest version (April 2002 (ENCS version of Quarterly VAT Return (BIR Form 2550Q-April 2002 (ENCS) hereto attached as Annex A. The term taxable quarter shall mean the quarter that is synchronized to the income tax quarter of the taxpayer (i.e., the calendar or fiscal quarter). Amounts reflected in the monthly VAT declarations for the first two (2) months of the quarter shall still be included in the quarterly VAT return which reflects the cumulative figures for the taxable quarter. Payments in the monthly VAT declarations shall, however, be credited in the quarterly VAT return to arrive at the net VAT payable or excess input tax/over-payment as of the end of a quarter. "Example. Suppose the accounting period adopted by the taxpayer is fiscal year ending October 2003, the taxpayer has to file monthly VAT declarations for the months of November 2002, December 2002, and for the months February, March, May, June, August, and September for Year 2003, on or before the 20th day of the month following the close of the taxable month. His quarterly VAT returns corresponding to the quarters ending January, April, July, and October 2003 shall, on the other hand, be filed and taxes due thereon be paid, after crediting payments reflected in the Monthly VAT declarations, on or before February 25, May 25, August 25, and November 25, 2003, respectively. The monthly VAT Declarations (BIR Form 2550M) of taxpayers whether large or non-large shall be filed and the taxes paid not later than the 20 th day following the end of each month. (as amended by RR 4-2002 and 8-2002). (B) Payment of VAT All persons liable to VAT whether large or nonlarge shall pay the tax monthly based on the taxable sales/receipts for the month, using the monthly VAT declaration form within [twenty five (25)] twenty (20) days after the end of [the] each month; provided, however, that with respect to taxpayers enrolled with the electronic filing and payment system (EFPS), the deadline for electronically filing the monthly VAT declaration and paying the tax due thereon shall be five (5) days later than the deadline set in RR 4-2002. The declaration shall be

SECTION [4.110-2] 9.236-8 INDICATION OF TAXPAYER IDENTIFICATION NUMBER (TIN) For tax identification purposes, any person required under the authority of the Code to make, render, or file a return, statement, or a document, shall be supplied with or assigned a TIN, which shall be indicated on such return, statement or document. Any person who shall secure more than one TIN or who fails to indicate his correct TIN as required in the foregoing paragraph, shall be criminally liable under the provision of Section 27[4] 5 of the Code. (C) Withholding of Creditable Value-added Tax SECTION [4.110-3] 4.114-2 WITHHOLDING OF CREDITABLE VALUE-ADDED TAX AND FINAL VALUE ADDED TAXii (a) Withholding of Creditable VAT- The government or any of its political subdivisions, instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs) shall, before making payment on account of its purchase of goods from sellers and/or of services rendered by contractors/suppliers which are subject to VAT under Sections 106 and 108 of the Code, deduct and withhold VAT due at the rate of three percent (3%) of the gross sales, whether paid or payable, for the purchase of goods, and six percent (6%) on gross receipts for services rendered by contractors/serviceproviders, on every sale or installment payment which shall be creditable against the VAT liability of the seller or contractor/supplier: Provided, however, That in case of government public works contractors, the withholding tax rate shall be eight and one-half percent (8.5%). "(b) Withholding of Final VAT. The government or any of its political subdivisions, instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs), as well as private corporations, individuals, estates and trust, whether large or non-large taxpayers, shall withhold ten percent (10%) VAT with respect to the following payments: (1) Lease or use of properties or property rights owned by non-residents; (2) Services rendered to local insurance companies, with respect to reinsurance premiums payable to non-residents; and (3) Other services rendered in the Philippines by non-residents. "In remitting the VAT withheld, whether creditable or final, the withholding agent shall use BIR Form No. 1600-Remittance Return of Value-Added Tax and Other Percentage Taxes Withheld".
The Government or any of its political subdivisions, instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installment payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That in the case of government public works contractors, the withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent. The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made.

"The VAT withheld and paid for the non-resident recipient (remitted using BIR Form No. 1600), which VAT is passed on to the resident withholding agent by the non-resident recipient of the income, may be claimed as input tax by said VAT-registered withholding agent upon filing his own VAT Return, subject to the rule on allocation of input tax among taxable sales, zero-rated sales and exempt sales. The duly filed BIR Form No. 1600 is the proof or documentary substantiation for the claimed input tax or input VAT." "Nonetheless, if the resident withholding agent is a non-VAT taxpayer, said passed-on VAT by the nonresident recipient of the income, evidenced by the duly filed BIR Form No. 1600, shall form part of the cost of purchased services, which may be treated either as an "asset" or "expense", whichever is applicable, of the resident withholding agent. (as amended by RR 8-2002. Note: RR 14-2002 subjects the following gross payments by the government/government agencies and private entities to non-residents to a final withholding tax of 10%: gross payments from services of rendered in the Philippines by non-residents including lease or use of properties or property rights owned by non-residents; and services rendered to local insurance companies with respect to reinsurance premiums payable to non-resident insurance or reinsurance companies.
RR 4-2002 provided that: The VAT (and percentage) withholding agents, whether large or non-large taxpayers, government or private, shall accomplish the Monthly Remittance Return of VAT (and other percentage taxes withheld whether for the withholding of VAT (or percentage tax) by large and non-large taxpayers, shall be filed and payments made within ten (10) days following the end of the month withholding wasmade; which deadline shall be extended for an additional five (5) for taxpayers who are availing of the Electronic Filing Payment and Payment System (EFPS) of the BIR from the time that the return is made available in the System (EFPS). Thus in the remittance of VAT withheld, whether creditable or final, the type of form to be used by the withholding agent is BIR FORM No. 1600 and

not BIR Form Nos. 2550M/2550Q (Monthly VAT Declaration/Quarterly VAT Return) which are the forms used by the income recipients in the declaration of their monthly quarterly taxable and non-taxable sales/receipts. With respect to VAT withheld on income payments made to non-residents, as provided in Section 6 hereof, the duly filed BIR Form No. 1600 and proof of payment thereof shall serve as sufficient basis for the claim of input tax to be applied against the output tax that may be due from the VAT registered withholding agent . If the withholding agent is a non-VAT registered taxpayer, the passed on VAT withheld shall form part of the cost of the service or treated as an expense, whichever is applicable. (4 RR 4-2002). Every government withholding agent, whether a large or non-large taxpayer, shall furnish each seller of goods and services from whom the value added taxes have been deducted and withheld, the Certificate of Creditable Tax Withheld at Source (BIR Form NO. 2307) to be accomplished in quadruplicate, the first three copies of which shall be given to the sller/payee not later than the 10 th day of the following month. The fourth copy shall be the file copy of the withholding agent. The rule stated herein shall also apply to private payors/persons in control of the payment, whether large or non-large taxpayers for: The lease or use of properties or property rights owned by non-residents; Services rendered to local insurance companies whether large or non-large taxpayers with respect to insurance premiums payable to non-resident insurance or reinsurance companies; and Services rendered in the Philippines by non-residents; but the certificate or statement to be issued is the Certificate of Final Tax Withheld at Source (BIR Form No. 2306) which should be issued upon the request of the payee.
(6 RR 4-2002). For purposes of claiming or applying the creditable taxes withheld against the taxes due on the returns to be filed by the payee, the payee shall attach a copy of the Certificate of Creditable Tax Withheld at Source (BIR Form 2307) issued by the

withholding agent to the Monthly VAT Declaration (BIR Form No. 2550M) and also to the Quarterly VAT Return (BIR Form No. 2550Q). In addition to attaching the Certificate (BIR Form No. 2307) to the applicable return to be filed, a schedule summarizing the applied creditable withholding tax, as evidenced by the Certificate (BIR Form No. 2307), shall be attached as an integral part of the return. The schedule should show the following: 1. Payor's Name; 2. Nature of Income Payment; 3. Period Covered; 4. Tax Base; 5. Rate; 6. Applied Tax Withheld; and 7. Unapplied Tax Withheld in the Current Return Period. Provided, however, that for taxpayers who are enrolled in EFPS, the filing of the Certificate (BIR Form No. 2307) attached to the income tax returns (quarterly or annual), VAT declarations/returns (monthly or quarterly), and percentage tax returns by the taxpayer-payee shall be made in accordance with the rules set in the Revenue Regulations governing EFPS (8 RR 4-2002). Payors reported by the payees for not having issued the Certificate of Tax Withheld at Source, which report has been validated to be correct, shall be subject to mandatory audit on their withholding tax liabilities and to other appropriate sanctions under the Tax Code and applicable regulations. (9 RR-42002) Note The transitory provisions of RR 4-2002 provide that: Attachments of the Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) to the returns prescribed in Section 8 hereof shall take effect with respect to the monthly, quarterly or annual returns due to be filed after March 31, 2002, without prejudice to the application of existing rules on returns filed prior to March 31, 2002. The change in the due dates in the filing of returns/forms under Sections 2, 3, 4, 5, 6 and 7 hereof shall likewise apply to March 2002 returns/forms that are due for filing in April 2002, except for the due date of BIR Form No. 1603 for large and non-large taxpayers, and of BIR Form No. 1600 for large taxpayers, which will be covered by these Regulations starting the quarter or month of April 2002.
SECTION 4.110-4
SUBMISSION OF THE

NAMES OF QUARTERLY SUMMARY LISTS OF SALES/PURCHASESiii a. Persons Required to Submit Summary Lists of Sales/Purchases. (1) Persons Required to Submit Summary Lists of Sales. All persons liable for VAT such as manufacturers, wholesalers, service-providers, among others, with quarterly total sales/receipts (net of VAT) exceeding Two Million Five Hundred Thousand Pesos (P2,500,000). (2) Persons Required to Submit Summary Lists of Purchase. All persons liable for VAT such as manufacturers, service-providers, among others, with quarterly total purchases (net of VAT) exceeding One Million Pesos (P1,000,000). b. When and Where to File the Summary Lists of Sales/Purchases. The quarterly summary list of sales or purchases, whichever is applicable, shall be submitted to the RDO or LTDO or LTAD having jurisdiction over the taxpayer, on or before the twenty-fifth (25th) day of the month following the close of the taxable quarter (VAT quarter)calendar quarter or fiscal quarter. c. Information that Must be Contained in the Quarterly Summary List of Sales to be Submitted. The quarterly summary list must contain the monthly total sales generated from regular buyers/customers, regardless of the amount of sale per buyer/customer, as well as from casual buyers/customers with individual sales amounting to P100,000 or more. For this purpose, the term "regular buyers/customers" shall refer to buyers/customers who are engaged in business or exercise of profession and those with whom the taxpayer has transacted at least six (6) transactions regardless of amount per transaction either in the previous year or current year. The term "casual buyers/customers", on the other hand, shall refer to buyers/customers who are engaged in business or exercise of profession but did not qualify as regular buyers/customers as defined in the preceding statement. The foregoing paragraph, notwithstanding, information pertaining to sales made to buyers not engaged in business or practice of profession (e.g., foreign embassies) may still be required from the seller the details of which shall be covered by a separate revenue issuance. The Quarterly Summary List of Sales to Regular Buyers/Customers and Casual Buyers/Customers and Output Tax shall reflect the following:

(1) BIR-registered name of the buyer who is engaged in business/exercise of profession; (2) Taxpayer Identification Number of the buyer (Only for sales that are subject to VAT); (3) Exempt Sales; (4) Zero-rated Sales; (5) Sales Subject to VAT (exclusive of VAT); and (6) Output Tax (VAT on sales). (The total amount of sales shall be systemgenerated) d. Information that must be Contained in the Quarterly Summary List of Purchases. The following information must be indicated in the following quarterly summary schedules of purchases: (1) The Quarterly Summary List of Local Purchases and Input Tax. a. BIR-registered name of the seller/supplier/service-provider; b. Address of seller/supplier/serviceprovided; c. Taxpayer Identification Number (TIN) of the seller; d. Exempt Purchases; e. Zero-rated Purchases; f. (i) Purchases Subject to VAT (exclusive of VAT) on services; (ii) Purchases Subject to VAT (exclusive of VAT) on capital goods; and (iii) Purchases Subject to VAT (exclusive of VAT) on goods other than capital goods g. Creditable } (to be Input Tax; and } computed not } on a per h. Non-Creditable } supplier basis Input Tax. } but on a per } month basis) (The total amount of purchases shall be systemgenerated) "(2) The Quarterly Summary List of Importations (a) The import entry declaration number; (b) Assessment/Release Date; (c) The date of importation; (d) The name of the seller; (e) Country of Origin; (f) Dutiable Value; (g) All Charges Before Release From Customs' Custody; (h) Landed cost: (i) Exempt; (ii) Taxable (Subject to VAT); (i) VAT paid; (j) Official Receipt (OR) Number of the

Official Receipt evidencing payment of the tax; and (k) Date of VAT payment For the claimed input tax arising from services rendered in the Philippines by non-residents, no summary list is required to be submitted. e. Rules in the Presentation of the Required Information in the Summary Schedules. (1) The summary schedules of sales to regular buyers/customers shall not only refer to sales subject to VAT but shall likewise include exempt and zerorated sales. (2) The summary schedule of purchases likewise shall not only refer to purchases subject to VAT but also to exempt and zero-rated purchases. (3) The names of sellers/suppliers/serviceproviders and the buyers/customers shall be alphabetically arranged and presented in the schedules. (4) All the summary lists or schedules mentioned above for submission to the BIR shall mention as heading or caption of the report/list/schedule the BIR-registered name, trade name, address and Taxpayer Identification Number (TIN) of the taxpayer-filer and the covered period of the report/list/schedule. (5) Failure to mention the TIN of the buyer in the "Schedule of Sales" would not have any effect on the seller but may be a ground for the audit of the records of the buyer or of both the buyer and the seller. (6) The quarterly summary lists shall reflect the consolidated monthly transactions per seller/supplier or buyer for each of the three (3) months of the VAT taxable quarter of the taxpayer as reflected in the quarterly VAT return except the summary list of importation which shall show the individual transactions for the month for each month of the taxable quarter/VAT quarter. Thus, the period covered by the aforementioned summary list required to be submitted to the BIR shall be the covered period of the corresponding quarterly VAT return. (7) The Quarterly Summary List of Sales and Purchases shall be submitted in magnetic form using 3.5-inch floppy diskettes following the format provided in Subsection (g) hereof. To provide for a clear-cut rule on the mandatory submission of the said summary lists in diskette form, the following shall be observed: (a) Submission of said summary lists in diskette form shall be required for the taxable quarter where the total sales (taxable-net of VAT, zero-rated, exempt) exceed Two Million Five Hundred Thousand (P2,500,000) or total purchases (taxable-net of VAT, zero-rated, exempt) exceed

One Million Pesos (P1,000,000). Thus, if the total quarterly sales amounted to P3,000,000 and the total quarterly purchases amounted to P900,000, the quarterly summary list to be submitted shall only be for sales and not for purchases. On the other hand, if the total quarterly sales amounted to P2,000,000 and the total quarterly purchases amounted to P1,500,000 then the quarterly summary list to be submitted shall only be for purchases and not for sales. (b) Once any of the taxable quarters total sales and/or purchases exceed the threshold amounts as provided above, the VAT taxpayer, in addition to the requirement that the summary list for such quarter be submitted in accordance with the herein prescribed electronic format, shall be further required to submit the summary lists for the next three (3) succeeding quarters, still in accordance with the herein prescribed electronic format, regardless of whether or not such succeeding taxable quarter sales and/or purchases exceed the herein set threshold amounts of P2,500,000 for sales and P1,000,000 for purchases. f. The threshold amounts as herein set for sales and purchases may be increase/modified by the Commissioner if it is necessary for the improvement in tax administration. g. Required Procedure and Format in the Submission of Quarterly List of Sales/Purchases. The Quarterly Summary List of Sales and Purchases as required above shall be submitted directly to the RDO or LTDO or LTAD having jurisdiction over the taxpayer on the same date when the Quarterly VAT return is due for filing with and the tax thereon due for payment to the appropriate AAB or BIR Office, whichever is applicable. The list shall contain all the information required in the preceding paragraphs and shall conform to the electronic format to be prescribed in a Revenue Memorandum Circular (RMC), using any of the following: 1. Excel format; 2. Taxpayer's own extract program; or 3. The Data Entry Module developed by the BIR that will be available upon request or by downloading from the BIR's web site at http://www.bir.gov.ph, with the corresponding job aid to be provided in a RMC to be issued by the BIR. "For those who would choose either option 1 or option 2, such taxpayers shall use a validation module developed by the BIR, which can either be downloaded from the BIR website or made available in diskette form upon request. "Only diskettes readable upon submission shall be considered as duly filed/submitted Quarterly

Summary List of Sales and Output Tax/Purchases and Input Tax/importations. Failure to submit the aforementioned quarterly summary lists in the manner prescribed above shall be punishable under the pertinent provisions of the Code and regulations and shall trigger an audit of taxpayer's VAT liabilities."(As amended by 8-2002). SEC. 4.110-5. PENALTY PROVISION. (added by RR 8-2002) In accordance with the provisions of the Tax Code of 1997, a person who fails to file, keep or supply a statement, list, or information required herein on the date prescribed therefor shall pay, upon notice and demand by the Commissioner of Internal Revenue, an administrative penalty of One thousand pesos (P1,000) for each such failure, unless it is shown that such failure is due to reasonable cause and not to willful neglect. For this purpose, the failure to supply the required information for each buyer or seller of goods and services shall constitute a single act or omission punishable hereof. However, the aggregate amount to be imposed for all such failures during a taxable year shall not exceed Twenty-five thousand pesos (P25,000). In addition to the imposition of the administrative penalty, willful failure by such person to keep any record and to supply the correct and accurate information at the time or times as required herein, shall be subject to the criminal penalty under the relevant provisions of the Tax Code of 1997 (e.g., Sec. 255, Sec. 256, etc.,), upon conviction of the offender. The imposition of any of the penalties under the Tax Code of 1997 and the compromise of the criminal penalty on such violations, notwithstanding, shall not in any manner relieve the violating taxpayer from the obligation to submit the required documents. Finally, the administrative penalty shall be imposed at all times, upon due notice and demand by the Commissioner of Internal Revenue. A subpoena duces tecum for the submission of the required documents shall be issued on the second offense. A third offense shall set the motion for a criminal prosecution of the offender.
Section 115 Power of the Commissioner to suspend the business operations of a taxpayer
SECTION 115 POWER OF THE COMMISSIONER TO SUSPEND THE BUSINESS OPERATIONS OF A TAXPAYER The Commissioner or his authorized representative is hereby empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations: (a) In the Case of a VAT-registered Person. (1) (2) (3) Failure to issue receipts or invoices; Failure to file a value-added tax return as required under Section 114; or Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.

SECTION [4.111-1]4.115-1 ADMINISTRATIVE AND PENAL PROVISIONS. (a) Suspension of business operations In addition to other administrative and penal sanctions provided for in the Code and implementing regulations, the Commissioner or his duly authorized representative may order suspension or closure of a business establishment for a period of not less than five (5) days for any of the following violations: (1) (2) Failure to issue receipts and invoices. Failure to file value-added tax return as required under the provisions of Section [110] 114. Understatement of taxable sales or receipts by 30% or more of his correct taxable sales or receipt for the taxable quarter. Failure of any person to register as required under the provisions of Section [107] 236. Surcharge, interest and other penalties
(3)
(b)
Failure of any Person to Register as Required under Section 236.
(4) (b)
The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.
The interest on unpaid amount of tax, civil penalties and criminal penalties imposed in Title XI of the Tax Code shall also apply to violations of the provisions of Title IV of the Code.
SECTION 15. Effectivity of the Imposition of VAT on Certain Goods, Properties and Services. The value-added tax shall be levied, assessed and collected on the following transactions starting JANUARY 1, 1998: (a) Services performed in the exercise of profession or calling subject to the professional tax under the Local Government Code or RA No. 7160, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers and emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage directors; and professional athletes; (b) Services rendered by banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions; and (c) The lease or use of sports facilities and equipment by amateur players, as provided under RA No. 6847, except sports facilities and equipment which are exclusively or mainly for the private use of shareholders or members of the club or organization which owns or operates such sports facilities and equipment. Prior to their inclusion in the coverage of the value-added tax, the above services shall continue to pay the applicable tax prescribed under the present provision of the Code. However, when public interest so requires, the Congress of the Republic of the Philippines, taking into account the impact on prices of goods and services, may exclude any of the above services from the coverage of the value-added tax: Provided, however; That in the event of the exclusion of any of the above services the existing applicable tax under the provisions of the Code shall continue to be paid on the service so excluded. The imposition of the value added tax on previously exempted services has become effective after January 1, 2003 in the absence of later legislation and in accordance with Republic Act 9010 AN ACT TO FURTHER DEFER THE IMPOSITION OF THE VALUE ADDED TAX ON CERTAIN SERVICES, AMENDING FOR THE PURPOSE OF SECTION 5 OF REPUBLIC ACT NO. 8424, AS AMENDED BY REPUBLIC ACT 8761. These services are: a) Services performed in the exercise of a profession or calling subject to professional tax as provided in Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers, and emcees,; radio and television broadcasters, choreographers, musical directors, movie, television and stage directors, and professional athletes;
b) Services rendered by bank, non-bank financial internmediaries, finance companies and other financial intermediaries not performing quasi banking functions; and c) Services rendered by stock, real estate, commercial customs and immigration brokers who will be subject to a value added tax in lieu of 8% tax of their gross receipts.
The transitory provisions contained in Revenue Regulation 1-2003 provide that the afftected taxpayers should register as VAT taxpayer by January 31,2003 without penalty. In addition, NON-VAT registered taxpayers who change their status are required to submit an inventory of unused receipts. Unused receipts may continue to be used provided they are stamped VAT registered as of ________is stamped on all copies thereof. Billed but uncollected services- Amounts due on sales of services rendered on or before December 31, 2002 and becoming liable to VAT starting January 1, 2003 payments due on or before after such date shall be considered as accrued as of December 31,2002, for purposes of VAT exemption and payment of the applicable percentage tax subject to the following conditions: 1) An information return shall be filed showing the name of the contractee /s, customer/s, client/s and amount of the contract price outstanding as of December 31, 2003 and containing a declaration to pay percentage tax due if any; 2) The seller billed the unpaid amount not later than December 31, 2002 and a copy of such builling is attached to the information return in section (1) hereof; 3) The seller has recorded in its books of account for 2002 the amount receivable; 4) The seller issued or should issue a non-VAT invoice to buyer for this purpose; 5) He seller files not later than January 20, 2003or on or before the 20 th day of the next month, depending on the month of the collection of the consideration, the regular percentage tax return for the payment of the percentage tax payments received after 2002 (applicable to brokers only).
Failure to comply with the above conditions shall automatically subject gross receipts to value added tax. (Revenue Regulation 1-2003)
ii
See also Revenue Regulations No. 2-98: SECTION 4.114. Withholding of Creditable Value-Added Tax In general, value-added tax due on sales of goods and services are not subject to withholding since the tax is not determinable at the time of sale. However, sale of goods and services to the government subject to VAT shall be subject to withholding pursuant to Sec. 114 (C) of RA 8424. (A) Rates and basis of creditable value-added tax to be withheld. The gross payments made by the government to sellers of goods and services shall be subject to withholding tax at the rates herein prescribed: (1) In general, payments by the government or any of its political subdivisions, instrumentalities or agencies including government-owned or controlled corporations (GOCCs) on account of its purchase of goods from sellers and services rendered by contractors who are subject to the value-added tax On gross payment for the purchase of goods 3% On gross payment for services rendered 6% (2) Payments made to government public works contractors 8.5% (3) Payments for lease or use of property or property rights to non-resident owners 10% (B) Persons required to deduct and withhold. All local government units, represented by the Provincial Treasurer in provinces, the City Treasurer in cities, the Municipal Treasurer in municipalities, and Barangay Treasurer in barangays, Treasurers of GOCCs and the Chief Accountant or any person holding similar position and performing similar function in national government offices, as withholding agents, shall deduct and withhold the prescribed creditable value-added tax before making any payment to seller of goods and services. Where the government as herein defined has regional offices, branches or units, the withholding and remittance of the creditable VAT may be done on a decentralized basis as such, the treasurer or the chief accountant or any person holding similar function in said regional office, branch or unit shall deduct and withhold the creditable VAT before making any payment to the seller of goods and services. (C) Returns and payment of taxes withheld. The withholding agents shall accomplish the Monthly Value-Added Tax Declaration (BIR Form 2550M) in duplicate and the amount withheld paid upon filing the return with the authorized agent banks located within the Revenue District Office (RDO) having jurisdiction over the place where the government office is located. In places where there are no authorized agent bank, the return shall be filed directly with the Revenue District Offices, Collection Offices or the duly authorized Treasurer of the city or municipality where the government office is located except in cases where the Commissioner otherwise permits. The required return shall be filed and payments made within ten (10) days following the end of the month the withholding was made except taxes withheld for the 3rd month of the quarter which shall be remitted through a Quarterly Value-Added Tax Return (BIR Form 2550Q) to be filed not later than the 25th day after the end of the calendar quarter. (D) Certificate of Value Added Tax Withheld. Every withholding agent shall furnish each seller of goods and services from whom taxes has been deducted and withheld, the Certificate of Creditable Tax Withheld at Source (BIR Form 2307) to be accomplished in quadruplicate, the first three copies of which shall be given to the seller/payee not later than the fifteenth day of the following month. The fourth copy shall be the file copy of the withholding agent. (E) Liability of designated officers. (1) Additions to the tax. The designated Treasurers, Chief Accountants and other persons holding similar positions, who have the duty to withhold and remit the value added tax in their respective offices shall be personally liable for the additions to the tax prescribed in Sec. 247 of the Code. (2) Punishable acts or omissions. Every officer or employee of the government of the Republic to the Philippines or any of its agencies and instrumentalities, its political subdivisions, as well as government owned or controlled corporations charged with the duty to deduct and withhold any internal revenue tax and to remit the same in accordance with these regulations shall, upon conviction for each act or omission herein-below specified, be fined in a sum of not less than five thousand pesos (P5,000.00) but
not more than fifty thousand pesos (P50,000.00) or imprisoned for a term of not less than six months and one day but not more than two years, or both. (a) Fails or causes the failure to deduct and withhold any internal revenue tax covered by these regulations; (b) Fails or causes the failure to remit the taxes deducted and withheld within the time prescribed therein; (c) Fails or causes the failure to file the return or issue certificate required. REPEALING CLAUSE. All existing rules and regulations or parts thereof which are inconsistent with the provisions of these regulations are hereby revoked. EFFECTIVITY. These regulations shall take effect on compensation income paid beginning January 1, 1998. No penalties shall apply until May 15, 1998 for non-compliance with the new features of the Code as implemented in these regulations.
iii
Section 4.110-4 inserted by section 1 of Revenue Regulations No. 13-97, dated 18 November 1997. Section 2 of those regulations, with related only to section 4.110-4 as inserted, reads: Penalty Provision. A person violating any provision of these Regulations [Revenue Regulation No. 13-97] shall upon conviction FOR EACH ACT OR OMISSION be fined in a sum of not more than One thousand pesos (P1,000), or imprisonment for a term of not more than six (6) months, or BOTH. Thus, failure to submit the name of each buyer or seller/supplier of goods and services would constitute a single act or omission punishable by law. However, payment of the said penalty and/or imprisonment upon conviction as provided for by law shall not relieve the subject taxpayer from submitting the aforesaid names of buyers and sellers of goods and services to be contained in Summary Lists of Sales and Purchases, which shall be considered as a single act or omission by itself.

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TITLE IV VALUE-ADDED TAX

CHAPTER I IMPOSITION OF TAX

CHAPTER II COMPLIANCE REQUIREMENTS

1997 National Internal Revenue Code

Consolidated Revenue Regulations 07-95

Section 105 Persons liable

Section 105 Persons liable

Consolidated Revenue Regulations 07-95

Section 106 Value-added tax on sale of goods or properties

Consolidated Revenue Regulations 07-95

Section 106 Value-added tax on sale of goods or properties

Section 106 Value-added tax on sale of goods or properties

Section 106 Value-added tax on sale of goods or properties

Consolidated Revenue Regulations 07-95

Section 106 Value-added tax on sale of goods or properties

Section 106 Value-added tax on sale of goods or properties

Consolidated Revenue Regulations 07-95

The following transactions shall be deemed sale:

Section 106 Value-added tax on sale of goods or properties

Section 106 Value-added tax on sale of goods or properties

Section 106 Value-added tax on sale of goods or properties

Consolidated Revenue Regulations 07-95

Basis of tax arising from changes in or

Section 106 Value-added tax on sale of goods or properties

Section 107 Value-added tax on importation of goods

Consolidated Revenue Regulations 07-95

Transfer of Goods by Tax-exempt Persons

Applicability and Payment

Section 109 Exempt transactions

Consolidated Revenue Regulations 07-95

(9) (10) (11)

Defined at end of section.

Section 109 Exempt transactions

Section 109 Exempt transactions

Consolidated Revenue Regulations 07-95

Section 109 Exempt transactions

Section 109 Exempt transactions

Section 109 Exempt transactions

Section 109 Exempt transactions

2. 3. (B) TRANSACTIONS SUBJECT TO ZERO PERCENT (0%) RATE

Section 109 Exempt transactions

Consolidated Revenue Regulations 07-95

The following shall be exempt from the value-added tax:

Section 109 Exempt transactions

Section 109 Exempt transactions

Section 109 Exempt transactions

Consolidated Revenue Regulations 07-95

Section 109 Exempt transactions

Section 109 Exempt transactions

Section 109 Exempt transactions

Consolidated Revenue Regulations 07-95

Section 109 Exempt transactions

Lease of a residential unit with a monthly

Lease of residential units with a monthly

Section 109 Exempt transactions

Consolidated Revenue Regulations 07-95

Section 109 Exempt transactions

Consolidated Revenue Regulations 07-95

Section 110 Tax credits

Section 110 Tax credits

Consolidated Revenue Regulations 07-95

(iii) (iv) (v)

Purchase of services on which a value-added tax has been actually paid.

Section 110 Tax credits