VALUE ADDED TAX AND

OTHER PERCENTAGE TAXES

Atty. Vic C. Mamalateo
August 2, 2013
Univ of San Jose Recoletos, Cebu City
BUSINESS TAXES
VAT (Title IV, NIRC)
Taxable transactions
Sale or lease of goods or
properties; excise tax forms
part of GSP
Sale or exchange of services
Importation of goods
Formula
Output Tax
Less: Input Tax
VAT Payable/(Excess Input
Tax)
NON-VAT/EXEMPT FROM
VAT
Transaction is subject to
Other Percentage Tax (Title V,
NIRC)
Tax is imposed on Gross
Receipts or Gross Income
VAT is imposed in addition
to Excise Tax on transaction
(Title VI, NIRC)
No VAT or OPT is imposed
on transaction (Sec 109, NIRC)
OTHER PERCENTAGE TAXES
Sec. 116 3% percentage tax on sale or lease of goods, properties or services of
non-VAT registered persons whose annual gross sales or receipts do not exceed
P1.5 M
Sec. 117 3% common carriers tax on domestic common carriers by land on
transport of passengers and keepers of garages
Sec. 118 3% common carriers tax on international air and sea carriers
Sec. 119 3% franchise tax on grantees of radio and/or TV broadcasting whose
gross receipts do not exceed P10 M and 2% franchise tax on grantee of gas and
water utilities
Sec. 120 10% overseas communication tax on dispatch originating from the Phil
Sec. 121 Gross receipts tax on banks
Sec. 122 Gross receipts on finance companies
Sec. 123 2% premium tax on life insurance companies per RA 10001 and RMC 22-
2010, March 9, 2010
Sec. 125 Amusement tax on proprietors, lessees or operators of cockpits,
cabarets, night or day clubs (18%), boxing exhibitions (10%), professional
basketball games (15%) and race tracks (30%)
EXCISE TAXES
On alcohol products
Wine, scotch, vodka, beer, etc.
On tobacco products
Cigarettes, tobacco, etc.
On petroleum products
Premium gas, diesel, bunker fuel, LPG, etc.
On mineral products
Gold, silver, copper, etc.
On miscellaneous products
Automobiles any 4 or more wheeled motor vehicle, regardless of seating
capacity, which is propelled by gasoline, diesel, electricity or any other motive
power, except buses, trucks, cargo vans, jeeps/jeepneys, single cab chassis,
and special purpose vehicles (e.g., funeral cars).
Non-essential goods (jewelry; pearls, precious and semi-precious stones;
perfumes and toilet waters; yachts and other vessels for pleasure or sports.
DUTIES OF VAT TAXPAYERS
1. Secure Taxpayer Identification Number (TIN)
2. Pay annual registration fee of P500 for every separate and
distinct establishment
Rev Regs No. 7-2012, Apr 2, 2012 (primary and secondary registration)
Rev Regs No. 10-2012, June 1, 2012 (JV undertaking construction)
3. Register with BIR proper office as VAT or Non-VAT taxpayer and
get BIR Certificate of Registration (BIR Form 2303)
4. Apply for Authority To Print (ATP) as well as register and issue
VAT and/or Non-VAT sales invoices or receipts
5. Keep registered VAT books of accounts (computerized or manual)
6. File VAT returns/declarations and pay VAT
7. Withhold and remit Final Withholding VAT, when appropriate
8. Submit SLS/SLP
Rev Regs No. 1-2012, Feb 20, 2012
VALUE ADDED TAX
CHARACTERISTICS OF VAT SYSTEM
Tax on value added of taxpayer
Transparent form of sales tax; R.A. 9337 requires that the VAT
component should be separately indicated in the VAT invoice or
receipt
Broad-based tax on consumption of goods, properties and services in
the Phil
Indirect tax
Tax exemption of rural bank (RA 7353) extends only to taxes to which it is
directly liable to pay, not to VAT, which is an indirect tax.
Tax is collected thru the tax credit or invoice method
Output tax on sales less input tax on purchases
No cascading of tax in VAT system (tax is not again subject to tax)
Tax-inclusive method was discarded in favor of separate indication
of VAT system (RR 18-2011, Nov 21, 2011)
VALUE ADDED TAX
TAXABLE PERSONS
Seller of goods or properties
There is actual or deemed sale, barter or exchange of goods or
properties that are consumed or for consumption in the Phil;
In the course of trade or business; and
Sale of goods or properties is not exempt from VAT
Seller of services
Listed services are performed or to be performed in the Phil
In the course of trade or business
For a valuable consideration
Services are not exempt from VAT
Importer of goods
Whether done in the course of his trade or business or for
personal consumption

VALUE ADDED TAX
SPECIAL TYPES OF PERSONS ENGAGED IN TAXABLE TRANSACTIONS
Husband and wife are separate taxpayers; aggregation rule
Unincorporated joint venture undertaking construction activity is
subject to VAT, although exempt from income tax (RR 10-2012)
Government
Governmental function: Exempt from VAT
Proprietary function: Subject to VAT
Non-stock, non-profit association (e.g., social clubs, condo corps, and
homeowners associations)
Association dues and special assessments; guest fees and fees for
use of facilities taxable
Income from operating restaurant, boutique or shop or for leasing
facilities -- taxable


VALUE ADDED TAX
1(a) Sale, barter or exchange (actual or deemed sale)
Sale, barter or exchange has the same tax consequence
There must be valuable consideration. However, if the property
transferred is one for sale, lease or use in the course of business and the
transfer constitutes a completed gift, it is also subject to VAT.
Deemed sale is subject to VAT (output tax) in order to recoup previous VAT
(input tax) allowed
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. Withdrawal of goods in connection with the trade or
business of the taxpayer without any valuable consideration shall not
be treated as deemed sale.
Distribution or transfer to: (a) shareholders or investors as share in the
profits of the VAT-registered persons; or (b) creditors in payment of
debt;
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.


VALUE ADDED TAX
Export sales of goods
Actual shipment of goods to a foreign country
Sale and delivery of goods to a person located and doing
business in special economic zones and freeport zones in
the Philippines.
Customs territory is any territory located in the Philippines,
except special economic zones under RA 7916 (PEZA) and other
ecozone laws and freeport zones under RA 7227 (BCDA law, as
amended), which are treated as foreign territories by fiction of law
(CIR v. Seagate Technology Phil, G.R. No. 153866, 2005; CIR v. Toshiba
Information Equipment, G.R. No. 150154, 2005).
The concept of foreign territory by fiction of law applies
only for VAT purposes, because for income tax purposes,
ecozones and freeport zones are treated as within the
Philippines.

VALUE ADDED TAX
Sale, barter or exchange of goods (ordinary or capital)
The sale, barter or exchange of goods must be one that is
contemplated under the Tax Code. Thus, securities
borrowing and lending done to support trading strategies
or settlement obligations, in exchange for a collateral and
the promise to return the equivalent shares or securities at
the end of the borrowing period not to exceed two years
pursuant to a Master Agreement, is exempt from VAT (RR
10-2006, June 23, 2006).
If the requisites for taxation of sale of goods are present,
registration of seller and status of the buyer are not
important for VAT purposes.
Sale of goods for the same price or at a price lower than its
cost does not exempt such sale from VAT.
VALUE ADDED TAX
The absence of profit in the performance of taxable services does not
make such activity for a fee exempt from VAT (CIR v. COMASERCO, GR 125355, Mar 30, 2000).
1(b) Goods or properties must be located in the Philippines
and consumed or destined for consumption in the Phil.
Special economic zones under RA 7916 (PEZA Law) and freeport zones
under RA 7227 (BCDA Law) are treated as foreign territories by fiction
of law. Hence, importation of goods by a special economic or freeport
zone enterprise shall be exempt from VAT and customs duties and will
be subject to VAT and duties only upon their withdrawal from the
customs custody.
Destination Principle (sometime referred to cross boarder doctrine):
Export sales of goods are zero-rated (0% VAT), provided seller is VAT-
registered person
Import of goods into the Phil is taxable at 12% VAT
VALUE ADDED TAX
2. In the course of trade or business
The regular conduct or pursuit of a commercial or an economic
activity, including transactions deemed incidental thereto,
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.
The rule of regularity to the contrary notwithstanding, services
rendered in the Philippines by nonresident foreign persons shall
be considered as being rendered in the course of trade or
business (Sec 105, NIRC).
Isolated transactions are not subject to VAT.
Incidental income follows taxation of the principal activity.
Thus, sale of scrap materials by a VAT-registered person is
subject to VAT as the sale of its main finished products. But
rental income of a bank is subject to gross receipts tax, not VAT.

VALUE ADDED TAX
Incidental means something else as primary;
something necessary, appertaining to, or
depending upon another, which is termed the
principal. Hence, an isolated transaction is not
necessarily disqualified from being made
incidentally in the course of trade or business.
Although the primary business of a taxpayer is
manufacturing of garments for sale abroad, the
sale of motor vehicle to its General Manager is
transaction incidental to such business, subject to
VAT (CS Garments v. CIR; RMC 15-2011, Mar 16, 2011).
VALUE ADDED TAX
Non-taxable transactions
Change of control of a corporation by the acquisition of
the controlling interest of such corporation by another
stockholder or group of stockholders.
Transfer of assets for shares of stocks where the transferor gains
control of the corporation does not constitute a sale of properties.
The transaction merely involves a change in the nature of
ownership of property from unincorporated to incorporated entity.
Ownership over the properties remains the same (Dolpher Trades Corp
v. IAC, 157 SCRA 349).
However, exchange of real property for shares of stocks of a REIT
Corporation is subject to VAT.
Merger or consolidation
Change in the trade or corporate name of the business
VALUE ADDED TAX
Seller of real properties is subject to VAT
Seller executes a document of sale (DAS or CTS)
Real property is located in the Phil
Seller is engaged in real estate business either as dealer,
developer or lessor
Real property is held primarily for sale or for lease in the
ordinary course of trade or business
Sale is not exempt from VAT

However, Rev. Regs. No. 4-2007 (Feb 2007) provides that if the real
property sold is used in his trade or business, said transaction is
subject to VAT, being incidental to the main business of the
taxpayer, who is a VAT-registered taxpayer engaged in other types
of business.
The exchange of goods or properties, including the real estate
properties used in business or held for sale or lease by the
transferor, for shares of stocks, whether resulting in corporate
control or not, is subject to VAT (RR 10-2011, July 1, 2011).
VALUE ADDED TAX
Installment sales of real property
Rules on installment sales of real property in income tax
law are adopted for VAT purposes in VAT regulations.
Sales with initial payments of 25% or less of GSP in the year of sale
shall be reported only in period of sales. Collections in the second
and succeeding years shall be reported in the year of collection for
VAT purposes.
However, if initial payments exceed 25% of gross selling price, the
sale is treated as a cash sale; hence, the entire selling price is
subject to VAT in the period of sale. Collections in the succeeding
years are no longer subject to VAT.
Initial payments means the down payment plus all monthly
amortizations in the year of sale.
However, the rules on installment sales of appliances in
income tax are not adopted for VAT purposes.
VALUE ADDED TAX
Tax base for sale of goods or property is Gross Selling Price (GSP) - 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 VAT. If the GSP is
unreasonably lower than the actual market value, the CIR is authorized to
determine and prescribe the actual market value to be used as tax base.
The GSP is considered unreasonably lower than the actual market value,
if it is lower by more than 30% of the actual market value of the same
goods of the same quantity and quality sold in the immediate locality on
or nearest the date of sale.

As a rule, output tax accrues on sale of goods or properties (other than a
real property sold with initial payments of 25% or less) at the time of sale,
when the VAT sales invoice is issued, although none or only a part of the
gross selling price is paid by the buyer at the time of sale (e.g., sale of
appliances on installments).
Excise tax, if any, shall form part of GSP.
VALUE ADDED TAX
Sales discounts determined and granted at the time of sale, which are
expressly indicated in the sales invoice do not form part of the tax base.
Grant of discount must not depend upon the happening of a future event
or the fulfillment of certain condition. They must be recorded in the books
of accounts of the seller.
Senior citizens are entitled to 20% sales discounts and to exemption from
VAT under the Expanded Senior Citizens Law.

GSP shall separately indicate the VAT component.
When VAT is not separately indicated in the invoice or receipt, to
determine Gross Selling Price or Gross Receipts (100%), divide Total
Invoice Amount (112%) by 1.12. If Total Invoice Amount includes EWT,
determine first the Gross Selling Price, and then apply the VAT rate on GSP.

Tax rates
12% beginning Feb 1, 2006 (RA 9337)
0% VAT on zero-rated sales (automatic or effectively zero-rated)

VALUE ADDED TAX
Sales of goods subject to 0% VAT
Actual export sales
Deemed export sales
Internal or constructive export sales under BOI law (EO 226) and special
laws (RA 7916 and RA 7227) are automatically zero-rated.
Ecozones and freeport zones are deemed foreign territories by fiction
of law (CIR v. Seagate Technology (2005); CIR v. Toshiba Information Equipment (2005)
For as long as the goods remain within the zone, consumed or
destroyed there, they will be duty-free and tax-free (Coconut Oil Refiners
Asso v. Torres (2005)
Effectively zero-rated sales (sales to ADB, embassies, etc) need approval
from BIR before sale; otherwise, sale is exempt.
Sales of gold to BSP, but sales of silver is subject to 12% VAT.
Foreign currency denominated sales (balikbayan program)
Sales of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations
VALUE ADDED TAX
ZERO-RATED SALE
Transaction is completely free of
VAT; rate charged by seller is zero
VAT-registered seller can reclaim
input taxes passed on to it by
sellers of goods or services from
BIR in form of refund or tax credit
Zero-rated sales are taxable sales
for purposes of registration as
VAT taxpayer to determine
threshold
EXEMPT SALE
Exemption removes the VAT
at the exempt stage

Exempt taxpayer cannot
reclaim VAT passed on to it
by VAT-registered sellers

Exempt sales are not
taxable sales for VAT
purposes
VALUE ADDED TAX
PERSONS SELLING TAXABLE SERVICES
Construction and service contractors
Health Maintenance Organization (HMO) acts like an independent
contractor taxed on entire gross receipts
Security agency (taxed only on its agency fee, provided that there is
proper segregation between the fee and salary of security guards);
employment and janitorial agencies (taxed on its entire gross receipts)
Travel agency: Hotel room charges for foreign tourists and travel agencies
are not part of its gross receipts
Brokers
Reimbursement of expenses are not subject to VAT if receipts or invoices
are issued in the name of principal
Lessors of property, real or personal
Royalties are not subject to VAT if paid by a PEZA- or SBMA-registered
enterprise to a non-resident foreign corporation
Warehousing services
VALUE ADDED TAX
PERSONS SELLING TAXABLE SERVICES
Lessors or distributors of cinematographic films
Movie houses and theaters are exempt from VAT; they are subject to local
amusement tax and based on past laws not subject to VAT, which tax shall
be paid by local payor
Persons engaged in milling, processing, manufacturing or repacking goods for
others
Miller of palay into rice, corn into grits, and sugar cane into raw sugar is
exempt from VAT
Miller of refined sugar or cassava is subject to VAT
Proprietors or operators or keepers of hotels, motels, resthouses, pension
houses, inns and resorts
Hotel-operator of limousine services to hotel guests is subject to VAT (and
not to common carriers tax because it is not a common carrier)
Tolling charges collected by hotel for PLDT for overseas calls made by
hotel guests are not part of taxable receipts of hotel
Proprietors or operators of restaurants and other similar establishments

VALUE ADDED TAX
PERSONS SELLING TAXABLE SERVICES
Dealers in securities
Securities borrowing and lending among dealers in securities covered by a
Master Agreement as well as judicial and foreclosure sales of securities are
exempt from VAT
Lending investors (includes a person who lends six times or more during the year at
interest to another). However, pawnshops are not lending investors; they are
subject to GRT.
Transportation contractors on their transport of goods or cargoes
Domestic common carriers by air and sea between points in the Philippines
Sales of electricity
Sale of power thru renewable sources of energy by generation, transmission
and distribution companies is zero-rated
Services of franchise grantees, including operators of toll highways (Diaz & Timbol
v. Secretary of Finance and CIR [2011]), except water and gas, and broadcast
stations whose gross receipts do not exceed P10 Million
Non-life insurance companies, except crop insurance
Accident and health insurance are deemed life insurance
Similar services, regardless of whether or not the performance thereof calls for the
exercise or use of the physical or mental faculties

VALUE ADDED TAX
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
advance payments actually or constructively received during
the taxable quarter for the services performed or to be
performed for another person, excluding the VAT, except
those amounts earmarked for payment to unrelated third
party or received as reimbursement for advance payment on
behalf of another, which do not redound to the benefit of the
payor.
For sale of services, the test is not whether services have been performed
or not, but whether amount of compensation or fee is received, actually
or constructively. The rule is: NO RECEIPT OF PAYMENT, NO VAT LIABILITY.
A contractor that agrees to provide the materials and labor for a
construction project is a seller of services for the entire amount of
consideration.
VALUE ADDED TAX
ZERO-RATED SALES OF SERVICES
Processing, manufacturing or repacking goods for other persons doing
business outside the Phil, which goods are subsequently exported,
where the services are paid for in acceptable foreign currency and
accounted for in accordance with BSP rules and regulations
Services other than processing, manufacturing or repacking rendered
to a person engaged in business conducted outside the Phil or to a
non-resident person not engaged in business who is outside the Phil
when the services are performed, the consideration for which are paid
for in acceptable foreign currency and accounted for in accordance
with BSP rules and regulations (CIR v. BWSC Mindanao, GR 153205, Jan 22,
2007)
Services rendered to persons or entities whose exemption under
special laws or international agreements to which the Phil is a
signatory effectively subjects the sale of services to 0% rate
VALUE ADDED TAX
ZERO-RATED SALES OF SERVICES
Services rendered to persons engaged in international shipping or
international air transport operations, including leases of property for
use thereof
Services rendered by local shipping agents and by local shipping
lines to international carriers are zero-rated only if they pertain to
outbound trips; on inbound trips, they are subject to 12% VAT.
Services provided by hotels to their clients engaged in
international air transport operations pertaining to room
accommodations and food and beverage services subject to
subject to 12% VAT. To qualify for zero-rating, the service must
pertain to or must be attributable to transport of goods and
passengers from a port in the Philippines directly to a foreign port,
without docking or stopping at any port in the Philippines (RMC 31-
2011, Aug 4, 2011; RR 4-2007).
VALUE ADDED TAX
The docking charges (tuggage entrance or tuggage departure) computed
on US dollars and converted in its equivalent Phil pesos rendered to
foreign vessels is zero-rated, even if the company did not bill directly the
foreign principal but billed only its local husbanding agent, and that the
payments were not received in foreign currency (Phil Sinter Corp v. CIR, CTA 4447,
Jan 26, 1995).
Services performed by subcontractors and/or contractors in processing,
converting or manufacturing goods for an enterprise whose export sales
exceeds 70% of total annual production
Transport of passengers and cargo by domestic air or sea carriers from the
Phil to a foreign country
Sale of power or fuel generated thru renewable sources of energy
(biomass, solar, wind, hydropower, geothermal and other emerging
sources)
Sale of service by ROHQ is not zero-rated; it is an administrative
arm of the head office; hence, it is considered as one and the same
entity for tax purpose (Institutional Shareholder Services Phil ROHQ v. CIR, CTA
7662, June 3, 2010).

VALUE ADDED TAX
CIR v. BWSC Mindanao, Inc., GR153205, Jan 22, 2007

Tax Code not only requires that the services other than processing, manufac-
turing or repacking of goods and that payment for such services be in
acceptable foreign currency accounted for in accordance with BSP rules.
Another essential condition for qualification to zero-rating under Sec 102(b)(2)
is that the recipient of such services is doing business outside the Phil.
While this requirement is not expressly stated in the 2
nd
paragraph of Sec.
102(b), this is clearly provided in the 1
st
paragraph of Sec 102(b) where the
listed services must be for other persons doing business outside the Phil.
The above phrase not only refers to services enumerated in the first
paragraph, but also pertains to the general term services appearing in the
second paragraph.
Otherwise, those subject to the regular VAT under Sec 102(a) can avoid paying
the VAT by simply stipulating payment in foreign currency inwardly remitted
by the recipient of services. To interpret Sec. 102(b)(2) shall apply to a payer-
recipient of services doing business in the Phil is to make the payment of
regular VAT dependent on the generosity of the taxpayer.
A tax is a mandatory exaction, not a voluntary contribution.

VALUE ADDED TAX
Significantly, the amended Section 108(b) [previously Sec 102(b)] of the
present Tax Code clarifies this legislative intent. For zero-rating of services,
it must be rendered to a person engaged in business conducted outside
the Phil.
The payer-recipient of respondents services is the Consortium which is a
joint venture doing business in the Phil. While the Consortiums principal
members are non-resident foreign corps, the Consortium itself is doing
business in the Phil. This is shown in BIR Ruling 23-95, which states that
the contract between Consortium and NPC is for a 15-year term.
Considering the length of time, the Consortiums operation and
maintenance of NPCs power barges cannot be classified as a single or
isolated transaction.
This BWSCM case is different from CIR v. American Express International,
Inc. (Phil Branch), because in the latter case, the recipient of services is
AEII (HK Branch) doing outside the Phil.
CIRs filing of its Answer before the CTA in the BWSCM case, challenging
claim for refund effectively serves as a revocation of VAT Ruling 03-99 and
BIR Ruling 23-95. However, such revocation cannot be given retroactive
effect since it will prejudice respondent.
VALUE ADDED TAX
VAT-EXEMPT TRANSACTIONS
A. Sale or importation of agricultural and marine food products in their
original state; livestock and poultry generally producing food for
human consumption; and breeding stock
Original state simple processes of preparation or preservation
for the market. Process is no longer simple, if it involves physical
or chemical process that alters the exterior texture or form or
inner substance of the product as to prepare it for a special use.
Rice, corn grits, raw sugar, molasses, ordinary salt and copra are
products in their original state
B. Sale or importation of fertilizers; seeds, seedlings and fingerlings;
fish, prawn, livestock and poultry feeds (except specialty feeds for race
horses, fighting cocks and other pets)
C. Importation of personal and household effects belonging to
residents of the Phil returning from abroad and non-resident citizens
coming to resettle in the Phil
D. Importation of professional instruments and implements, and
personal effects (except vehicle, vessel, aircraft, machinery for use in
manufacture) belonging to persons coming to settle in the Phil

VALUE ADDED TAX
VAT EXEMPT TRANSACTIONS
E. Services subject to percentage tax under Title V, such as 3%
percentage tax, common carriers tax on land transportation and
international carriers, gross receipts tax on banks and finance
companies, premium tax on life insurance companies, franchise tax on
gas and water grantees, etc.
F. Services by agricultural contract growers and milling for others of
palay into rice, corn into grits, and sugar cane into raw sugar
Contract growing includes poultry, livestock and agricultural and
marine food products
G. Medical, dental, hospital and veterinary services, except those
rendered by professionals
Sales of medicines by hospitals to in-patients are exempt from VAT
as medical/hospital services.
H. Educational services rendered by private educational institutions
accredited by DepEd, CHED, TESDA (Informatics Alabang Center v. CIR,
CTA EB 593, Feb 28, 2011), and those rendered by government
educational institutions


VALUE ADDED TAX
VAT-EXEMPT TRANSACTIONS
I. Services rendered by individuals pursuant to an employer-employee
relationship
J. Services by a regional or area headquarters (RHQ)
K. Transactions exempt under international agreements to which the
Phil is a signatory and special laws
K. 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 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
M. Gross receipts from lending activities by credit or multi-purpose
cooperatives duly registered with the CDA
N. 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 P15,000
VALUE ADDED TAX
VAT-EXEMPT TRANSACTIONS
O. Export sales by persons who are not VAT-registered
P. Sale of real property not primarily held for sale to customers or for
lease in the ordinary course of trade or business, or real property for low-
cost and socialized housing, residential lot valued at P1.5 M (P1,919,500
beginning 2012) or below, house and lot and other residential dwellings
valued at P2.5 M (P3,199,200 beginning 2012 [RR 16-2011, Oct 27, 2011])
or below
This threshold on Sec 109(P) is on a per transaction basis.
Q. Lease of a residential unit with a monthly rental not exceeding P10,000
(P12,800 beginning 2012):
Lease of commercial buildings are subject to VAT, regardless of rental
per month or unit, provided threshold of P1.5 M (P1,919,500
beginning 2012) is exceeded, or the lessor registered as a VAT person.
This threshold on Sec 109(Q) is on a per residential unit per month
basis.
R. Sale, importation, printing or publication of books (hard bound) and
any newspaper or magazine which appear at regular intervals with fixed
prices and is not devoted principally to publication of paid advertisements

VALUE ADDED TAX
VAT EXEMPT TRANSACTIONS
S. Sale, importation or lease of passenger or cargo vessels and
aircrafts and their parts for domestic or international transport
T. Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations
U. Services of banks, non-bank financial institutions performing quasi-
banking functions, and other financial intermediaries
V. Sale or lease of goods or property or the performance of services
other than transactions mentioned above, the gross sales or receipts
(for the preceding 12 months) do not exceed P1.5 M (P1,919,500
beginning 2012)
If sale of goods pertains to agricultural or marine food products in
their original state or sale of books, or sale of service relates to
rental of residential unit not exceeding P12,800, transaction is
exempt even if gross sales or receipts exceed P1.5 M (P1,919,500
beginning 2012).
VAT OR 3% PT
VAT
If lessor receives rental income
for residential houses per unit
per month of P12,800 or less,
he is exempt from VAT even if
his gross annual rental is more
or less than P1.5 million
(P1,919,500 beginning 2012).
Since the reason for VAT
exemption is Sec. 109(Q), he is
also exempt from 3% PT.
3% PERCENTAGE TAX
Registered as a non-VAT
person and the reason for his
exemption from VAT is that his
gross sales or receipts for the
preceding 12 months do not
exceed P1.5 million
(P1,919,500 beginning 2012).
3% OPT applies to lessors of
residential units over P12,800
per month per unit and of
commercial properties.
VAT OR 3% PT
VAT
If the lessor has commercial
stalls for lease and the amount
of gross rental for the year is
P1.5 M (P1,919,500 beginning
2012) or less, he is (a) exempt
from VAT if he did not register
as a VAT person, or (b) subject
to VAT if he registered as a VAT
person, or he issued a VAT
receipt for the rental income
to the lessee.
3% PERCENTAGE TAX
In (a), he is liable to the 3%
percentage tax because he
derives rental income and
the reason for his VAT
exemption is that he did not
exceed the annual
threshold of P1.5 million
(P1,919,500 beginning
2012).
In (b), he is liable to VAT.
RMC 63-2010
VAT on operator of tollways.-- Tollway fees are not taxes.
They are not assessed and collected by the BIR and do not
go to the general coffers of government. A tax is imposed
under the taxing power of the government principally for
the purpose of raising revenues to fund public
expenditures. Toll fees, on the other hand, are collected by
private tollway operators as reimbursement for the costs
and expenses incurred in the construction, maintenance
and operation of the tollways, as well as to assure them a
reasonable margin of income. Taxes may be imposed by
the government under its sovereign authority, while toll
fees may be demanded by either the government or private
persons as an attribute of ownership. Accordingly, VAT on
toll fees is not a tax on tax.

RMC 63-2010
The CIR did not usurp legislative prerogative or expand the VAT
laws coverage when she sought to impose VAT on tollway
operations. Section 108(A) of the Code clearly states that services
of all other franchise grantees are subject to VAT, except as may be
provided under Section 119 of the Code. Tollway operators are not
among the franchise grantees subject to franchise tax under the
latter provision. Neither are their services among the VAT-exempt
transactions under Section 109 of the Code.
If the legislative intent was to exempt tollway operations from VAT,
as petitioners so strongly allege, then it would have been well for
the law to clearly say to. Tax exemptions must be justified by clear
statutory grant and based on language in the law too plain to be
mistaken. But as the law is written, no such exemption obtains for
tollway operators. The Court is thus duty-bound to simply apply
the law as it is found.

VALUE ADDED TAX
Sale of medicines by the hospital pharmacy to in-patients is exempt from
VAT, but sale to out-patients is subject to 12% VAT (St. Lukes Medical
Center v. CTA and CIR, 1998).
Tolling fees received by a hotel for PLDT is not part of its gross receipts
Payment of VAT by the hotel on fees for providing limousine service to its
client is correct. It is not subject to the 3% common carriers tax. Claim
for tax credit is denied (Manila Mandarin Hotel v. CIR)
Gross receipts of theatre owner or operator from sales of tickets to
moviegoers are exempt from VAT. Theatres and movie houses are not
included in the enumeration of taxable services in the VAT law. Our tax
laws, past and present, did not adopt more specific terms for sale or
exchange of services to include showing of films in public (CIR v. SM
Prime Holdings, GR 183505, Feb 26, 2010).
PAGCOR is exempt from VAT pursuant to its charter, PD 1869. Being a
special law, PD 1869 prevails over RA 7716, a subsequent general law. To
be valid, repeal of special law should be express (CIR v. Acesite Hotel Corp,
GR 147295, Feb 16, 2007).
VALUE ADDED TAX
CATEGORIES OF INPUT TAXES
Input tax credit on importations of goods and
current local purchases of goods, properties and
services
Input tax on capital goods must be amortized
over certain period
Transitional input tax credit
Presumptive input tax credit
Withholding input tax credit
Excess input tax credit
VALUE ADDED TAX
Transitional Input Tax (TIT)
A person who becomes liable to VAT or any person who elects to be a
VAT-registered person shall, subject to the filing of an Inventory, be
allowed input tax on his beginning inventory of goods, materials and
supplies equivalent to 2% of the value of such inventory (showing
quantity, description, and amount) or the actual VAT paid on such
goods, materials and supplies, whichever is higher.
Goods that are exempt from VAT, forming part of inventory, are
excluded. Taxpayer is not allowed to claim 2% TIT on inventory of
goods without VAT components (RMC 61-2005, Oct 27, 2005).
Capital goods do not form part of inventory.
Transitional input tax is allowed not only on land improvements but
also on land itself (CIR v. Fort Bonifacio Dev Corp, 2009)
Journal entry removing the input tax on inventory account shall be
made and recorded in the books.
VALUE ADDED TAX
Presumptive Input Tax
Persons or firms engaged in the processing of sardines,
mackerel and milk, and in manufacturing refined sugar and
cooking oil, and packed noodle-based instant meals are
entitled to presumptive input tax equivalent to 4% of gross
value in money of their purchases of primary agricultural
products which are used as inputs to their production (Sec.
111, NIRC)
Processing means pasteurization, canning and activities
which, through physical or chemical process, alter the
exterior texture or form or inner substance of a product in
such a manner as to prepare it for special use to which it
could not have been put in its original form or condition.
VALUE ADDED TAX
Input tax on capital goods
Capital goods are fixed assets with estimated useful lives of more
than one year used in the trade or business of the taxpayer and are
subject to depreciation.
If the aggregate acquisition cost (exclusive of VAT) in a calendar month
exceeds P1 million, and (a) the estimated useful life of the asset is 5
years of more, the total input tax shall be amortized over a period of
60 months, or (b) the estimated useful life is less than 5 years, the
total input tax shall be amortized over the estimated useful life of the
asset.
If the aggregate acquisition cost (exclusive of VAT) in a calendar month
does not exceed P1 million, the total input tax will be allowed as credit
against the output tax in the month of purchase.
Construction in Progress refers to cost of construction work that is
not yet completed. It is not a capital asset, but is treated as a sale of
service; hence, not covered by the rules on capital goods.

VALUE ADDED TAX
Subsidiary records for capital goods
A subsidiary record in ledger form should be maintained for the
acquisition or importation of capital goods, such as (a) total
input tax; (b) monthly input tax claimed per VAT declaration or
return; (c ) purchase amount; (d) date of purchase; (e)
description of goods (RR 16-2005; RMC 62-2005, Oct 18, 2005).
For capital goods covered by BOT scheme (e.g., IPP with limited
duration), the excess input tax shall be allowed to be amortized
over the life of the asset or the remaining life of the project
agreement, or five (5) years, whichever is shortest (RMC 61-2005).
Remedy of filing claim for refund or tax credit on unused
input tax arising from purchase of capital goods was
deleted in R.A. 9337.
VALUE ADDED TAX
Input tax will be disallowed for refund or tax
credit, if:
The invoice is not under the name of the petitioner;
The invoice or receipt cannot be presented;
The input tax is evidenced only by provisional receipts
and statement of accounts;
The input tax is supported by non-VAT invoices or
receipts; or
The invoices or receipts were printed before July 31,
1991 with only TAN and VAT number, without TIN-
V/VAT (Placer Dome Technical Services v. CIR, CTA 5685, Mar 19, 2002).
VALUE ADDED TAX
Allocation of input taxes
Input taxes directly attributable to transactions subject to
VAT are creditable against output tax;
Input taxes attributable to exempt transactions become
part of the cost or expense;
Input taxes that are not directly attributable to VATable
and/or VAT-exempt transactions shall be allocated as
follows:
Input tax attributable to exempt sales = Exempt sales/Total sales
Input tax attributable to taxable sales = Taxable sales/Total sales
Input taxes attributable to sales to government are not
creditable against output tax from sales to non-govt offices
VALUE ADDED TAX
Allocation of input taxes
Input taxes directly attributable to zero-rated sales may be
claimed as refund or tax credit or credited against output
tax for the period;
Input taxes directly attributable to taxable sales (not zero-
rated) are creditable against output tax for the period;
Input taxes that are not directly attributable to zero-rated
and/or taxable sales shall be allocated as follows:
Input tax attributable to zero-rated sales = Zero-rated sales/Total
sales
Input tax attributable to taxable sales = Zero-rated sales/Total sales
VALUE ADDED TAX
Tax reliefs of VAT taxpayers on their excess input
taxes (EIT) attributable to zero-rated and effectively
zero-rated sales
Carry over the excess input tax to the next quarter, until excess is
utilized
File a claim for refund
File a claim for tax credit, within two years after the close of taxable
quarter where the sales were made, (NOT from the filing of the
quarterly VAT return)
For non-zero-rated sales, remedy available is only to
carry over EIT to the next quarter(s), or to dissolve
the corporation or cease operation of business
subject to VAT within 2 years from date of dissolution
or cessation of business

VALUE ADDED TAX
Reckoning of two-year prescriptive period
From the date of the filing of the VAT return and payment of the
tax. After all, VAT liability or refundability can only be
determined upon the filing of the quarterly VAT return (Atlas
Consolidated Mining & Dev Corp v. CIR, G.R. No. 141104, June 8, 2007).
From the close of the taxable quarter when the relevant sales
were made pertaining to the input VAT, regardless of whether
said tax was paid or not. The phrase within two years refers
to the application for refund or TCC filed with the CIR, and not
to filing of appeal to CTA.
Secs. 204 and 229, NIRC cannot apply in a claim for refund of
excess input VAT on zero-rated sales, considering that it is not a
case of erroneous payment or illegal collection of taxes (CIR v.
Mirant Pagbilao Corp, G.R. No. 172129, Sept 12, 2008).
VALUE ADDED TAX
Reckoning of two-year prescriptive period
From the close of the taxable quarter when the sales were
made. Sec.112(A) which states within two years apply
for the issuance of a tax credit certificate or refund refers
to applications for tax refund/credit filed with the CIR and
not to appeals made to the CTA.
Sec. 112(D), NIRC provides that CIR has 120 days from date
of submission of complete documents within which to
grant or deny the claim. In case of full or partial denial, or
the failure of CIR to act on the application within the
required period, taxpayer may, within 30 days from receipt
of the decision denying the claim or after the expiration of
the 120 day period, appeal the decision or the unacted
claim with the CTA.
VALUE ADDED TAX
In this case, administrative and judicial claims were
simultaneously filed on Sept 30, 2004. Taxpayer should
have waited for the decision of the CIR or the lapse of the
120-day period. Sec 112(A) applies to administrative
claims, while Sec 112(D) applies to judicial claims. Thus, SC
found the judicial claim with the CTA premature.
The 120-30 day period under Sec. 112(D) is crucial in filing
an appeal to the CTA. Sec. 229 does not apply to
refunds/credits of unutilized input VAT arising from zero-
rated sales.
In computing legal periods, the Administrative Code of
1987 prevails over the Civil Code (CIR v. Aichi Forging Co. of Asia, G.R.
No. 184823, Oct 6, 2010).

VALUE ADDED TAX
MAJORITY OPINION
REFUND/TCC CASES PENDING BEFORE THE CTA EN BANC, WHICH
WERE PREVIOUSLY APPROVED BY CTA DIVISION, WERE SUBSEQUENTLY
DENIED BY CTA EN BANC BASED ON MIRANT RULING.
IN EFFECT, RETROACTIVE APPLICATION OF SC DECISION WAS MADE TO
SUCH PENDING CASES, WHICH IMPAIRED VESTED RIGHTS.

DISSENTING OPINION
TAXPAYERS AND LITIGANTS RELIED IN GOOD FAITH ON THE AFORE-
QUOTED JURISPRUDENCE (ATLAS), AND IT WOULD BE THE HEIGHT OF
INJUSTICE TO APPLY A DOCTRINE TO A PENDING CASE, INVOLVING A
PARTY WHO ALREADY INVOKED A CONTRARY VIEW AND WHO ACTED
IN GOOD FAITH THEREON PRIOR TO THE ISSUANCE OF SAID DOCTRINE
(CIR v. Taganito Mining Corp, CTA EB Case No. 559, Apr 18, 2011).
VALUE ADDED TAX
A multi-purpose cooperative filed a claim for refund of
alleged erroneously paid advance VAT on the withdrawal of
its refined sugar produced. The cooperative assailed the
validity of RR 13-2008, which provides for instances where
withdrawal of sugar from refinery is exempt from advance
VAT. The CTA did not rule on the validity of the regulation
for lack of jurisdiction, but nonetheless allowed the partial
refund of the advance VAT.
The CTA held that the coops sale of sugar to its members
and non-members is exempt from VAT. Both the
administrative and judicial claims were filed within 2 years
pursuant to Secs. 204 and 229, NIRC (United Cadiz Sugar Farmers
Asso Multi-Purpose Coop v. CIR, CTA Case No. 7995, Aug 16, 2011).
VALUE ADDED TAX
ADMINISTRATIVE REQUIREMENTS
REGISTRATION
INVOICING
BOOKKEEPING
FILING OF TAX RETURN AND PAYMENT OF TAX
WITHHOLDING OF TAX
INVENTORY OF:
GOODS, MATERIALS AND SUPPLIES
UNUSED NON-VAT INVOICES OR RECEIPTS
VALUE ADDED TAX
OPTIONAL VAT REGISTRATION FOR EXEMPT
PERSON:
ANY PERSON WHO IS NOT REQUIRED TO REGISTER FOR
VAT UNDER SUBSEC. (G) MAY ELECT TO REGISTER FOR VAT
PURPOSES.
ELECTION IS IRREVOCABLE FOR 3 YEARS FROM QUARTER
ELECTION WAS MADE (Sec. 236(H), RA 9337)
ANY PERSON WHO IS VAT-EXEMPT UNDER SEC. 4.109-
1(B)(1)(V), NOT REQUIRED TO REGISTER FOR VAT MAY, IN
RELATION TO SEC. 4.109-2, ELECT TO BE VAT-REGISTERED.
ONCE VAT-REGISTERED, HE CANNOT CANCELL HIS
REGISTRATION FOR THE NEXT 3 YEARS (Sec. 109-2, RR 14-05)

VALUE ADDED TAX
Significance of VAT registration
Only VAT-registered persons are entitled to credit input
taxes against their output tax.
Non-registration as a VAT taxpayer does not exempt him
from VAT output tax liability on his taxable sales of goods,
properties or services, where his gross sales or receipts for
the preceding 12 months exceeded P1.5 million.
Erroneous registration as a VAT person and consequently,
the issuance by him of VAT invoice or receipt makes the
person liable to VAT.
The buyer of exempt goods or service who is in possession
of VAT invoice or receipt is entitled to input tax.
VALUE ADDED TAX
REGISTER AS VAT PERSON
VENUE
LARGE TAXPAYER
NON-LARGE TAXPAYER
BIR FORM
CANCELL NON-VAT REGISTRATION
SURRENDER ORIGINAL CERT. OF REGISTRATION
PENALTY FOR NON-REGISTRATION
12% OUTPUT TAX LIABILITY
NO INPUT TAX CREDIT
ANNUAL REGITRATION FEE


VALUE ADDED TAX
REQUIRED INFORMATION IN INVOICE OR RECEIPT
NAME AND ADDRESS OF SELLER
STATEMENT THAT SELLER IS VAT-REGISTERED PERSON + TIN
DATE, QTY, UNIT COST, AND DESCRIPTION OF GOODS OR NATURE OF
SERVICE
TOTAL AMOUNT
SEPARATE INDICATION OF VAT (prev. Sec. 106(D) & 108, NIRC)
VAT-EXEMPT SALE
ZERO-RATED SALE
NAME, BUS. STYLE, ADDRESS AND TIN OF VAT-REGIS-TERED BUYER OR
CUSTOMER, IF AMOUNT IS P1,000 OR MORE (Sec. 113(B), RA 9337)
VALUE ADDED TAX
SEPARATE INVOICE OR RECEIPT
SUBJECT TO VAT
10% or 12%, beginning Feb 1, 2006 (REGULAR SALE, INCL. SALE TO
GOVERNMENT), OR 0% (ZERO-RATED SALE)
EXEMPT FROM VAT: EXEMPTION MAY REFER TO A TRANSACTION OR
PERSON
AMOUNT RECEIVED IS NOT ITS INCOME OR FEE BUT FOR ANOTHER
ENTITY
FOR REIMBURSEMENT OF ADVANCES
VAT-EXEMPT SALE
If VAT invoice or receipt is issued by a seller for a VAT-exempt
transaction, he is liable to VAT output tax as a penalty, but the buyer is
entitled to claim VAT input tax.
COMBINED VAT AND NON-VAT INVOICE OR RECEIPT
BREAKDOWN OF SALES PRICE
CALCULATION OF VAT ON TAXABLE PORTION

VALUE ADDED TAX
VAT sales invoice or receipt
In case of sales of P1,000 or more, where the sale is
made to a VAT-registered person, the name, business
style, address and TIN of the purchaser shall be
indicated.
If the purchaser will not voluntarily disclose the above
information, the gasoline dealer has no valid excuse
for not knowing the status of its customer (whether
VAT or non-VAT person); hence, it shall be liable for
any omission of the information in the invoice/receipt.
However, for sales to non-regular customers, they
would not be entitled to input taxes (RMC 29-2005, June 29,
2005)
VALUE ADDED TAX
Separate invoices or receipts for VAT and non-VAT
transactions may be issued, provided that the term VAT
EXEMPT or VAT ZERO-RATED shall be written or printed
prominently on the invoice or receipt.
Use of single invoice/receipt involving VAT and non-VAT
transactions
The seller has the option to use a single invoice/ receipt,
provided that the breakdown of the sales price between
taxable, exempt and zero-rated sales and calculation of the VAT
on each portion of the sale is shown on the invoice/receipt.
For this purpose, the printed invoice/receipt must reflect the
taxable, exempt and zero-rated sales, either in separate columns
or separate rows (RMC 29-2005 and RMC 62-2005).
VALUE ADDED TAX
Use of CRM/POS
Taxpayer-users who have been issued permits to use
sales machines are required to re-configure their
machines in conformity with RA 9337. The program
shall reflect and show separately the 12% output tax
(RMC 8-2006, Jan 31, 2006).
They are not required to apply for re-accreditation but
they have the responsibility to re-configure the
machines. However, the BIR reserves the right to
check randomly their compliance, and if found non-
compliant, the BIR shall withdraw their accreditation
plus penalties (RMC 62-2005, Oct 18, 2005).
VALUE ADDED TAX
The invoicing requirement set forth in Sec. 4.108-1 of
RR 7-95, particularly the printing of the word zero-
rated on invoices/receipts, though not expressly
provided in law, was recognized as reasonable and in
accord with the efficient collection of VAT. When RA
9337 took effect on Nov 1, 2005, it included the
invoicing requirement under RR 7-95.
The conversion from regulation to law did not diminish
the binding force of such regulation with respect to
acts committed prior to the enactment of that law
(Panasonic Communication Imaging Corp of the Phil v. CIR, G.R. No. 178090, Feb 8,
2010).
VALUE ADDED TAX
The absence of the word zero-rated on the
invoices/receipts is fatal to a claim for refund
or credit of input tax.
The period involved in this refund refers to the
taxable quarters of 2000 (JRA Philippines v. CIR, G.R. No.
177127, Oct 11, 2010)
Non-compliance with the requirements under
Sec. 4.108-1 of RR 7-95 is fatal to the claim for
refund (Hitachi Global Storage Technologies Phil Corp v. CIR, G.R. No.
174212, Oct 20, 2010)
VALUE ADDED TAX
The SC denied taxpayers claim for refund for
failure to comply with the substantiation
requirements under RR 7-95, particularly the
imprinting of the word TIN-VAT in the invoices
and receipts.
SC reiterated that Sec. 4.108-1 of RR 7-95 neither
expanded nor supplanted the Tax Code, but
merely supplemented what the Tax Code already
defined and discussed (Kepco Phil v. CIR, G.R. No. 181858, Nov 24,
2010).
VALUE ADDED TAX
A VAT-registered taxpayer is required to comply with all the VAT
invoicing requirements to be able to file a claim for input taxes on
domestic purchases for goods or services attributable to zero-rated
sales. A VAT invoice is an invoice that meets the requirements of
Sec. 4.108-1 of RR 7-95. All purchases covered by invoices other
than a VAT invoice shall not give rise to any input tax.
Microsofts invoice, lacking the word zero-rated is not a VAT
invoice and thus cannot give rise to any input tax (Microsoft Phil v. CIR,
G.R. No. 180173, Apr 6, 2011).

Failure to indicate in the sales invoices or receipts the Authority To
Print is not fatal to the claim. What is important is that ATP has
been secured by taxpayer and invoices or receipts are registered
(Silicon Phil v. CIR, G.R. No. 172378, Jan 17, 2011).
VALUE ADDED TAX
Sales invoice vs. official receipt
Petitioner offered in evidence VAT invoices to substantiate its zero-
rated sales. CTA en banc denied petitioners claim, stating that since it
is engaged in sale of services, VAT receipts should have been
presented.
Sec. 113 of the Tax Code does not create a distinction between a sales
invoice and an official receipt. Sales invoices are recognized
commercial documents to facilitate transactions. They are proofs that
business transactions have been concluded. Thus, an invoice would
suffice, provided substantiation requirements are met (AT&T Communications
Services Phil v. CIR, G.R. No. 182364, Aug 3, 2010).
There is a fine distinction between a VAT invoice and a VAT official
receipt. VAT invoice and VAT receipt should not be confused as
referring to one and the same thing. Certainly, neither does the law
intend the two to be used alternatively (Kepco Phil Corp v. CIR, G.R. No. 181858, Nov
24, 2010).
VALUE ADDED TAX
RMC 4-96 allows the input taxes to be credited from output
taxes where advertising agency issues VAT receipt to
advertiser for the entire amount received, even if the
agency recognizes only 15% share in the total amount
billed.
Relevant supporting documents are documents
necessary to support the legal basis in disputing a tax
assessment as determined by the taxpayer. Otherwise, a
taxpayer will be at the mercy of the BIR, which may require
production of documents that taxpayer cannot submit. RR
7-95 does not require original to be submitted to the BIR
(CIR v. Jimenez Basic Advertising, CTA EB 509, Feb 9, 2010, citing CIR v. First Express
Pawnshop Co, G.R. No. 172045, June 16, 2009).
VALUE ADDED TAX
VAT returns
When claiming tax refund/credit, the VAT-
registered taxpayer must be able to establish that
it does have refundable or creditable input VAT,
and the same has not been applied against its
output VAT the information that supposed to be
reflected in taxpayers VAT returns. Thus, an
application must be accompanied by copies of the
taxpayers VAT return(s) for the quarter(s)
concerned (Atlas Consolidated Mining & Dev Corp v. CIR, G.R. No.
159471, Jan 26, 2011).
VALUE ADDED TAX
Final Withholding Tax on Payments to Non-Resident
Person
Party required to withhold VAT is the payor, regardless of
whether or not he is VAT-registered. If it is a non-VAT
person, VAT becomes part of cost of asset or expense
VAT is passed on to the resident withholding agent
Payor shall claim input tax upon filing of its VAT return,
subject to allocation of input tax
Duly filed BIR Form 1600 is the proof or documentary
substantiation for the input tax
Withholding tax shall be remitted within 10 days following
the end of the month withholding was made
VALUE ADDED TAX
Final Withholding Tax on sales to government
Sale of coal to NPC by a holder of Coal Operating
Contract is exempt from final withholding VAT. RA
9337 neither expressly nor impliedly repealed PD 972.
A special law cannot be repealed, amended or altered
by a subsequent general law by mere implication.
The applicable provisions are Secs. 204 and 229,
NIRC, which gives the taxpayer a period of two years
from date of payment within which to file both its
administrative and judicial claims for refund (Semirara
Mining Corp v. CIR, CTA Case No. 7727, Feb 10, 2011).
REV REGS NO. 12-2011, July 25, 2011
Reportorial requirements for establishments leasing
spaces for commercial activities
It shall be the responsibility of all owners or sub-lessors of
commercial establishments/buildings/ spaces to ensure
that lessee is a BIR-registered taxpayer (TIN, COR, and
registered invoices/ receipts).
Every Jan 31
st
, all owners or sub-lessors of commercial
establishments/buildings/spaces who are leasing or
renting out such commercial space to any person doing
business therein are required to submit to BIR RDO (a)
building/space layout; (b) copy of lease contract; and
lessee information statement.
First filing of tenants profile was Sept 1, 2011. This was
extended to Nov 2, 2011.
REV REGS NO. 1-2012, Feb 20, 2012
PERSONS REQUIRED TO SUBMIT SLS
All persons liable for VAT, such as manufacturers, wholesalers,
service-providers, among others, are required to submit
Summary List of Sales.
PERSONS REQUIRED TO SUBMIT SLP
All persons liable for VAT, such as manufacturers, service-
providers, among others, are required to file Summary List of
Purchases.
RULES IN SUBMISSION
Quarterly SLS/SLP shall be submitted thru compact-disk-
recordable (CDR) medium following the format provided in
subsection g hereof. The magnetic form (3.5-inch floppy
diskettes) in RR 16-2005 shall henceforth refer to CDR.
RR 1-2012 shall take effect on Jan 1, 2012
REV REGS NO. 3-2012, Feb 20, 2012
RR 16-2011, Oct 27, 2011
NIRC Section Old Amount New Amount
Sec. 109(P) P1,500,000 P1,919,500 Res Lot
Sec. 109(P) 2,500,000 3,199,200 Res H&L
Sec. 109(Q) 10,000 12,800 Res unit
Sec. 109(V) 1,500,000 1,919,500 Annual
EFFECTIVITY OF ADJUSTED THRESHOLD AMOUNT
If instrument of sale is executed and notarized on or after Jan 1,
2012, apply 12% VAT on new threshold amount.
If instrument of sale is executed and notarized on or after Nov 1,
2005 but prior to Jan 1, 2012, threshold amount is old amount,
and VAT rate is 10% up to Jan 31, 2006 or 12% beginning Feb 1,
2006.

REV REGS NO. 10-2012, June 1, 2012
JV NOT TAXABLE AS CORPORATION
JV or consortium is formed for the purpose of undertaking
construction projects;
It involves joining or pooling of resources by licensed local
contractors; i.e., licensed as a general contractor by the Phil
Contractors Accreditation Board (PCAB) of the DTI;
Local contractors are engaged in construction business; and
JV itself is likewise licensed as such by PCAB.
If any requirement above is absent, JV or consortium is a
taxable corporation.
Tax-exempt JV shall not include those who are mere
suppliers of goods, services or capital to a construction
project.
REV REGS NO. 10-2012, June 1, 2012
JV involving foreign contractors may be treated as non-taxable
corporation only if:
Member foreign contractor is covered by a special license as
contractor by PCAB; and
Construction project is certified by the appropriate Tendering Agency
(government office) that the project is a foreign-
financed/internationally-funded project and that international bidding
is allowed under the Bilateral Agreement entered into by and between
the Phil government and the foreign/international financing
institution, pursuant to the rules and regulations of RA 4566
(Contractors License Law).
Each member of JV not taxable as corporation shall report and pay
taxes on their respective shares to the JV profit.
All licensed local contractors must enroll to BIRs EFPS at the RDO
where local contractors are registered as taxpayers.


END OF PRESENTATION

Atty. Vic C. Mamalateo
Mobile: 0939-9209175; 0917-5280445
Email: vicmamalateo@yahoo.com
vic.mamalateo@vcmlaw.com.ph