Professional Documents
Culture Documents
Characteristics of VAT
1.
2.
3.
4.
Rates of VAT
1. For Output VAT
a. Regular VAT rate of 12%
b. Zero percent (0%) rate
2. For Input VAT
a.
b.
c.
d.
e.
A VAT-exempt person is not liable for the imposition of output VAT on its
sales, either because his transactions are not taxable transactions or he is
specifically exempt from VAT by specific provision of the Tax Code or by
special laws.
A VAT-exempt person may be exempted from levying of output VAT;
however, he may still be required by his VAT-registered supplier to pay
the VAT component on his purchases.
1. Persons engaged in non-VAT transactions
a. Those whose sales or receipts are exempt under Sec 109(v) of
NIRC
b. Those whose annual gross sales or receipts do not exceed
P1,919,500 and not registered under the VAT system
c. Non-stock/nonprofit organizations
A nonstock/nonprofit organizations which has no income but
collecting monthly dues from the members. However, it
becomes a VAT taxable person if it regularly conducts or
pursues a commercial or an economic activity.
2. Persons exempt from VAT under Special Laws
a. CDA-registered cooperatives
b. Enterprise registered with Special Economic Zones or Free
Ports in the Philippines
c. Regional or Area Headquarters established in the Philippines
by multinational corporations (BIR ruling 176-88)
d. Inventors (RA 7459; RR 19-93)
3. VAT-exempt under treaty
4. Vat-exempt Senior Citizen and PWDs
A senior citizen or elderly is a Filipino citizen who is a resident of the
Philippines, and sixty (60) years old and above. It includes senior
citizens with dual citizenship status provided they prove their Filipino
citizenship and have at least six (6) months residency in the
Philippines.
Senior citizens and PWDs are not subject to 20% discount and VATexempt on purchases of goods and services as long as they can show
proof of their status.
The purchases made by the senior citizen shall be processed separately
as an independent transaction from his or her non-eligible companions
j. Medical Services
Medical, dental, hospital, and veterinary services are VATexempt (Sec 109 NIRC)
Hospital, laboratory services, and medicines used for inpatients in performing medical procedures by a hospitals
special units (e.g. operating and delivery rooms) are VATexempt.
The VAT-exemption does not cover the following medical
services:
i. Services rendered by health maintenance organizations
(HMOs). (CIR vs Phil Health Care, G.R. No. 168129,
April 29, 2007)
ii. Services rendered by medical professionals engaged in
the practice of their profession who are either VATregistered or VAT-registrable. (RA 9337)
iii. Sale of drugs and medicine by hospital pharmacy or
drug store not included in the hospital bill. (St. Lukes
Medical Center Inc vs. CIR. CTA case No. 5068, Mar
17, 1999)
k. Educational Services
Educational services refer to academic, technical, or
vocational education provided by private educational
institutions duly accredited by the DECS, CHED or TESDA and
those rendered by government educational institutions.
It does not include seminars, in-service trainings, review
classes, and other similar services rendered by persons who
are not accredited by the DECS, CHED, or TESDA. (Rev Regs
No. 6-97, Sec 109 NIRC, RA 9337)
l. Works of Art, Literary Works and Musical Compositions
Sale by the artist of his works of art, literary works, musical
compositions and similar creations, or his services performed
for the production of such works are now subject to VAT. (RA
9337)
m. Employees Services
Compensation income received by individuals derived from
an employer-employee relationship is exempt. Additional
Deposits for telephone instruments and the like are not subject
to VAT. However, if the said deposits are forfeited, they are
included in the taxable gross receipts of the
telecommunications company.
Amounts received for overseas dispatch, message, or
conversation originating in the Philippines which are subject
to the overseas communications tax do not form part of gross
receipts for VAT purposes. (Sec 120, NIRC)
i. 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 brand or other like property or
right.
Zero-Rated or Effectively Zero-Rated Services
The Tax Code used the word export in describing the destination of
goods sold but not for the services supplied. It uses the phrase
performance of all kinds of services in the Philippines to be subject to
12% VAT. The law explicitly used one single criteria: the place where the
service was performed as the jurisdictional basis for the imposition of the
VAT on supply of services. (Sec 108 NIRC)
The Doctrine of Cross Border of VAT system provides that no VAT shall
be imposed to form part of the cost of goods sold destined for
consumption outside of the territorial border of the taxing authority. (RMC
No. 74-99)
Accordingly, services performed outside the Philippines are zero-rated or
effectively zero-rated VAT.
Zero-rated or Effectively Zero-rated Organizations
The Zero-rated VAT or effectively zero-rated VAT is applied on the supply
of services by a VAT-registered person to a person or entity who was
granted indirect tax exemption under special laws or international
agreements (Regs 7-95)
VAT-registered business is allowed to deduct the related input VAT but is
not allowed to collect output VAT on its sale of goods or services with
zero-rated VAT or effectively zero-rated VAT:
1. PEZA or SBMA-Registered Enterprises
Proper documentations
Delivery receipts not allowed
No double input tax credit is allowed
Ignore erroneous VAT rate.
A VAT invoice or receipt containing an erroneous rate does not
deprive the purchaser of claiming the correct input VAT arising from
purchase. (BIR Ruling 141-99, Sept 13, 1999)
Creditable as INPUT
VAT
Yes
No
No
No