VALUE-ADDED TAX (VAT)
CHARACTERISTICS
CONCEPT
1. It is a tax imposed on the value added to goods,
properties, or services of a taxpayer.
2. It is a transparent form of sales tax imposed on
the taxable sale, barter, or exchange of goods,
properties or services.
3. It is a broad-based tax on consumption imposed
on all stages of taxable sale but the tax burden
rests with the final consumer who consumes the
goods, properties, or services.
4. It is an indirect tax.
5. It is computed through “tax credit method” or
“invoice method” wherein the input tax shifted
bu the sellers to the buyer is credited against the
buyer’s output taxes when he in turn sells the
taxable goods, properties , or services. [NIRC
Sec. 105 and Sec. 110(A)]
6. It follows the “destination principle/crossborder doctrine” (no VAT shall be imposed to
form part of the cost of the goods destined for
consumption outside the territorial border of
the taxing authority e.g. exportation)
 The VAT system uses the destination
principle as a basis for the jurisdictional
reach of the taxed. Goods and services are
taxed only in the country where they are
consumed. Thus, exports are zero-rated,
while imports are taxed.
 VAT is a tax on consumption levied on the sale,
barter, exchange, or lease of goods or properties
and services in the Philippines and on importation of
goods into the Philippines.
 VAT is a percentage tax imposed at every stage
of the distribution process on the sale, barter, or
exchange, or lease of goods or properties, and on
the performance of service in the course of trade or
business, or on the importation of goods, whether
for business or non- business purposes.
 It is a business tax levied on certain transactions
involving a wide range of goods, properties, and
services, such tax being payable by the seller, lessor,
or transferor. The tax is so-called because it is
imposed on the value not previously subjected to
VAT.
VAT REGISTRATION
 Any person intending to engage in business shall
determine whether he has to register his business as
VAT or non-VAT.
 Registration for VAT business is compulsory
when his expected annual gross sales or receipts
exceed 3 million.
 If tax payer expects to exceed the threshold, then
it may opt to register under the VAT system.
Optional registration as VAT taxpayer is irrevocable
for 3 years from the quarter when election was
made.
IMPACT OF TAX
INCIDENCE OF TAX
The impact of taxation is
on statutory taxpayer,
the one from whom the
government collects.
The incidence of tax is on
the one who bears the
burden of taxation.
 VAT registered business is subject to 12%
business tax
The impact of VAT is on
the seller upon whom
the tax has been
imposed.
 non-VAT business is generally subject to 3%
business tax (also known as 3% other percentage tax
on gross receipts/sales).
The incidence of VAT is on
the final consumer.
TAX CREDIT METHOD
 The tax credit method refers to the manner by
which the value added tax of a taxpayer is
computed. The input taxes shifted by the sellers to
the buyer are credited against the buyer's output
taxes when he in turn sells the taxable goods,
properties or services.
 Under the VAT method of taxation, which is
invoice-based, an entity can credit against or
subtract from the VAT charged on its sales or
outputs the VAT paid on its purchases, inputs and
imports.
 If at the end of a taxable quarter the output taxes
charged by a seller are equal to the input taxes
passed on by the suppliers, no payment is required.
It is when the output taxes exceed the input taxes
that the excess has to be paid.
 If, however, the input taxes exceed the output
taxes, the excess shall be carried over to the
succeeding quarter or quarters.
 Should the input taxes result from zero-rated or
effectively zero-rated transactions or from the
acquisition of capital goods, any excess over the
output taxes shall instead be refunded to the
taxpayer or credited against other internal revenue
taxes.
BASIC FORMULA OF VAT
 OUTPUT VAT – INPUT VAT = VAT PAYABLE /
EXCESS INPUT TAX
Gross Sales
Divided by
Amount Net of VAT
Multiply by
xxx
1.12
xxx
12%
VAT AMOUNT
 If input VAT is higher than output VAT, the excess
input tax is carried over to the succeeding taxable
quarter/s as tax credit.
 Any input tax attributable to zero-rated sales
may instead be refunded or credited against other
internal revenue taxes.
INPUT VAT
 the VAT due from or paid by a VAT-registered
person in the course of his trade or business on
importation of goods or local purchase of goods or
services, including lease or use of property, from a
VAT registered person.
SOURCES OF INPUT VAT
1. Purchase or importation of goods
a. For sale
b. For conversion into or intended to form
part of a finished product for sale
including packaging materials.
c. For use as supplies in the course of
business
d. For use as materials supplies in the sale
of service
e. For use in the trade or business for which
deduction
for
depreciation
or
amortization
2. Purchase of real properties for which a VAT
has actually been paid
3. Purchase of services in which VAT has
actually been paid
4. Transactions deemed sale
5. Transitional input tax – (2%)
 2% of the beginning inventory of goods,
materials and supplies or the actual VAT paid
on such goods, materials and supplies
(whichever is HIGHER)
6. Presumptive input tax – (4%)
 Persons or firms engaged in the processing
of sardines, mackerel and milk, in
manufacturing refined sugar and cooking oil
and packed noodle based instant meals, shall
be allowed a presumptive input tax,
creditable against the output tax, equivalent
to 4% of the gross value in money of their
purchases of primary agricultural products
which are used as inputs to their production.
OUTPUT TAX  the VAT due on the sale or lease of
taxable goods or properties or services by any
person registered or required to register under
section 236 of the tax code.
PERSONS LIABLE
Any person who:
a. in the course of his trade or business
i. sells,
ii. barters,
iii. exchanges,
iv. leases goods or properties,
v. renders services
b. any person who imports goods.
 “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 non-stock,
nonprofit organization
 irrespective of the disposition of its net
income and whether or now it sells
exclusively to members of their guests, or
government entity. (Sec 105)
 the importer, whether an individual or
corporation and whether or not made in the course
of his trade or business, shall be liable to pay VAT.
 When the annual sales do not exceed 3 million:
 any person whose gross annual sales and/or
receipts do not exceed the amount of
P3,000,000, and who is not VAT registered
shall pay a tax equivalent to 3% of his gross
monthly sales or receipts.
 To be subject to 3% percentage tax, the
following requisites must be satisfied:
1. The gross annual sales and/or receipts do
not exceed P3,000,000
2. The taxpayer is not a VAT-registered
person
VAT ON SALE OF GOODS
RATE: 12% VAT (beginning 1 February 2006)
BASIS: Gross selling price or gross value in money of
the goods or properties.
WHO PAYS: paid by SELLER
 Goods or properties – all tangible and intangible
objects which are capable of pecuniary estimation,
including:
1. Real properties held primarily for sale to
customers or held for lease in the ordinary
course of trade or business;
2. The right or the privilege to use patent,
copyright, design, or model, plan, secret
formula or process, goodwill, trademark,
trade brand or other like property or right;
3. The right or the privilege to use in the
Philippines of any industrial, commercial or
scientific equipment;
4. The right or the privilege to use motion
picture films, films tapes and discs;
5. Radio, television, satellite transmission and
cable television time
GROSS SELLING PRICE
 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 VAT.
 The excise tax, if any, on such goods or
properties shall form part of the gross selling
price.
 In this case of sale, barter or exchange of real
property, gross selling price shall mean the
consideration stated in the stales document
of the fair market value (whichever is higher
of the zonal value or the fair market value as
shown in the schedule of values of the
provincial and city assessors), whichever is
HIGHER.
REQUISITES OF THE TAXABILITY OF SALE OF
GOODS OR PROPERTIES
The sale of goods (tangible or intangible) must be:
1. An actual or deemed sale of goods or
properties for a valuable consideration;
2. Undertaken in the course of trade or
business;
3. For the use or consumption in the
Philippines; and
4. Not exempt from VAT under Tax Code,
special law, or international agreement
SALE OF REAL PROPERTIES
SUBJECT TO VAT
NOT SUBJECT TO VAT
 On installment plan
 Pre-selling by real
estate dealers
 Sale of residential lot
exceeding P1,500,000
 Sale of house and lot
exceeding P2,000,000
(effective January
1,2021; formerly P2.5
milion)
 not primarily held for
sale

INSTALLMENT SALE OF REAL PROPERTY
1. Sale of real property by a real estate dealer
2. The initial payments of which in the year of
sale do not exceed 25% of the gross selling
price.
 Initial payments = down payment + all
payments actually or constructively received
during the year of sale
DEFERRED PAYMENT OF REAL PROPERTY
 In the case of sale of real properties on the
deferred-payment
basis,
the
initial
payments in the year of sale exceed 25% of
the gross selling price.
 The transaction shall be treated as cash sale
which makes the entire selling price taxable
in the month of sale.
INSTALLMENT SALE1
DEFERRED PAYMENT
 Initial payment dos not
exceed 25% of the
gross selling price
 Taxable only on the
payment actually or
constructively received
 Initial payment exceeds
25% of the gross selling
price
 Treated as cash sale and
the entire selling price is
taxable on the month of
sale.
Example of Installment Sale: (Assume that during
the year of sale)
 Initial payment is P1 million (10% of the
selling price)
 Since initial payment is less than 25%, it is
installment sale. Therefore, VAT for year 1 is
P1 million x 12% = P120,000
 For year 2 onwards, VAT is based on future
installment collections.
Example of Deferred Payment: (Assume that during
the year of sale)
 Initial payment is P3 million of P10 million
(30% of the selling price)
 Since initial payment is more than 25%, it is
deferred payment. Therefore, VAT is P10
million x 12% = P1.2 million (output VAT)
 P1.2 mullion output VAT is payable on the
month of sale.
ZERO-RATED SALE OF GOODS
 A zero-rated sale by a VAT-registered person
is a taxable transaction for VAT purposes,
but shall not result in any output tax.
 Input tax on purchases of goods, properties
or services related to such zero-rated sale
shall be available for refund.
 The Philippine VAT Law adheres to the “cross
border doctrine” of the VAT system which
means that no VAT shall be imposed to form
part of the cost of goods destined for
consumption outside the territorial border
of the Philippine taxing authority.
ZERO-RATED SALES
EFFECTIVELY ZERO-RATED
SALES
 Generally refers to
the export sale of
goods and supply
of services.
It refers to the sale of goods
or supply of services to
persons or entities whose
exemption under special laws
or international agreements
to which the Philippines is a
signatory effectively subjects
such transactions to a zero
rate:
1. Sales to enterprise duly
registered and
accredited with the
Subic Bay Metropolitan
Authority and
Philippine Economic
Zone Authority;
2. International
agreements to which
the Philippines is
signatory, such as Asian
Development Bank
(ADB), and
International Rice
Research Institute
(IRRI)
SALES OF GOODS BY VAT-REGISTERED PERSONS
SUBJECT TO ZERO PERCENT (0%) RATE
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 BSP.
2. Sale and delivery of goods to
a. Registered enterprises within a
separate customs territory as
provided under special laws; and
b. Registered
enterprises
within
tourism enterprise zones as
declared
by
the
Tourism
3.
4.
5.
6.
Infrastructure and Enterprise Zone
Authority (TIEZA) subject to the
provisions under Republic Act No.
9593 or The Tourism Act of 2009:
Sale of raw materials or packaging materials
to a nonresident buyer for delivery to a
resident local export- oriented enterprise to
be used in manufacturing, processing,
packing or repacking in the Philippines of the
said buyer's goods and paid for in acceptable
foreign currency and accounted for in
accordance with the rules and regulations of
the BSP.
Sale of raw materials or packaging materials
to export-oriented enterprise whose export
sales exceed seventy percent (70%) of total
annual production.
Those considered export sales under
Executive Order No. 226. otherwise known
as the Omnibus Investment Code of 1987,
and other special laws; and
The sale of goods, supplies, equipment and
fuel to persons engaged in International
shipping or international air transport
operations: Provided. That the goods,
supplies, equipment, and fuel shall be used
exclusively for international shipping or air
transport operations.
SERVICES PERFORMED BY VAT-REGISTERED
PERSONS SUBJECT TO ZERO PERCENT (0%) RATE
1. Processing, manufacturing or repacking of
goods for other persons doing business
outside the Philippines, which goods are
subsequently exported and paid for in
acceptable foreign currency and accounted
for in accordance with the rules and
regulations of the BSP.
2. Services (other than those mentioned in the
preceding paragraph) rendered to a person
engaged in business conducted outside the
Philippines or to a nonresident person not
engaged in business who is outside the
Philippines when the services are performed
and paid for in acceptable foreign currency
3.
4.
5.
6.
7.
and accounted for in accordance with the
rules and regulations of the 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 0% rate.
Services rendered to persons engaged
exclusively in international shipping or air
transport operations, including leases of
property for use thereof; Provided, that
these services shall be exclusively for
international shipping or air transport
operations.
Services performed by subcontractors
and/or
contractors
in
processing,
converting, or manufacturing goods for an
enterprise whose export sales exceed 70%
of the total annual production.
Transport of passengers and cargo by
domestic air or sea vessels from the
Philippines to a foreign country.
Sale of power or fuel generated through
renewable sources of energy such as but not
limited to,
biomass,
solar,
wind,
hydropower, geothermal and steam, ocean
energy, and other emerging sources using
technologies such as fuel cells and hydrogen
fuels. The sale of power or fuel is the one
being subject to 0% and not the sale of
services related to the maintenance or
operation of the plants generating said
power.
TRANSACTIONS DEEMED SALE
 Before considering whether the transaction is
deemed sale. It must first be determined whether
the sale was in the ordinary course of trade or
business. Even if the transaction was "deemed sale,"
if it was not done in the ordinary course of trade or
business, still the transaction is not subject to VAT.
 In a transaction deemed sale, the input VAT was
already claimed by the seller as credit against
output VAT. However, since there is no actual sale,
no output VAT is actually charged to the customers.
As a result, the state will be deprived of its right to
collect the output VAT. To avoid the situation
where a VAT-registered person avail of input VAT
without being liable for corresponding output VAT,
certain transactions shall be considered sales even
in the absence of actual sale.
 In transaction deemed sale, the seller is also the
buyer, and no valuable consideration is thus paid.
 For transactions 'deemed sale, the output tax
shall be based on the market value of the goods
deemed sold as of the time of the occurrence of the
transactions enumerated.
1. 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 (e.g. when a VATregistered person withdraws goods from his
business for his personal use)
2. Distribution or transfer to:
 Shareholders or investors as share in
the profits of the VAT-registered
persons; or
 Creditors in payment of debt.
3. 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
are not deemed sold.
4. Retirement from or cessation of business,
with respect to inventories of taxable goods
existing as of such retirement or cessation.
VAT ON IMPORTATION OF GOODS
 VAT is imposed on goods brought into the
Philippines, whether for use in business or not.
 The VAT on importation shall be paid by the
importer prior to the release of such goods from
customs custody.
 The importer is any person who brings goods into
the Philippines, whether or not made in the course
of trade or business. It includes non-exempt persons
or entities who acquire tax-free imported goods
from exempt persons, entities or agencies.
 The 12% VAT is based on:
1. 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, prior to the release
of goods from customs custody: or,
2. In case the valuation used by the BOC in
computing customs duties is based on
volume or quantity of the imported goods,
the landed cost shall be the basis for
computing VAT. 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.
TRANSFER OF GOODS BY TAX-EXEMPT PERSONS





As a rule, all importations are subject to
VAT.
However, importations by tax-exempt
persons are not subject to VAT.
Tax-exempt persons pertain to those who
enjoy exemption from VAT due to special
laws or international agreements to which
the Philippines is a signatory.
If importer is tax-exempt, the subsequent
purchasers, transferees or recipients of
such imported goods shall be considered as
importers who shall be liable for the tax on
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.
SALE OR EXCHANGE OF SERVICE
 Sale or exchange of service means the
performance of all kinds of services in the
Philippines for others for a fee, remuneration or
consideration.
 "Service" has been defined as "the art of doing
something useful for a person or company for a fee"
or "useful labor" or work rendered or to be rendered
to another for a fee.
 The tax base is gross receipts derived from the
sale or exchange of services.
SALES OF SERVICE IN THE COURSE OF BUSINESS
INCLUDES SERVICES PERFORMED BY:
1. Construction and service contractors
2. Stock, real estate, commercial, customs and
immigration brokers
3. Lessors of property, whether personal or real
4. Transmission of electricity by electric
cooperatives
5. Persons engaged in warehousing services
6. Lessors or distributors of cinematographic films
7. Persons engaged in milling, processing,
manufacturing or repacking goods for others
8. Proprietors, operators, or keepers of hotels,
motels, rest houses, pension houses, inns, resorts,
theaters, and movie houses
9. Proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places,
including clubs and caterers
10. Dealers in securities
11. Lending investors
12. 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 relative to their
transport of goods or cargoes
13. Common carriers by air and sea relative to their
transport of passengers, goods or cargoes from one
place in the Philippines to another place in the
Philippines
14. Sales of electricity by generation, transmission,
and/or distribution companies, including electric
cooperatives
15. Franchise grantees of electric utilities,
telephone and telegraph, radio and/or television
broadcasting and all other franchise grantees,
except franchise grantees of radio and/or television
broadcasting whose annual gross receipts of the
preceding year do not exceed P10,000,000, and
franchise grantees of gas and water utilities
16. Non-life insurance companies (except their crop
insurances), including surety, fidelity, indemnity and
bonding companies; and
17. Similar services regardless of whether or not the
performance thereof calls for the exercise or use of
the physical or mental faculties.
COMMON CARRIER
COMMON
CARRIER
TRANSPORTI
NG
By land
Persons
By sea
Goods or
Cargo
Whether
person or
goods/car
go
KIND OF
CARRIER
Domestic
Domestic
Domestic
Internatio
nal
By air
Domestic
TAX LIABILITY
3% percentage
tax
12% VAT
3% percentage
tax, doing
business in the
PH
Zero rated VAT
– International
trip
12% VAT Domestic flight
Zero rated VAT
– International
trip
SALE OR EXCHANGE OF SERVICES SHALL
LIKEWISE INCLUDE:
1. The lease or the use of or the right or privilege to
use any copyright, patent, design or model, plan
secret formula or process, goodwill, trademark,
trade brand or other like property or right.
2. The lease of the use of, or the right to use of any
industrial, commercial or scientific equipment.
3. The supply of scientific, technical, industrial or
commercial knowledge or information.
4. The supply of any assistance that is ancillary and
subsidiary to and is furnished as a means of enabling
the application or enjoyment of any such property,
or right as is mentioned in number (2) or any such
knowledge or information as is mentioned in
number (3);
5. The supply of services by a nonresident person
or his employee in connection with the use of
property or rights belonging to, or the installation or
operation of any brand, machinery or other
apparatus purchased from such nonresident person.
6. The supply of technical advice, assistance or
services rendered in connection with technical
management or administration of any scientific,
industrial or commercial undertaking, venture,
project or scheme.
7. The lease of motion picture films, films, tapes
and discs.
8. The lease or the use of or the right to use radio,
television, satellite transmission and cable
television time.
LEASE OF PROPERTIES
 The lease of properties shall be subject to
VAT irrespective of the place where the
contract of lease or licensing agreement was
executed, if the property is leased or used in
the Philippines.
 There shall be levied, assessed and collected,
a VAT equivalent to 12% of gross receipts
derived from the sale or exchange of
services, including the use or lease of
properties.
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 applied as payments
for services rendered and advance payments
actually or constructively received during the
taxable period for the services performed or to be
performed for another person, excluding VAT.
VAT-EXEMPT TRANSACTIONS
 VAT-exempt transactions refer to the sale of
goods or properties and/or services and the
use or lease of properties that is not subject
to VAT (output tax) and the seller is not
allowed any tax credit of VAT (input tax) on
purchases.
 The seller shall not bill any output tax to his
customers since transaction is not subject to
VAT.
 Any person whose sales or receipts are
EXEMPT from VAT or who is not VATregistered person, shall pay a tax of 3% of his
monthly gross sales or receipt.
ZERO-RATED
VAT-EXEMPT
 Transaction is taxable
for VAT purposes but
 Transaction is
subject to VAT
NOT
shall not result to
output tax
 Input tax on the
purchases of goods,
properties or services,
related to the zerorated sale shall be
available as tax credit
or refund
 Input tax on the VATexempt sale is not
allowed as tax credit
VAT-EXEMPT TRANSACTIONS
1. Sale or importation of agricultural and marine
food products
 must be in their original state (even if they
have undergone simple process of
preparation or preservation for the market
such as freezing, drying, salting, broiling,
smoking, stripping, etc. including those using
advance technological means of packaging
such as shrink wrapping in plastics, vacuum
packing, tetra-pack etc.)
NOT EXEMPT /VATABLE IF:
 it undergoes many processes (ex. marinated
products)
 sale of pet animals/ zoo animals (not for
human consumption / livestock animals)
2. Sale or importation of fertilizers, seed, seedlings
and fingerlings
 it should be consumed by poultry or livestock
NOT EXEMPT/ VATABLE IF:
 specialty feeds for race horses, zoo animals,
or animals considered as pets (not a
livestock)
3. Importation of personal and household effects
 imported goods must be for personal use
 belonging to residents of the PH returning
from abroad and non-resident citizens
coming to resettle in the PH; provided that
such goods are exempt from custom duties
under the Tariff and Customs Code of the
Philippines
NOT EXEMPT/ VATABLE IF:
 imported goods are made available for sale
4. Importation of professional instruments
 instruments must be for personal use and
not to be sold or bartered in the country
5. Services subject to Percentage Tax under Title V
of the Tax Code
i. Sale or lease of goods or properties or the
performance of services of non-VAT
registered persons, other than the
transactions mentioned in paragraphs (A) to
(AA) of the Tax Code, the gross annual sales
and/or receipts of which does not exceed
the amount of three million pesos
P3,000,000.
ii. Services
rendered
by
international
air/shipping carriers
iii. Services rendered by franchise grantees of
radio and/or television broadcasting whose
annual gross receipts of the preceding year
do not exceed ten million pesos
P10,000,000, and by franchise grantees of
gas and water utilities
iv. Services rendered by overseas dispatch,
message or conversation originating from
the Philippines
v. Services rendered by any person, company,
or corporation (except purely cooperative
companies or associations) doing life
insurance business of any sort in the
Philippines.
vi. Services rendered by fire, marine, or
miscellaneous insurance agents of foreign
insurance companies.
vii. Services of proprietors, lessees or operator
of cockpits, cabarets, night or day clubs,
boxing exhibitions, professional basketball
games, Jai-Alai and race tracks,
viii. Receipts on sale, barter or exchange of
shares of stock listed and traded through the
local stock exchange or through initial public
offering.
6. Services by agricultural contract growers and
milling
 milling for others (palay into rice, corns into
grits, sugar cane into raw sugar)
 Agricultural contract growers – persons
producing for others poultry, livestock or
other agricultural and marine food products
in their original state.
 Toll Processing/ Toll Dressing
EXEMPT: if performed as packaged service
(yung nagkatay is also the owner/grower)
VATABLE: if separate contractor
7. Medical, dental, hospital and veterinary services
EXCEPT those rendered by professionals
EXEMPT:
 Laboratory services of Outpatient
 Medical expenses part of the hospital bill
(medicines, professional fee) of in-patients
or confined patients
 VATABLE: If the hospital or clinic operates a
pharmacy or drugstore, the sale of drugs and
medicine, doctor’s fee of OUTPATIENTS
8. Educational services rendered by private
educational institutions
must be duly accredited by DepED, CHED,
TESDA, and those rendered by government
educational institutions.
 VATABLE: tuition fees to review centers, inservice trainings not accredited by
mentioned above.
9. Services rendered by individuals pursuant to an
employer-employee relationship
must be duly accredited by DepED, CHED,
TESDA, and those rendered by government
educational institutions.
10. Services rendered by regional or area
headquarters established in the Philippines by
multinational corporations
that do not earn or derive income from the
Philippines
11. Transactions which are exempt under
international agreements to which the Philippines
is a signatory or under special laws except those
granted under PD No. 529
PEZA- Philippine Economic Zone Authority –
already paying special 5% tax on gross
income, thus, VAT EXEMPT
12. Sale by Agricultural Cooperatives
Agricultural
To
Cooperatives members/
investors
Own
EXEMPT
products
Other than EXEMPT
own products
which are not
agricultural
To
nonmembers
EXEMPT
VATABLE
13. Gross receipts from lending activities
Lending and For
For
nonmultipurpose members
members
activities
From lending EXEMPT
EXEMPT
activities
From
non- VATABLE
VATABLE
lending
activities
14. Sales by non-agricultural, non-electric and noncredit cooperatives
Contribution For
For
nonper members members
members
15,000 and EXEMPT
EXEMPT
below
15,000 above VATABLE
VATABLE
15. Export sales by persons who are not VATregistered
16. Sale of real properties
Sale not in the ordinary course of trade or business
In general
VAT EXEMPT
Sale of residential lot by a real estate dealer
Selling price is less than P1.5 million
VAT EXEMPT
Selling price is more than P1.5 million VATABLE
Sale of residential house and other residential
dwellings by a real estate dealer
Selling price is less than P2 million
VAT EXEMPT
Selling price is more than P2 million
VATABLE
Sale of residential lot or residential house and lot by a
non-dealer
Used
in
business
(incidental VATABLE
transaction)
Not used in business (regardless of 6% capital
amount)
gains tax
Sale of real property classified as low-cost housing
In general
VAT EXEMPT
Sale of real property for socialized housing
In general
VAT EXEMPT
17. Lease of real properties
RULES ON LEASE OF RESIDENTIAL UNITS
Monthly rental per unit
Tax Treatment
P15,000 and below per unit
Aggregate
annual
gross YES VAT EXEMPT &
receipts of lessor exceed P3 NO NOT subject to
3% Percentage
million?
tax
Above P15,000
Aggregate
annual
gross YES 12% VAT
receipts of lessor exceed P3
NO VAT EXEMPT &
million?
but subject to
3% Percentage
tax
Lessor has several residential units
P15,000 and below monthly
YES
rental per unit, regardless of
aggregate annual gross
receipts
Above P15,000 and monthly YES
rental per unit BUT aggregate
annual gross receipts from said
units do NOT exceed P3 million
Above P15,000 monthly rental YES
per unit AND aggregate annual
gross receipts from said units
exceed P3 million
Above P15,000 per unit &
YES
above P3 million VAT
threshold
VAT EXEMPT &
NOT subject to
3% Percentage
tax
VAT EXEMPT &
but subject to
3% Percentage
tax
12% VAT
12% VAT
18. Sale, importation, printing or publication of
books and any newspaper, magazine review or
bulletin at regular intervals
NOT EXEMPT/ VATABLE if:
 Publication
of
paid
advertisements
(brochure)
 E-books, E-journals
19. Transport of passengers by international
carriers
 subject to common carriers tax
Ex. Air asia, Malaysian company doing
business in the PH (VAT EXEMPT)
20. Sale, importation or lease of passenger or cargo
vessels and aircraft for domestic or international
transport operations
21. Transportation of fuel, goods and supplies by
persons engaged in international shipping or air
transport operations.
22. Service of bank, nonbank financial
intermediaries performing quasi-banking function
 subject to percentage tax
 Example of intermediaries performing quasi
banking function: Palawan express, LBC,
Cebuana
23. Sale to senior citizens and PWD
24. Transfer of property pursuant to Section 4 (c)
(2)
25. Association dues, membership fees, and other
assessment collected on a purely reimbursement
basis of Home Owner’s Association
26. Sale of gold to BSP
27. Sale or importation of prescription drugs and
medicines for
 Diabetes, high cholesterol and hypertension,
beginning January 1, 2020
 Cancer, mental illness, tuberculosis and
kidney diseases, beginning January 1, 2023
Note: Provided that the DOH shall issue a list of
approved drugs and medicines for this purpose
within sixty (60) days from the effectivity of this Act.