Posted by: robertgsarmiento | September 10, 2010

Value Added Tax – Frequently Asked Questions

I. General VAT Queries

Who are liable to register as VAT taxpayers?
Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if:
  1. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos (P1,500,000.00): or
  2. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).
When is a new VAT taxpayer required to apply for registration and pay the registration fee?
New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding registration fee of five hundred pesos (P500.00) using BIR Form No. 0605 for every separate or distinct establishment or place of business before the start of their business following existing issuances on registration.

Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos (P500.00) not later than January 31, every year.

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?
The following compliance activities must be performed by a VAT-registered taxpayer:
  1. Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales;
  2. Register the books of accounts of the business/occupation/calling, including practice of profession, before using the same;
  3. Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use on transactions subject to VAT. (If there are other transaction not subject to VAT, a separate set of non-VAT invoices or non-VAT official receipts need to be registered for use on transactions not subject to VAT);
  4. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable month (for manual filers)/on or before the prescribed due dates enunciated in RR No. 16-2005 (for e-filers) using BIR Form No. 2550M and of the Quarterly VAT Return on or before the 25th day following the end of the taxable quarter using BIR Form No. 2550Q, reflecting therein gross receipts (for seller of service)/ gross sales (for seller of goods) and output tax (VAT on sales); purchases of goods and services made in the course of trade or business/exercise of profession and input tax (VAT on purchases), other allowable tax credits as in the case of advance VAT payment and VAT withheld by government payors, and VAT payable or excess input VAT, whichever is applicable, with the accredited agent banks (AABs) of the BIR or Revenue Collection Officers (RCOs) of the BIR (in areas without AAB), for returns with payment, or with the RDO/LTDO having jurisdiction over the taxpayer (home RDO/LTDO), for returns without payment. (The monthly VAT Declaration and the Quarterly VAT Return shall reflect the consolidated total for all the taxable lines of activity and all the establishments – head office and branches);
  5. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax (if the quarterly sales exceed P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic Purchases and Input Tax/ the soft copy of the Schedule of Transactional/Individual Importation ( if the quarterly total purchases exceed P1,000,000.00), reflecting therein the required data prescribed under existing revenue issuances.
How do we determine the main or principal business of a taxpayer who is engaged in mixed business activities?

In determining the main or principal business of a taxpayer, we apply the predominance test. Under this test, if more than fifty (50%) of its gross sales and/or gross receipts comes from its business/es subject to VAT, its main/principal business falls within the VAT system making its status as a VAT person. Otherwise, he can not be considered as a VAT person eligible for the election provided for under Section 109(2) of the Tax Code.

What is the liability of a taxpayer becoming liable to VAT and did not register as such?

Any person who becomes liable to VAT and fails to register as such shall be liable to pay the output tax as if he is a VAT-registered person, but without the benefit of input tax credits for the period in which he was not properly registered.

Who may opt to register as VAT and what will be his liability?
  1. 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 by registering with the RDO that has jurisdiction over the head office of that person, and pay the annual registration fee of P500.00 for every separate and distinct establishment.
  2. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed transactions) may opt that the VAT apply to his transactions which would have been exempt under Section 109(1) of the Tax Code, as amended [Sec. 109(2)].
  3. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed ten million pesos (P10,000,000.00) derived from the business covered by the law granting the franchise may opt for VAT registration. This option, once exercised, shall be irrevocable. (Sec. 119, Tax Code).
  4. Any person who elects to register under optional registration shall not be allowed to cancel his registration for the next three (3) years.

The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the calendar quarter and shall pay the registration fee unless they have already paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. Once registered as a VAT person, the taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day of the month following registration.

What are the instances when a VAT-registered person may cancel his VAT registration?
  1. If he makes a written application and can demonstrate to the commissioner’s satisfaction that his gross sales or receipts for the following twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will not exceed one million five hundred thousand pesos (P1,500,000.00); or
  2. If he has ceased to carry on his trade or business, and does not expect to recommence any trade or business within the next twelve (12) months.
When will the cancellation for registration be effective?

The cancellation for registration will be effective from the first day of the following month the cancellation was approved.

What is the invoicing/ receipt requirement of a VAT-registered person?
A VAT registered person shall issue :
  1. A VAT invoice for every sale, barter or exchange of goods or properties; and
  2. A VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services.
May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions?

Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided that the invoice or receipt shall clearly indicate the break-down of the sales price between its taxable, exempt and zero-rated components and the calculation of the Value-Added Tax on each portion of the sale shall be shown on the invoice or receipt.

May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-VAT transactions?

Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and zero-rated component of its sales provided that if the sales is exempt from value-added tax, the term “VAT-EXEMPT SALE” shall be written or printed prominently on the invoice or receipt and if the sale is subject to zero percent (0%) VAT, the term “ZERO-RATED SALE” shall be written or printed prominently on the invoice or receipt.

How is the Value-Added Tax presented in the receipt/ invoice?
The amount of the tax shall be shown as a separate item in the invoice or receipt.

Sample:


Sales Price
P100,000.00


VAT
12,000.00


Invoice Amount
P112,000.00

What is the information that must be contained in the VAT invoice or VAT official receipt?
  1. Name of Seller
  2. Business Style of the Seller
  3. Business Address of the Seller
  4. Statement that the seller is a VAT-registered person, followed by his TIN
  5. Name of Buyer
  6. Business Style of Buyer
  7. Address of Buyer
  8. TIN of buyer, if VAT- registered and amount exceed P1,000.00
  9. Date of transaction
  10. Quantity
  11. Unit cost
  12. Description of the goods or properties or nature of the service
  13. Purchase price plus the VAT, provided that:

    • The amount of tax shall be shown as a separate item in the invoice or receipt;
    • If the sale is exempt from VAT, the term “VAT-EXEMPT SALE” shall be written or printed prominently on the invoice or receipt;
    • If the sale is subject to zero percent (0%) VAT, the term “ZERO-RATED SALE” shall be written or printed prominently on the invoice receipt; and
    • If the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or exempt from VAT, the invoice or receipt shall clearly indicate the breakdown of the sales price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt.
  14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt.
What is the liability of a taxpayer not registered as VAT and issues a VAT invoice/ receipt?

The non-VAT registered person shall, in addition to paying the percentage tax applicable to his transactions, be liable to VAT imposed in Section 106 or 108 of the Tax Code without the benefit of any input tax credit plus 50% surcharge on the VAT payable (output tax). If the invoice/ receipts contain the required information, purchaser shall be allowed to recognize an input tax credit.

What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT-exempt transactions?

If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction but fails to display prominently on the invoice or receipt the words “VAT-EXEMPT SALE”, the transaction shall become taxable and the issuer shall be liable to pay the VAT thereon. The purchaser shall be entitled to claim an input tax credit on his purchase.

What is “output tax”?

Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or services by any person registered or required to register under Section 236 of the Tax Code.

What is “input tax”?

Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods, properties or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period.

What comprises “goods or properties”?
The term “goods or properties” shall mean all tangible and intangible objects, which are capable of pecuniary estimation and shall include, among others:
  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 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; and
  5. Radio, television, satellite transmission and cable television time.
What comprises “sale or exchange of services”?
The term “sale or exchange of services” means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, whether in kind or in cash, including those performed or rendered by the following:
  1. Construction and service contractors;
  2. Stock, real estate, commercial, customs and immigration brokers;
  3. Lessors of property, whether personal or real;
  4. Persons engaged in warehousing services;
  5. Lessors or distributors of cinematographic films;
  6. Persons engaged in milling, processing, manufacturing or repacking goods for others;
  7. Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts, theatres, and movie houses;
  8. Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places, including clubs and caterers;
  9. Dealers in securities;
  10. Lending investors;
  11. Transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes;
  12. 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;
  13. Sales of electricity by generation, transmission, and/or distribution companies;
  14. 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 Ten Million Pesos (P10,000,000.00), and franchise grantees of gas and water utilities;
  15. Non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and
  16. Similar services regardless of whether or not the performance thereof calls for the exercise of use of the physical or mental faculties.

The phrase “sale or exchange of services” shall likewise include:

  1. The lease of use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right;
  2. The lease or the use of, or the right to use of any industrial, commercial or scientific equipment;
  3. The supply of scientific, technical, industrial or commercial knowledge or information;
  4. The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right or any such knowledge or information;
  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 non-resident 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; and
  8. The lease or the use of or the right to use radio, television, satellite transmission and cable television time.
What is a zero-rated sale?

It is a sale, barter or exchange of goods, properties and/or services subject to 0% VAT pursuant to Sections 106 (A) (2) and 108 (B) of the Tax Code. It is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sales, shall be available as tax credit or refund in accordance with RR No. 16-2005.

What transactions are considered as zero-rated sales?
The following services performed in the Philippines by VAT-registered person shall be subject to zero percent (0%) rate:
  1. Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
  2. Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
  3. Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;
  4. Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to 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, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting Feb. 1, 2006;
  5. Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceeds seventy percent (70%) of total annual production;
  6. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. Gross receipts of international air carriers doing business in the Philippines and international sea carriers doing business in the Philippines are still liable to a percentage tax of three percent (3%) based on their gross receipts as provided for in Sec. 118 of the Tax Code but shall not be liable to VAT; and
  7. 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 shipping sources using technologies such as fuel cells and hydrogen fuels; Provided, however that zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power .
The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
  1. Export sales
    • 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 in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
    • The sale of raw materials or packaging materials to a non-resident buyer for delivery to as resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods, paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP;
    • The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production;
    • Sale of gold to the BSP;
    • Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments 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 same is limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port, or vice-versa without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than the mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to twelve percent (12%) output VAT.
  1. Foreign Currency Denominated Sales

The sale to a non-resident of goods, except those mentioned in Sections 149 and 150 of the Tax Code, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.

  1. Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement

Sale of goods or property to persons or entities who are tax-exempt under special laws or international agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc.

Where will taxpayers file their applications for VAT zero-rating?

Taxpayers shall file their application directly with the Audit Information, Tax Exemption and Incentives Division (AITEID) under the Assessment Service, or with the LTAID I and II, BIR National Office, as the case may be.

What is a Contractor’s Final Payment Release Certificate and where should taxpayers file their application for this?

The Contractor’s Final Payment Release Certificate is issued by the BIR before a government contractor is fully paid for his contract with the government. Taxpayers may file their application at the BIR National Office at the Audit Information, Tax Exemption and Incentives Division (AITEID)

What transactions are considered deemed sales?
The following transactions are considered as deemed sales:
  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. Transfer of goods or properties not in the course of business can take place when VAT-registered 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 person; or
    • Creditors in payment of debt or obligation
  1. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period are not deemed sold;
  2. Retirement from or cessation of business, with respect to all goods on hand, whether capital goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or successor. The following circumstances shall, among others, give rise to transactions “deemed sale”;
    • Change of ownership of the business. There is a change in the ownership of the business when a single proprietorship incorporated; or the proprietor of a single proprietorship sells his entire business.
    • Dissolution of a partnership and creation of a new partnership which takes over the business.
What is VAT-exempt sale?
It is a sale of goods, properties or service and the use or lease of properties which is not subject to output tax and whereby the buyer is not allowed any tax credit or input tax related to such exempt sale.
What are the VAT-exempt transactions?
  1. Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefore;
  2. Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals considered as pets);
  3. Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-resident citizens coming to resettle in the Philippines; Provided, that such goods are exempt from custom duties under the Tariff and Customs Code of the Philippines;
  4. Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery and other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bonafide;
  5. Services subject to percentage tax under Title V of the Code, as amended;
  6. Services by agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw sugar;
  7. Medical, dental, hospital and veterinary services except those rendered by professionals;
  8. Educational services rendered by private educational institutions duly accredited by the Department of Education (DepED), the Commission on Higher Education (CHED) and the Technical Education and Skills Development Authority (TESDA) and those rendered by the government educational institutions;
  9. Services rendered by individuals pursuant to an employer-employee relationship;
  10. Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines;
  11. Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws except those granted under P.D. No. 529 – Petroleum Exploration Concessionaires under the Petroleum Act of 1949;
  12. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA) to their members, as well as 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;
  13. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good standing with the Cooperative Development Authority;
  14. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in good standing with CDA; Provided, that the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P15,000.00) and regardless of the aggregate capital and net surplus ratably distributed among the members;
  15. Export sales by persons who are not VAT-registered;
  16. The following sales of real properties are exempt from VAT, namely:
    1. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business;
    2. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the “Urban Development and Housing Act of 1992″ and other related laws, such as RA No. 7835 and RA No. 8763;
    3. Sale of real properties utilized for specialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws;
    4. Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or house and lot and other residential dwellings valued at Two Million Five Hundred Thousand Pesos (P2,500,000.00) and below where the instrument of sale/ transfer/ disposition was executed on or after July 1, 2005; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year.
  17. Lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos (P10,000.00), regardless of the amount of aggregate rentals received by the lessor during the year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO;
  18. Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements;
  19. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine equipment and spare parts thereof for domestic or international transport operations; Provided, that the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be limited to those of one hundred fifty (150) tons and above, including engine and spare parts of said vessels; Provided, further, that the vessels to be imported shall comply with the age limit requirement, at the time of acquisition counted from the date of the vessel’s original commissioning, as follows: (a) for passenger and/or cargo vessel, the age limit is fifteen (15) years old, (b) for tankers, the age limit is ten (10) year old, and (c) for high-speed passengers crafts, the age limit is five (5) years old; Provided, finally, that exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as “The Domestic Shipping Development Act of 2004″;
  20. Importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates, used for shipping transport operations; Provided, that the exemption shall be subject to the provisions of Section 4 of Republic Act No. 9295, otherwise known as “The Domestic Shipping Development Act of 2004″.
  21. Importation of capital equipment, machinery, spare parts, life-saving and navigational equipment, steel plates and other metal plates including marine-grade aluminum plates to be used in the construction, repair, renovation or alteration of any merchant marine vessel operated or to be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions of Section 19 of Republic Act No. 9295, otherwise known as the “The Domestic Shipping Development Act of 2004″.
  22. Importation of fuel, goods and supplies engaged in international shipping or air transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice-versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated form abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other that the mentioned in the paragraph, such portion of fuel, goods and supplies shall be subject to 12% VAT;
  23. Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Sections 121 and 122, respectively of the Tax Code; and
  24. Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00). Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shall be adjusted to its present value after using the Consumer Price Index, as published by the NSO.
What are the previously exempt transactions that are now subject to VAT?
  • Medical services such as dental & veterinary services rendered by professionals;
  • Legal services;
  • Non-food agricultural products;
  • Marine and forest products;
  • Cotton and cotton seeds;
  • Coal and natural gas;
  • Petroleum products;
  • Passenger cargo vessels of more than 5,000 tons;
  • Work of art, literary works, musical composition;
  • Generation, transmission and distribution of electricity including that of electric cooperatives;
  • Sale of residential lot valued at more than P1,500,000.00;
  • Sale of residential house & lot/dwellings valued at more than P2,500,000.00;
  • Lease of residential unit with a monthly rental of more than P10,000;

II. RELIEF-Related Queries

What is “RELIEF”?
RELIEF means Reconciliation of Listing for Enforcement. It supports the third party information program of the Bureau through the cross referencing of third party information from the taxpayers’ Summary Lists of Sales and Purchases prescribed to be submitted on a quarterly basis.
Who are required to submit Summary List of Sales?
VAT taxpayers with quarterly total sales/receipts (net of VAT), exceeding Two Million Five Hundred Thousand Pesos (P2,500,000.00) are required to submit a Summary List of Sales.
Who are required to submit Summary List of Purchases?
VAT taxpayers with quarterly total purchases (net of VAT) of goods and services, including importation exceeding One Million Pesos (P1,000,000.00) are required to submit Summary List of Purchases.
What are the Summary Lists required to be submitted?
  • Quarterly Summary List of Sales to Regular Buyers/ Customers Casual Buyers/ Customers and Output Tax
  • Quarterly Summary of List of Local Purchases and Input tax; and
  • Quarterly Summary List of Importation.
When is the deadline for submission of the above Summary Lists?
The Summary List of Sales/Purchases, whichever is applicable, shall be submitted on or before the twney-fifth (25th) day of the month following the close of the taxable quarter — calendar quarter or fiscal quarter.

What are the penalties for failure to submit the Summary Lists?

  • For failure to file, keep or supply a statement, list or information required on the date prescribed shall pay and administrative penalty of One Thousand Pesos (P1,000.00) for each such failure, unless it is shown that such failure is due to reasonable cause and not to willful neglect; and
  • An aggregate amount to be imposed for all such failures during a taxable year shall not exceed Twenty-Five Thousand Pesos (P25,000.00).

III. What is the treatment for Withholding of VAT on Government Money Payments?

  • The goverment or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or services taxed at twelve percent (12%) VAT pursuant to Sections 106 and 108 of the Tax Code, deduct and withhold a Final VAT due at the rate of five percent (5%) of the gross payment.

The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller.  The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably apportioned to such sales.  Should actual input VAT attributable to sales to government exceeds seven percent (7%) of gross payments, the excess may form part of the sellers’ expense or cost.  On the other hand, if actual input VAT attributable to sale to government is less than seven percent (7%) of gross payment, the difference must be closed to expense or cost.

  • The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall withhold twelve percent (12%) VAT with respect to the following payments:
    1. Lease or use of properties or property rights owned by non-residents; and
    2. Other services rendered in the Philippines by non-residents.

IV. In what grounds can the Commissioner of Internal Revenue suspend the business operations of a taxpayer?

The Commissioner or his authorized representative is empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations:

(a) In the case of a VAT-registered Person:

  • Failure to issue receipts or invoices;
  • Failure to file a value-added-tax return as required under Section 114; or
  • Understatement of taxable sales or receipts by thirty percent (30%)  or more of his correct taxable sales or receipts for the taxable quarter.

(b) Failure to any Person to Register as Required under Section 236

  • The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.


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Responses

  1. bir is public info open to the public, it is to their advantage that that info about their rulings are given to the public, thanks for your concern


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