A. Nature and Characteristics of VAT a.

Fertilizers
 It is a business tax levied on the b. Seeds, seedlings, and fingerlings
value-added on certain goods, c. Fish, prawn, livestock and poultry
properties and services in the feeds
domestic market and/or importer of d. Ingredients used in the manufacture
goods. of finished feeds (except specialty
 It is imposed not on the goods or feeds for race horses, fighting cocks,
services for a free, remuneration or aquarium fish, zoo animals and
consideration other animals generally considered
 It is an indirect tax and the amount as pets.)
of tax may be shifted or passed on to 3) Importation of personal and household
the buyer, transferee or lessee of the effects belonging to the:
goods, properties or services. a. Residents of the Philippines
 The party directly liable for the returning from abroad; and
payment of the tax is the seller, b. Non-resident citizens coming to
importer or the service provider, resettle in the Philippines.
although the burden of the tax may
NOTE: Such goods must be
be shifted or passed on to the
exempted from customs duties.
consumer.
4) Importation of Professional instruments
and implements, wearing apparel,
B. EXEMPT TRANSACTIONS domestic animals, and personal
household effects, provided:
This means the sales of goods, a. It belongs to persons coming to
properties or services and the use or settle in the Philippines;
lease of properties are not subject to b. For the ir own use and not for
VAT (Output Tax) and the seller or sale, barter, or exchange;
lessor is not allowed to any tax credit on c. Accompanying such persons, or
VAT (Input Tax) on purchase. arriving within ninety (90) days
before or after their arrival;
The following are VAT exempt d. Upon production of evidence
examples: satisfactory to the
1) Sale or importation of: Commissioner, that such
a. Agricultural and marine persons are actually coming to
food product in their settle in the Philippines; and
original state; e. The change of residence is
b. Livestock and poultry used bonafide.
as, or producing foods for
NOTE: Importation of vehicle,
human consumption;
vessel, aircraft, machinery and other
c. Breeding stock and genetic
goods for use in the manufacture
materials.
and merchandise of any kind in
commercial quantity is subject to
Products that will be considered
VAT.
in their original state:
a. Products which undergone 5) Services subject to percentage tax.
simple process of
preparation or preservation 6) Services by agricultural contract
for the market (freezing, growers and milling for others of palay
drying, salting, broiling, into rice, corn into grits and sugar cane
roasting, smoking or into raw sugar;
stripping)
b. Polished or husked rice 7) Medical, dental, hospital and veterinary
c. Corn grits services except those rendered by
d. Raw cane sugar and professionals;
molasses
NOTE:
e. Ordinary salt
 Laboratory services are
f. Copra exempted. If the hospital or
NOTE: Livestock or poultry does not unclude clinic operates a pharmacy or
fighting cocks, race horses, zoo animals and drugstore, the sale of drugs and
medicines are subject to VAT.
other animals generally considered as pets.
 Hospital bills constitute medical
2) Sale or importation of: services. The sale made by the
 drugstore to the in-patients members but also to other persons who
which are included in the are not members.
hospital bills are part of medical
bills (not subject to VAT). 14) Sales by non-agricultural, non-electric
 The sales of the drug store to the and non-credit cooperatives, provided,
out-patients are taxable because that the share capital contribution of
they are NOT PART of medical each member does not exceed P15,000
services of the hospital.
NOTE:
8) Educational services rendered by: Importation by non-agricultural, non-
a. Private educational institutions, electric and non-credit cooperatives of
duly accredited by: machineries and equipment including
i. Department of spare parts thereof, to be used by them
Education (DepEd) are subject to VAT.
ii. Commission on Higher
Education (CHED) 15) Export sales by persons who are not
iii. Technical Education VAT-registered
and Skills Development
Authority (TESDA) 16) Sale of:
b. Government Educational a. Real properties not primarily held
Institutions. for sale to customers or held for
lease in the ordinary course of trade
9) Services rendered by individuals or business
pursuant to an employer – employee b. Real property utilized for low-cost
relationship. and socialized housing
c. Real properties primarily held for
10) Services rendered by regional or area sale to customers or held for lease in
headquarters. the ordinary course of trade or
business, if;
i. Residential lot valued at
11) Transactions which are exempt under 1,919,500 and below;
international agreements to which the ii. House and lot, and other
Philippines or under special laws residential dwellings valued
at 3,199,200 and below.
12) For agricultural cooperatives:
a. Sales to their member NOTE:
b. Sales to non-members if the  If two or more adjacent
cooperative is the producer (if residential lots, and other
not, subject to VAT) residential dwellings are sold or
c. Importation of: disposed in favor of one buyer
from the same seller, for the
- Direct farm inputs,
purpose of utilizing the lots,
machineries and
house and lots, or other
equipments, including
residential dwellings as one
spare parts thereof
residential area “within a 12-
- To be used directly and
month period”, the sale shall be
exclusively in the
exempt from VAT only if the
production and/or
aggregate value do not exceed
processing of their
P1,919,500 for residential lots
produce.
and P3,199,200 for residential
lots and other residential
Type of Sale to Sale to Non - dwellings.
Product Members Members  Adjacent residential lots, house
Sale to Exempt Exempt and lots, and other residential
Cooperatives dwellings, although covered by
Other than Exempt Subject to separate titles and/or separate
the VAT tax declarations, when sold to
cooperative’s one and the same buyer,
own produce whether covered by one
(i.e., from separate Deed of Conveyance,
Traders) shall be presumed as sale of one
13) Gross receipts from lending activities by residential lot, house and lot and
credit or multi-purpose cooperatives other residential dwellings (RR
16-2011; RR 13-2012). This
NOTE: however, does not include the
Exemption is not only limited to the sale of parking lot which may or
gross receipts on loans extended to its may not be included in the sale
 of condominium units. The sale b) With fixed prices for
of parking lots in a subscription and sale;
condominium is a separate and c) Not devoted principally to
distinct transaction and is not the publication of paid
covered by the rules on advertisements.
threshold amount not being a 19) Transport of passengers by
residential lot, house and lot or a international carriers doing
residential dwelling, thus, business in the Philippines. The
should be subject to VAT same shall not be subject to Other
regardless of amount of selling Percentage Taxes as amended
price.” (RR-13-2012) under RA 10378 and Transport of
cargo by international carriers
17) Lease of a residential unit with a doing business in the Philippines,
monthly rental not exceeding as the same is subject to 3%
P12,800, regardless of the amount common carrier’s tax (Other
of aggregated rentals received by Percentage Taxes) as amended
the lessor during the year. under RA103378 and (RR 15-
2015).
NOTES: 20) “ Sale, importation or lease of
 LEASE of RESIDENTIAL passengers or cargo vessels and
UNITS where the monthly aircraft, including engine,
rental per unit exceeds P12,800 equipment and spare parts therof
but the aggregate of such rentals for domestic or international
of the lessor during the year do transport operations, provided, that
not exceed P1,919,500 shall the exemption from VAT on the
likewise be exempt from VAT, importation and local purchase of
however the same shall be passengers and/or cargo vessels
subjected to three (3%) shall be subject to the requirements
percentage tax (RR 16-2011). on restriction on vessel
 In cases where a lessor has importation and mandatory vessel
SEVERAL RESIDENTIAL retirement program of MARINA
UNNITS for LEASE, some are (RR 15-2015)
leased out for a monthly rental 21) “Importation of fuel, goods and
per unknit of not exceeding supplies by persons engaged in
P12,800 per unit, his tax international shipping or air
liability will be: transport operations; Provided
- The gross receipts from that/the;
rentals not exceeding  Fuel, goods and supplies shall
P12,800 per month per be exclusively or shall pertain
unit shall be exempt to the transport goods and/or
from VAT regardless of passenger from a port in the
aggregate annual gross Philippines directly to a
receipts. foreign port, or vice versa,
- The gross receipts from without docking or stopping at
rentals exceeding any other port in the
P12,800 per month per Philippines unless the docking
unit shall be subject to or stopping at any other
VAT if the annual gross Philippine port is for purpose
receipts (from said units of unloading of passengers
only – not including the and/or cargoes that originated
gross receipts from from abroad, or load to
units leased out for not passengers and/or cargoes
more than P12,800) bound for abroad.
exceed P1,919,500.  If fuel, goods and supplies is
Otherwise, the gross used for purposes other than
receipts shall be subject that mentioned in the
to three percent (3%) preceding paragraph, such
percentage tax under portion of fuel, goods and
section 116 of the tax supplies shall be subject to
code (RR 16-2011) 12% VAT
22) “Services of banks, non-bank
18) Sale, importation, printing or financial intermediaries
publication of books and any performing quasi-banking
newspaper, magazine, review or functions, and other non-bank
bulletin: financial intermediaries such as
a) Appears at regular intervals; money changers and pawnshops,
subject to percentage tax under
 Sections 121 and 122, exempt from VAT (mixed
respectively, of the Tax Code. transactions) may opt that the Vat
23) “Sale or lease of goods or apply to his transactions which
properties or the performance of would have been exempt under
services other than the transactions Section 109(1) of the Tax Code, as
mentioned in the preceding amended [Sec. 109(2)].
paragraphs, the gross annual sales
and/or receipts do not exceed the Franchise grantees of radio and/or
amount of One Million five television beraodcasting whose
hundred thousand pesos annual gross receipts of the
(P1,919,500). preceding year do not exceed ten
24) Vat on Purchase of SPECIFIED million pesos (P10,000,000) derived
Goods and Services by Senior from the business covered by the
Citizen (RA 9994). law granting the franchise may opt
25) Vat on Purchase of SPECIFIED for VAT registration.
Goods and Services by Person This option, once exercised, shall
With Disability (PWD) under RA be irrevocable. (Sec.119, Tax
10754 Code).

C. VAT REGISTRATION The above-stated taxpayers may

1) MANDATORY REGISTRATION apply for Vat registration not later
a. Any person or entity who, in the than ten (10) days before the
course of his trade business, beginning of the calaendar quarter
sells, barters, exchanges, leases and shall pay registration fee unless
goods or properties and renders they have already the Commissioner
services subject to VAT, if the of Internal Revenue may, for
aggregate amount of actual administrative reason deny any
gross sales or receipts exceeds application for registration. Once
P1,919,500 for the past 12 registered as Vat person, taxpayers
months (other than those that shall be liable to output tax and be
are exempt) OR there are entitled to input tax credit beginning
reasons to belive that the gross on the first day of the month
sale or receipts for the next 12 following registration.
months will exceed P1,919,500. 3) CANCELLATION OF VAT
b. Radio and/or television REGISTRATION
broadcasting companies whose Instances when a Vat-registered
annual gross receipts of the person may cancel his VAT
preceding year exceeds registrations
P10,000,000.
c. A person required to register as
VAT taxpayer but failed to
register.
Penalty for non-registration of
those required to register as
VAT?
He shall be liable to pay the tax as
if he were a VAT- registered
person but he cannot avail the
benefits of input tax credit for the
period he was not properly
registered.

2) OPTIONAL REGISTRATION
Any person who is VAT-exempt or
not required to register for VAT
may, in relation to 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. Any person
who elects to register under
optional registration shall not be
allowed to cancel his registration
for the next three (3) years.
Any person who is VAT-registered
but enters into transactios which are