Vat Exempt Transaction

VAT Exempt Transactions
Written by Taxumo Customer Care

[Updated as of 2020 March 30]
According to our tax code, the following are transactions that can be considered as VAT exempt:
(A) Sale or importation of agricultural and marine food products in their original state, livestock
and poultry of or king generally used as, or yielding or producing foods for human consumption;
and breeding stock and genetic materials therefor.
Products classified under this paragraph shall be considered in their original state even if they
have undergone the simple processes of preparation or preservation for the market, such as
freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked rice,
corn grits, raw cane sugar and molasses, ordinary salt and copra shall be considered in their
original state;
(B) 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 generally considered as pets);
(C) Importation of personal and household effects belonging to the residents of the Philippines
returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided,
That such goods are exempt from customs duties under the Tariff and Customs Code of the
Philippines;
(D) Importation of professional instruments and implements, wearing apparel, domestic animals,
and personal household effects (except any vehicle, vessel, aircraft, machinery 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, that such persons are actually
coming to settle in the Philippines and that the change of residence is bona fide;
(E) Services subject to percentage tax under Title V;
(F) Services by agricultural contract growers and milling for others of palay into rice, corn into
grits and sugar cane into raw sugar;
(G) Medical, dental, hospital and veterinary services except those rendered by professionals.
(H) Educational services rendered by private educational institutions, duly accredited by the
Department of Education(DepED), the Commission on Higher Education (CHED), the Technical
Education and Skills Development Authority (TESDA)and those rendered by government
educational institutions;
(I) Services rendered by individuals pursuant to an employer-employee relationship;
(J) 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;
(K) Transactions which are exempt under international agreements to which the Philippines is a
signatory or under special laws, except those under Presidential Decree No. 529;
(L) Sales by agricultural cooperatives duly registered with the Cooperative Development
Authority 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 Cooperative Development Authority;
(N) Sales by non-agricultural, non- electric and non-credit cooperatives duly registered with the
Cooperative Development Authority: Provided, That the share capital contribution of each
member does not exceed Fifteen thousand pesos (P15, 000) and regardless of the aggregate
capital and net surplus ratably distributed among the members;
(O) Export sales by persons who are not VAT-registered;
(P) Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business or real property utilized for low-cost and socialized housing
as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing
Act of 1992, and other related laws, residential lot valued at One million pesos (P1,500,000) and
below, house and lot, and other residential dwellings valued at Two million five hundred
thousand pesos (P2, 500, 000) and below: Provided, That not later than January 31, 2009 and
every three (3) years thereafter, the amount herein stated shall be adjusted to their present values
using the Consumer Price Index, as published by the National Statistics Office (NSO);
(Q) Lease of a residential unit with a monthly rental not exceeding Ten thousand pesos (P10,
000): Provided, That not later than January 31, 2009 and every three (3) years thereafter, the
amount herein stated shall be adjusted to its present value using the Consumer Price Index as
published by the National Statistics Office (NSO);
(R) 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;
(S) Transport of passengers by international carriers;
(T) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine,
equipment and spare parts thereof for domestic or international transport operations;
(U) Importation of fuel, goods and supplies by persons engaged in international shipping or air
transport operations;
(V) Services of bank, non-bank financial intermediaries performing quasi-banking functions, and
other non-bank financial intermediaries; an
(W) 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): Provided, That not
later than January 31, 2009 and every three (3) years thereafter, the amount herein stated shall be
adjusted to its present With footnote in the book value using the Consumer Price Index, as
published by. the National Statistics-Office (NSO);
Note that a VAT-registered entity may elect that the above not apply to its sale of goods or
properties or services: Provided, that an election made under this subsection shall be irrevocable
for a period of three (3) years from the quarter the election was made.

Vat Exempt Transaction

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VAT Exempt Transactions

Written by Taxumo Customer Care

(E) Services subject to percentage tax under Title V;

(I) Services rendered by individuals pursuant to an employer-employee relationship;

(J) Services rendered by regional or area headquarters established in the Philippines by

(O) Export sales by persons who are not VAT-registered;

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